IOG.L Regulatory News (IOG)

7 December 2015

Independent Oil and Gas plc

Skipper Well Funding and Progress towards Drilling

Independent Oil and Gas plc ("IOG" or the "Company"), (AIM: IOG.L), the North Sea focused oil and gas company, is pleased to provide the following funding and operational update regarding the upcoming appraisal well on Skipper.

Overview

· Skipper well funding now secured.

· The Company now has sufficient working capital for the next twelve months.

· Loan Agreements signed with GE Oil & Gas UK Limited ("GE O&G") and London Oil & Gas Limited ("London O&G"), part of London Group Limited, for an aggregate amount of up to £4.75 million.

· Approximately £4.5 million of the well funding will be deferred until December 2016. Some of these agreements are still subject to completion of documentation.

· Deadline on the Skipper Sale and Purchase Agreement extended to 21 December 2015.

· Anticipated spud date for the Skipper well is late January or early February 2016.

· A contract with a drilling rig provider and the well management service contract are subject to completion of documentation.

Loan Agreements

On Friday 4 December 2015 the Company and its wholly owned subsidiary IOG North Sea Limited ("IOG North Sea") entered into two loan agreements (the "Loan Agreements") with GE O&G and London O&G (together, the "Lenders") pursuant to which the Lenders will provide loans of, in aggregate, up to £4.75 million (the "Loans") to help fund the drilling of the Skipper appraisal well. Of this sum, GE O&G is providing £2 million and London O&G is providing £2.75 million. Interest of 9% per annum is payable on amounts of the Loans drawn by IOG North Sea and both the principal and interest are repayable by 30 December 2016.

IOG and IOG North Sea have granted the Lenders a fixed and floating charge over the Company and the assets of IOG North Sea as security for repayment of the Loans. IOG has also agreed to grant warrants to each of the Lenders to subscribe respectively for up to 5,777,310 ordinary shares in the capital of the Company ("Ordinary Shares") at a price of 11.9p per Ordinary Share. The total of 11,554,620 warrants may be exercised at the Lenders' discretion at any time up to 30 December 2016.

The drawdown of the Loans is subject to the satisfaction or waiver of certain conditions precedent including the Oil and Gas Authority ("OGA") approving IOG as licence operator and AGR Well Management Limited ("AGR") as well operator and completion of the rig contract.

Essential Equipment, Rig and Service Contracts

An agreement with a major service contractor has now been executed with significant deferral.

Now that the Loan Agreements are in place, the Company is well placed to conclude contract negotiations on the Skipper rig and an announcement will be made in due course.

The Company has agreed but not yet executed a well management contract with AGR. The Company anticipates that AGR's fees pursuant to this contract will be part satisfied by the issue of Ordinary Shares and part satisfied by payment in cash. Initial payments at IOG's election of £657,220 may be satisfied either in cash or by the issue of new Ordinary shares at an issue price equal to the volume weighted average of the price of the Ordinary Shares for the calendar month prior to issue.

The Company is also anticipating entering into further contracts with a number of other service and equipment providers on deferred payment terms. All contractors who agree to defer their fees will also share in the security over the Company's assets being provided to the Lenders. No interest is payable by IOG on the deferred amounts, which must be repaid by 30 December 2016.

Skipper SPA

As a consequence of the good progress that the Company has made toward drilling the Skipper well, Alpha Petroleum Resources Limited ("Alpha") has agreed to extend the deadline on the Skipper sale and purchase agreement to 21 December 2015.

IOG anticipates that the Skipper appraisal well will be spudded late January or early February 2016. This is contingent upon the OGA approving IOG as operator of the licence area and granting an extension to the Skipper licence.

Weatherford Loan

As part of the funding arrangements, Weatherford Technical Services Limited ("Weatherford") has agreed to extend the maturity date for its outstanding loan of approximately US$2 million until 30 December 2016. As consideration for the extension, Weatherford will share in the same security package as that granted to the Lenders and the contractors providing services on a deferred payment basis.

General Meeting

The Company has granted warrants to GE O&G in respect of 4,989,122 Ordinary Shares which exhausts the Company's remaining share authorities. Accordingly, the grant of the balance of the warrants to the Lenders and the potential issue of Ordinary Shares to AGR pursuant to the arrangements described above will require the passing of resolutions of the Company's shareholders at a general meeting. The Company will shortly be publishing a circular to shareholders containing a notice convening a general meeting to obtain these approvals and a further announcement will be made in due course.

Mark Routh, CEO of IOG commented:

"We are delighted to have secured this loan funding along with very significant contractor deferrals, demonstrating industry's support for the Skipper project. Subject to completion of certain contracts we are now fully funded to drill this transformational well early in 2016 and look forward to reverting with the final details shortly."

-ENDS-

Enquiries:

Notes

About Independent Oil and Gas:

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. After the completion of the Skipper acquisition from Alpha, the combined estimate of 2P reserves in Blythe and 2C resources in Skipper net to IOG will be 37.1 million barrels of oil equivalent ("MMBoe").

Post completion of the Cronx acquisition IOG will have five licences in the North Sea. Four of these licences will now be owned 100% by IOG and subject to DECC/OGA approval will be operated by IOG. The Blythe licence is co-owned 50% with Alpha which is the operator. IOG has a 100% working interest in two other licences, one awarded in the 27th licensing round and another in the recent 28th licensing round. One is to the east of Blythe containing the Truman prospect and Harvey discovery and the other is between the Blythe and Cronx licences which contains the Elgood and Hambleton discoveries and the Tetley and Rebellion prospects. Both these 100% owned licences have potential resources that could be tied back to nearby infrastructure or to the Blythe development.

Further information can be found on www.independentoilandgas.com

About Blythe:

The Blythe gas discovery straddles Blocks 48/22b and 48/23a in the Southern North Sea in licence P1736 which is 50% co-owned by IOG and Alpha (operator). Blythe needs no further appraisal and has independently verified gross 2P reserves of 34.3 BCF (6.1 MMBoe) which is 17.2 BCF (3.0 MMBoe) net to IOG. (Source: ERC Equipoise Competent Person's Report ("CPR") dated September 2013.)

The partnership is working towards submitting a draft Field Development Plan for Blythe by the end of 2015.

About Skipper:

The Skipper oil discovery is in Block 9/21a in the Northern North Sea in licence P1609. Skipper needs further appraisal by drilling a well to retrieve an oil sample in order to design the optimum field development plan. Subject to the completion of the previously announced acquisition of Skipper from Alpha, IOG can now progress to the appraisal and development stage of this asset. Skipper has independently verified gross 2C resources of 26.2 MMBbls. IOG management estimates that the recoverable oil from Skipper is 34.1 MMBbls based on a recovery factor of 25%, compared to the historic CPR estimate of 19%. Successful flow tests from nearby heavy oil fields substantiate the company's estimate of a 25% recovery factor. The appraisal well will also target two exploration prospects directly beneath the Skipper oil discovery which may contain oil in place of 46 MMBbls. (Source: AGR Tracs CPR dated September 2013.)

About Cronx:

IOG has agreed to acquire 100% of Cronx (Block 48/22a, licence P1737) which is subject to completion. The Cronx gas discovery is 14km north-west of the Blythe field in which IOG owns 50%. Cronx was discovered in 2007 by well 48/22b-6 drilled by Perenco UK Ltd.

IOG commissioned an independent 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 well in 2016, subject to rig availability, the necessary permits and funding. 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. IOG is currently evaluating options for the development and export of the Cronx gas.

About Elgood and Hambleton:

The Elgood discovery (IOG 100%) (Block 48/22c, licence P2260) was drilled by Enterprise Oil in 1991 and tested gas to surface at 17.6 MMcfd but was not progressed by Enterprise due to size and gas prices at that time. IOG's estimate of the recoverable reserves in Elgood is 2.1 MMBoe.

The Hambleton discovery, to the south of the same licence, was drilled by Century Exploration in 2005 but also was not progressed to development. IOG estimates that Hambleton has recoverable resources of 6 BCF (1 MMBoe). IOG believes that the reprocessing of existing 3D seismic data could increase recoverable resources up to 26 BCF.

There are prospective resources on licence P2260 of 5.3 MMBoe in the Tetley and Rebellion prospects. Reprocessing of existing 3D seismic across 48/22a and 48/22c is required to determine whether Elgood connects to Cronx which would boost recoverable reserves significantly. The new seismic interpretation will also determine the likely size of Hambleton. IOG is now working on the potential development plans and will commission a CPR‎ to confirm the resources over this area.

Competent Person's Statement:

In accordance with the AIM Note for Mining and Oil and Gas Companies, IOG discloses that Mark Routh, IOG's CEO and Interim Executive Chairman is the qualified person that has reviewed the technical information contained in this announcement. 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.