Independent Oil and Gas plc, the UK gas company targeting high returns via an infrastructure-led hub strategy, provides an update on the previously announced 32nd Round Licence offers and the P2085 (Harvey) and P2441 (Redwell) licences.

During 2020, IOG has been undertaking a programme of 3D seismic reprocessing to Pre-Stack Depth Migration (PSDM) over its UK Southern North Sea (SNS) portfolio, covering an aggregate area in excess of 1200km², with the new seismic dataset for each licence area then reinterpreted in turn. The objectives of this programme are to enhance subsurface understanding across the portfolio, generate a development hopper of the best incremental investment opportunities, inform detailed well designs for Phase 1 assets and enable portfolio rationalisation where necessary.

Initial results of this work are discussed below and inform the licence activity described here. Further updates are expected in the coming months as the team completes reinterpretation work on the Southwark, Nailsworth, Elland, Abbeydale and Goddard licences.

P2589 (Panther and Grafton) 32nd Round Licence Offer

IOG North Sea Limited (IOGNSL) has received from the Oil and Gas Authority (OGA) and accepted a formal offer of licence P2589, which incorporates Blocks 49/21e and 49/22b. P2589 includes two gas discoveries, Panther and Grafton, with management estimated recoverable gas resources of 46 Bcfe and 35 Bcfe respectively. IOGNSL applied for these blocks in November 2019 in the 32nd Offshore Licensing Round as 50% operator in partnership with CalEnergy Resources (UK) Limited (CER, 50%).

These assets are directly adjacent to IOG's existing portfolio. Panther lies c.5km from the IOG-CER JV's Elland field and c.10km north of its Southwark field, which is part of the Phase 1 development, while Grafton lies c.16km northeast of Southwark. The work programme includes reservoir studies and 79km² of 3D seismic reprocessing to PSDM. This will help to refine resource estimates, inform development planning and evaluate any further opportunities on the licence.

P2587 32nd Round Licence Offer

In November 2019 IOGNSL also applied in the 32nd Offshore Licensing Round for Blocks 48/23d and 48/24c as 100% operator, with a work commitment to reprocess to PSDM 61km² of 3D seismic data over the licence area within 4 years. With the OGA's licensing process extended due to the pandemic, the Company completed this work prior to formal offer of the licence, as part of its seismic reprocessing programme.

Interpretation of the reprocessed dataset indicated that the undrilled structures originally identified over blocks 48/23d and 48/24c are relatively small and the overburden is complex, with further 3D seismic reprocessing deemed unlikely to mitigate trap risk. Consequently, IOG has notified the OGA of its decision not to accept the offer of the notional Licence P2587. This will help prioritise capital and resource allocation appropriately, avoiding potentially significant expenditure on further seismic purchasing and reprocessing, as well as direct licence costs.

P2085 Harvey

The reinterpretation of the newly reprocessed seismic over the Harvey and Redwell licences has also integrated the data from the 48/23b-6 Harvey well drilled in 2019. The image quality of the new seismic dataset is significantly improved compared to 2018 and gives a more reliable indication of the vertical seismic velocities and depths beneath and within the overburden. However, the variability of the low-relief structures depending on the depth conversion technique applied means reinterpretation of this area remains challenging.

The reinterpretation indicates that the structure around the 48/23b-2 well (Harvey-2) has a management estimated Minimum, Most Likely and Maximum recoverable gas resource of 12-21-35 billion cubic feet (Bcfe), while the structure around the 48/23b-6 well location remains a small isolated closure of sub-economic size. For comparison, the Elgood field, a single well subsea tie-back to Blythe as part of the Phase 1 development, has 2P reserves of 27 Bcfe.

Consequently, IOG has notified the OGA of its intention to retain the Harvey-2 structure and relinquish the remainder of the P2085 licence, which will minimise future costs. The Company will then undertake a detailed commercial assessment of Harvey-2, in particular evaluating a potential "Elgood lookalike" development concept. This entails a single well tied back subsea to the Blythe platform, which has been designed to have a spare 10-inch riser and j-tube. Harvey will then be ranked against other assets in IOG's development opportunities hopper, which will mature over coming months as further seismic reinterpretation results become available.

P2441 Redwell

The reinterpretation indicates that the main section of the previously mapped Redwell structure is now estimated to have a Most Likely recoverable gas resource of 36 Bcfe. However, the relatively thin pay and poor reservoir quality represent significant challenges to commercial development.

Meanwhile, the north-west area of the previously mapped Redwell structure is significantly reduced in height as compared with previous imaging, no longer connected to the main structure and, with a clearly delineated spill-point into the Harvey fault block, unlikely to hold a gas accumulation.

The reinterpretation has therefore led to the decision to relinquish the P2441 Redwell licence to minimise any further costs and prioritise more commercial assets.

Andrew Hockey, CEO of IOG, commented:
"We are pleased to formally accept the 32nd Round Licence P2589 containing the Panther and Grafton discoveries, as 50% Operator alongside our partner CalEnergy Resources. These development opportunities show good synergies with our core portfolio and further technical work will help to assess the full potential of the licence.

Alongside this we continue to evaluate a Harvey subsea tie-back to Blythe concept, to include in our development opportunities hopper being derived from the 3D seismic reinterpretation programme. In addition, completing the work commitment prior to formal award enabled us to save resources by declining the offer for Licence P2587.

Our ongoing technical re-evaluation and portfolio ranking work is key to realising our growth ambitions by allocating resources to the best incremental investment opportunities. We will continue to assess our portfolio against rigorous technical standards, enabling us to focus our acreage position and deploy capital where it creates most value for shareholders. I look forward to providing updates as further seismic reinterpretation results become available."

About IOG

IOG (AIM: IOG.L) owns and operates a 50% stake in substantial low risk, high value gas reserves in the UK Southern North Sea. The Company's Core Project targets a gross 2P peak production rate of 140 MMcfe/d (c. 24,000 Boe/d) from gross 2P gas Reserves of 302 Bcfe¹ + 2C gas Contingent Resources of 108 Bcfe², via an efficient hub strategy. In addition to the independently verified 2P reserves at Blythe, Elgood, Southwark, Nailsworth and Elland and 2C Contingent Resources at Goddard, IOG also has independently verified best estimate gross unrisked prospective gas resources of 73 Bcfe² at Goddard. Alongside this IOG has management estimated mid-case recoverable gas volumes of 21 Bcfe at Harvey. In December 2020 IOG also accepted a 50% operated stake in Licence P2589, containing the Panther and Grafton gas discoveries with management estimated 46 Bcfe and 35 Bcfe respectively. In addition IOG continues to pursue value accretive acquisitions to help generate significant shareholder returns.