12th May 2015 10:24
LONDON (Alliance News) - Independent Oil and Gas PLC shares fell Tuesday after it said it has started a 3D seismic remapping project over its southern North Sea gas portfolio which should better define its previous discoveries, though it said that likely will lead to the need for further funding.
Independent Oil shares were trading down 8.1% to 7.35 pence per share late Tuesday morning.
The North Sea focused oil and gas company is conducting the remapping programme in phases and said the first lot of results is expected to be received before the end of May.
The first phase will cover the "core southern North Sea" area including the Elgood, Cronx and Blythe license areas before moving into an optional second phase, which would cover the Skipper license area. The last phase would focus on the prospective southern North Sea area including the Truman, Harvey and Hambleton license areas.
Reservoir Development Services, part of Baker Hughes Inc, has been commissioned by the Independent Oil to complete the remapping project based on the 3D seismic that was purchased last year as part of Independent Oil's 28th licensing round application. The remapping will provide a set of maps across the whole core southern North Sea area showing the Rotliegendes, Carboniferous and Hauptdolomit hydrocarbon bearing horizons.
At the Cronx and Elgood areas, the remapping "should remove uncertainties" about the mapping and commercial discoveries that have been made at both areas. The remapping should lead to the company being able to upgrade the resources at Elgood and Cronx to 2P reserves from 2C resources. However Independent Oil said the upgrade would require a commercial development plan and funding.
Independent Oil has estimated the remapping could double its current 2P reserves if they are upgraded. Currently, the company has 17.2 billion cubic feet of gas, equivalent to 3.0 million barrels of oil equivalent, of 2P reserves net to the company in the Blythe area.
"We are delighted to progress this essential remapping work with the geophysical experts at Baker Hughes RDS. If successful, and subject to a new competent person's report and funding, our 2P reserves could be more than doubled," said Mark Routh, chief executive of the company.
"Independent Oil and Gas continues to work on the potential co-development of Cronx and Elgood and, as previously advised, is in discussions regarding the funding of the well on Cronx, which is required for the completion of the Cronx acquisition," it said in a statement.
At the Blythe discovery, the remapping will "provide a better understanding" of the gas lying beneath. The company said it is carrying out this work itself as it is not part of its joint venture programme.
Independent Oil said it has achieved commercial rates of around 15.0 million cubic feet per day from the Blythe discovery, but said previously tested zones such as the Rotliegend interval, which have proven to be uncommercial in the past, will be re-tested due to success elsewhere in similar zones in the North Sea using fracture stimulated horizontal wells.
"A better understanding of this gas bearing horizon will add to Independent Oil's Hub strategy if commercial in place volumes can be demonstrated," it said in its statement.
The Hauptdolomit horizon above Blythe has also achieved rates of 1,000 barrels of oil per day in two separate wells. The company said the rates "may be commercial" but said the remapping work should establish the actual size of the resource.
The field development plan for the the proven reserves in the Rotliegendes horizon on Blythe is still expected to be submitted by September 2015, it said.
Following that work, Independent Oil will consider a similar remapping project over the nearby Skipper license area, and said it will make a decision on the remapping project before designing the appraisal wells for the area.
"The primary aim of the Skipper appraisal well is to obtain good quality oil and core samples from the Skipper reservoir," Independent Oil said.
The third and final phase will consist of remapping the prospective southern North Sea area, including the Truman, Harvey and Hambleton discoveries.
"This additional work is also expected to be completed by Baker Hughes RDS in due course. The high level objectives would be to demonstrate commerciality or otherwise of the Harvey and Hambleton discoveries and to better define the Truman prospect," said the company.
"We look forward to sharing the results of our technical work in due course and also news of our funding plans," said Routh.
By Joshua Warner; [email protected]; @JoshAlliance
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