IOG.L Share News (IOG)

(Sharecast News) - Independent Oil and Gas updated the market on its core development project in the UK Southern North Sea (SNS) on Tuesday, reporting that the two-phase project had been expanded to include the 108 BCF of 2C contingent resources assigned to the Goddard discovery by ERC Equipoise.The AIM-traded firm said the project now comprised a total of 410 BCF of 2P+2C reserves and resources, across six discovered gas fields.That "significantly enhanced" management's core project economics, the board explained, delivering a 40% internal rate of return, £358m of post-tax net present value at a 10% discount, and a peak annual production rate of 146 MMCF/d - up from 114 MMCF/d - with no increase in the funding requirement.Goddard's 108 BCF of 2C contingent resource was discovered gas, which was development ready.Independent said it believed those resources could be reclassified to reserves upon submission of the field development plan (FDP) to the Oil & Gas Authority, which was planned for the first half of 2019.As it had previously announced, the core project was now technically ready to enter the execution phase, and phase 1 pre-final investment decision (FID) engineering was now complete.Thames Pipeline integrity had been proven, and major contractor terms "substantially agreed" with letters of intent in place for a number of key contracts.Geotechnical surveys for design and installation of the Southwark and Blythe production platforms were also successfully completed in December, Independent reported.Preparations were continuing for drilling the Harvey appraisal well, which management estimated had prospective resources in the low/best/high case of 85/129/199 BCF and 63% geological chance of success.In the event of Harvey success, it said its portfolio would deliver a 77% internal rate of return and £688m of post-tax net present value with a 10% discount.Funding plans for the core project were advancing, as the firm detailed on 29 November, with the objective of final investment decision within the first quarter of 2019.First gas was planned to be delivered within 20 months of FID."The integration into our core project of 108 BCF 2C contingent resources at the newly-awarded Goddard discovery makes what was already a very strong investment case even more compelling - our fully-owned and operated Southern North Sea gas development project now carries a base case IRR of 40% and post-tax NPV of over £350m," said Independent Oil & Gas chief executive officer Andrew Hockey."The award of Goddard to IOG in the highly competitive 30th licensing round was a big win for us - we consider it one of the most valuable remaining undeveloped UK SNS fields and an ideal fit for our portfolio, lifting our core project's projected peak production rate as high as 146 MMCF/d."We assess the main part of the Goddard structure to be technically ready for development and with 108 BCF 2C Contingent Resources it will be the largest field in our core project, which can now deliver a total of over 400 BCF of gas into the UK market."Hockey said that at the outset of 2019, the company's focus was to deliver funding for phase 1 of the core project, thereby reaching FID at the earliest opportunity."We are technically and commercially prepared for project execution having made a head start on relevant offshore site surveys."In addition, the core project does not yet include the potential upside of Harvey, which subject to successful appraisal could add another 129 BCF best estimate prospective resources."