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We can breath again. H2 should have been a regulation drill but as is IOG way it's not been straightforward.

Having dealt with the short term bond covenant tests and now resolved H2 (but why oh why does the kit keep having issues!) and firmer gas price to still be under 7p is tad surprising. But never mind.

It's good news that the fault has been rectified. Fingers crossed now that flow stabilises and is maintained water free at a higher level.

Part 2 of the RNS around the rig is more interesting. It has been inevitable that would happen. Not to have let it go would have been too risky. They need to rebuild the cash balance. It's a shame as they had a good rate but it has to be about the unluckiest rig in the North Sea. So I'm glad to see the back of it.

The plan seems to be to try and find a buyer for a 50% interest in Goddard as the next likely target. So unless they have something easy to tie back in 33rd round they will be exploring options to push out license commitments with the O&G authorities and CalE. You would think both should be broadly supportive and that should be an easier discussion than the bond discussion.

So all in all it's been a good past 10 days. Now the one wildcard to do still have is the LOG administrators. Hopefully, they will like the long term and long suffering shareholders sit on their hands and give IOG the time to rebuild and go again.

My only other thought remains whether IOG is a potential target. The likelihood of an equity raise has receded greatly at a low level.

So next scheduled news should be the license round updates and any updates on future targets such as the review of Southwark. The plunge into the abyss has been stopped but the damage to the share price of the past 9 months shocks has been huge and while I think we can look forward to some higher valuations without clarity on the next phase of work it's a wait and see. Gas price and stable fiscals very important now to give IOG the time to recover.

Well we get a bit more information on this bond discussions.

What's new in that RNS is the inclusion of the lOG subordinated debt in the text.

It's the second condition that's odd. Have the lOG administrators started to seek to get the convertible paid in cash not shares? Were they seeking to use the default on the euro bond to claim a cross default?

What is the significance of the 31st July? Is that a date significant to the LOG subordinated debt?

Still a couple of pieces of the zigsaw missing here to explain these events.

Yeh it's hard to tell.

Reading each line slowly and carefully (I shouldn't have to of course!) Today was the record date by that I take it like a dividend the interest was to be paid to whoever recorded today as the bondholder. The cash was paid into an account - I assume at the paying agent. But then IOG I assume as the issuer has asked them to hold onto it and not pay out pending some further update.

With 50% of bondholders inside they must be convening a meeting of the bondholders to agree something. The something is unknown and speculative.

The board need to come back quickly to shareholders with what the plan is. We are clearly currently second priority behind debtors.

Some sort of refinance or restructure of bond seems the likely reason. To be called technical is very odd it suggests it's part of the process of whatever they are doing. Can't tell if that means it's just the payment delayed and the bondholders per record date today remains who would get it.

The original bond was issued assuming higher reserves in Elgood and Southwark. With just Blythe producing the reserves are greatly diminished and there is no firm plan on the table of where the next producing asset will be. As it's not likely to be a phase 2 funded by calE that is why both the cash and balance sheet is stressed.

They obviously have to conclude the discussions with bondholders as they have 50% in the group maybe the technicality is notifying the other holders what the majority group decides?

But we really do need some stability and clarity for shareholders as to what the plans now are. I guess they need the bondholders to say what conditions they intend to apply to support to work out what that means in terms of the next operations.

You also have the outside possibility of a takeover or offer.

If it was dire situation the share would have been suspended pending further announcements. It's not been. So as the moment it appears an orderly process.

I hate IOG RNS!

I assume the yield on the bond has risen because the price fell reflecting the increased risk.

Well I would say they had planned this all along hence the previous odd inclusion in the last couple of RNS.

The problem with it while it says they deferred the interest for 'technical reasons' it gives no clue what the technical reason is or why it's not been paid when clearly it could have been paid.

The only reason would be they need to pay for something (like the rig next location) and 15m less 3m leaves them with no cash buffer less say 12.5m for the next operation or they have deferred to allow a bit of cash in or god forbid as part of some other capital restructure debt swap or equity raise they are working on. Either way it has to be to do with cash else makes no sense at all.

Now the board need to explain in a bit more detail exactly what they are up to as to be honest I think they are being not entirely open here and slow walking whatever they are up to onto shareholders.

They may just be being very conservative and faced with issues with the bond favouring debt holders over shareholders which is legally correct for a board to do. But that RNS is short of some critical details so hard to fully understand and calibrate. Need to read it several more times I suspect and await some further updates.

Whatever it is they clearly now have a majority of the bond voters inside the process.

Deltalo it's pretty clear given both parties are willing to give 25% of Goddard away to fund that in a farm out that the thinking is giving away shares of future assets in farm out to attract funding from other parties.

Based on that alone I'd say calE are looking to manage the risk not put significant sums beyond their 50% commitments.

IoG are going to have dig themselves out of this hole that is going to be by stronger gas price, discipline with capital, a bit of luck/better judgement on risk and viability of assets. That will take time and so e forebearance by stakeholders including unfortunate long term shareholders who gave been severely battered.

Deltalo and why on earth would calE give IOG money for fields they already have a 50% share! The 65m is for the phase 2 fields. If they aren't developed then one suspects the 65m is potentially gone to IOG. IoG need to review Southwark and draw conclusions on whether phase 2 still makes sense. CalE one would think would be pretty miffed if IOG pressed on with phase 2 with significant uncertainty post Southwark. One would imagine it would put severe strain or break the jv.

calE are in the stronger position and could just sit on phase 1 and walk away pretty much ahead while Blythe pumps to depletion. IOG can't as they need Blythe to repay the bond. IOG need more assets now in the future to give shareholders a decent return particularly the LOG administrators.

So nice idea but can't see it . They are here to make money.

The answer to why it's not bounced back is likely for several reasons.

While it's good news they think they know what the mechanical issue is it's not actually fixed yet. So that piece of good news and a confirmed revised flow is awaited. Based on past experience with IOG it's clearly wise to wait and see.

Secondly the drop is as much to do with the toxic combination of lower gas prices and the bond test at end of month. The poor result originally announced simply amplified the impact of the second part of the corporate update they chose to issue with the last RNs. IOG have a track record of raising cheap with their mates in the city. However, this time I suspect the LOG administrators with 30% of the shares, an unsecured debt and an underwater convertible option which will expire soon must be absolutely livid. They will have a view on any raise.

So I do think it would only occur this time if there was no option.

The firmer gas price and getting H2 flowing promptly has improved the prospect of avoiding it.

So what will put some winds back in the sails will be firmer gas pricing and news they get past June month end with no drama from the bondholders.

It's not IOG fault gas pricing and windfall tax has undercut the finances. But Southwark and Elgood were key parts of the financial model and alot of the blame for those lies in whoever analysed the geology and made the call to include them in phase 1.

They really just have to get over the thin mid year gas price period and then have a chance with the next drill and 33rd license update. Pushing out any capital spend as long as possible and allowing the cash to rebuild before the next large spends. They need a bit of luck for a change with the drill and a good decision on which exploration drill to do and a firm plan to get another field progressed towards production. Lots of news and big decisions coming up over summer.

They have to pay interest at end of month, then the rig is due to go to a non phase 2 field which will need £12m+.

So yes they are effectively now relying on forebearance to defer spend while cash balance rebuilds.

They will still highly likely fail tests on the bond at end of month.

The bondholders this time should waive but they could easily say you need more capital and request an equity raise. That is the risk.

Had they gone to a phase 2 field next then that would have a full carry worth £65m. But they aren't instead they are looking at farming out Goddard and due to delays next target appears to be a non producing exploration well.

Blythe will produce cash now to cover interest but to go forwards they need to have a plan for phase 2 or another field else all Blythe does is fund the bond repayment.

So the way out very much depends on getting the next field decision right. Compared to where the company was 1 year ago the Southwark failure has placed the company in a very difficult position.

Jonny it's dropped for several reasons.

First phase 1 was a 3 field campaign. Since first gas which was about 9 months late missing the first winter of high gas prices the first field Elgood produced but depleted in 6 months and is now shut in. Blythe second field well has water ingress (hence current H2 well), third field Southwark after 2 drills and over a year has effectively proved sub commercial and that is after they put a platform on it.

That has left IoG with probably a tenth of the production column and depleted cash.

That's a problem as the bond raised to pay for phase 1 should have repaid from phase 1 production and also funded future development.

As of today with lower gas price and an unjust windfall tax IOG now need forbearance by stakeholders UK gas authority, bondholders and JV partner calE else they will be in serious trouble and need to giveaway shares of assets or raise funds.

Hence the drop is harsh but due to operational failure placing the company finances at risk.

Todays RNs is maybe the start of the turn from the plunge. They now have to work out how to balance future commitments with bondholders over rest of year with a very thin cash balance not helped by windfall tax and lower gas pricing.

Alligator mechanical covers a broad range from the tubing to cement and other reasons they are not getting communication with the reservoir. What we know is it seems to be down hole and they intend to run something down to try and resolve. It's not a fracked well and nothing unusual seemed to be required for H1. So hopefully they have a good idea what it is.

The drop is more to do with the rest of the update those chose to put out with it. It's interesting the title was corporate not operational update. I will be working out a model of the cash flow to see which terms of covenant are at risk. There were 3 in the results RNS.

One day we will get a straight up good news RNS from IOG. Today was not one of those.

By IoG standards it's not the worse RNS.

But they are simply unable to execute a work program on these marginal fields without a sting in the tail.

On H2 the flow is clearly again below expectations. A mechanical issue I take to mean something more geological or drilling residue orientated restricting flow.

Lower volumes is particularly painful given the low gas price.

H1 is now clearly not economic at this low gas price given the costs of handling fluid. Hence H2 is now simply replacing H1.

So overal IOG finds itself having spent £15m to produce the same volume which it sells at a reducing price. Hence revenue is down which brings the bond and balance sheet into play.

So the low gas price in combination with a continued failure to get fields in volume on line is the problem and the reason for the drop.

The next problem is how they progress the next exploration assuming phase 2 is still a way off. They have £15m and that costs £12m a drill.

They need to progress something but the low gas price means the cash is slow to top up till next winter. The windfall tax is going to kill the North sea as an investment prospect. So finding a farm in is harder.

They failed to take advantage of the high gas prices through being late in getting bacton on line. They have wasted most of the bond money on fields that should not have been developed leaving a single still sub optimal well.

They still have the phase 2 carry. That is what should be happening but isn't.

Southwark and the now low gas price has left IOG in a very poor position.

They are limping along. Fixing H2 might help a bit but the low gas price and windfall tax is a bigger issue for small producers especially if you borrow to invest and then don't deliver.

The problems with IOG go back to when they selected the fields in the first place but the run of 'bad luck' is quite astounding. The question is how long they leave to call the next move of the rig to conserve cash. A phase 2 prospect is where they should go but that's not straight forward now. They are getting boxed in and options to strengthen the balance sheet are where the price critical events will occur. Another bad day in IOG land.

Denis is right read the RnS and presentations.

H2 will replace H1 by producing gas without water we hope. H1 will be shut in so as not to pass water into the pipeline. That will save short term costs. But it will need to be produced to extract the full reserve potential of the field. Look at the reserve report from last month for details.

H2 should end up producing the equivalent of what IOG were getting last year from Elgood and Blythe H1.

The downside is the gas price is lower so IOG needs to work harder just to stay still.

There may be condensate but not oil. At least I hope not as not sure they could handle it of they did.

What's IOG worth?

Well it's valued at cash. But it has liabilities falling due and likely 1 or 2 drill commitments of £10 to £12m to pay each this year.

So alot of the current cash is commited to interest and exploration.

The cash generated by H1 depends on the gas price over next 12 months. Beyond that the value is in the other assets not yet developed. Phase 2 should have been a free carry worth £65m but is now pretty uncertain how and when it will be developed. So you will have to look at the reserves report and apply your own assumptions on the assets and what share IOG will end up with and which assets will come online and when. At the moment it's hard to look too far beyond H2 without the company reporting back with more information.

Delay? Delay is Southwark delayed by 16 months by every known problem you could dream up. H2 they only restarted drilling last week with a few thousand feet to hit TD. So it's in range still.

The bigger issue one suspects is gas pricing and the pernicious effect leaving a super tax on UK producers while encouraging LnG imports will have on UK gas for future.

IOG have really missed the boat over last 2 years the late and lost production from 2021 to 2023 could have made such a difference to the balance sheet.

There seems to have been a persistent 100k seller for a while now as well.

Small pullback off a recovered price nothing to worry about. Larger moves would indicate the leaky pipeline of industry offshore insiders know something. IOG has been bad in that regard over last 2 years.

Good to see a few of the old timers posting.

It's been a good week as we emerge from the abyss. But a long way to go. When Deltalo posted about H2 being a game changer I had to laugh. Southwark has been the game changer. H2 should never have even been necessary! But I'm pleased if they can now go on to complete it with no further issues.

H2 buys a bit of time. The big decision is where they go with the rig, how they fund it (from cash I hope) and then news on phase 2 (sounds like a farm out rather than a straight forward free carry). So Scored yes there is a path back to a higher share price but the past year has seriously damaged the upside particularly for long term shareholders. Hence why I dont want the board trying to add working capital via equity to mates in the city unless they have no choice and not at this pathetic level.

It's impossible to price too far ahead at moment as there are too many unknowns still. The board have handsomely rewarded themselves with cheap replacement options and are now well on the way to the exercise price having done little or nothing to justify it.

Indeed. But be careful speaking like that here now you will be accused of deramping and told to pipe down!

Well it was a better RNS for a change no real sting in the tail. The drill is 2200 feet deeper than H1 and the target is @80 thicker. Guidance is as expected at this stage and shutting H1 in makes sense for now to hopefully get clean gas down to bacon. They will run H1 in due course but if anything that is the only downside.

Be very disappointing to hit further problems from this point.

Cash remains tight. They will be running low on cash once they pay interest and if next drill is a non phase 2 paid for target. So they need to get H2 connected and running at capacity as soon as. Can they self fund and avoid having to raise cash? That is the question.

They need H2 online to pull us out of the abyss the stock has plunged. So fingers crossed we may finally be off the bottom and back upwards again. It's been a very painful year to hold IOG stock.

Let's see if it gets reversed as a mistaken transaction.
Crazy price to process a transaction at unless you knew something.

I think some work on the bond is highly likely.
The problem with equity is LOG administrators view on it. They are already down heavily, face the next options at 32p lapsing and have their own loan due next year. The windfall tax has also altered the dynamic. The tax and quality of the assets risk profile makes farmouts harder and takeover offer less likely.
So farmout makes more sense. But the board have a track record of raising working capital at mates low rates.
The problem is now the sequence is broken. Phase 1 has come up way short and phase 2 which was funded is now u scheduled but exploration drills that will not generate revenue are moving ahead and need funding. That is the problem. The bond and LOG loans then just add to the problem.
What price did Zeus place on the business out of interest?

Deltalo the problem was everything as bad if not worse.
They neglected to report the drill string wax actually stuck in the well.
£3m to fix was an expensive problem given it was £12m for the full drill.
It's a huge relief they managed to contain and now seal off the interval to proceed.

Fortunately there is still some cash to burn on this rework. The problem now is they need to fund non phase 2 exploration work at £12m a drill out of £24m or so uncommitted. They will also have interest to keep servicing. So cash is now tight.
The prospect of now farming out rather than developing all the pipeline of prospects is the real cost of Southwark, Blythe and Elgood underperformance.
That is impacting the longer term value now.
The motions to grant rights to issue shares is too small to fund much. But would be hugely dilluting if they did raise like that. So the prospect of farm out to fund makes sense but would be disappointing when it happens. Some clarity on phase 2 is what I would like and would have asked had I been able to go. I will just have to email Me Chance I guess.

Well a quick scan - I can't make AGM due to early time and existing work and family commitments.

H2 was way more serious than the RNS! They actually had alot more trouble than just the gas pocket. Hence the extra cost. Fortunately they managed to recover the drill string.
The fallout from Southwark is ongoing. No news on Southwark but it confirms Nailsworth is in same tight field review as expected.
For first time it alluded to a revised phase 2 and with a drill or drop date for Goddard the news is the ,£18m cost they are looking to fund with a farmout.
So the question would be asking is with phase 2 in doubt has the CER development carry been lost or can it be used on different fields and repackaged?

They are appointing new directors because it has already gone pear shaped.
This seems a good appointment but means nothing about current operations.
They would have appointed anyway.

I've been offline since yesterday working but I remain of the view they make the AGm be it this year or last year hard to attend at short notice like that particularly if you live outside London and actually work.