20th Nov 2007 07:02
Island Oil and Gas PLC20 November 2007 PRESS RELEASE 20 November 2007 ISLAND OIL & GAS PLC RESOURCE UPDATE Island Oil & Gas plc (LSE: IOG) ("Island" or "the Company"), announces thatFugro Robertson Limited ("Fugro Robertson") has recently updated its independentassessment of the Company's near-development oil and gas projects offshoreIreland and the Netherlands. This takes account of the successful appraisalwells in the Old Head and Schull gas fields earlier this year and significantprogress in outlining a potential development plan for the Connemara oil field.It also reflects an increase in the Amstel oil field development costs relatedto the highly competitive market conditions created by very strong growth in oiland gas prices during 2007. This assessment constitutes a Competent Person'sReport (the "CPR Report") under the AIM Rules. Highlights of the CPR Report are: •Contingent P50 Resources of 25.6 MMboe for Old Head of Kinsale andSchull gas fields and the Amstel and Connemara oil fields, representing a 46%increase in P50 Contingent Resources relative to the corresponding FugroRobertson Report announced in March 2007. This reflects the fact that Connemarahas now been included as a Contingent Resource by Fugro Robertson and includesIslands revised lower equity share in the Licences (except Schull) following itssuccessful farmout programme •Old Head of Kinsale gas field (Island interest 65%) - On a P50basis, gross gas in place of 41.3 Bscf for the Field; gross gas recoverable of28.9 Bscf for the Field; net contingent resources of 2.6 MMboe. On a P10 basis, gross gas in place of 92 Bscf for the Field; gross gasrecoverable of 64.4 Bscf for the Field; net contingent resources of 5.8 MMboe. Internal Rate of Returns of 25% and 39% respectively for the P50 and P10resources using a Base Case Pricing Scenario. •Schull gas field (Island interest 62.5%) - On a P50 basis, gross gasin place of 42.6 Bscf; gross gas recoverable of 27.7 Bscf; net contingentresources of 2.9 MMboe. On a P10 basis, gross gas in place of 51.1 Bscf; gross gas recoverable of 33.2Bscf; net contingent resources of 3.5 MMboe. Internal Rate of Returns of 19% and 29% respectively for the P50 and P10resources using a Base Case Pricing Scenario. •Amstel oil field (Island interest 50%) - On a P50 basis, gross oilrecoverable of 10.9 MMbo for the field; net contingent resources of 5.5 MMboe. On a P10 basis, gross oil recoverable of 16.4 MMbo; net contingent resources of8.2 MMboe. Internal Rate of Returns of 44% and 116% respectively for the P50 and P10resources using a Base Case Pricing Scenario. •Connemara oil field (Island interest 51.5%) - On a P50 basis, grossoil and gas recoverable of 26.5 MMbo and 10.6 Bscf respectively; net contingentresources of 14.6 MMboe. On a P10 basis, gross oil and gas recoverable of 40 MMbo and 16 Bscfrespectively; net contingent resources of 22 MMboe. Island drilled two successful appraisal wells in the Old Head of Kinsale andSchull gas fields offshore Ireland during 2007 which realised the Company'spre-drilling objective of establishing commercial flow rates from these fields. The P50 Contingent Resources assigned by the Fugro Robertson Report to theSchull and Old Head gas fields confirms the commercial viability of developingthe fields and those potentially attractive rates of return can be achieved fromthese planned developments using a base case scenario for gas prices. On thisbasis Island has entered into negotiations with lenders with regard to raisingproject finance for the development of these fields. Island is also in activediscussions with a number of industry parties with respect to selling equity inthe fields to potentially fund any equity component of a project financepackage. Island has commenced substantive preliminary discussions with Marathon, theowners of the Kinsale and Seven Heads gas gathering facilities in the CelticSea, regarding the engineering solutions required for the Old Head of Kinsaleand Schull fields to be tied back subsea to these facilities and is negotiatingcommercial terms for these access rights. Both Island and Marathon are acutelyaware of the need to secure access to new indigenous gas resources to maximisethe use of the valuable infrastructure represented by the Kinsale and SevenHeads facilities. The P10 Contingent Resource estimates for the Old Head of Kinsale and Schull gasfields demonstrate the significant potential upside in the fields based onlarger Contingent Resources and a higher future gas price that reflects thecurrent upward market trend in oil and gas prices. The P50 Contingent Resources presented for the Amstel oil field in theNetherlands underpin the value of this project to Island, particularly giventhat the base case price scenario for oil used in the economic modelling byFugro Robertson is significantly less than present day oil prices. Island is insubstantive negotiations with a number of lenders with regard to raising projectfinance for the development of the Amstel oil field. As in the case of the OldHead and Schull Celtic Sea gas developments, The Company's high equity stake inthe Amstel oil field development has allowed Island to enter into substantivediscussions with several industry parties with respect to selling equity in thefield to potentially eliminate any requirement to raise equity finance as acomponent of any project finance package and to facilitate potential access tothe nearby Rijn Platform as a potential evacuation route for Amstel oil. Fugro Robertson used the guidelines of Chapter 19 of the Listing Rules of theLondon Stock Exchange as a guide for the reporting standard. The Fugro RobertsonReport does not currently address Island's exploration portfolio of prospectsaround the Schull gas field; on the highly prospective Atlantic Margin, whereIsland has already executed agreements that have allowed OMV and Bluewater toparticipate in a potential 2009 drilling programme, subject to securingadditional partners; and in Southern Morocco; nor does it address the Company'sinherited gas/condensate discovery in Albania or the potential value of theCompany's potential acquisition of producing and revenue generating assets inMoldova. Fugro Robertson has commenced work on a second Report to include the aboveportfolio and Island will make a further announcement once this Report iscompleted. Paul Griffiths, Chief Executive of Island Oil & Gas plc, commented: "The Fugro Robertson Report supports Island's view of the potential commercialviability of our most advanced near-term oil and gas development projects inIreland and the Netherlands and is a key contributor to our ongoing commercialdiscussions with banks and potential industry partners to secure the financerequired to develop the oil and gas fields in a timely manner so as to takemaximum advantage of the recent increase in oil and gas prices. Notwithstandingthis the Company is committed to accelerating activity in our portfolio ofexploration prospects on the Atlantic Margin off the west coast of Ireland wherethe value of our extensive licence holding may potentially increase, shouldthere be success in any of the four wells being drilled by other operators nextyear in the area. Recent transactions with OMV and the Bluewater Groupdemonstrate the attractiveness of the portfolio and substantiate Island'sstrategy of promoting activity on our licences in this potentially significanthydrocarbon province". Enquiries: Paul Griffiths Island Oil & Gas PLC Chief Executive +353 1 6313755 Karl Prenderville Commercial Director Island Oil & Gas PLC +353 1 6313755 Lisa J N Pope MCIPR MIRS Newman Consulting +44 1252 878682 Notes to Editors: Turlough Cooling, Reservoir Engineering Manager, M.Sc. Petroleum Engineering ofFugro Robertson Limited is the qualified person who managed the evaluation ofthe technical and commercial information relating to Island Oil & Gas plc andthe documentation of the Competent Persons Report from Fugro Robertson Limited.Turlough Cooling has reviewed and approved the technical information included inthis announcement. Glossary of technical terms: Bscf - Billions of standard cubic feet of gas MMbo - Million barrels of oil MMboe - Million barrels of oil equivalent, which assumes that 6 Mscf of gas hasthe same calorific equivalent of 1 barrel of oil Mscf - Thousands of standard cubic feet of gas MMscf - Millions of standard cubic feet of gas P10 - Proven, Probable and Possible reserves P50 - Proven and Probable Reserves Proven Reserves - Those quantities of petroleum which, by analysis of geologicaland engineering data, can be estimated with reasonable certainty to becommercially recoverable, from a given date forward, from known reservoirs andunder current economic conditions, operating methods, and governmentregulations. Proved reserves can be categorized as developed or undeveloped. Ifdeterministic methods are used, the term reasonable certainty is intended toexpress a high degree of confidence that the quantities will be recovered. Ifprobabilistic methods are used, there should be at least a 90% probability thatthe quantities actually recovered will equal or exceed the estimate. Unproven Reserves - Based on geologic and/or engineering data similar to thatused in estimates of proved reserves; but technical, contractual, economic, orregulatory uncertainties preclude such reserves being classified as proved.Unproved reserves may be further classified as probable reserves and possiblereserves. Probable Reserves - Those unproved reserves which analysis of geological andengineering data suggests are more likely than not to be recoverable. In thiscontext, when probabilistic methods are used, there should be at least a 50%probability that the quantities actually recovered will equal or exceed the sumof estimated Proved plus Probable reserves. Possible Reserves - Those unproved reserves which analysis of geological andengineering data suggests are less likely to be recoverable than probablereserves. In this context, when probabilistic methods are used, there should beat least a 10% probability that the quantities actually recovered will equal orexceed the sum of estimated Proved plus Probable plus Possible reserves. Reserve and Resource Categories After discovery, reserves may be assigned to one of the following two categoriesbased upon their commercial status at any point in time. Reserves - Those quantities of petroleum that have been discovered that areestimated to achieve a commercial return on investment and have been approvedfor development by Government and the Board of Directors of the owners. Contingent Resources - Contingent Resources are those quantities of petroleum,which are estimated, on a given date, to be potentially recoverable from known(discovered) accumulations, but which are not currently considered beingcommercially recoverable. Prospective Resources - Prospective Resources are those quantities of petroleumthat are estimated, on a given date, to be potentially recoverable fromundiscovered accumulations. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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