IOG Recovers oil in Skipper Probe
Wednesday 17 August 2016
Independent Oil and Gas plc ("IOG" or the “Company”), the development and production focused Oil and Gas Company, is pleased to provide the following update on the drilling of the appraisal well on the Skipper oil discovery which lies in Block 9/21a in licence P1609 in the Northern North Sea, of which IOG is 100% owner and operator.
The Skipper well has been drilled to 3,860 ft. Good quality reservoir condition oil samples have been retrieved from the Skipper field and have been dispatched to Aberdeen for full analysis. Initial onboard observations during sampling confirm the oil to be mobile in the reservoir. This fulfils the primary well objective and will allow optimisation of the Skipper field development plan. Approval of a field development plan will be subject to funding, IOG Board and regulatory approvals.
The oil viscosity appears likely to be within the 50cP – 150cP range expected by the IOG management, which is significantly better than the viscosity assumed in the Competent Persons Report (“CPR”) published by AGR Tracs in September 2013. If these oil properties are confirmed in the laboratory tests, which should be completed in September 2016, the development will require fewer wells than previous assumptions in the CPR thereby reducing the base case development costs.
After spudding on 23 July 2016, the well experienced some operational challenges, which were unrelated to the reservoir. This required an early re-spud of the well and therefore an increased overall well duration. In addition to this, in early August we experienced a force 10 gale at the well location which caused a suspension of operations for almost two and a half days for safety reasons. These delays have resulted in an estimated increase in the operational phase of the well by approximately 13 days, the cost of which will be met in the short term by the existing London Oil and Gas loan facilities. Other costs are being deferred until the end of 2017, as previously announced.
The next step of the current well program is to drill the exploration prospects in the Lower Dornoch and the Maureen formations beneath the Skipper oil field in which the CPR author has mapped structures which together may contain 46 MMBbls of oil in place. Initial results of this exploration drilling phase of the well are expected to be available before the end of August.
Mark Routh, CEO of IOG commented:
The initial data acquired from the Skipper well, our first operated well, is an excellent result for IOG and operations proceed without any reported safety incidents.
By retrieving the oil samples, the primary well objectives have been fulfilled and we have proved that the oil is moving in the Skipper reservoir. This is a significant step for IOG towards achieving the target of being a company with 100 MMBOE heading for development, in assets 100% owned as operator. I am immensely proud of the IOG team and extremely grateful for the co-operation and support from all of the contractors involved. The support of our financial backers is of course crucial and it is very satisfying to achieve our preliminary objectives which in turn repays their trust in the management team and our strategy.
We now move on to drill the exploration prospects, where any further oil discoveries would provide additional upside and look forward to analysing the results in order to progress the Skipper field development plan as soon as possible, in parallel with our exciting gas assets in the Southern North Sea.
Exercise of Options
Former non-Executive Director of IOG Paul Murray has exercised his final tranche of 1p share options and has accordingly been issued 103,462 new ordinary shares in the capital of the Company (the “New Ordinary Shares”) at that price. The options were granted in lieu of cash compensation for his duties, calculated on the volume weighted average share price for the relevant period. The options were granted without any discount or uplift. The Company has applied to the London Stock Exchange for admission of the New Ordinary Shares to trading on AIM (“Admission”). Admission is expected to occur on 22 August 2016. Following Admission there will be 102,690,072 Ordinary Shares in issue. Accordingly, this number may be used by shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in the Company under the FCA’s Disclosure and Transparency Rules.
The information communicated in this announcement is inside information for the purposes of Article 7 of Regulation 596/2014.