Thursday 10 January 2019

Independent Oil and Gas plc, a development and production company focused on becoming a substantial UK gas producer, provided an upgrade on its core development project in the UK Southern North Sea (“SNS”).

Highlights

- The Company’s two-phase Core Project has been expanded to include the 108 BCF of 2C Contingent Resources assigned to the Goddard discovery by ERC Equipoise, and now comprises a total of 410 BCF¹,² of 2P+2C reserves and resources across six discovered gas fields

- This significantly enhances management’s Core Project³ economics, delivering 40% IRR, £358m post-tax NPV10 and peak annual production rate 146 MMCF/d (up from 114 MMCF/d) with no increase in funding requirement

- Goddard’s 108 BCF² of 2C Contingent Resource is discovered gas which is development ready. Management believe these Resources can be reclassified to Reserves upon submission of the Field Development Plan (FDP) to the Oil & Gas Authority, which is planned for 1H 2019.

- As previously announced, the Core Project is now technically ready to enter the execution phase and Phase 1 pre-Final Investment Decision (FID) engineering is now complete. Thames Pipeline integrity has been proven and major contractor terms substantially agreed with LOIs in place for a number of key contracts.

- Geotechnical surveys for design and installation of the Southwark and Blythe production platforms were successfully completed in December 2018.

- Preparations continue for drilling the Harvey appraisal well, which management estimates has Prospective Resources in the Low/Best/High case of 85/129/199 BCF and 63% Geological Chance of Success. In the event of Harvey success, IOG’s portfolio would deliver 77% IRR and £688m post-tax NPV10.

- Funding plans for the Core Project are advancing as detailed on 29 November 2018 with the objective of Final Investment Decision (FID) within Q1 2019. First Gas is planned to be delivered within 20 months of FID.

- IOG has released a revised Investor Presentation to reflect the Core Project upgrade

SNS project upgrade

The Company’s revised Core Project plan comprises a two-phase development of its 302 BCF¹ of 2P gas reserves at the Blythe Hub and the Vulcan Satellites Hub and 108 BCF² 2C Contingent Resources at Goddard. This delivers a 40% IRR and has a £358m³ post-tax NPV10 with no additional funding required to develop Goddard. The Core Project now comprises a total of 410 BCF¹,² of 2P+2C reserves and resources across six discovered gas fields to be developed in two phases: Phase 1 consists of the Southwark, Blythe and Elgood fields (158 BCF¹ 2P Reserves) and Phase 2 consists of the Goddard, Nailsworth and Elland fields (144 BCF¹ 2P Reserves and 108 BCF² 2C Resources). Phase 1 of the Core Project is technically ready to enter the execution phase with all engineering work required for FID complete. Commercial terms are substantially agreed with all major contractors.

The Goddard licence, which was awarded in the recent 30th round, commenced on 1st October 2018. Goddard’s 108 BCF of 2C Contingent Resources are discovered gas resources which are technically ready for development. Goddard also contains a further 73 BCF² Best Estimate Prospective Resources to be appraised at the optimal time. IOG’s development team is preparing FDP submission for the Goddard 2C discovery to the Oil & Gas Authority during 1H 2019. IOG believes these 2C Resources can be reclassified to 2P Reserves upon FDP submission. ERC Equipoise’s October 2018 Competent Persons Report (CPR) is available on the IOG website and describes the Goddard resource base.

The Company is in the final stages of signing documentation for purchase of the onshore Thames Reception Facility, where its fully-proven, 550 MMCF/d capacity Thames Pipeline lands at Bacton Gas Terminal on the North Norfolk coast. The pipeline will provide a low-cost, safe and efficient export route for IOG’s assets straight to the UK market with future commercialisation opportunities for new asset additions to IOG’s portfolio and for 3rd party gas.

Funding and Harvey

The Company remains ready to progress its funding plans, with a view to achieving FID in Q1 2019, and technically ready to achieve First Gas within 20 months of FID. Further to the 29 November 2018 update regarding the repurposing of the September 2018 loan, the Company is continuing discussions regarding funding of the Harvey appraisal well alongside its wider FID funding process. Detailed commercial and technical preparatory work continues for the Harvey appraisal well. The Core Project with the addition of Harvey would potentially deliver a 77% IRR and a £688m³ post-tax NPV10 with a peak annual production rate of over 230 MMCF/d.