IOG.L Regulatory News (IOG)

Independent Oil and Gas plc

Acquisition of Block 48/22a ("Cronx")

Independent Oil and Gas plc (AIM: IOG.L) ("IOG"), the North Sea focused oil and gas development and production company, is pleased to announce that is has entered into an agreement to acquire 100% of the UK licence block 48/22a from Swift Exploration ("Swift") for an initial consideration of approximately £468,000. Block 48/22a contains a gas discovery which IOG intends to rename Cronx. The Acquisition is subject to the satisfaction of certain conditions on or before 30th April 2014 including the approval of the Department of Energy and Climate Change ("DECC").

The Cronx gas discovery is 14km north-west of the Blythe field in which IOG holds 50%. Cronx was discovered in 2007 by well 48/22b-6 drilled by Perenco UK Ltd. Subject to agreement with the co-owner of the Blythe field, Alpha Petroleum Resources Ltd and the successful development of Blythe, the gas export of Cronx would be via the Blythe hub which will be 50% owned by IOG.

IOG commissioned an independent Competent Person's Report (CPR) by ERC Equipoise on Cronx in July 2012 which shows a base case expected gas recovery of 17.6 BCF or 3.4 MMBOE 2C resource. IOG anticipates drilling a pilot well in November 2014, subject to rig availability, the necessary permits and funding, which IOG currently estimates to be £6.25m. IOG expects the well to confirm the recoverable resources, which IOG believes has the potential to be larger than the 17.6 BCF base case in the CPR. The well would be reused and extended into a producing well as part of the field development.

The initial consideration of approximately £468,000 will be paid to Swift at completion, which is expected at the end of April 2014. Additional milestone payments are due depending on field performance. Further details of the Acquisition are set out below.

The licence is due to expire on 30th April 2014 and an 18 month extension is being sought by IOG from DECC. The acquisition is subject to such an acceptable licence extension being obtained, DECC approval of IOG as the operator and IOG's funded commitment to the pilot well. Completion is expected by the end of April 2014 and these conditions must be satisfied by that date.

Mark Routh, CEO of Independent Oil and Gas plc said:

"We are delighted to have secured this asset at a low upfront cost and modest future consideration which will be paid from production revenue. IOG's strategy is to develop hubs in the North Sea and this acquisition is further delivery of that strategy. This would be our first well as a fully qualified operator and we have the team and experience to deliver an optimal result.

Based on the work ERC Equipoise has done and the additional work carried out by our own technical team we are confident that the CPR base case of a 17.6 BCF 2C resource will be confirmed as the minimum 2P case in due course, which would more than double our proven reserves to 6.4 MMBOE with potential for a greater increase. IOG also has additional 2C resources of 13.1 MMBbls in Skipper, which subject to further appraisal is also expected to be converted to proven reserves in due course.

We will make further announcements with regards to the Cronx deal completion and the rig as soon as possible."

Summary of the terms of the Acquisition and the Sale and Purchase Agreement

IOG North Sea and Swift entered into a sale and purchase agreement dated 28th February 2014 in relation to the Acquisition (the "Acquisition Agreement") pursuant to which Swift agreed to transfer to IOG North Sea a 100% interest in licence P1737 (the "Licence") covering block 48/22a. The Acquisition Agreement is subject to the satisfaction or waiver of a number of conditions on or before 30th April 2014 (the "Long Stop Date") including: (i) the approval of DECC and third parties to the transfer; (ii) Swift providing confirmation that it has completed the acquisition of the 50% interest in the Licence it did not already own; (iii) the initial term of the Licence being extended by DECC to a date not earlier than 30 October 2015; and (iv) approval by DECC of IOG as the operator of the Licence.

IOG North Sea has agreed to pay Swift an initial consideration of approximately £470,000. This includes a deposit of £100,000 payable upon Swift satisfying the condition at (ii) above. The deposit is non-refundable save in certain limited circumstances. The balance of the initial consideration includes the reimbursement of £38,700 of licence fees and a £79,200 seismic uplift fee and will be paid to Swift at completion, which is expected at end of April 2014.

IOG North Sea may also be liable to pay Swift further milestone payments depending on the performance of the field. An initial payment of £200,000 is due upon first commercial production and them further payments of £200,000 are payable on achieving each of 5bcf, 10bcf, 15bcf, 20bcf and 25bcf commercial production from the Licence. On achieving 30bcf and each subsequent 5bcf of commercial production, up to a maximum of 125bcf, further payments of £600,000 are due. Unless total commercial production exceeds 125bcf, a pro rata payment capped at £600,000 is payable on final abandonment of production. If commercial production from the Licence exceeds 125bcf then the maximum aggregate milestone payments by IOG North Sea will be £13.2 million, equivalent to $1.08/BOE. If commercial production is 17.6 BCF the aggregate payments would be £1.4m, equivalent to $0.67/BOE.

Swift has provided IOG North Sea with certain representations and warranties concerning itself and the Licence as well as undertakings during the period between the date of the Acquisition Agreement and completion of the Acquisition.

-ENDS-

Enquiries:

Notes:

IOG is an oil and gas company with established assets focused on the UK North Sea. The company's strategy is to deliver near term development and production assets in North West Europe, through its extensive technical and commercial expertise, whilst maintaining some exposure to exploration upside. The Company is looking to grow both organically and through acquisition.

ERC Equipoise prepared a Competent Person's Report on the Cronx Field (previously "Overstrand") in July 2012 and assigned it a 2C resource of 17 BCF. ERC Equipoise noted that the Cronx volumes were classified as contingent resources pending completion of reservoir studies to confirm the presence of the better quality reservoir interval identified at Blythe and preparation of a viable funded development plan.

Post deal completion IOG will have five licences in the North Sea: The Blythe and Skipper licences are co-owned 50% with Alpha Petroleum Resources (formerly ATP Oil and Gas UK Ltd). IOG has a 100% working interest in two other licences awarded in the 27th licencing round. One is to the west of and adjacent to Skipper, which contains the Theakston and Moorhouse prospects and the other is to the east of Blythe containing the Truman prospect and Harvey discovery. Both these 100% owned licences have potential resources that could be tied back to developments at Skipper and Blythe respectively.  The Blythe owners are targeting the Blythe Field Development Plan submission for 3Q 2014.

IOG is currently a non-operator although it is Licence Administrator and 100% owner of the licences containing the Truman, Moorhouse, Harvey and Theakston prospects. It is at an advanced stage of meeting DECC requirements to qualify as Operator of the Cronx Field.

IOG's naming convention for its fields is UK breweries which shares several parallels with UK oil and gas development and production. Major breweries are dominant but many new entrants are also thriving. The Cronx Brewery in South London is a good example of a thriving new entrant.

In accordance with AIM Note for Mining and Oil & Gas Companies IOG discloses that Mark Routh, IOG's CEO is the qualified person that has reviewed the technical information contained in this press release. Mark Routh has an MSc in Petroleum Engineering and is a member of the Society of Petroleum Engineers. He has 33 years' operating experience in the upstream oil and gas industry. Mark Routh consents to the inclusion of the information in the form and context in which it appears.

Glossary of key technical terms:

Further information can be found on www.independentoilandgas.com