5th Mar 2014 10:07
LONDON (Alliance News) - Independent Oil & Gas PLC saw its shares rise Wednesday after it said it will buy UK licence block 48/22a in the North Sea, which contains a gas discovery that will be renamed Cronx, from Swift Exploration for an initial payment of about GBP468,000.
The discovery, which was made in 2007, is 14 kilometres north-west of the Blythe field in which Independent Oil & Gas holds a 50% stake. As long as the Blythe co-owner, Alpha Petroleum Resources Ltd, agrees, Independent Oil & Gas intends to export the gas from Cronx through the Blythe hub.
The initial payment for the block will be made on completion, which the company expects to happen at the end of April. Additional milestone payments will then be made depending the performance of the field, up to a maximum of GBP13.2 million in milestone payments.
The block licence is due to expire at the end of April, and Independent Oil & Gas is seeking an 18 month extension from the UK government. The deal will only go through if the licence extension is granted.
In 2012, Independent Oil & Gas had commissioned a so-called competent person's report in Cronx. That showed a base case expected gas recovery of 17.6 billion cubic feet, or a 3.4 million barrels of oil equivalent 2C resource.
The company said it expects to drill a pilot well in November as long as a rig is available and it has the necessary funding, which it estimates at GBP6.25 million. It would then turn the well into a producing well as it develops the field.
"We are delighted to have secured this asset at a low upfront cost and modest future consideration which will be paid from production revenue," Chief Executive Nark Routh said in a statement.
"IOG's strategy is to develop hubs in the North Sea and this acquisition is further delivery of that strategy. This would be our first well as a fully qualified operator and we have the team and experience to deliver an optimal result," he added.
Independent Oil & Gas shares were up 10.4% 27.331 pence Wednesday morning, one of the top gainers on AIM.
By Steve McGrath; [email protected]; @SteveMcGrath1
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