Skipper Appraisal Well Rescheduled for July 2016
Wednesday 8 June 2016
Independent Oil and Gas plc ("IOG" or the “Company”), (AIM: IOG.L), is pleased to announce that the appraisal well on the Skipper oil discovery which lies in Block 9/21a in licence P1609 in the Northern North Sea, is scheduled to be drilled in July 2016.
IOG has renewed the previous contract announced on 14th December 2015 with Transocean to drill the Skipper appraisal well. The rig that will drill the well is Transocean’s Sedco 704 semi-submersible. The expected well duration has been reduced from 25 to 22 days and the rig is expected to start drilling on location in early July 2016. Commencement of drilling is contingent upon relevant technical and environmental approvals, including well permits, which are progressing with the OGA and DECC.
The Company is required to make an advance payment to Transocean of US$1,728,000 prior to the spud date. The Company will part-settle this amount by the issue of 2.7 million Ordinary Shares at a price of 18.375p reducing the required advance payment by £496,125. These shares will be admitted to trading on 10th June 2016 and the total shares then in issue shall be 93,754,847. The balance of the advance payment is to be paid by 4th July 2016 either in cash from IOG’s existing loan facilities or to be settled in shares issued at the prevailing share price. The balancing payment will be adjusted taking account of: (i) the net proceeds from any shares sold by Transocean; and (ii) the value of the shares retained by Transocean at the close of business on 1st July 2016; with a final cash adjustment taking account of the value of the shares held by Transocean at close of business on the 30th December 2016 as well as the net proceeds of shares sold between 2nd July 2016 and 30th December 2016
The total well cost has now been reduced to approximately £6.8 million, with approximately £5.7 million still to be paid. Approximately £3 million is expected to be deferred until 20th December 2017 as a result of agreements with various contractors, some of which remain subject to finalisation of documentation. The remaining £2.7 million and any required contingency is covered by IOG’s existing loan facilities. The loan facilities and contractor deferrals will benefit from a fixed and floating charge over the assets of IOG and IOG North Sea Limited.
The objectives of the Skipper well remain the same. This will be a vertical well drilled to 5,600ft with the primary objective of retrieving good quality reservoir condition oil samples in order to optimise the Skipper field development plan. The Directors believe an approved field development plan on Skipper would convert the Board’s estimated 34.1 MMBbls of contingent resources into 2P reserves. The AGR Tracs’ historical CPR estimate for Skipper is 26.2 MMBbls 2C resources, using a 19% recovery factor.
The secondary well objective is to drill two mapped reservoir structures beneath the Skipper oil field in the Lower Dornoch and Maureen formations, in which the CPR authors have mapped structures which could contain up to an additional 46 MMBbls of oil in place. If oil is present in these structures these accumulations would be co-developed with Skipper in line with the Company’s hub strategy.