Independent Oil and Gas (IOG) today confirmed it would drill the appraisal well for the North Sea’s Skipper prospect next month.
The oil discovery lies in Block 9/21a in licence P1609 in the Northern North Sea. The well, which is targeting a depth of 5,600ft, is expected to take 22 days to drill.
Chief executive Mark Routh said: “This well should be transformational for IOG and we are delighted to drill it next month with a significantly reduced estimated duration and cost.
“The willingness of our financial backers and contractors to co-operate in a progressive way to make this well happen amid these tough industry conditions is testament to a new collaborative spirit in the North Sea. The support and engagement of the OGA for this approach has been vitally important and is very encouraging for the future. We look forward to continuing to work with our regulators, investors and commercial partners to create value for all.
“Our determination to move Skipper forward further underlines our commitment to the future of the North Sea and indeed this may well prove a good time to invest counter-cyclically. Well-managed projects on the UK
“Continental Shelf can create excellent value for investors and that remains our clear focus.
IOG is very pleased to be working with Transocean, who have first class operational expertise and are showing their continued support for investment in the North Sea by partnering in this innovative commercial structure.”
Directors believe an approved field development plan on Skipper would convert the board’s estimated 34.1 MMBbls of contingent resources into 2P reserves.
Transocean’s Sedco 704 semi-submersible will drill the well.
A company statement read: “The company is required to make an advance payment to Transocean of $1,728,000 prior to the spud date. The Company will part-settle this amount by the issue of 2.7 million Ordinary Shares at a price of 18.375p reducing the required advance payment by £496,125.
“These shares will be admitted to trading on 10th June 2016 and the total shares then in issue shall be 93,754,847. The balance of the advance payment is to be paid by 4th July 2016 either in cash from IOG’s existing loan facilities or to be settled in shares issued at the prevailing share price.”
The total well cost has now been reduced to approximately £6.8 million, with approximately £5.7mmillion still to be paid. Approximately £3mmillion is expected to be deferred until 20th December 2017 as a result of agreements with various contractors, some of which remain subject to finalisation of documentation. The remaining £2.7 million and any required contingency is covered by IOG’s existing loan facilities. The loan facilities and contractor deferrals will benefit from a fixed and floating charge over the assets of IOG and IOG North Sea Limited.
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