25 January 2022
IOG plc ("IOG", or "the Company"), (AIM: IOG.L), the Net Zero UK gas and infrastructure operator focused on high return projects, provides a further update on Phase 1 operations.
Andrew Hockey, CEO of IOG, commented:
"I am on site again today at Bacton onshore terminal reviewing the latest progress, which is now 93% complete. Although it is very frustrating that it has been slower than planned, we are making every effort with the terminal operator Perenco to facilitate the fastest possible resolution. An expanded team is working days and nights aiming to be ready for back-gassing in mid-February, with First Gas expected approximately a week later.
Meanwhile, working with our drilling contractors and expert consultants, we have also been proactively engineering several options to resume safe drilling operations at Southwark. The timeline is expected to become clearer once we have analysed newly acquired seabed survey data this week.
We will keep shareholders regularly updated through these important final steps in bringing Phase 1 onstream."
Saturn Banks Reception Facilities (SBRF) at Bacton Gas Terminal
SBRF construction and pre-commissioning works, which are controlled by Bacton Gas Terminal operator Perenco UK Limited (PUK) on behalf of IOG, were 93% complete by Sunday 23 January. IOG senior management is in continuous dialogue with their PUK counterparts to expedite onshore completion as fast as possible. Work continued throughout the year end 2021 period and the on-site team has been expanded, albeit total personnel numbers are limited by the terminal operator's safety limits and have also been affected by Covid-19 related absences.
However, progress is being made and full readiness for commencement of back-gassing of the offshore pipeline system is targeted for mid-February. First Gas from both Blythe and Elgood is expected approximately a week thereafter. An important recent milestone was the handover of Blythe platform communications and Elgood subsea controls to the Bacton control room following successful testing of the integrated control and safety systems. The remaining work to complete primarily consists of the final electrical and instrumentation, construction and pre-commissioning, and system leak testing, all of which are being executed on both day and night shifts.
As previously announced, earlier this month the Noble Hans Deul rig was obliged to suspend drilling operations at Southwark as seabed conditions were causing excessive movement relative to the platform. Since then, the Company and its drilling contractors, assisted by technical experts experienced in similar situations, have been working constructively together to urgently investigate a range of potential solutions. Meanwhile, on 15 January the rig was moved to a safe location in the Elgood 500m zone where routine inspections are underway. Initial indications are that the rig remains fully serviceable.
Data from a new Southwark seabed survey is now being analysed to inform relocation and remediation options. The optimal plan would potentially enable the rig to safely resume Southwark drilling in the next 4-6 weeks, with scour protection applied after arrival. However, this remains subject to further investigation and an alternative plan may be required. Next steps and timing are likely to be clearer once survey data analysis is completed this week.
Further updates will be made as appropriate on SBRF completion at Bacton, Blythe/Elgood start-up and resumption of Southwark drilling.
The Company previously indicated that the gross outturn total Phase 1 capital expenditure was anticipated to exceed the original £305.5 million Field Development Plan (FDP) budget by up to 10%. Unplanned interruptions to the drilling campaign, additional requirements for offshore pre-operating activities and the need for an expanded scope of subsea and pipeline installations over recent months have now increased the anticipated gross outturn total Phase 1 capital expenditure to up to 20-25% over the FDP budget once the Southwark wells have been completed. However, based upon our revised project schedule no additional financing requirement is currently expected to be required to bring all three Phase 1 fields onstream. As a prudent additional measure, the Company also recently signed a €5 million working capital facility with a recognised international bank. Meanwhile, despite recent volatility, the UK NBP gas forward curve currently remains significantly above its long-term historical annual average. Further guidance will be issued in due course.
This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with the company's obligations under Article 17 of MAR.
Andrew Hockey (CEO)
Rupert Newall (CFO)
James Chance (Head of Capital Markets & ESG)
+44 (0) 20 7036 1400
Christopher Raggett / Simon Hicks
+44 (0) 20 7220 0500
Peel Hunt LLP
Richard Crichton / David McKeown
+44 (0) 20 7418 8900
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Patrick d'Ancona / Chris McMahon / Oliver Clark
+44 (0) 20 7390 0230
IOG's Saturn Banks Project targets a gross peak production rate of 140 mmscf/d (c. 24,000 Boe/d) from gross 2P gas reserves of 302 Bcfe¹ and management estimated 2C gas Contingent Resources of 132 Bcfe, via an efficient hub strategy based on co-owned infrastructure. In addition to its 2P reserves at Blythe, Elgood, Southwark, Nailsworth and Elland and 2C contingent resources at Goddard, it has management estimated gross 2C contingent resources of 23 Bcfe at Abbeydale and gross unrisked mid-case prospective resources of 36 Bcfe at Kelham North, 42 Bcfe at Kelham Central, 58 Bcfe at Thornbridge, 31 Bcfe at Southsea, 28 Bcfe and 19 Bcfe in the two Goddard flank structures. The Orrell discovery, with management estimated gross 2C contingent resources of 42 Bcfe, also lies approximately 50% on the P2442 licence held 50% by IOG. IOG also holds a 50% operated stake in Licence P2589, containing the Panther and Grafton gas discoveries with management estimated gross mid-case contingent resources of 46 Bcfe and 35 Bcfe respectively. In addition, IOG continues to pursue value accretive acquisitions to help generate further significant shareholder returns.
¹ERC Equipoise Competent Persons Report: October 2017, adjusted by Management to account for updated project timing and compression