Skipper Update
Monday 16 January 2017
The Company has received further results from the analysis of the oil samples retrieved from the Skipper appraisal well drilled in July/August last year. The oil has a high density of approximately 11 °API, a high viscosity and a high Total Acid Number. However, the Skipper oil is mobile in the very high permeability reservoir and is also mobile at ambient conditions thanks to its very low wax content. The Company is undertaking further technical and commercial evaluation, in particular building a reservoir model to simulate the oil’s mobility in the reservoir. If a field development plan can be designed to enable the economic extraction of oil from the Skipper field, the oil properties will present a challenge for refining and marketability. Depending on where and when the oil is sold, the Company anticipates the crude would trade at a significant discount to the prevailing quoted Brent oil price.
The total cost of the Skipper appraisal well drilled in July/August 2016 was £10 million. As previously announced this has been part financed via loans and deferred payments which are due to be repaid at the end of 2017. The total loans and deferred payments drawn for this purpose was approximately £6.8 million and approximately £3.2 million has been paid in cash or shares. In line with IOG’s business plan, the intention is to refinance or repay these loans in parallel with securing development funding for some or all of our SNS gas assets in 2017.
Mark Routh, CEO of IOG, commented:
This pipeline will be the cornerstone of our Southern North Sea portfolio which, subject to remediation, will enable us to deliver our approximately 0.5 trillion cubic feet of gas resources to the UK market. During a period of relatively low gas prices we have bought, at very attractive prices, quality assets which were considered effectively stranded. Subject to completion of the acquisition, full ownership and control of the export route creates significant value for the Company, especially given the recovery in UK gas prices. Owning our gas portfolio and export infrastructure 100% will enable us to accelerate both the development planning and funding processes.
The update on the Skipper crude quality has confirmed the earlier results and has provided us with some new data. The oil qualities are likely to be challenging, however given the oil’s mobility in the reservoir we continue to explore the potential extraction and marketing options to deliver value from the asset.