Harvey Appraisal Well Funding
Monday 20 August 2018
Independent Oil and Gas plc, the development and production focused Oil and Gas Company, announced the proposed funding of its 100% owned and operated high-impact Harvey appraisal well and updates on preparations for spudding the well in Q4 2018.
Highlights
- Non-binding term sheet for a new non-convertible loan facility (“Harvey Facility”) signed with London Oil and Gas Limited (“LOG”) of £15 million, principally to fund the upcoming Harvey appraisal well.
- Proceeds of the Harvey Facility to also fund other costs in the run-up to IOG’s gas development project sanction, including full repayment of final remaining Skipper liabilities.
- Loan will carry an interest rate of LIBOR+9% per annum;
- The Company would also issue 20,000,000 warrants exercisable at 32.18p, a 10% premium to the closing price of IOG shares on 16 August 2018.
- Advanced preparation work is ongoing on the Harvey appraisal well, targeting spudding in December 2018.
- The well aims to prove gas across the entire Harvey structure. The November 2017 Harvey CPR estimates Low/Mid/High resources of 45/114/286 BCF with a 50% Geological Chance of Success.
- Harvey area 3D-seismic reprocessing is complete, already fulfilling the 30th Licensing Round commitment. Seismic reinterpretation and remapping is expected to conclude in August 2018.
- Well management, rig and services discussions are very well advanced, with contracts to be agreed in coming weeks, further details of which will be announced once signed.
- The Harvey appraisal well lies in close proximity to IOG’s 100% owned Thames pipeline and on success any gas produced would be exported via the pipeline.
Harvey Facility
The term sheet for the Harvey Facility carries an initial interest rate of LIBOR+9% per annum and will be repayable 36 months after the date of drawdown. The Harvey Facility would be secured against the Company, its assets and its three subsidiaries; IOG North Sea Limited, IOG UK Limited and IOG infrastructure Limited. Upon signing of the Harvey Facility, the Company will issue 20,000,000 warrants to LOG, exercisable at 32.18p, a 10% premium to closing price of IOG shares on 16 August 2018. The warrants to have an expiry date of 5 years from the date of drawdown of the Harvey Facility.
Agreed purposes for use of the Harvey Facility include drilling of the Harvey appraisal well, payment of final remaining Skipper liabilities, development project costs and G&A. The Harvey Facility contains standard conditions precedent, representations & warranties and covenants which are customary for a transaction of this nature.
Harvey Appraisal Well
The main Harvey licence, P2085, was awarded to IOG at 100% Working Interest in December 2013 in the 27th Licensing Round and contains the majority of the Harvey gas discovery. In May 2018, IOG announced the successful application of the licence to the east of Harvey in Block 48/24a. This will be Licence P2441. This licence award secured 100% of the Harvey structure. The November 2017 Harvey CPR estimates Low/Mid/High resources of 45/114/286 BCF with a 50% Geological Chance of Success.
Following the successful conclusion of the Harvey 3D seismic reprocessing project carried out by Schlumberger Western Geco, which commenced in March 2018, IOG is now close to completing the interpretation and mapping of this new data set which has been reprocessed to deliver a pre-stack depth migration (“PSDM”) volume. The aim of this project is to optimise the appraisal well location, which therefore further de-risks this appraisal project.
The well will fulfil a 27th Round Licence commitment and will target the confirmation of IOG’s view that the Harvey structure already has proven gas from well 48/23-2 drilled by Arco in 1984 which clipped the flank of the newly mapped high case Harvey structure.
IOG is targeting spudding the Harvey appraisal well in December 2018 with the objective of proving up the upside resource estimate of 286 BCF.
The necessary safety and environmental site surveys are due to be carried out in early September. IOG expects to appoint a well management contractor to be the Well Operator on Harvey subject to regulatory approvals in the coming weeks. The selection of the drilling rig contractor and well services contracts will be finalised shortly thereafter.