Shares of Independent Oil and Gas (IOG) dropped this morning after the company said it had scrapped plans to buy the Cronx licence in the southern North Sea.
IOG said a reassessment of 3D seismic from the 1990s had shown that gas reserves would be “slightly lower” than originally estimated.
The London-listed firm said committing to a firm well on Cronx “would not be optimal use” of its funds.
The company said the same reprocessing of data did have some positive outcomes, however.
It showed that gas reserves in the Blythe Hub were “greater in aggregate than previously estimated”.
IOG shares slumped by about 9% this morning, before lifting slightly to -4.85% as of 9am.
IOG chief executive Mark Routh said: “The seismic reprocessing studies completed so far has involved a great deal of hard work by the IOG team. Prior to this work the Cronx resources comprised less than 5% of our estimated recoverable 2P and 2C gas resources and it has now become less material.
“The reprocessing work completed to date has proved very helpful in enabling us to focus on the most value-adding assets and not completing on the acquisition of Cronx will be more than compensated for elsewhere in the portfolio. We have discussed our latest thinking with the OGA who remain very supportive of our SNS strategy which is fully in line with the UK agenda of maximising economic recovery, particularly from previously overlooked assets.”
“If, following completion of the seismic reprocessing work, we are able to conclude that there is greater materiality across fewer assets in the Blythe Hub, development costs should also be streamlined.
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