UK-Based IOG Spuds Key Harvey Well
UK minnow Independent Oil & Gas (IOG) spudded the Harvey appraisal well at around midnight July 6, it said July 7. Completion of the well is expected to take about two months, all going well.
Harvey is centrally located within IOG's asset portfolio in UK Southern North Sea Blocks 48/23c, 48/24a, and 48/24b, close to the Thames Pipeline export route. The primary objective of the well is to confirm prospective resources which are now put at between 85bn ft³ and 199bn ft³ and to demonstrate reservoir deliverability.
On completion of the farm-out transaction announced July 26, Berkshire Hathaway Energy's CalEnergy Resources will have the option to acquire half the Harvey licences within three months of completion of the appraisal well, for £20mn to IOG and a £0.95/'000 ft³ royalty on all of CalEnergy's life-of-field net gas production from Harvey.
IOG CEO Andrew Hockey said that spudding the well was "an exciting development for IOG and potentially a major catalyst for the business. Our objective is to prove up a substantial, high-quality reservoir in the heart of our core asset base which would create significant shareholder value over and above our recently announced farm-out. Success at Harvey could trigger a further significant near-term cash payment plus valuable life-of-field royalties should our designated partner exercise its right to farm in. We are pleased with our choice of rig and contractors and look forward to drilling the well safely and successfully."
Halliburton is providing some services; Maersk is owner of the rig Resilient which will be operated by Fraser Well Management.
IOG fought off a takeover bid from RockRose this year, despite financial difficulties as its main creditor London Capital Finance went into receivership. Harvey will be IOG's first source of upstream cashflow, if it turns out as hoped. Berkshire Hathaway Energy is owned by Warren Buffett. It drove a hard bargain with Occidental Petroleum that allowed the producer to buy Anadarko.