UK Independent Adds to North Sea Gas Portfolio
UK-focused Independent Oil and Gas has bought southern North Sea (SNS) gas assets from Verus Petroleum. For a total potential consideration of £5mn it will acquire its subsidiary Oyster Petroleum, conditional upon Verus completing the transfer of Vulcan East, Northwest and South licences into Oyster which have 2C recoverable resources of 320.7bn ft³.·
CEO Mark Routh said June 13 the deal expanded IOG’s “hub strategy; to gain control over a number of dormant discoveries that can be developed through common existing infrastructure, thereby generating significant economies and capturing many synergies.”
Mark Routh, CEO, Independent Oil & Gas PLC (image credit IOG)
The deal more than doubles IOG's 2C recoverable resources, adding 320.7bn ft³, or 53.45mn barrels of oil equivalent at an effective cost of $0.22/boe.
IOG will make a down-payment of £1mn, using existing loan facilities, followed by a payment of £0.75mn nine months after completion, with further payments of up to £3.25mn following certain milestones, the last of which – following first gas, or seven days of continuous production from Vulcan – will be £1.5mn. Oyster also has about £25.6mn in UK pre-trading expenditure which can reduce the future amount of tax payable.
Subject to completion of this and previously announced acquisitions, IOG’s combined 2P reserves and 2C resources rise to 102.3mn boe.
The licenses lie 30-45km east of the Blythe field which is 100% owned by IOG pending completion of the Blythe acquisition. IOG is in advanced discussions regarding an export route for its SNS gas hubs. Once these offtake arrangements are in place IOG will prepare Field Development Plans.
Vulcan East has a suspended well requiring decommissioning which has been independently estimated to cost £3mn.
IOG’s portfolio will consist of roughly two thirds gas and one third oil, providing “an excellent springboard for us to become a significant development and production company. The additional scale will further enable IOG to contribute positively to UK energy security, in line with the principle of Maximising Economic Recovery for the UK North Sea," it said.
London Oil & Gas (LOG), which is providing financing, said the deal showed that IOG could expand and develop its portfolio in innovative ways by seeking to commercialise these sizeable developments.
It said it was “pleased to be in advanced discussions with IOG and other parties regarding the development funding required to unlock the considerable value in their portfolio, which we believe to have multi-billion dollar revenue potential…. The interaction between government, leading British multinationals and the company throughout this process has been invaluable and has shown 'UK Plc' operating in harmony to extend the life of the North Sea, in line with the government's aspirations.”
William Powell