IOG Speeds up UK Gas Development
UK explorer Independent Oil & Gas (IOG) aims to bring more gas from its southern basin project to market in time for winter of 2021, it said August 14. It has changed its field development plan to reflect this. Although it will cost more to accelerate the drilling and completion of the Elgood field well, the gas price will be higher in winter, it said. It expects to take final investment decision by early September.
Accordingly, Elgood and Blythe gas will reach market at the same time, three months after Southwark. This will entail higher capital expenditure of £139 ($168)mn before Phase 1 first gas, but it means more revenues over winter 2021, given the relatively high forecast initial rates from Blythe and Elgood.
IOG is in the advanced stages of retendering certain key project contracts and preparing to recommend final awards. The FID will follow directly from completion of the farm-out and bond, with the latter to be issued by August 16.
Assuming an early September FID date, under the development schedule to be submitted in the finalised field development plan (FDP), first gas – and so first cash-flow from IOG production – is expected to be reached in July 2021 from the Southwark field.
The proposed amount of the contemplated bond issue will be £88mn equivalent. The farm out will yield a further £40mn; and other sources will bring the total to £210mn. Phase 2 will in turn be funded by Phase 1 cash flows and the Phase 2 development carry.
CEO Andrew Hockey said Phase 1 FID “promises to be a very significant milestone for IOG, with the potential for a positive Harvey appraisal well result to follow. We look forward to a strong and successful alliance with our farm-out partner CalEnergy Resources which we believe will deliver excellent value to our shareholders."
IOG spudded the Harvey well and reached an agreement with London Oil & Gas on its two loans, clearing the decks for the bond issue, which will then be its sole long-term debt.