UK IOG Delays FID on Core Project to 2019
Independent Oil & Gas has delayed the final investment decision (FID) on its Blyth and Vulcan project until, it hopes, the first quarter of next year, it said November 29, citing poor "current oil price volatility and capital market conditions".
The project comprises the two-phase development of its 302bn ft³ 2P gas reserves at the Blythe Hub and the Vulcan Satellites hub, which it says delivers an internal rate of return of 38% and a post-tax value of £285mn ($364mn).
All the engineering work required for Phase 1 FID is complete; its wholly-owned Thames pipeline, which will evacuate all the gas, has been demonstrated at 550mn ft³/day – a summer integrity inspection went wrong – and commercial terms are substantially agreed with all major contractors, it said. First gas could flow within 20 months of FID, which now means the first half of 2020.
Separately it said that detailed progress is continuing on preparations for the Harvey appraisal well, with a letter of intent signed for the Ensco 72 rig, which is expected on location in Q1 2019. Management estimates the Harvey well to have a 63% geological chance of success, with prospective resources within the range 85bn ft³-199bn ft³.
To fund the ongoing Blythe and Vulcan costs it will use a portion of the loan from London Oil & Gas (LOG) granted to fund Harvey. LOG has demonstrated continued support and has also agreed to discuss the refinancing of the Harvey Loan to ensure the IOG remains funded for the Harvey well, said IOG.
CEO Andrew Hockey said IOG had "the right assets, team and strategy to become a substantial mid-cap gas producer and deliver outstanding returns to shareholders from the scale and synergies of our efficient hub strategy, once Phase 1 is funded. The Harvey appraisal well is a low-risk, high-impact near-term catalyst for shareholders and we look forward to providing further updates nearer to the spud date".
Analyst Malcolm Graham-Wood said in his blog that the project has considerable appeal and given that its market cap is "only just north of £30mn, the company itself must have attractions as a target for a corporate keen to pick up an oven-ready southern North Sea gas [Blythe and Vulcan] project with all the benefits that brings".