Page 9 - Euroil Week 11 2020

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North Sea-focused IOG says it can brave low prices
UK
The company is working on a gas project in the southern North Sea.
NORTH Sea-focused Independent Oil & Gas (IOG) insists it can ride out market volatility fol- lowing a sharp decline in oil prices on October 9.
Shares in the London-listed company were down 10% to GBP0.133 ($0.1625) apiece on March 9, as markets reacted to Saudi Arabia slashing its price of its oil exports. They dropped 13% on March 12 to GBP0.118 – their lowest level in almost a year
The company, which is developing gas in the southern North Sea, issued a statement on March 13 to quell investor concern, noting that development work was “proceeding to plan.”
IOG took a final investment decision (FID) in October on Phase 1 of its Core project, under which it will exploit the Southwark, Blythe and Elgood gas fields. Production is slated to start in July 2021.
Detailed design work on the stage’s two, normally unmanned installations is “well advanced” and “fabrication activities are now underway,” IOG said. This work is being carried out under a letter of limited commitment that will be converted into a full contract after its field development plan (FDP) gets approval, which is expected in April.
Most bulk materials for pipelines linking the Phase 1 fields to the IOG-operated Thames gas pipeline have been ordered and pipelaying work is due to start in the second half of this year. IOG has also reached an agreement in principle to acquire two subsea wellheads, trees and associ- ated equipment.
IOG has also selected a well management company for its Phase 1 drilling campaign, com- prising three wells at Southwark, one at Blythe and one at Elgood. It has also launched competi- tive tenders to obtain a rig and offshore services, with drilling scheduled to commence in the first quarter of 2021.
“Amid highly volatile market conditions, we are very pleased that IOG’s core strengths and competitive advantages remain intact: fully funded to cash flow, proven gas resource base, ownership of key infrastructure, strong team, high calibre joint venture partner, robust pro- ject economics with low opex, an exceptionally
low carbon footprint, and a clear value creation strategy,” CEO Andrew Hockey explained in a statement. “These advantages ensure we can maintain a rigorous focus on effective project execution, including utilising market dynamics to improve terms for key contracts.”
Investors reacted well to IOG’s statement, with its share price moving up to GBP0.129 on March 13 before declining further in line with oil prices. They were trading at GBP0.109 at the close of trading on March 18.
IOG is yet to say when it intends to approve Phase 2 of the Core project, involving the devel- opment of the Goddard, Nailsworth and Elland fields also in the southern North Sea. The two phases are targeting a combined 410bn cubic feet (11.6bn cubic metres) of gas.
Cluff Natural Resources
Other North Sea juniors have also pointed to the robustness of their operations in the face of low prices.
London-listed Cluff Natural Resources (CLNR) said its projects and southern North Sea drilling plans were “unaffected” by the recent slump in crude prices. The explorer stressed it was in a positive of relative strength”, with “no direct exposure to oil prices,” as it does not cur- rently produce any hydrocarbons. It has no debt and has GBP13.3mn ($16.3mn) in cash to fall back on.
CLNR is working a number of exploration and appraisal targets in the central and southern North Sea. Last year it farmed out a 70% stake in its Pensacola prospect and a 50% interest in its Selena prospect to Royal Dutch Shell via two separate deals, to pay for exploration wells.
CLNR said it was fully funded for its share for the Selena and Pensacola wells, and FIDs would be taken on both of the boreholes this year. But it warned that it could take longer to find a partner for its Dewar prospect.
The company’s shares were down 20.9% on March 9 to GBP0.00925, and slid further over the course of last week. They rebounded to GBP0.00825 on March 13, before decline set in again. ™
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