REG - IOG PLC - Operational update

IogAnnouncement

22/12/2022 07:00

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RNS Number : 5458K  IOG PLC  22 December 2022

22 December 2022

 

IOG plc

 

Operational update: Blythe H2 well plan and Southwark progress

 

IOG plc ("IOG", or "the Company"), (AIM: IOG.L), the Net Zero UK gas and
infrastructure operator focused on high return projects, provides an update on
current production, plans for a second Blythe production well ("H2") and
progress at Southwark.

 

Highlights:

-     Saturn Banks 2H22 average production expected to be c.22 mmscf/d

-     Southwark A2 well test and clean-up planned for next week with first
gas expected by mid-January

-     Blythe H2 well planned to be drilled directly after Southwark A1
well in 1H 2023

-     30,000 therms/day hedged for December 2022 at 303 p/therm and
January 2023 at 319 p/therm

 

Rupert Newall, CEO of IOG, commented:

 

"Operationally, the new leadership is making progress, but we still see room
for improvement over coming months. We are proactively engaged in improving
not only our own team's performance but also that of our duty holders.
Bringing new wells onstream, improving platform reliability and managing
liquids flows will enable us to maximise production and cash flow.

 

Importantly, we have made good progress at Southwark, with the A2 well
expected onstream by mid-January. The A1 well is then expected to strengthen
our production profile from early Q2. With Blythe H2 and the Kelham and
Goddard appraisal wells to follow, 2023 is set to be a high-impact year for
IOG.

 

The Blythe H2 well is a compelling investment for us to accelerate reserves
recovery, mitigate water production and maximise cash flow. We expect it to
pay back very quickly, benefitting from our final rig extension option
negotiated in 2020 and the spare well slot designed into the Blythe platform."

 

Saturn Banks Operations

 

-     Since the November restart, platform generator and MEG pump faults,
plus an unplanned Bacton terminal shutdown, have limited Blythe field gross
production to 17.1 mmscf/d at 81% uptime (current production rate is
approximately 22 mmscf/d)

-     Saturn Banks production is projected to average approximately 22
mmscf/d over 2H 2022 (with 59% uptime to date including planned shutdowns) and
approximately 27 mmscf/d from First Gas in March 2022 to year end

-     IOG management is very focused on helping its offshore duty holder
to address the causes of unplanned downtime and make the required performance
improvements

-     Elgood is currently shut-in with further production expected to
require lower liquid volumes in the Saturn Banks Pipeline System ("SBPS"),
after which it will be produced cyclically

-     Produced water from Blythe H1 continues to be managed onshore, with
disposal cost reductions being pursued

 

Southwark

 

-     A2 well hydraulic stimulation operations are expected to be complete
by the end of this week, while all subsea work is now complete

-     A2 well test and clean-up is planned for next week, with final
hook-up and commissioning and safety reviews then leading to Southwark first
gas by mid-January

-     The Shelf Perseverance rig is planned to then re-enter the A1 well,
complete and stimulate it in Q1 and bring it onstream by early Q2

 

Blythe H2 well plan

 

-     H2 is planned to be drilled directly after Southwark A1 and targeted
onstream by early Q3 2023 (with the two-well appraisal campaign to follow
directly after)

-     Final extension option in IOG's 2020 Shelf Perseverance rig contract
is to be exercised for H2

-     Detailed well design is already well advanced, building off earlier
successful development work on the Blythe H1 well

-     Integrating learnings from H1, the intention is to target the
field's central high, which has no observed faults and potentially better
reservoir quality

-     H2 has been approved internally and is subject to joint venture
partner and regulatory approval processes

 

Blythe H2 rationale

 

-     Achieve high returns and rapid payback, based on a gross budget of
approximately £26 million including hook up and commissioning costs, plus
potential for significant tax shelter

-     Accelerate and maximise recovery of the management estimated Blythe
gross 1P / 2P / 3P reserves of 25.4 / 42.5 / 55.8 billion cubic feet (BCF), at
a time of high expected gas prices

-     Allow flexibility to reduce water production from Blythe H1 into the
SBPS, improving operating efficiency and reducing water disposal costs

-     Existing spare well slot and riser on Blythe platform minimises need
for brownfield modifications

 

Gas pricing

 

-     30,000 therms/day hedged with offtaker BP Gas Marketing at 303
p/therm for December 2022 and 319 p/therm for January 2023

-     Average realised gas price has been 295.7 p/therm since the November
restart, 262.6 p/therm over 2H22 to date and 203.2 p/therm since First Gas in
March 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

 Rupert Newall (CEO)

 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

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
resources 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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