Independent Oil and Gas plc, the North Sea focused oil and gas development and production company, has entered into an agreement to acquire 100% of the UK licence block 48/22a from Swift Exploration (“Swift”) for an initial consideration of approximately £468,000.
Block 48/22a contains a gas discovery which IOG intends to rename Cronx. The Acquisition is subject to the satisfaction of certain conditions on or before 30th April 2014 including the approval of the Department of Energy and Climate Change (“DECC”).
The Cronx gas discovery is 14km north-west of the Blythe field in which IOG holds 50%. Cronx was discovered in 2007 by well 48/22b-6 drilled by Perenco UK Ltd. Subject to agreement with the co-owner of the Blythe field, Alpha Petroleum Resources Ltd and the successful development of Blythe, the gas export of Cronx would be via the Blythe hub which will be 50% owned by IOG.
IOG commissioned an independent Competent Person’s Report (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 pilot well in November 2014, subject to rig availability, the necessary permits and funding, which IOG currently estimates to be £6.25m. 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. The well would be reused and extended into a producing well as part of the field development.
The initial consideration of approximately £468,000 will be paid to Swift at completion, which is expected at the end of April 2014. Additional milestone payments are due depending on field performance. Further details of the Acquisition are set out below.
The licence is due to expire on 30th April 2014 and an 18 month extension is being sought by IOG from DECC. The acquisition is subject to such an acceptable licence extension being obtained, DECC approval of IOG as the operator and IOG’s funded commitment to the pilot well. Completion is expected by the end of April 2014 and these conditions must be satisfied by that date.
Mark Routh, CEO of Independent Oil and Gas plc said: “We are delighted to have secured this asset at a low upfront cost and modest future consideration which will be paid from production revenue. IOG’s strategy is to develop hubs in the North Sea and this acquisition is further delivery of that strategy. This would be our first well as a fully qualified operator and we have the team and experience to deliver an optimal result.
Based on the work ERC Equipoise has done and the additional work carried out by our own technical team we are confident that the CPR base case of a 17.6 BCF 2C resource will be confirmed as the minimum 2P case in due course, which would more than double our proven reserves to 6.4 MMBOE with potential for a greater increase. IOG also has additional 2C resources of 13.1 MMBbls in Skipper, which subject to further appraisal is also expected to be converted to proven reserves in due course. We will make further announcements with regards to the Cronx deal completion and the rig as soon as possible.”