IOG.L Regulatory News (IOG)

26 June 2023

IOG plc

Successful Blythe H2 Intervention and Drilling Programme Update

IOG plc ("IOG", or "the Company"), (AIM: IOG.L) provides an update on the Blythe H2 well wireline intervention and the drilling contract with the Shelf Drilling Perseverance ("SDP") jack-up rig.

Rupert Newall, CEO, commented:

"We have successfully completed the wireline intervention at Blythe H2 well, which has now flowed at a maximum stabilised rate around 42 mmscf/d, slightly above our original 30-40 mmscf/d guidance. Production will now be managed up from 20 mmscf/d towards the maximum rate to further dewater the pipeline. The team has worked very well to identify the issue and remediate it safely and efficiently. The significant improvement in our operating team performance is also demonstrated by Blythe operating efficiency increasing from 59% in 2022 to 93% over 1H23 to date.

In parallel with the remediation work on H2, we have been assessing next steps for the business very carefully. Mindful of current gas market and balance sheet risks, we have decided to pause drilling activity for now in order to maximise near-term cash flow."

H2 intervention

· During well testing prior to H2 First Gas on 12th June, gas flow appeared to be choked back below expected levels by a restriction above the reservoir. Equipment was mobilised to the rig to test whether this was caused by a partially activated downhole valve

· Over the weekend, the downhole blockage was duly verified at the expected depth. The valve was then fully opened with suitable equipment and the anticipated change in downhole pressure was observed

· The well was handed back to the Operations team in the early hours of Sunday 25th June and subsequently flowed at a maximum stabilised rate of 41.9 mmscf/d

· Production is now initially set at 20 mmscf/d and will be steadily built up to full rate over the coming week as the Saturn Banks Pipeline System is further dewatered

· The absence of formation water production from H2 is expected to significantly reduce aqueous liquid arrivals at Bacton, which should in turn reduce unit operating expenditure

· The plan remains to produce from H2 only over the next few months; once water levels have re-equilibrated at the H1 location, periodic production is planned from H1 at lower rates to minimise water production

SDP Drilling contract 

· The SDP has been contracted to the IOG-CalEnergy Resources JV ("the JV") since the Elgood well was spudded in April 2021 

· One of two priced contract extension options was previously exercised with a view to drilling one of the two planned appraisal wells at Kelham North/Central and Goddard 

· At the current time, having overcome both the Blythe H2 well control event and downhole blockage, and in the context of continued gas market volatility, maximising production and rebuilding cash balances are key priorities

· The decision has been taken to defer the drilling of the Kelham and Goddard appraisal wells at this time and the SDP will therefore be released after completion of Blythe H2 operations

· The JV will continue to assess the best options to drill the two appraisal wells by 31 March 2024 as per the respective licence terms 

· The JV is offering potential farm-in partners up to 50% of the Goddard licence (P2438) via the previously announced farm-out process

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 UK developer and producer of indigenous offshore gas. The Company began producing gas in March 2022 via its offshore and onshore Saturn Banks production infrastructure. In addition to its production assets, IOG operates several UK Southern North Sea licences containing gas discoveries and prospects which, subject to future investment decisions, may be commercialised through the Saturn Banks infrastructure. All its assets are co-owned 50:50 with its joint venture partner CalEnergy Resources (UK) Limited. Further details of its portfolio can be found at www.iog.co.uk.