IOG makes production cut as North Sea firm delivers first profits

electrician North Sea rig — The Shelf Drilling Perseverance rig (formerly the Noble Hans Deul) will soon move from the UK North Sea to Vietnam.

IOG (LON: IOG) has released its first set of profits following the start up of its Saturn Banks project in the North Sea.

The London-listed firm reported revenues of £30.2m for the first six months of 2022, with profits of £11.4m.

However the firm has had a number of unplanned shutdowns, including a week in July for a chemical injection fault at its Blythe field, so it has revised down its H2 2022 production guidance.

IOG now expects to produce 30-50 million standard cubic feet of gas per day, revised down from 45-60 million per day.

Gross first half production in H1 totalled 34 million per day.

The operator brought Saturn Banks, a multi-phase gas project covering multiple fields, online in March with the first two fields, Blythe and Elgood.

The third field, Southwark, is due for first gas in Q4 2022 following a series of drilling delays.

Moving forward, IOG pointed to a series of key milestones over the coming year, including the appraisal wells on Goddard and Kelham North and Central.

It is also expected to make a final investment decision on Nailsworth – the first part of Phase 2 – which IOG has previously said would be coming online towards the end of 2023.

Milestones ahead

IOG will also be making new licence applications in the upcoming exploration round from the North Sea Transition Authority (NSTA).

Capital expenditure from IOG is expected to be £70-85million for 2022 this year. The firm works in partnership with Warren Buffett’s Cal Energy Resources.

CEO Andrew Hockey said: “In March, IOG became the UK’s newest gas producer when we brought Saturn Banks Phase 1 onstream – a major milestone that is testament to many years of hard work across the whole team and our robust partnership with CalEnergy Resources. Generating our first revenues and profit in this period is an important step forward for the business.

“With high salinity fluids currently being received onshore, we are temporarily producing the Blythe and Elgood wells independently to establish the source of these fluids and optimise the operating plans. In view of this, we have revised our 2H 2022 guidance to a more conservative 30-50 mmscf/d.

“Our two other key priorities this year are delivering Southwark first gas and progressing our Phase 2 plans. We also aim to open up further synergistic gas hubs with the two exciting appraisal wells at Goddard and Kelham. We look forward to the rest of 2022 and beyond with a firm focus on maximising shareholder value.”