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Oilman Jim's Private Blog


Independent Oil & Gas - Farm-out Completion & Phase 1 FID

Independent Oil and Gas plc ("IOG" or the "Company"), the development and production company focused on becoming a substantial UK gas producer, is pleased to announce that it has now completed its farm-out transaction with CalEnergy Resources Limited ("CER") as announced on 26 July 2019 and taken Final Investment Decision ("FID") on Phase 1 of its Core Project. The Core Project comprises 410 BCF¹,² of 2P+2C reserves and resources across six discovered UK Southern North Sea ("SNS") gas fields.


·      IOG has completed the farm out to CER of 50 per cent of its SNS upstream assets (except for the Harvey licences), the Thames Pipeline and associated Thames Reception Facilities (the "Farm-out"), on the terms previously announced on 26 July 2019

·      IOG has received £40m as initial consideration from CER (and other completion adjustments) and CER's £60m carry of IOG's Phase 1 development costs will commence immediately

·      As part of the completion process, IOG and CER, have taken Core Project Phase 1 FID, initiating the development programme to deliver First Gas in July 2021

·      The Company has also completed on the acquisition of the Thames Reception Facilities ("TRF"), as announced on 24 July 2019

·      IOG has repaid in full the £17.1m non-convertible debt held by London Oil and Gas Limited (in administration) ("LOG")

·      LOG has converted the full £10.9m of its 2016 8p convertible loan principal and accrued interest into 135,464,155 new ordinary shares of 1 penny each in the capital of the Company ("Ordinary Shares"), which are subject to orderly market restrictions for 12 months

·      Further to the 12 August 2019 RNS, the full £11.6m of LOG's 2018 19p convertible loan principal and accrued interest has been restructured into long-term, unsecured, non-interest bearing loan notes, convertible at 19p into 60,872,631 Ordinary Shares ("Loan Note Instrument")

·      Under the Area of Mutual Interest ("AMI") agreement to pursue business development opportunities around the Thames Pipeline on a 50:50 basis, IOG and CER are planning to submit a joint application for certain blocks in the UK Offshore 32nd Round

Andrew Hockey, CEO, commented:

"I am delighted to announce that the farm-out agreement with our new partner CalEnergy Resources Limited, announced three months ago, has now closed. Alongside our successful €100m bond raise, this confirms us as fully funded for our Core Project, which is projected to deliver over £0.5bn in pre-tax cash flow net to IOG. IOG and CER, as joint venture partners, have consequently taken Phase 1 FID. I am immensely proud of our team for delivering this major milestone and would like to thank our shareholders for their support.

This is the culmination of a transformative year for IOG which begins a new phase in our growth. Our focus, as ever, is on delivering shareholder value. We have established a solid platform from which to generate cash flow from our existing portfolio through effective project execution. Furthermore, we have created the opportunity to generate additional value upside by bringing incremental volumes through our infrastructure. Our Southern North Sea gas business development strategy has clear competitive advantages: we have a very strong and well-aligned partner, we have our key export pipeline in place, we are an approved licence Operator, and we are fully funded to install our hub infrastructure."

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