IOG.L Regulatory News (IOG)

19 July 2021

IOG plc

Successful Elgood Development Well 48/22c-7 Flow Test Results

IOG plc ("IOG", or "the Company"), (AIM: IOG.L), the UK gas company targeting growth and high returns via an infrastructure-led hub strategy, is pleased to provide an update on the Elgood well 48/22c-7, our first Phase 1 development well.

The well was drilled horizontally through the reservoir section to a Total Depth of 15,472ft Measured Depth (MD), intersecting 1,080 ft of high-quality Permian Leman Sandstone reservoir along hole between 14,290 ft MD and 15,370 ft MD, with a net:gross ratio of 91%, good porosity at 12.4% and average log-derived permeability of 13.3 milliDarcies (mD) versus the P50 prediction of 5mD.

Over recent days the well was successfully cleaned up and flow tested. Test rates were ahead of expectations, with a maximum rate of 57.8 mmscf/d of gas and 959 bbl/d condensate through a 80/64th inch choke, constrained by surface facilities on the Noble Hans Deul jack-up rig. The Elgood field is planned to be produced as a subsea tie-back, via the 6" pipeline laid in Q4 2020, to the platform at the Blythe field once the single development well at the latter has also been drilled. The subsea tree will be controlled via the umbilical being installed over the coming weeks as part of the summer 2021 subsea installation campaign.

A number of mechanical issues were experienced on the Elgood well since it spudded on 9 April 2021, which extended it beyond the initially expected three-month duration. The Company has collaborated closely with Well Operator Petrofac and its key drilling contractors, Noble Corporation and Schlumberger, to overcome these challenges and execute the well as safely and efficiently as possible.

The Company and its contractors have investigated the root causes of these issues and are putting in place protocols and procedures to limit the potential for similar mechanical issues to occur in subsequent wells.

The Noble Hans Deul rig is expected to mobilise within the next week to the Blythe field where it will drill the development well through the Blythe platform, before moving on to Southwark. Due to the extended duration at Elgood, the Blythe well despite being shorter is now expected to be completed by October 2021, and Phase 1 First Gas therefore to occur in Q4 2021.

The Elgood reservoir was encountered 39ft deep to prognosis. Management's preliminary integration of the well data, prior to the well test, indicated that the range of ultimate recoverable gas may be less than the pre-well estimates. The Company will undertake a full technical review to determine an updated range of ultimate recoverable gas from the reservoir, which will require further modelling and analysis of several months of production. In the meantime, in light of the higher than expected clean-up flow rates combined with the high forward gas pricing environment for the coming year, management believes that near-term Elgood cashflows are likely to exceed the Company's planning base case.

Andrew Hockey, CEO of IOG, commented: 

"Delivering our first development well at Elgood is another important milestone for IOG and a surface-constrained maximum well test rate of 57.8 mmscf/d and 959 bbl/d condensate is encouraging for initial production rates.

We expected the Elgood well to be technically challenging, being the first development well drilled on the smallest Phase 1 field and the only subsea tie-back in the programme. The mechanical issues experienced have indeed tested my team, but thanks to their hard work, resourcefulness and diligent collaboration with our key contractors, Petrofac, Noble Corporation and Schlumberger, we have now completed it safely and successfully. In that respect I would also like to acknowledge the continued support of our Joint Venture partner CalEnergy Resources (UK) Limited.

The Elgood volumetric range will be revised once we fully integrate well and production data. Initial field revenues look likely to be strong given the positive well test rates and the very buoyant gas market, with Winter 2021 prices currently over 90p/therm. We will shortly be spudding the Blythe well, which is expected to take under three months, after which we can provide a more comprehensive view of initial Phase 1 production rates."

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with the company's obligations under Article 17 of MAR.

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About IOG:

IOG owns and operates a 50% stake in substantial low risk, high value gas reserves in the UK Southern North Sea. The Company's Core Project targets a gross 2P peak production rate of 140 MMcfe/d (c. 24,000 Boe/d) from gross 2P gas reserves of 302 Bcfe¹ and management estimated 2C gas Contingent Resources of 132 Bcfe, via an efficient hub strategy based on co-owned infrastructure. In addition to its 2P reserves at Blythe, Elgood, Southwark, Nailsworth and Elland and 2C contingent resources at Goddard, it has management estimated gross 2C contingent resources of 23 Bcfe at Abbeydale and unrisked mid-case prospective resources of 66 Bcfe at Thornbridge, 31 Bcfe at Southsea, 31 Bcfe at Kelham, 27 Bcfe and 16 Bcfe in the two Goddard flank structures, and 21 Bcfe at Harvey. In December 2020 IOG also accepted a 50% operated stake in Licence P2589, containing the Panther and Grafton gas discoveries with management estimated gross mid-case contingent resources of 46 Bcfe and 35 Bcfe respectively. In addition IOG continues to pursue value accretive acquisitions to help generate significant shareholder returns.

1ERC Equipoise Competent Persons Report: October 2017, adjusted by Management to account for updated project timing and compression

Competent Person's Statement

In accordance with the AIM Note for Mining and Oil and Gas Companies, IOG discloses that Andrew Hockey, IOG's CEO, is the qualified person that has reviewed the technical information contained in this document. Andrew Hockey has an MSc in Petroleum Geology and has been a member of the Petroleum Exploration Society of Great Britain since 1983. He has almost 40 years' operating experience in the upstream oil and gas industry. Andrew Hockey consents to the inclusion of the information in the form and context in which it appears.