UK IOG Farms Out North Sea Assets
London-listed Independent Oil & Gas (IOG) has struck a “landmark” deal to bring on board a partner at its North Sea assets, the company announced on July 26.
The gas producer has entered into binding agreements with US-based CalEnergy Resources (CER) on the sale of a 50% stake in all its assets in the southern North Sea, bar the Harvey licences. It will also retain control of the Thames gas pipeline and recently-acquired reception facilities in Bacton.
CER has agreed to pay £40mn ($49.7mn) for the assets, while also pledging to cover 80% of IOG’s share of development costs, or £125mn ($155mn). In addition, it will receive a royalty of 20.2% of IOG’s revenues from the first phase of its development plans, and has an option to buy 50% of the Harvey licences for £20mn ($24.9mn) within three months of an appraisal well's completion. The well is to be spudded in early August.
IOG is developing six offshore discoveries estimated to hold 302bn ft³ of 2P gas reserves. It expects to flow 146mn ft³/day from these fields at peak capacity.
“The successful farm-out to a partner of the stature of CalEnergy Resources is a landmark transaction for IOG which should deliver very significant value for our shareholders both now and in the future,” IOG CEO Andrew Hockey said. “This transaction with CER is a strong validation of our exciting portfolio of upstream and infrastructure assets, as well as our focused Southern North Sea gas strategy which can generate exceptional shareholder returns.”
The farm-out deal follows IOG’s purchase of the Thames gas pipeline’s onshore reception facilities earlier this week, enabling it to upgrade them to handle gas from its projects.
IOG also intends to issue £70mn ($87mn) of bonds to cover its remaining share of development expenses. Once it has closed the sale to CER and placed the bonds, it will file a final investment decision (FID) with UK authorities.
CER is a subsidiary of Warren Buffett's Berkshire Hathaway Energy, with upstream assets in Australia, Poland and the UK.