Independent Oil and Gas plc (IOG) has made progress towards drilling the Skipper well, in the UK North Sea.
Namely, Alpha Petroleum has agreed to extend until December 7, 2015 the date for satisfaction of the conditions precedent relating to the acquisition by IOG of for the remaining 50% of Skipper.
Alpha Petroleum previously extended the deadline till October 7, 2015. The sale remains subject to Oil and Gas Authority (OGA) approval which will require IOG to be fully funded for the well.
To this end, IOG has terms agreed in principle for a semi-submersible rig contract with the day rate on the rig expected to be substantially deferred, the company said in a press release issued on Thursday.
IOG has also agreed terms with AGR Well Management (AGR) which is expected to be the designated Well Operator and it has made a formal request to the OGA that AGR take on this role upon completion of the Skipper acquisition and in conjunction with IOG becoming the licence operator.
IOG has also signed a Letter of Interest with a global equipment supplier for the Skipper appraisal well and subsequent expected development. The Letter of Interest envisages the provision by the supplier of a £2m loan to IOG.
Good progress is also being made with a large service company to provide essential services on the rig including the oil sampling, the company further added. Part of these costs are also expected to be deferred.
The various service contractors and suppliers supporting IOG now are all expected to be granted security over the Skipper, Blythe and Elgood licences and will also become preferred partners in the anticipated subsequent Skipper development. All deferrals and loans accrued will be payable at the end of September 2016.
The main aim of the well is to retrieve an oil sample in order to design the optimum field development plan. Skipper has independently verified gross 2C resources of 26.2 MMBbls, based on a 19% recovery factor, which IOG believes to be conservative. The appraisal well will also target two exploration prospects directly beneath the Skipper oil discovery which the Competent Person estimates may contain additional oil in place of 46 MMBbls.
Discussions with several investors to fund any shortfall in the well costs are ongoing, IOG said. In addition, Darwin Strategic has agreed to extend the outstanding balance of its loan amounting to £358,000 to December 7, 2015 without any interest or penalties. Darwin will retain the right to convert into equity on the same terms as previously advised effective from October 4, 2015 if it has not been repaid. IOG currently has sufficient funding until late October 2015.
Mark Routh, CEO of IOG commented: “I am very pleased with the indications of support we have had from the contractor and oil service community towards getting this transformational yet low risk well, funded and drilled, which could increase our reserves from 3 MMBoe to more than 30 MMBoe.
“We are working hard to address our funding position with significant progress being made. I look forward to providing an update shortly.”