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IOG PLC (IOG)

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Wednesday 29 September, 2021

IOG PLC

Successful Blythe Development Well Flow Test

RNS Number : 2985N
IOG PLC
29 September 2021
 

29 September 2021

 

IOG plc

 

Successful Blythe Development Well 48/23a-H1 Flow Test

 

IOG plc ("IOG", or "the Company"), (AIM: IOG.L), the Net Zero UK gas and infrastructure operator focused on high return projects, is pleased to provide an update on the Blythe well 48/23a-H1, the second Phase 1 development well.

 

Highlights

· Blythe well successfully drilled, cleaned up and flow tested to a maximum gas rate of 45.5 mmscf/d through an 80/64th inch choke within two months of spud

· Gas in place and recoverable volumes at Blythe are estimated to be in line with prognosis

· Good improvement in drilling performance over the Elgood well

· Phase 1 First Gas guidance reiterated for Q4 2021

· Initial Blythe Hub production rates expected to be within planning case range

· At current gas prices, 2021-22 cash flows expected to substantially exceed planning case

· Noble Hans Deul jack-up rig mobilising shortly to Southwark to continue the Phase 1 development drilling programme

 

The well was drilled by the Noble Hans Deul jack-up rig to a Total Depth of 10,750ft Measured Depth (MD), intersecting 1,238 ft of good quality Permian Leman Sandstone reservoir along hole between 9403 ft MD and 10,641 ft MD, with a net:gross ratio of 95%, porosity at 10.6% and average log-derived permeability of 5.0 milliDarcies (mD). Based on this initial data, the Blythe gas in place and recoverable volumes are estimated to be in line with pre-drill expectations.

 

Drilling performance saw a notable improvement over Elgood thanks to close collaboration between the Company's drilling, subsurface and HSE teams with the key drilling contractors Noble Corporation, Schlumberger and the Well Operator, Petrofac.

 

Over recent days the well was successfully cleaned up and flow tested to a maximum gas rate of 45.5 mmscf/d through an 80/64th inch choke. One operational challenge experienced during drilling was the loss of drilling mud due to natural fracturing in the reservoir. This necessitated the use of Lost Circulation Materials (LCM) down-hole which may have constrained the clean-up flow rate with drilling mud being recovered to surface during clean-up. Due to drilling fluid and LCM being recovered during clean-up, further analysis is required to determine the amount of condensate produced.

 

The Blythe field is planned to be produced through the Blythe normally unmanned platform, via the 12" pipeline laid earlier this year, which connects to the main 24" Saturn Banks pipeline to Bacton. The Company continues to expect First Gas from both the Blythe and Elgood fields in Q4 2021 once the final subsea and onshore installations are complete. The Noble Hans Deul rig is expected to mobilise shortly across to Southwark, the third of the Phase 1 fields, where it will spud the next production well through the Southwark platform.

 

Based on early indications from the Elgood and Blythe clean-up well tests, the Company expects that initial production rates from the Blythe Hub upon start-up will be within its planning case range. Specific production guidance is expected to be available once onstream. In light of exceptionally high forward gas prices, management expect that the Company's cash flows over 2021-22 could substantially exceed its planning base case.

 

Andrew Hockey, CEO of IOG, commented:  

 

"Delivering the Blythe well within two months and achieving a maximum well test rate of 45.5 mmscf/d gas is another important step forward for IOG. Phase 1 First Gas is now coming firmly into sight which is a testament to the dedication of the whole IOG team and the excellent collaboration with our contractors.

 

We are now integrating the well data into our planning for the start-up of both Blythe and Elgood in Q4. The improvement in drilling performance at Blythe is also very encouraging as we progress on to Southwark and then on to drill the Goddard and Southern Hub appraisal wells in mid-2022.

 

Gas market conditions not just for this coming winter but throughout the forward curve indicate the potential for very strong cash flow generation for IOG over the coming years. We plan to start executing a sensible hedging strategy once onstream, while we also maintain our prudent planning price deck as we work up the next phases of growth.

 

As a committed Net Zero company we firmly believe that domestic gas produced at very low carbon intensity is an indispensable part of the UK's energy transition and IOG's gas will make a positive contribution in that regard."

 

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.

 

Enquiries:

 

IOG plc

Andrew Hockey (CEO)

Rupert Newall (CFO)

James Chance (Head of Capital Markets & ESG)

 

+44 (0) 20 7036 1400

finnCap Ltd

Christopher Raggett / Simon Hicks

 

+44 (0) 20 7220 0500

Peel Hunt LLP

Richard Crichton / David McKeown 

+44 (0) 20 7418 8900



Vigo Consulting

Patrick d'Ancona / Chris McMahon / Oliver Clark

 

+44 (0) 20 7390 0230

About IOG:

 

IOG's Saturn Banks Project targets a gross peak production rate of 140 mmscf/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 gross unrisked mid-case prospective resources of 36 Bcfe at Kelham North, 42 Bcfe at Kelham Central, 58 Bcfe at Thornbridge, 31 Bcfe at Southsea, 28 Bcfe and 19 Bcfe in the two Goddard flank structures, and 21 Bcfe at Harvey. The Orrell discovery, with management estimated gross 2C contingent resources of 42 Bcfe, also lies approximately 50% on the P2442 licence held 50% by IOG.

In December 2020 IOG was also awarded 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 further significant shareholder returns.

¹ ERC 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.

 

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