IOG.L Regulatory News (IOG)

23 May 2022

IOG plc

Operational Update

IOG plc ("IOG", or "the Company"), (AIM: IOG.L), the Net Zero UK gas and infrastructure operator focused on high return projects, provides a further operational update.

Over the past month, Blythe and Elgood hydrocarbon liquids (condensate) flowing into the Saturn Banks Reception Facilities (SBRF) slugcatcher have fluctuated considerably, reaching peak levels of up to 1,850bbl/d. The SBRF, which lies adjacent to the main Perenco Bacton terminal, is co-owned by IOG and CalEnergy Resources Limited and operated by Perenco (UK) Limited (PUK). All liquids streams coming into Perenco Bacton, including Saturn Banks liquids, are processed through the terminal's Condensate Stabilisation Unit (CSU).

In the past week, a PUK operational risk assessment has identified a drainage system deficiency in the CSU's two recycle compressors, which has been highlighted by the increased Saturn Banks liquid rates. PUK has concluded that this must be addressed before any further Saturn Banks liquids can be processed and has limited the SBRF slugcatcher to a 15% maximum liquid level. Consequently, after progressive reduction in flow rates to manage these constraints, PUK has now enforced a full shut-in of Blythe and Elgood production to prevent further liquids entering the slugcatcher.

PUK has been developing a modification to their CSU compressor drainage system to resolve the issue. Subject to a safety review scheduled for Monday 23rd May, one compressor is expected to be modified within approximately one week, enabling limited initial resumption of Saturn Banks production (currently projected to be c.30 mmscf/d of gas). Following modification of the second compressor, which is expected to take approximately one further week, Saturn Banks production is expected to be gradually restored to normal levels over the following weeks. The outcome of PUK's safety review may yet affect this provisional timeline.

As previously indicated, Blythe and Elgood condensate yields per unit of gas produced are expected to decline relatively rapidly during the first year of production. This should reduce any longer-term potential for such onshore liquids handling challenges. Southwark is expected to have far lower condensate yield.

Average aggregate Saturn Banks gas production over the 30 days prior to 20th May was 41 mmscf/d, achieving uptime of 74% at Blythe and 78% at Elgood. During that period, the volume weighted average realised gas price was 100p/therm. Over recent weeks, UK NBP day-ahead prices have continued to diverge both from European benchmark day-ahead prices and NBP forward curve prices, following record high LNG inflows into the UK, lack of domestic storage and interconnector capacity driving significant short-term price volatility.

Andrew Hockey, CEO of IOG, commented:

"Whilst relatively high liquids flows are welcome and generate revenue, liquids handling issues within the Perenco Bacton terminal have unfortunately required a short-term shut-in of Saturn Banks production. This is a very frustrating interruption to our efforts to maintain stable, consistent early gas flows, however, maintaining the highest safety standards must always be the first priority.

We are in close dialogue with Perenco at both management and technical levels to ensure the modification to their plant is rapidly expedited. Subject to their risk review, we currently expect a limited re-start after approximately one week with a gradual return to full production levels over the following weeks."

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 is a Net Zero UK gas and infrastructure operator focused on high-return projects. The Company's operations are currently concentrated around its offshore and onshore Saturn Banks infrastructure in the UK Southern North Sea. Phase 1 of its Saturn Banks Project, which started production in March 2022, entails the commercialisation of the Blythe, Elgood and Southwark gas fields through this infrastructure. Phase 2 of the Saturn Banks Project entails the Nailsworth, Goddard and Elland gas discoveries, which are subject to future investment decisions and expected to be commercialised through the same export infrastructure. The Company also holds further licences with additional resources including the Abbeydale, Panther and Grafton gas discoveries, the Kelham North, Kelham Central, Thornbridge and Thornbridge Deep prospects, and part of the Orrell gas discovery. Currently, all IOG's licences are held 50:50 with its joint venture partner CalEnergy Resources (UK) Limited and operated by IOG. In addition, the Company continually evaluates further opportunities for accretive portfolio additions to help generate additional shareholder returns. Further details are available at www.iog.co.uk.