BOUNCING25 Sep 2018 13:32
Was down around 12% this morning, price rising back up throughout the day. Now only -5.6%.
I think people are starting to realise that this is fantastic news with multiple brokers upgrading their targets.
Finn Cap Note:
Independent Oil & Gas (IOG) : Corp
Energy
Thames pipeline integrity confirmed
IOG’s Southern North Sea hub development moves another big step closer, with inspection and pressure testing of the Thames pipeline demonstrating it is in excellent condition and more than fit for purpose, with an expected capacity approaching twice initial estimates. First gas for Phase 1 of the project has slipped slightly, to Q2 2020, but this is more than offset by the higher pipeline capacity, which offers material third-party tariff income potential. This drives an increase to our risked-NAV based price target, from 61p to 64p. Funding plans for Phase 1 are being finalised; conclusion will materially de-risk the project.
Jonathan Wright
020 7220 0543
jwright@finncap.com
VSA Capital Note:
Independent Oil & Gas (IOG LN)#
Independent Oil & Gas (IOG LN) has announced important positive confirmation from its most recent studies on the Thames Pipeline which it intends to use an export route for its Southern North Sea gas project. The 150-bar pressure test (well above the expected 80-bar pressure necessary to deliver gas to Bacton terminal) fully confirmed the pipeline’s integrity proving its viability over the next two decades for use as an export route for IOG. A tethered pig inspection also delivered positive results with no internal corrosion or external defects found.
The Thames Pipeline is one of the crucial factors in determining the strong and enhanced economics of IOG’s project given that it is wholly owned by the company and has saved significant front-end capex. Furthermore, there is expected to be substantial ullage which paves the way for additional projects such as Harvey, where the company recently secured funding for an appraisal well in January 2019 as well as further acquisitions and indeed third-party tariff opportunities given that peak gas will likely be around 180mmcfd of around 550mmcfd capacity.
IOG is now in preparation for the final stages of FID, with FEED designs now completed in all areas. FID is now expected in in Q4 2018 with construction commencing in 2019 and first gas in late Q2 2020. With strong gas pricing and high levels of geopolitical tension the merits of IOG’s project are clear which we believe bodes well for FID and project financing.
We reiterate our Buy recommendation and 92p target price.
#Indicates VSA house stock.
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