Independent Oil & Gas PLC Southern North Sea Resources Increase (0265S)

TIDMIOG

RNS Number : 0265S

Independent Oil & Gas PLC

16 December 2016

16 December 2016

Independent Oil and Gas plc

Southern North Sea Resources Increase and Licence Extensions

Independent Oil and Gas plc ("IOG" or the "Company"), the development and production focused Oil and Gas Company, is pleased to announce a significant increase in its internal resource estimates for Elgood and Harvey based on work undertaken by a third party contractor. The Company is also pleased to announce that it has secured licence extensions for Harvey and Skipper to allow more work on both licences prior to the Company undertaking any further work commitments.

Highlights:

-- Significant increase in the Company's internal P50 probabilistic gas resources from 382 BCF to 490 BCF. While these estimates are internal at present they follow the completion of detailed interpretation and remapping of the 3D seismic reprocessing project by Beagle Geoscience.

   -      The P50 resources at Harvey have increased to 113 BCF (previously 16 BCF). 
   -      The P50 resources at Elgood have increased to 22 BCF (previously 11 BCF). 
   --      This is an increase in P50 resources of 108 BCF or approximately 18 MMBoe. 
   --      Three month extension to the Harvey licence. 
   --      Two year extension to the Skipper licence. 

Southern North Sea ("SNS") Resources Upgrades

Earlier this year, IOG completed a 3D seismic reprocessing project across the wider Blythe area and acquired additional 3D seismic data covering an area to the east of the Harvey well drilled in 1984. IOG then contracted Beagle Geoscience Limited ("Beagle") to carry out detailed interpretation and remapping of these new data sets. This project has resulted in a significant increase in the Company's internal resource estimates as detailed below.

Harvey

Prior to this work the Harvey discovery (drilled by Arco in 1984, well 48/23-2) and the Truman prospect were considered separate structures with resources of 16 BCF and 25 BCF respectively. The new data has led to improved understanding of the complex faulting that exists in the overlying strata, which provides management with a new significantly different interpretation of what it believes is a single, larger Harvey structure. The comparison of the probabilistic Gas Initially in Place ("GIIP") and the probabilistic resources numbers are presented below.

 
                                 Gas Initially       Estimated resources 
                                    in Place 
----------------------------  ------------------  ------------------------ 
            Field                    (BCF)                  (BCF) 
----------------------------  ------------------  ------------------------ 
                               P90    P50    P10    P90      P50      P10 
----------------------------  -----  -----  ----  -------  -------  ------ 
 Harvey (previous estimate)     8      22    36      6        16      26 
----------------------------  -----  -----  ----  -------  -------  ------ 
 Harvey (new estimate)          77    176    403     44      113      290 
----------------------------  -----  -----  ----  -------  -------  ------ 
 Increase                       69    154    367     38       97      264 
----------------------------  -----  -----  ----  -------  -------  ------ 
 

These are internal management estimates based on the work undertaken above by Beagle. IOG is now considering committing to a firm appraisal well on Harvey which would be required before a reservoir model could be built and a development plan could be prepared. If an appraisal well was to be drilled successfully and Harvey was subsequently developed, the Company believes that it could be tied back to the same export route as the Blythe and Vulcan Satellite hubs.

Elgood

The Elgood discovery was drilled by Enterprise in 1991, well 48/22-4 and tested gas to surface at rates up to 17.6 MMcfd. The new mapping work completed by Beagle has resulted in a modest increase in management's internal resource estimates.

The comparison of the probabilistic Gas Initially in Place ("GIIP") and the probabilistic resources numbers for Elgood are presented below.

 
                                 Gas Initially       Estimated resources 
                                    in Place 
----------------------------  ------------------  ------------------------ 
            Field                    (BCF)                  (BCF) 
----------------------------  ------------------  ------------------------ 
                               P90    P50    P10    P90      P50      P10 
----------------------------  -----  -----  ----  -------  -------  ------ 
 Elgood (previous estimate)     6      14    18      4        11      14 
----------------------------  -----  -----  ----  -------  -------  ------ 
 Elgood (new estimate)          26     35    48      15       22      31 
----------------------------  -----  -----  ----  -------  -------  ------ 
 Increase                       20     21    30      11       11      17 
----------------------------  -----  -----  ----  -------  -------  ------ 
 

As above, these are internal management estimates based on the work undertaken by Beagle. The Company expects that Elgood will be co-developed with the Blythe gas field and would have a single well tied back to the unmanned platform and producing well at Blythe. Some further pre-development technical work is now being undertaken on Elgood prior to an anticipated Field Development Plan being completed and submitted.

Other SNS portfolio

There are no significant changes to management's estimate of the Resources in the other assets within the Blythe hub. The probabilistic GIIPs and resources estimates for IOG's SNS portfolio of Blythe, Elgood, Harvey and the Vulcan Satellites are now as follows: -

 
 SNS Portfolio      Gas Initially       Estimated resources 
                       in Place 
---------------  ------------------  ------------------------ 
 Field                  (BCF)                  (BCF) 
---------------  ------------------  ------------------------ 
                  P90    P50   P10     P90      P50      P10 
---------------  -----  ----  -----  -------  -------  ------ 
 Blythe            39    52     84      22       34      48 
---------------  -----  ----  -----  -------  -------  ------ 
 Elgood            26    35     48      15       22      31 
---------------  -----  ----  -----  -------  -------  ------ 
 Harvey            77    176   403      44      113      290 
---------------  -----  ----  -----  -------  -------  ------ 
 Vulcan North 
  West            184    215   251     112      131      153 
---------------  -----  ----  -----  -------  -------  ------ 
 Vulcan East      104    124   145      64       77      91 
---------------  -----  ----  -----  -------  -------  ------ 
 Vulcan South     117    186   275      59      112      193 
---------------  -----  ----  -----  -------  -------  ------ 
 Totals           547    789   1206    315      490      806 
---------------  -----  ----  -----  -------  -------  ------ 
 

This does not include other discoveries that may be sub-commercial, or potential additional resources that could be recovered from the carboniferous sections or other undrilled prospects in the SNS portfolio.

Licence Extensions

IOG recently requested a 3-month extension to the end of March 2017 for the 100%-owned licence P2085, which includes the Harvey discovery. The UK Oil & Gas Authority has granted this request, thereby allowing IOG sufficient time to consider the significant technical work that has been completed before deciding whether to make a firm well commitment.

Furthermore, IOG has been granted a 2-year extension on licence P1609 to 11 February 2019. This licence covering block 9/21a contains the 100%-owned Skipper oil discovery to the east of Shetlands. This is to allow field development options to be considered once a reservoir model has been developed.

Mark Routh, CEO of IOG commented:

"We are delighted with the results of the excellent technical work done by Beagle Geoscience. This has really vindicated our strategy of acquiring licences containing overlooked discoveries near to our existing assets and reworking the data using the very best technical resource.

Our gas portfolio is now estimated at nearly half a trillion cubic feet of P50 resources, or more than 82 million barrels of oil equivalent ("MMBoe"), that we believe could all be developed via our cost-efficient hub strategy utilising the same export route.

Funding discussions are progressing well in parallel with the technical work and we are pleased to have a number of large institutions interested in partnering with us to deliver these substantial gas resources to the UK market."

S 

Enquiries:

 
 Independent Oil and Gas plc 
  Mark Routh (CEO)                  [phone] 
  Peter Young (CFO)                  0510 
 finnCap Ltd 
  Matt Goode/Christopher Raggett    [phone] 
  (Corporate Finance)                0500 
 Camarco                            [phone] 
  Billy Clegg / Georgia Edmonds      4980 
 

Notes

About Independent Oil and Gas:

IOG is an oil and gas company with established assets in the UK North Sea. The company's strategy is to deliver near term development and production assets in North West Europe, through its extensive technical and commercial expertise, whilst maintaining some exposure to exploration upside. The company is looking to grow both organically and through acquisition.

All of IOG's licences are owned 100% and operated by IOG.

Further information can be found on www.independentoilandgas.com

About the Vulcan Satellites:

The Vulcan Satellites consist of three fields, Vulcan East, Vulcan North West and Vulcan South, which hold independently estimated 2C resources of 77.4 BCF, 131.3 BCF and 112.0 BCF respectively, 320.7BCF collectively. These fields lie in Block 49/21a (Licence P039), Block 49/21d (Licence P2122), Block 48/25b (Licence P130) and Block 49/21c (Licence P1915) in the UK sector of the Southern North Sea. They lie approximately 30-45km east of IOG's 100%-owned Blythe field and are considered ready for development with no further appraisal required. IOG is progressing exclusive discussions regarding an export route for these fields and once that is in place the Company will prepare a Field Development Plan. IOG has assumed liability for decommissioning a suspended well on Vulcan East, which in April 2015 was independently estimated to cost GBP3.0 million as part of a development campaign, based on prevailing rig rates at that time.

About the Blythe Hub:

The Blythe hub licences comprise Blythe, Elgood, Hambleton, Truman and Harvey.

About Blythe:

The Blythe gas discovery in the Rotliegendes Leman formation straddles Blocks 48/22b and 48/23a in the Southern North Sea in licence P1736. The Blythe Leman reservoir needs no further appraisal and has independently verified 2P reserves of 34.3 BCF (6.1 MMBoe). (Source: ERC Equipoise Competent Person's Report ("CPR") dated September 2013.) The Blythe licence has been extended to 31 December 2017.

Gas tested to surface from three separate intervals in the Carboniferous beneath the Blythe Leman gas discovery from one of the Blythe discovery wells, 48/23-3 drilled by Arco in 1987. The maximum rate achieved was 0.9 MMcfd from an unstimulated vertical test. (Source: End of well report 48/23-3 - November 1987.) This was deemed uncommercial at the time, before the advent of horizontal multi-fracture stimulated wells. Further technical work including seismic reprocessing and remapping needs to be completed to evaluate this potential resource to refine the gas-in-place estimates which are between 70 BCF and 310 BCF. (Source: Tullow Oil 48/23a Relinquishment Report - May 2009.)

Oil has flowed to surface from the naturally fractured Zechstein Carbonates in the Hauptdolomit formation above the Blythe Leman gas discovery from two wells. Well 48/22-1 drilled by Burmah in 1966 flowed 39deg API oil at rates up to 2,000 barrels per day (Source: Composite well log 48/22-1 - October 1966) and well 48/23-3 drilled by Arco in 1987 at flowed 38deg API oil at a maximum rate of 1,128 barrels of oil a day. (Source: End of well report 48/23-3 - November 1987.) The extent of the structure and potential oil resources in the Hauptdolomit remains unknown. Previous estimates considered that the mapped closure was probably small. Oil-in-place has been estimated between 2 MMBbls and 4 MMBbls. (Source: Tullow Oil 48/23a Relinquishment Report - May 2009.) Further evaluation and re-mapping is continuing now that a development will proceed on the main Blythe gas discovery.

About Truman and Harvey:

IOG has a 100% working interest in licence P2085 to the east of Blythe (Blocks 48/23c & 48/24b) which was awarded in the 27th licensing round. At the time of the application IOG identified the Truman prospect with prospective resources of 25 BCF and the Harvey discovery with contingent resources of 16 BCF. The 3D seismic reprocessing and remapping project led to improved understanding of the complex faulting that exists in the overlying strata. This resulted in a map with one large structure instead of two. This large structure is named Harvey. The complete range of probabilistic GIIPs and resources for Harvey are presented above.

About Elgood:

IOG has a 100% working interest in licence P2260 awarded in the 28th licensing round to the west of Blythe containing the Elgood discovery (Block 48/22c). Elgood was drilled by Enterprise Oil in 1991 and tested gas to surface at 17.6 MMcfd but was not progressed by Enterprise due to size and gas prices at that time.

IOG is now working on the development plan for Elgood and will commission a CPR to confirm the resources over this area. The complete range of probabilistic GIIPs and resources for Elgood are presented above.

About Hambleton:

The Hambleton discovery, to the south of licence P2260, was drilled by Century Exploration in 2005 but also was not progressed to development. IOG previously estimated that Hambleton had P90/P50/P10 probabilistic resources of 2/6/26 BCF. The result of the Beagle remapping project has not led to a significant increase in estimated GIIPs or resources. Beagle has estimated the P90/P50/P10 probabilistic resources at Hambleton of 4/8/17 BCF.

There are prospective resources on licence P2260 of 5.3 MMBoe in the Tetley and Rebellion prospects.

About Skipper:

The Skipper oil discovery is in Block 9/21a in the Northern North Sea in licence P1609. IOG owns 100% of the Skipper licence P1609 and is the Operator. In July/August 2016 the Company successfully drilled its first operated appraisal well and retrieved oil samples, in order to design the optimum field development plan. Skipper has independently verified gross 2C resources of 26.2 MMBbls. Following the results from the appraisal well, IOG management's estimates of the oil in place in the Skipper reservoir are minimum/most likely/maximum 119.3/142.6/168.3 MMBbls. Recovery factor estimates will be revised during the full field reservoir simulation studies which will now commence. The Skipper licence has now been extended to 12 February 2019.

Competent Person's Statement:

In accordance with the AIM Note for Mining and Oil and Gas Companies, IOG discloses that Mark Routh, IOG's CEO is the qualified person that has reviewed the technical information contained in this announcement. Mark Routh has an MSc in Petroleum Engineering and has been a member of the Society of Petroleum Engineers since 1985. He has over 35 years' operating experience in the upstream oil and gas industry. Mark Routh consents to the inclusion of the information in the form and context in which it appears.

This information is provided by RNS

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December 16, 2016 02:00 ET (07:00 GMT)