Monday 14 March 2022

IOG plc ("IOG", or "the Company"), (AIM: IOG.L), the Net Zero UK gas and infrastructure operator focused on high return projects, is pleased to update on gas sales arrangements and progress towards resumption of Southwark drilling.

Gas Sales Agreement

The Company has executed a new gas sales agreement ("GSA") with BP Gas Marketing Limited ("BPGM"). This covers its equity gas from all of the Saturn Banks Phase 1 fields (Blythe, Elgood, Southwark), plus the Nailsworth and Elland fields which are part of Phase 2, on a long-term basis with break clauses after September 2023. The GSA replaces the gas sales agreement originally signed with BPGM in February 2014, which covered the Blythe field only, on improved terms for the Company.

Under this GSA, gas will be sold on a day-ahead daily nomination basis at a price linked to the National Balancing Point (NBP, the UK traded gas benchmark). The GSA incorporates the potential, subject to credit approval, for physical gas hedging up to 50% of forecast production over various periods, in line with the Company's hedging strategy.

Under this hedging strategy, the Company expects to start executing a prudent wedge-shaped hedging programme, using simple structures, to reduce cashflow volatility whilst allowing shareholders to retain appropriate gas price exposure. This would entail a higher proportion of forecast production hedged over earlier periods reducing to a lower proportion hedged over later periods, on a rolling basis. IOG has not undertaken any hedging prior to production and therefore currently is fully exposed to prevailing UK NBP gas prices.

Southwark

The Company has in parallel been making good progress with the required regulatory and commercial processes to implement the rock dumping solution to the seabed scour issue at the Southwark field location. Resumption of Southwark drilling therefore remains targeted for later this month, potentially moving to mid-April due to the interplay of logistical factors and tidal conditions. On that basis, Southwark First Gas currently remains targeted for Q3 2022.

Andrew Hockey, CEO of IOG, commented:

"It is another very positive step for IOG to have this more comprehensive Gas Sales Agreement in place with a highly credible counterparty in BP Gas Marketing with whom we have enjoyed a long relationship already.

In parallel, I can confirm that the backgassing and ready for start-up processes have been proceeding this week as planned. It is also important to note that we have been making good progress in overcoming the necessary hurdles to resume safe drilling at Southwark over the coming weeks."