Independent Oil & Gas PLC Project & Corporate Update: FDP Approval (5792L)

TIDMIOG

RNS Number : 5792L

Independent Oil & Gas PLC

01 May 2020

1 May 2020

Independent Oil and Gas plc

Project & Corporate Update: FDP Approval

Independent Oil and Gas plc ("IOG" or "the Company"), (AIM: IOG.L), the development and production company focused on becoming a substantial UK gas producer , is pleased to announce that the UK Oil & Gas Authority ("OGA") has approved the Core Project Phase 1 Field Development Plan ("FDP"). The Company also provides a comprehensive project and corporate update.

Highlights

-- The OGA has approved the Core Project Phase 1 FDP - a major milestone for IOG and its partner CalEnergy Resources (UK) Ltd

-- Full contract awards are expected shortly for key Phase 1 workstreams underway since FID, including platform fabrication, pipelay and subsea work, and well management

-- Project execution activities remain on track and at present there is no impact to schedule from the ongoing industry and macroeconomic turbulence

o Safety of staff and contractors remains the primary concern - Covid-19-related risks being proactively identified and managed

o Working with suppliers to ensure social distancing is in effect at all relevant sites, to maintain safe project delivery

o Further strengthened focus on cost savings across all activities

-- Construction activities are ramping up to deliver the Southwark and Blythe platforms on schedule in 1H 2021

-- Offshore pipelay campaign remains on schedule for 2H 2020 with necessary applications submitted to regulatory bodies and the line pipe already transported to the UK

-- Competitive rig tender for the Phase 1 drilling programme is progressing well, supported by the Company's selected well management contractor

o Detailed well and completion design work is ongoing in parallel

-- Acquisition and testing of two unused, refurbished subsea trees and wellheads has been successfully completed

-- Detailed engineering and planning continues for refurbishment of the Thames Reception Facilities (TRF) at Bacton, with initial works expected to commence in Q2 2020 despite access restrictions due to Covid-19

-- Further seismic reprocessing work is underway to improve subsurface imaging of Vulcan Satellites, Goddard and Abbeydale

-- Technical work continues on the 40 Bcfe Harvey and 100 Bcfe Redwell structures to support plans for high-return potential incremental developments

-- 32(nd) Round licence application interviews completed with OGA, with results now expected by early summer; several other nearby growth opportunities remain under evaluation

   --      The AGM management presentation is now available on the IOG website at www.iog.co.uk/investors/results-reports-and-presentations/ 

Andrew Hockey, CEO of IOG, commented:

"We are very pleased to have received this milestone approval for our core UK gas project. Such government endorsement brings a welcome boost to the UK offshore industry and supply chain given the current environment. This innovative low-carbon project, re-using previously decommissioned infrastructure to develop otherwise stranded domestic gas resources, is a definitive example of Maximising Economic Recovery (MER), in line with UK government strategy.

In such a turbulent and unpredictable environment, we remain as focused as ever on leveraging our core strengths: funded status, proven resource base, infrastructure ownership, excellent partner, low unit costs, low carbon footprint and experienced team with a clear value creation strategy.

The safety of our staff, suppliers and their families remains our top priority and we have continually reviewed and upgraded our procedures to ensure they reflect government guidance and maintain safe working environments. As Phase 1 execution ramps up, we have avoided any schedule impact to date from Covid-19 and are also targeting cost savings even more proactively to help deliver our project on time and budget."

Corporate Update

The Company adapted to remote working quickly and seamlessly in March, in response to government guidance. Systems implemented to ensure efficient internal and external collaboration have proved robust and reliable. The organisation is functioning well despite current restrictions and any extended lockdown is expected to be managed likewise. The planned post-FID organisation is in place, with high quality hires having filled the remaining key technical roles to ensure optimal project delivery.

Regulatory and Commercial

The Phase 1 EIA review process has been successfully completed by the Offshore Petroleum Regulator for Environment and Decommissioning (OPRED), which is part of the Department for Business, Enterprise and Industrial Strategy (BEIS).

Further to this, the Phase 1 FDP was approved and all necessary Phase 1 Fields Production Consents granted by the Oil and Gas Authority (OGA) on behalf of the UK government, on the afternoon of 30 April.

The necessary Pipeline Works Authorisation applications (PWAs) and other required consent applications have been submitted for the pipelay activities planned for later this year and are in progress with the relevant bodies.

The suite of commercial agreements relating to, among others, pipeline proximity and crossing, procurement, onshore refurbishment activities and terminal processing are either completed or being progressed with the relevant third parties as planned.

Platforms

Fabrication activities for the two Phase 1 Normally Unmanned Installation (NUI) platforms continue to ramp up, alongside procurement of major equipment items and deliveries of bulk materials. With FDP approval in place, a full engineering, procurement and construction (EPC) contract is expected to be signed with the platform contractor in the near future, superseding the current limited commitment letter.

At the platform fabrication yard, a two-shift system is in place to optimise Covid-19 restricted working conditions and ensure work progresses as planned. Expected platform delivery dates have not currently been affected by Covid-19 despite pressures on the supply chain.

Subsea, Umbilicals, Risers and Flowlines (SURF)

Good progress continues with the major long lead subsea and pipeline items. The 24-inch (Southwark) and 12-inch (Blythe) line pipe have now been manufactured and delivered from Greece to the UK for storage prior to loading onto the pipelay vessels in the summer. With FDP approval in place, the full EPC contract award to the main SURF contractor is also expected to supersede the current limited commitment letter in the near future.

Planning and preparation continue for the offshore pipelay programme in 2H 2020. The PWA applications for laying the 24-inch and 12-inch extensions to the Thames Pipeline have been submitted and formally accepted for review by the OGA. The approval process for such applications entails standard internal and public consultation periods, the first of which is underway. PWA approvals are expected towards the end of 1H 2020, enabling the pipelay programme to proceed as planned thereafter.

Drilling

IOG's competitive tendering process for the jack-up rig for the five-well Phase 1 drilling programme is also progressing well, with a view to securing attractive terms given current industry conditions. Preparations are also underway for tendering offshore drilling services and detailed well and completion design work is likewise proceeding on schedule. The selected well management contractor is now well established, supporting the IOG in-house drilling and subsurface teams with detailed well planning and design, contracting strategy and regulatory processes. Further details will follow after contract signing.

The two unused and refurbished subsea wellheads and trees purchased by the Company have been successfully tested. These are typically long lead items. As previously mentioned, one set is to be used on the Elgood subsea well and the other available for Harvey or other incremental development opportunities. The Company has also agreed a contract to procure the control system for the Elgood subsea well.

Onshore

Front-End Engineering and Design (FEED) studies on the TRF refurbishment at Bacton Gas Terminal (BGT) are ongoing, with good co-operation between IOG, the BGT operator Perenco UK Limited (PUK) and the engineering contractor Worley. Tendering and planning activities are also being progressed for the environmental, geo-technical and other surveys required at the TRF site. Initial preparatory works at the TRF are expected to commence in May 2020.

The Covid-19 pandemic has necessitated operating protocols to be temporarily revised at BGT, which as one of the UK's main gas terminals is a site of national strategic importance. IOG is working proactively with PUK to resolve any potential disruptions which might arise to planned TRF activities.

Portfolio Development

Further seismic reprocessing and interpretation of the Vulcan Satellite fields and Goddard and Abbeydale discoveries is underway. This work will enhance the Company's subsurface imaging and help to optimise field developments and well designs.

In addition, the further technical work to progress the Harvey (P2085) and Redwell (P2441) licences is also proceeding. The objective is to obtain more accurate recoverable gas volumes via improved reservoir modelling following integration of the dataset acquired in the Harvey well. As previously indicated, scoping economics based on current mid-case recoverable gas estimates of 40 Bcfe at Harvey and 100 Bcfe at Redwell indicate high-return incremental investments, benefiting from substantially lower capex requirements to integrate with the Core Project assets. The results of this work will help to inform IOG's development and commercial strategy for these assets.

The Company has made detailed presentations to the OGA in support of its 32(nd) Offshore Licensing Round applications and, based on latest indications, results are expected by early summer. Several other nearby growth opportunities remain under evaluation. As ever, the Company's approach is to prioritise the highest returns from any incremental investments.

Certain information communicated in this announcement was, prior to its publication, inside information for the purposes of Article 7 of Regulation 596/2014.

Enquiries:

 
Independent Oil and Gas plc 
 Andrew Hockey (CEO) 
 Rupert Newall (CFO) 
 James Chance (Head of Corporate Finance & IR)   [phone] 
finnCap Ltd 
 Christopher Raggett (Corporate Finance) 
 Simon Hicks (Corporate Finance) 
 Camille Gochez (Corporate Broking)              [phone] 
Peel Hunt LLP 
 Richard Crichton 
 David McKeown                                   [phone] 
Vigo Communications 
 Patrick d'Ancona 
 Chris McMahon 
 Simon Woods                                     [phone] 
 

About IOG:

IOG owns and operates a 50% stake in substantial low risk, high value gas reserves in the UK Southern North Sea. The Company's Core Project targets a gross 2P peak production rate of 140 MMcfe/d (c. 24,000 Boe/d) from gross 2P gas Reserves of 302 Bcfe(1) + 2C gas Contingent Resources of 108 Bcfe(2), via an efficient hub strategy. In addition to the independently verified 2P reserves at Blythe, Elgood, Southwark, Nailsworth and Elland and 2C Contingent Resources at Goddard, IOG also has independently verified best estimate gross unrisked prospective gas resources of 73 Bcfe(2) at Goddard. Alongside this IOG has management estimated mid-case recoverable gas volumes of 40 Bcfe and 100 Bcfe at the Harvey and Redwell licences and continues to pursue value accretive acquisitions to generate significant shareholder returns.

(1) ERC Equipoise Competent Persons Report: October 2017, adjusted by Management to account for updated project timing and compression

(2) ERC Equipoise Competent Persons Report: October 2018

Competent Person's Statement

In accordance with the AIM Note for Mining and Oil and Gas Companies, IOG discloses that Andrew Hockey, IOG's CEO, is the qualified person that has reviewed the technical information contained in this document. Andrew Hockey has an MSc in Petroleum Geology and has been a member of the Petroleum Exploration Society of Great Britain since 1983. He has over 35 years' operating experience in the upstream oil and gas industry. Andrew Hockey consents to the inclusion of the information in the form and context in which it appears.

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May 01, 2020 02:00 ET (06:00 GMT)