(Alliance News) - Independent Oil & Gas PLC said Monday it has completed the farm-out agreement with CalEnergy Resources Ltd for half of its southern North Sea assets.
Shares in the company closed 6.7% higher in London on Monday at 20.00 pence each.
The company entered into the talks in July.
IOG also said it has taken a final investment decision on phase 1 of its core project, which comprises 2P reserves of 410 billion cubic feet of gas across six gas fields.
"I am delighted to announce that the farm-out agreement with our new partner CalEnergy Resources, announced three months ago, has now closed. Alongside our successful EUR100 million bond raise, this confirms us as fully funded for our core project, which is projected to deliver over GBP500 million in pre-tax cash flow net to IOG," said IOG Chief Executive Andrew Hockey.
He continued: "IOG and CER, as joint venture partners, have consequently taken Phase 1 final investment decision. I am immensely proud of our team for delivering this major milestone and would like to thank our shareholders for their support."
CalEnergy will pay the UK-focused gas & oil company an initial GBP40.0 million cash payment and could pay an additional GBP125.0 million in core project costs. Independent Oil said CalEnergy could finance GBP60.0 million in phase one development costs and GBP65.0 million could be paid during phase two.
CalEnergy will receive 20% of Independent Oil's net revenue from the first phase of development, up to a cap of GBP91.0 million.
Hockey added: "This is the culmination of a transformative year for IOG which begins a new phase in our growth. Our focus, as ever, is on delivering shareholder value. We have established a solid platform from which to generate cash flow from our existing portfolio through effective project execution.
"Furthermore, we have created the opportunity to generate additional value upside by bringing incremental volumes through our infrastructure. Our Southern North Sea gas business development strategy has clear competitive advantages: we have a very strong and well-aligned partner, we have our key export pipeline in place, we are an approved licence Operator, and we are fully funded to install our hub infrastructure."
By Paul McGowan; paulmcgowan@alliancenews.com
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