IOG sets new spud date for Skipper well

Independent Oil and Gas (IOG) has scheduled the appraisal well on the Skipper oil discovery, which lies in the Northern North Sea, to be drilled in July 2016.

In January, IOG postponed the drilling of the Skipper well, that lies in Block 9/21a in licence P1609, due to low oil price and bad weather in the North Sea. The well was initially supposed to be drilled with Transocean’s John Shaw semi-submersible drilling rig.

However, as the well was delayed, Transocean stacked the 1982-built John Shaw in February.

IOG reported on Tuesday it has now renewed the previous contract announced in December 2015 with Transocean to drill the Skipper appraisal well. The rig that will drill the well is Transocean’s semi-submersible Sedco 704.

The Skipper will be a vertical well drilled to 5,600ft with the primary objective of retrieving good quality reservoir condition oil samples in order to optimize the Skipper field development plan.

The secondary well objective is to drill two mapped reservoir structures beneath the Skipper oil field in the Lower Dornoch and Maureen formations, in which the CPR authors have mapped structures which could contain up to an additional 46 MMBbls of oil in place. If oil is present in these structures these accumulations would be co-developed with Skipper in line with the company’s hub strategy.

The expected well duration has been reduced from 25 to 22 days and the rig is expected to start drilling on location in early July 2016. The beginning of drilling is contingent upon relevant technical and environmental approvals, including well permits, which are progressing with the OGA and DECC.

Mark Routh CEO of IOG commented: “The willingness of our financial backers and contractors to co-operate in a progressive way to make this well happen amid these tough industry conditions is testament to a new collaborative spirit in the North Sea. The support and engagement of the OGA for this approach has been vitally important and is very encouraging for the future.”

The company is required to make an advance payment to Transocean of $1,728,000 prior to the spud date. The company will part-settle this amount by the issue of 2.7 million Ordinary Shares at a price of 18.375p reducing the required advance payment by £496,125. These shares will be admitted to trading on 10th June 2016 and the total shares then in issue shall be 93,754,847.

The balance of the advance payment is to be paid by 4th July 2016 either in cash from IOG’s existing loan facilities or to be settled in shares issued at the prevailing share price.

IOG noted that the total well cost has now been reduced to approximately £6.8 million, with approximately £5.7 million still to be paid. Approximately £3 million is expected to be deferred until 20th December 2017 as a result of agreements with various contractors, some of which remain subject to finalization of documentation.

The remaining £2.7 million and any required contingency is covered by IOG’s existing loan facilities. The loan facilities and contractor deferrals will benefit from a fixed and floating charge over the assets of IOG and IOG North Sea Limited.

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