IOG.L Regulatory News (IOG)

21 February 2018

Independent Oil and Gas plc

Corporate and Funding Update

Loan facility of £10million, IOG fully funded to FID

Independent Oil and Gas plc ("IOG" or the "Company"), the development and production focused Oil and Gas Company, is pleased to provide the following financial, operational and Board update.

Highlights

· £10 million convertible loan facility (the "New Facility") successfully signed with existing lender London Oil and Gas Limited ("LOG").

o Subject to shareholder approval, convertible into ordinary shares of 1p in the Company ("Ordinary Shares") at a conversion price of 19p (the "Conversion Price"), a 15% premium to the closing price of the Ordinary Shares on 20 February 2018.

o Loans drawn down under the New Facility will carry a coupon of LIBOR+9%.

o The New Facility is secured against all of the current and future assets of the Company and of the Company's subsidiaries IOG North Sea Limited ("IOG NS") and IOG UK Limited ("IOG UK"), and is repayable 36 months after the drawdown of each tranche.

· IOG is now fully funded to Final Investment Decision ("FID") on its 100% owned UK Southern North Sea ("SNS") dual gas hub development project (Blythe and Vulcan Satellites), expected in August 2018.

o Blythe and Vulcan Satellite gas hubs consist of five fields with independently verified 2P reserves of 303 BCF (54 MMBOE).

o IOG remains on track for first gas in Q4 2019.

· Proceeds of the New Facility are to be used to fund: -

o Ongoing site survey programme for the Thames Pipeline and other project pipeline routes, as well as all future platform locations.

o Intelligent pigging operation to confirm the integrity of the decommissioned Thames pipeline, scheduled for late March.

o Platform and pipeline Front-End Engineering & Design ("FEED").

o Thames gas reception facility refurbishment and FEED work at the Bacton terminal.

· Alongside this, initial planning work is underway for the drilling of the Harvey appraisal well.

· Andrew Hockey to succeed Mark Routh as CEO. Mark Routh to be appointed Non-Executive Chairman.

· The issue of Ordinary Shares pursuant to the New Facility is subject to shareholder approval. A General Meeting is to be convened for 13 March 2018.

Mark Routh, Chairman of IOG commented: -

"IOG is pleased to deepen its strategic relationship with LOG to advance its highly attractive SNS development project to FID and beyond.

"This is an exciting year for IOG, with funding in place and a busy work schedule ahead. We are on track by the end of this month to complete the acquisition of the Thames Pipeline, the cornerstone of IOG's SNS gas hub strategy. We have submitted the Blythe Hub Environmental Impact Assessment ("EIA") and will shortly submit the Vulcan Satellites Hub EIA as we target August 2018 for the FID for our entire SNS portfolio.

"The new financing enables us to complete the remaining engineering studies, technical and planning work ahead of FID on what will be a highly cash generative gas portfolio. Development funding plans are progressing well with a view to finalising the optimal mix of conventional debt, offtake-linked finance and contractor finance to take the project to first gas.

"I wholeheartedly congratulate Andrew on his new role as CEO. Andrew has been with IOG since March 2017 as Deputy CEO, working closely with me and has a deep technical and commercial understanding of the business and an excellent SNS development track record. As Chairman I look forward to providing dedicated support and guidance to the Board and management as the Company proceeds to its next stage of growth."

Andrew Hockey, CEO of IOG commented: -

"I am thrilled that the Board has appointed me to succeed Mark as CEO. IOG has a fantastic set of assets, an excellent team, new funding in place and a clear growth strategy focused on UK offshore gas. I look forward to continuing to work with Mark and the wider team to deliver significant shareholder value by bringing our proven assets into production while further expanding our portfolio."

Michael Starkie, Finance Director of LOG said: -

"We are delighted to have supported IOG with this financing which will ensure these highly attractive UK gas assets reach FID in the coming months. We have every confidence that the Company will deliver full project funding to achieve FID in August 2018 and first gas by late 2019. We are also excited by the portfolio growth and production opportunities being actively pursued on the solid foundations of the SNS gas hub strategy."

£10 million New Facility

LOG has agreed to make a secured convertible loan facility of up to £10 million available to the Company. The New Facility will carry a coupon of LIBOR + 9%, with accrued interest capitalised every six months and added to the outstanding principal. Principal and accrued interest is repayable 36 months after the drawdown of the relevant tranche. LOG may, at its sole discretion, elect to extend the maturity date of a tranche by up to 12 months (provided that no maturity date shall extend beyond 25 February 2022). However, interest will not accrue during the period of this extension. The New Facility is secured against all the current and future assets of the Company and of IOG NS and IOG UK and, subject to shareholders approving the resolutions at the General Meeting, amounts drawn down under the New Facility and accrued interest will be fully convertible at any time following the drawdown of each tranche at LOG's election into Ordinary Shares at the Conversion Price. Prior to the shareholders' approval, the Company can draw down a maximum of £1 million under the New Facility. If the shareholders' resolutions are not passed at the General Meeting, any sums drawn down (together with all accrued interest) would become repayable on the date falling three months after the date of the New Facility.

The Company may elect to draw down the New Facility no more than once each month and in a sum of not less than £500,000 and up to £1 million, unless otherwise agreed with LOG. Any election by the Company to draw down the New Facility may be accepted or declined by LOG, in its sole discretion. If LOG accepts the Company's election to draw down the New Facility, LOG is irrevocably committed to advance the full amount of the loan specified in the Company's notice to draw down the New Facility.

The New Facility is in addition to the existing loans from LOG ("Existing Loans") as announced on 7 December 2015, 11 December 2015 and 5 February 2016. The New Facility will share senior security with the Existing Loans. LOG retains the right under the Existing Loans to nominate two directors to the board, currently Martin Ruscoe and The Right Honourable Charles Hendry. As previously announced, the Company is seeking to appoint a further independent Non-Executive Director in the near future.

Proceeds from the New Facility will primarily be used to fund the 2018 work programme to FID as detailed below.

2018 Work Programme

The Company has two 100% owned gas hubs, the Blythe and Vulcan Satellites Hub Developments which consist of five fields with independently verified 2P reserves of 303 BCF (54 MMBOE). The EIA has been submitted for the Blythe Hub, which includes the Blythe and Elgood fields and the EIA for the Vulcan Satellites Hub will be submitted shortly. The Company continues to target August 2018 for FID at both hubs with first gas scheduled for Q4 2019 subject to project financing.

The Company's pre-FID work on the SNS gas hubs project includes: -

· Ongoing site survey programme for the Thames Pipeline and other project pipeline routes, as well as all future platform locations.

· Intelligent pigging operation to confirm the integrity of the decommissioned Thames Pipeline, scheduled for late March.

· Platform and pipeline FEED.

· Thames gas reception facility refurbishment FEED work at Bacton terminal.

In addition, the Company is focused on progressing other value-adding activities during 2018. Initial planning work to drill the Harvey appraisal well is underway. This includes commissioning of Pre-Stack Depth Migration of the 3D seismic on the Harvey licence. Under the current licence IOG has until December 2019 to drill the well. A final decision as to the timing of this drilling will be taken later this year.

Alongside this the Company has applied for three new areas in the UK 30th Offshore Licensing Round and looks forward to a successful outcome later this year. The Company continues to target production acquisition opportunities to supplement its SNS gas development strategy.

Board Changes

Mark Routh is to be appointed Non-Executive Chairman and Andrew Hockey will now step up from Deputy CEO to lead IOG's executive function as CEO. As part of the transition, Mark Routh will continue to be available to provide certain executive functions as requested by the Company for a minimum period of three months which may be extended by the parties each quarter as required.

Notice of General Meeting

The Company has today published and posted to its shareholders a circular containing a Notice of General Meeting at which resolutions will be proposed in order to grant authority to the directors to issue and allot Ordinary Shares to satisfy conversion of sums drawn down under the New Facility without being required to offer these Ordinary Shares to shareholders on a pre-emptive basis.

The General Meeting is to be held at the offices of Shakespeare Martineau LLP, 6th Floor, 60 Gracechurch Street, London EC3V 0HR on 13 March 2018 at 11:00 am.

A copy of the Circular is available at the Company's website at www.independentoilandgas.com 

-ENDS-

Certain information communicated in this announcement was, prior to its publication, inside information for the purposes of Article 7 of Regulation 596/2014.

Enquiries:

Notes

About Independent Oil and Gas:

IOG owns substantial low risk, high value gas reserves in the UK Southern North Sea. The Company is targeting a 2P peak production rate in excess of 200 MMcfd (c. 35,000 Boe/d) from its substantial current portfolio via an efficient hub strategy. Alongside this it continues to pursue value accretive acquisitions, to generate significant shareholder returns. All of IOG's licences are owned 100% and operated by IOG.

Competent Person's Statement:

In accordance with the AIM Note for Mining and Oil and Gas Companies, IOG discloses that Mark Routh, IOG's Chairman is the qualified person that has reviewed the technical information contained in this document. Mark Routh has an MSc in Petroleum Engineering and has been a member of the Society of Petroleum Engineers since 1985. He has over 35 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.

Further information can be found on www.independentoilandgas.com