IOG plc, the Net Zero UK gas and infrastructure operator focused on high return projects, provides a Phase 1 operational update.

Southwark Drilling

Southwark A2 well

• Well stimulation vessel SLB BIGORANGE XVIII is scheduled to start mobilising to Southwark today
• A2 hydraulic stimulation operations are expected to start by early next week
• A2 first gas is expected around year end, subject to stimulation progress and operational risks to final hook-up and commissioning

Southwark A1 well

• A1 resumption plan has been agreed, risk-assessed and associated procurement actioned for direct continuation after A2
• A1 first gas is expected by early Q2 2023

Saturn Banks Operations

• Saturn Banks Pipeline System ("SBPS") has been depressurised as planned to enable safe installation of final subsea spool connecting to Southwark over the coming days
• October gross average production was 15.8 mmscf/d at a volume weighted average price of 164 p/therm, with 59% uptime driven partly by the depressurisation
• Production is expected to restart in late November, subject to operational risks and Perenco Bacton terminal maintenance, which commenced overnight 4-5 November
• Dewatering and backgassing of the SBPS outer section to Southwark are planned to be completed during the shutdown

Finance & Contractual

• October 2022 gas price fix of 30,000 therms/day at 263 p/therm was closed out early given the shut-in, resulting in £0.47 million income to IOG over late October shut-in period
• 2022 net IOG capex (including IFRS16 leases) is expected to outturn at the low end of £70-85 million guidance range
• Aqueous liquids handling onshore is putting upward pressure on operating costs - management is evaluating a range of potential solutions 
• Following sale to Shelf Drilling Holdings Ltd ("Shelf"), the Noble Hans Deul jack-up drilling rig is being renamed the Shelf Perseverance - no operational impact
• IOG's rig contract, which includes one further unexercised extension option at an attractive dayrate, has been novated to Shelf

Rupert Newall, CEO of IOG, commented:
"The IOG team is addressing recent operational challenges in order to restore forward momentum across the business. Our new COO Dougie Scott and I have set clear short, medium and longer-term objectives that can unlock shareholder value from our diverse portfolio of gas and infrastructure assets. I am much encouraged by the renewed focus and commitment of everyone at IOG to mitigate risks and deliver these objectives.

For the remainder of 2022, our top priorities are safe and timely resumption of Saturn Banks production after the Bacton shutdown and successful stimulation to deliver first gas at the Southwark A2 well. The pipeline depressurisation and stimulation vessel mobilisation announced today are two steps towards these goals. Additionally, having assessed several A1 drilling options in light of well conditions to date, we have decided on an optimal plan to complete and bring it onstream after A2.

The increase in cash generation from both Southwark wells can underpin the multiple further value adding activities we are planning over coming months, including Blythe production optimisation, progressing Nailsworth as part of a wider Central Hub development with Elland and Panther, the appraisal campaign at Goddard and Kelham, evaluating the commercial potential of the Grafton area (P2589) via seismic reinterpretation, and submitting bids for a range of complementary assets when the 33rd Round closes in January. I look forward to keeping investors regularly updated as we progress through this important phase for the business."

KeyFacts Energy: IOG UK country profile