IOG Takes FID on UK Gasfields
UK-focused Independent Oil & Gas has taken final investment decision on its southern basin gas project, it said October 28. It also announced the completion of the July farm-in agreement with CalEnergy Resources (CER) for 50% stakes in all its offshore reserves except for the Harvey field, on which CER has an option. IOG has also completed the purchase of the Thames reception facilities. First gas is due in the summer of 2021.
The announcements will be greeted with a big sigh of relief from its shareholders, as the company came close to succumbing to a hostile takeover by RockRose in the winter when the owner of major creditor LOG went into administration. However they held firm in the hope that a farm-in partner could be found to rescue them and discharge debts. RockRose reluctantly dropped its bid April 1.
The project comprises 410bn ft3 of 2P+2C reserves and resources across six fields. CER has paid the initial £40mn (51mn) and has another £60mn to pay in carrying costs for Phase 1. In turn, IOG has been able to repay in full the £17.1mn owed to LOG.
LOG's £11.6mn 19p convertible loan principal and accrued interest has been restructured into long-term, unsecured, non-interest bearing loan notes, convertible at 19p into 60,872,631 ordinary shares.
Under an agreement to pursue business development opportunities around the Thames Pipeline on a 50:50 basis, IOG and CER are planning to submit a joint application for certain blocks in the UK Offshore 32nd Round.
IOG CEO Andrew Hockey said that, alongside its €100mn ($111mn) bond raise, the company is fully funded for its core project, which is projected to deliver over £0.5bn in pre-tax cash flow net to IOG. IOG and CER, as joint venture partners, have consequently taken Phase 1 FID.
He said IOG has "established a solid platform from which to generate cash flow from our existing portfolio through effective project execution. Furthermore, we have created the opportunity to generate additional value upside by bringing incremental volumes through our infrastructure. Our Southern North Sea gas business development strategy has clear competitive advantages: we have a very strong and well-aligned partner, we have our key export pipeline in place, we are an approved licence operator, and we are fully funded to install our hub infrastructure."
IOG will be submitting confirmation of full funding to the upstream regulator Oil & Gas Authority in support of the Phase 1 field development plan approval.