Sector News

IOG announces acquisition of Oyster Petroleum

June 14, 2016
News

Independent Oil and Gas plc, the development and production focused oil and gas company, is pleased to announce that on 10 June 2016 it signed a Sale and Purchase Agreement with Verus Petroleum Ltd, to conditionally acquire 100% of the shares of Oyster Petroleum Limited a subsidiary of Verus.

The acquisition is conditional upon Verus completing the transfer of certain licences into Oyster which have 2C recoverable resources of 320.7 billion cubic feet of gas.

Highlights:

  • SPA signed to acquire 100% of the shares of Oyster, for an initial consideration of £1 million, £0.75 million nine months after Completion with further payments of up to £3.25 million upon the achievement of certain milestones (the ‘Acquisition’).
  • Initial consideration to be funded by drawing down on the Company’s available loan facilities.
  • Oyster will hold 100% of Block 49/21a (Licence P039), 100% of Block 49/21d (Licence P2122), 100% of Block 48/25b (Licence P130) and 100% of Block 49/21c (Licence P1915), in the UK sector of the Southern North Sea. These licences contain the Vulcan East, Vulcan North West and Vulcan South fields (collectively, the ‘Vulcan Satellites’). Oyster also has approximately $25.6 million in UK pre-trading expenditure which can reduce the future amount of tax payable.
  • The Acquisition increases IOG’s 2C recoverable resources by 320.7 BCF or 53.45 million barrels of oil equivalent (‘MMBoe’) at an effective cost of US$0.22/Boe.
    • Acquisition consists of 77.4 BCF at Vulcan East, 131.3 BCF at Vulcan North West and 112.0 BCF at Vulcan South.
    • Subject to completion of this and previously announced acquisitions, the Company’s combined 2P reserves and 2C resources increases to 102.3 MMBoe.
  • The Vulcan Satellites, which require no further appraisal, lie 30-45km east of the Blythe field which is 100% owned by IOG pending completion of the Blythe acquisition.
  • Vulcan East has a suspended well requiring decommissioning which has been independently estimated to cost £3.0 million.
  • IOG is in advanced discussions regarding an export route for its SNS gas hubs. Once these offtake arrangements are in place IOG will prepare Field Development Plans.

Mark Routh CEO of IOG commented: ‘We are extremely pleased to have agreed this major transaction, to acquire a number of attractive assets, in what remains a challenging market. These assets will more than double our 2P and 2C recoverable resources at a very compelling price and come with substantial pre-trading expenditure.

This acquisition expands our hub strategy; to gain control over a number of dormant discoveries that can be developed through common existing infrastructure, thereby generating significant economies and capturing many synergies.

Once all announced transactions have completed, we should have more than 100 MMBoe of low risk resources in our portfolio. This will be approximately two thirds gas and one third oil which provides an excellent springboard for us to become a significant development and production company. The additional scale will further enable IOG to contribute positively to UK energy security, in line with the principle of Maximising Economic Recovery for the UK North Sea.

We remain confident that with the right approach, there is considerable value remaining in the North Sea and I look forward to making further updates on the Vulcan Satellites development plans in due course.’

Simon Hume-Kendall Chairman of London Oil & Gas Limited (‘LOG’) commented: ‘This transaction demonstrates that LOG’s investment in IOG has assisted the Company in overcoming the worst of the upheaval in the oil and gas market. The company is now clearly able to expand and develop its portfolio in innovative ways by seeking to commercialise these sizeable developments.

Furthermore and most critically, LOG is pleased to be in advanced discussions with IOG and other parties regarding the development funding required to unlock the considerable value in their portfolio, which we believe to have multi-billion dollar revenue potential.’

LOG special adviser, The Right Honourable Charles Hendry, former UK Minister of Energy added: ‘The interaction between Government, leading British multinationals and the Company throughout this process has been invaluable and has shown ‘UK Plc’ operating in harmony to extend the life of the North Sea, in line with the Government’s aspirations.

With recoverable resources of more than 100 MMBoe now in sight, IOG is on its way to becoming a substantial North Sea company. The agreement shows that even in challenging times for the industry, major partners are able and willing to work together to deliver new investment.’

Source: OilVoice

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