REG - IOG PLC - Operational Update

IogAnnouncement

03/05/2022 07:00

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RNS Number : 9825J  IOG PLC  03 May 2022

3 May 2022

 

IOG plc

 

Operational Update

 

IOG plc ("IOG", or "the Company"), (AIM: IOG.L), the Net Zero UK gas and
infrastructure operator focused on high return projects, provides a full
operational update ahead of its Annual General Meeting today.

 

Andrew Hockey, CEO of IOG, commented:

 

"I am pleased to provide an update on the initial weeks of Blythe and Elgood
production. As we address early facilities issues and control liquids handling
onshore, production is currently stabilising at 55-65 mmscf/d gas and
800-1,000 bbl/d condensate, with steadily improving uptime rates. Meanwhile,
drilling progress continues at Southwark while we prepare for the two
follow-on appraisal wells at Goddard and Kelham North/Central."

 

Blythe & Elgood

 

Facilities, Infrastructure & Reservoirs

 

Over the initial seven weeks of production, the Bacton terminal operator
Perenco (UK) Limited (PUK), IOG and its Pipeline and Facilities Duty Holder
ODE Asset Management (ODEAM) have been jointly establishing the full
functionality of the end-to-end Saturn Banks infrastructure. Offshore, the
chemical injection fault on the Blythe topsides has been temporarily
addressed, giving an aggregate production capacity of 75 mmscf/d, which will
increase to design capacity once modifications are installed over coming
months.

 

Onshore, the first Saturn Banks hydrocarbon liquids were received on 7 April.
The Bacton terminal operator has been working to integrate these efficiently
into existing Bacton liquid streams. This entails processing the liquids
through the dedicated Saturn Banks slugcatcher (reception vessel) and
modifying the terminal condensate stabilisation unit's operation to suit this
transient composition of fluids.

 

As previously noted, reservoir data from the early months of production will
be required to make a reliable assessment of subsurface performance and inform
forward guidance on Blythe and Elgood. Subject to operations, this guidance is
therefore expected to be provided by late Q2, approximately three months from
First Gas.

 

Production

 

The PUK, ODEAM and IOG teams are working jointly to optimise onshore liquids
handling and improve offshore reliability to maintain stable production rates.
Currently, stable gas production from Elgood and Blythe has been established
in the 55-65 mmscf/d range on a gross basis. Over the final week of April,
aggregate production averaged 60 mmscf/d, with a maximum daily rate of 64
mmscf/d and 100% uptime on both assets. Since First Gas from both wells in
mid-March to end of April, overall average aggregate gas production was 37
mmscf/d, with average uptime of 68% at Elgood and 33% at Blythe. This
primarily reflects the chemical injection fault outage before the Blythe well
was reopened in mid-April, among other shorter temporary outages.

 

Under its gas sales agreement with BP Gas Marketing Ltd, IOG receives pricing
closely linked to the UK National Balancing Point (NBP) day-ahead price. The
volume weighted average realised gas price was 232 p/therm for March and 161
p/therm for April. Amid very high LNG imports and limited UK storage capacity,
temporary constraints on the UK-Belgium interconnector pipeline pulled prompt
NBP prices in April significantly lower than European gas benchmarks (which
are usually highly correlated to NBP).

 

Average aggregate condensate arrivals into Bacton have been in the 800-1,000
bbl/d range since first liquids flowed onshore on 7 April. Condensate
production was well above 1,000 bbl/d in the final week of April but is
expected to be largely front ended with a relatively rapid decline rate.
Condensate is sold to a petrochemical offtaker at prices linked to naphtha and
gasoil.

 

Southwark

 

Drilling of the two development wells, Southwark east and west, is scheduled
to continue into Q4 2022. Final hook-up and commissioning is then expected to
deliver Southwark first gas later that quarter. Upon resumption in mid-April
after seabed remediation, the Southwark east well remained in good condition
with no further rig stability issues encountered, enabling drilling to
continue as planned.

 

Clearance of the 6km 24" pipeline extension route from the Saturn Banks
Pipeline System to the Southwark platform is expected in May, followed by
laying and trenching by Subsea7's Borealis vessel in June. All regulatory
consents are in place for these key remaining Phase 1 subsea works.

 

Southwark accounts for the majority of 2022 net capital expenditure, which is
currently expected to be within the £70-85 million range. This figure
incorporates projected Goddard, Kelham North/Central and Nailsworth
expenditure.

 

Further Phase Activities

 

The appraisal wells at Goddard and Kelham North/Central are planned to be
drilled in direct continuation from the Southwark east and west development
wells, using the Noble Hans Deul rig and with Petrofac continuing as Well
Operator. The purpose of these wells to prove up two incremental gas hubs and
obtain sufficient subsurface data to fully optimise the developments.

 

The geophysical site surveys for both appraisal wells were completed in March,
with the Nailsworth area also incorporated in the same campaign. Geotechnical
surveys are planned for later this quarter.

 

Basis of designs for the two appraisal wells are complete and detailed well
planning, contracting and long-lead procurement is well underway in
preparation to execute the appraisal wells in Q4 2022.

 

This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law
by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is
disclosed in accordance with the company's obligations under Article 17 of
MAR.

 

Enquiries:

 

 IOG plc                                            +44 (0) 20 7036 1400

 Andrew Hockey (CEO)

 Rupert Newall (CFO)

 James Chance (Head of Capital Markets & ESG)

 finnCap Ltd                                        +44 (0) 20 7220 0500

 Christopher Raggett / Simon Hicks

 Peel Hunt LLP                                      +44 (0) 20 7418 8900

 Richard Crichton / David McKeown

 Vigo Consulting                                    +44 (0) 20 7390 0230

 Patrick d'Ancona / Finlay Thomson / Oliver Clark

About IOG:

 

IOG is a Net Zero UK gas and infrastructure operator focused on high-return
projects. The Company's operations are currently concentrated around its
offshore and onshore Saturn Banks infrastructure in the UK Southern North Sea.
Phase 1 of its Saturn Banks Project, which started production in March 2022,
entails the commercialisation of the Blythe, Elgood and Southwark gas fields
through this infrastructure. Phase 2 of the Saturn Banks Project entails the
Nailsworth, Goddard and Elland gas discoveries, which are subject to future
investment decisions and expected to be commercialised through the same export
infrastructure. The Company also holds further licences with additional assets
including the Abbeydale, Panther and Grafton gas discoveries, the Kelham
North, Kelham Central, Thornbridge and Thornbridge Deep prospects, and part of
the Orrell gas discovery. Currently, all IOG's licences are held 50:50 with
its joint venture partner CalEnergy Resources (UK) Limited and operated by
IOG. In addition, the Company continually evaluates further opportunities for
accretive portfolio additions to help generate additional shareholder returns.
Further details are available at www.iog.co.uk (http://www.iog.co.uk) .

 

 

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