30 September 2016
Independent Oil and Gas plc
Initial Skipper Appraisal Well Results
Independent Oil and Gas plc ("IOG" or the "Company"), the development and production focused Oil and Gas Company, announces the initial results from its first operated 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.
· Although the oil is moving in the reservoir, the first sample results indicate that the oil is approximately 11° API and has a significantly higher viscosity than expected.
· These measurements do not align with our observations and therefore the remaining samples need to be reviewed and tested. Next steps will then be Reservoir modelling to consider potential development options. Determining commerciality may therefore take several months.
· The quality of the sands, although not cored, suggest permeabilities in excess of 10 Darcies, significantly better than previously assumed.
· As the crest of the Skipper reservoir in the appraisal well was found to be 44ft shallower than prognosed, management's estimate of the most likely oil in place has increased from 136.5 million barrels ("MMBbls") to 142.6 MMBbls.
Mark Routh, CEO of IOG commented:
"The analysis of the oil retrieved from the appraisal well indicates that Skipper is a heavy oil discovery with similar gravity to other nearby heavy oil fields. We have observed that the oil moves in the reservoir and is mobile at surface at ambient conditions. The initial oil analysis results are incompatible with our observations, therefore we are now reviewing our strategy to establish the commerciality of Skipper. In addition, we have an increased oil in place, higher observed reservoir permeabilities and an increased reservoir height from the crest to the oil water contact.
"Drilling our first well as operator was a very important step for IOG and we now have an excellent portfolio of assets, comprising of one-third oil and two-thirds gas. This is subject to completion of the Vulcan Satellite fields acquisition, which is expected in short order.
The Skipper appraisal well was successfully drilled to a total vertical depth of 5,578ft in August 2016, with no safety incidents and achieved its primary objective of retrieving oil samples from the Skipper reservoir in order to optimise the Skipper field development plan.
The crest of the Skipper reservoir in the appraisal well was found to be 44ft shallower than prognosed. As a result, management's estimate of the most likely oil in place has increased from 136.5 million barrels ("MMBbls") in the 2013 Competent Persons Report to 142.6 MMBbls. An increased distance between the crest of the reservoir and the Oil Water Contact in any development will improve the likely oil recovery by delaying the onset of water breakthrough.
The quality of the sands, although not cored, suggested permeabilities in excess of 10 Darcies, which is significantly better than previously assumed.
The initial licence commitment on P1609, to drill a well into the Maureen formation to a minimum depth of 1,700m (5,578ft) has now been fulfilled and the licence will now proceed into the second term.
The information communicated in this announcement is inside information for the purposes of Article 7 of Regulation 596/2014.
Independent Oil and Gas plc
Mark Routh (CEO)
Peter Young (CFO)
+44 (0) 20 3206 1565
Matt Goode/Christopher Raggett
+44 (0) 20 7220 0500
Billy Clegg / Georgia Mann
+44 (0) 20 3757 4980
About Independent Oil and Gas:
IOG is an oil and gas company with established assets in the UK North Sea. The company's strategy is to deliver near term development and production assets in North West Europe, through its extensive technical and commercial expertise, whilst maintaining some exposure to exploration upside. The company is looking to grow both organically and through acquisition. Following the Blythe acquisition, the Company's combined estimate of 2P reserves in Blythe and 2C resources in Skipper net to IOG are 40.2 MMBoe.
Upon completion of the Cronx acquisition IOG will have five licences in the North Sea. All of these licences will be owned 100% and operated by IOG.
Further information can be found on www.independentoilandgas.com
The Blythe gas discovery in the Rotliegendes Leman formation straddles Blocks 48/22b and 48/23a in the Southern North Sea in licence P1736. The Blythe Leman reservoir needs no further appraisal and has independently verified 2P reserves of 34.3 BCF (6.1 MMBoe). (Source: ERC Equipoise Competent Person's Report ("CPR") dated September 2013.)
Gas tested to surface from three separate intervals in the Carboniferous beneath the Blythe Leman gas discovery from one of the Blythe discovery wells, 48/23-3 drilled by Arco in 1987. The maximum rate achieved was 0.9 MMcfd from an unstimulated vertical test. (Source: End of well report 48/23-3 - November 1987.) This was deemed uncommercial at the time, before the advent of horizontal multi-fracture stimulated wells. Further technical work including seismic reprocessing and remapping needs to be completed to evaluate this potential resource to refine the gas-in-place estimates which are between 70 BCF and 310 BCF. (Source: Tullow Oil 48/23a Relinquishment Report - May 2009.)
Oil has flowed to surface from the naturally fractured Zechstein Carbonates in the Hauptdolomit formation above the Blythe Leman gas discovery from two wells. Well 48/22-1 drilled by Burmah in 1966 flowed 39° API oil at rates up to 2,000 barrels per day (Source: Composite well log 48/22-1 - October 1966) and well 48/23-3 drilled by Arco in 1987 at flowed 38° API oil at a maximum rate of 1,128 barrels of oil a day. (Source: End of well report 48/23-3 - November 1987.) The extent of the structure and potential oil resources in the Hauptdolomit remains unknown. Previous estimates considered that the mapped closure was probably small. Oil-in-place has been estimated between 2 MMBbls and 4 MMBbls. (Source: Tullow Oil 48/23a Relinquishment Report - May 2009.) Further evaluation and re-mapping is now underway now that a development will proceed on the main Blythe gas discovery.
The Skipper oil discovery is in Block 9/21a in the Northern North Sea in licence P1609. IOG owns 100% of the Skipper licence P1609 and is the Operator. In July/August 2016 the Company successfully drilled its first operated appraisal well and retrieved oil samples, in order to design the optimum field development plan. Skipper has independently verified gross 2C resources of 26.2 MMBbls. Following the results from the appraisal well, IOG management's estimates of the oil in place in the Skipper reservoir are minimum/most likely/maximum 119.3/142.6/168.3 MMBbls. Recovery factor estimates will be revised during the full field reservoir simulation studies which will now commence.
IOG has agreed to acquire 100% of Cronx (Block 48/22a, licence P1737) which is subject to completion. The Cronx gas discovery is 14km north-west of the Blythe field. Cronx was discovered in 2007 by well 48/22b-6 drilled by Perenco UK Ltd.
IOG commissioned an independent CPR by ERC Equipoise on Cronx in July 2012 which shows a base case expected gas recovery of 17.6 BCF or 3.4 MMBOE 2C resource. IOG anticipates completing the Cronx acquisition by the end of October 2016. IOG is currently evaluating options for the development and export of the Cronx gas.
About Truman and Harvey:
IOG has a 100% working interest in a licence awarded in the 27th licensing round to the east of Blythe containing the Truman prospect and Harvey discovery. IOG estimates potential resources in this licence of 16 BCF or 3.1 MMBoe. These 100%-owned fields have potential resources that could be tied back to nearby infrastructure being developed for the Blythe development.
About Elgood and Hambleton:
IOG has a 100% working interest in a licence awarded in the 28th licensing round to the west of Blythe containing the Elgood discovery (Block 48/22c, licence P2260). Elgood was drilled by Enterprise Oil in 1991 and tested gas to surface at 17.6 MMcfd but was not progressed by Enterprise due to size and gas prices at that time. IOG's estimate of the recoverable reserves in Elgood is 2.1 MMBoe.
The Hambleton discovery, to the south of the same licence, was drilled by Century Exploration in 2005 but also was not progressed to development. IOG estimates that Hambleton has recoverable resources of 6 BCF (1 MMBoe). IOG believes that the reprocessing of existing 3D seismic data could increase recoverable resources up to 26 BCF.
There are prospective resources on licence P2260 of 5.3 MMBoe in the Tetley and Rebellion prospects. Reprocessing and reinterpretation of existing 3D seismic across 48/22a and 48/22c is ongoing to determine whether Elgood connects to Cronx which would boost recoverable reserves significantly. The new seismic interpretation will also determine the likely size of Hambleton. IOG is now working on the potential development plans and will commission a CPR to confirm the resources over this area.
Competent Person's Statement:
In accordance with the AIM Note for Mining and Oil and Gas Companies, IOG discloses that Mark Routh, IOG's CEO is the qualified person that has reviewed the technical information contained in this announcement. Mark Routh has an MSc in Petroleum Engineering and has been a member of the Society of Petroleum Engineers since 1985. He has over 35 years' operating experience in the upstream oil and gas industry. Mark Routh consents to the inclusion of the information in the form and context in which it appears.
This information is provided by RNS