IOG.L Regulatory News (IOG)

30 September 2022

IOG plc

Production Update

IOG plc ("IOG", or "the Company"), (AIM: IOG.L), the Net Zero UK gas and infrastructure operator focused on high return projects, provides an update on Saturn Banks production.

Andrew Hockey, CEO of IOG, commented:

"Over 2H 2022 to date, average gross gas rates have been 28.6 mmscf/d, with average realised gas prices of 274 p/therm, resulting in higher revenues in both July and August than previous months. In September, saline liquids production has constrained average gas production to 21.8 mmscf/d, with latest rates of 32 mmscf/d as we work to restore higher flows.

Working closely with Perenco and ODE, we have secured short-term aqueous liquids handling capacity and are pursuing more attractive medium-term solutions. As the water is most likely being produced via a natural Blythe reservoir fracture, we are also working to optimise reservoir management."

Blythe and Elgood production

In September, Saturn Banks combined gross flow rates have averaged 21.8 mmscf/d at uptime of 87%, building up to a latest gross production rate of 32 mmscf/d. The volume weighted average realised gas price (VWAP) in September, factoring in the 30,000 therms/day fixed at 444 p/therm for this month, was 290 p/therm. IOG has fixed the same volume at 263 p/therm for October.

Build-up of stable gas rates has been constrained by intermittent flows of aqueous liquids into the Saturn Banks Reception Facilities. Condensate and aqueous liquids have each averaged approximately 300 bbl/d in September. The aqueous liquids consist of saline water and monoethylene glycol (MEG), which is injected in the wells to inhibit hydrate formation.

When liquids arrivals reduce available storage capacity, the Perenco Bacton terminal control room reduces gas flow to avoid overfilling the Saturn Banks slugcatcher and shutting in production. As liquids are let down from the slugcatcher and removed, gas flow rates can be gradually increased.

Currently, letdown capacity is restricted by storage availability (shared with other non-Saturn Banks liquids), tanker removals and the cycling of letdowns between Saturn Banks and other Bacton gas streams. IOG is working with Perenco on modifications to enable continuous letdowns.

Due to salinity levels, the aqueous liquids cannot currently be regenerated at Bacton as originally planned, but are stored onsite or offsite to be either regenerated for reinjection or disposed. Up to four tankers per day are transporting liquids to offsite storage facilities and several MEG regeneration routes have also been identified.

Analysis indicates that a sub-seismic resolution natural reservoir fracture encountered during Blythe development drilling is the most likely source of the saline water. IOG is therefore evaluating ways to optimise Blythe reservoir management.

The intention over the coming weeks is to continue restoring higher stabilised flow rates, subject to liquids handling constraints. As gas rates are increased, the extent to which aqueous liquids production increase will be assessed.

Separately, in November the Perenco Bacton terminal is scheduled to undergo annual maintenance, during which Saturn Banks production is expected to be suspended for up to two weeks. Meanwhile, as work continues to establish remote platform restart capability offshore, IOG retains permanent standby logistical capacity to ensure that, in the event of platform trips, restart interventions can be expedited typically in well under 24 hours.

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.