TIDMIOG
RNS Number : 8140J
IOG PLC
26 August 2021
26 August 2021
1H 2021 Interim Results
IOG plc ("IOG" or the "Company" or "Group") (AIM: IOG.L) , the
Net Zero UK gas and infrastructure operator focused on high return
projects, is pleased to present its unaudited interim results for
the six months ended 30 June 2021.
Corporate and Operational Highlights
-- Core Project and associated Thames infrastructure renamed as
the Saturn Banks Project and Saturn Banks Pipeline System ("SBPS"),
a reference to local seabed features in the Southern North Sea
("SNS")
-- Fabrication, transportation and installation of both the
Saturn Banks Phase 1 Normally Unmanned Installations ("NUIs") at
Blythe and Southwark successfully completed
-- Key subsea installation activities include laying of 12"
Blythe line and 6" Elgood line, which are to be connected to the
Blythe platform and Elgood wellhead ahead of First Gas
-- Phase 1 development drilling campaign kicked off with spud of
Elgood well 48/22c-7 in April 2021 by the Noble Hans Deul jack-up
rig, with Petrofac as Well Operator and Schlumberger as key
drilling services contractor
-- ODE Asset Management awarded the Phase 1 Duty Holder contract
for Installation and Pipeline Operator, as well as facilities
operations and maintenance ("O&M")
-- Refurbishment and recommissioning process for the co-owned
Saturn Banks Reception Facilities continued to progress at the
Bacton Gas Terminal ("BGT") to prepare for First Gas
-- 3D seismic reprocessing to Pre-Stack Depth Migration ("PSDM")
significantly improved the potential for two new incremental
high-return gas hubs, a northern hub in P2438 and a southern hub in
P2442
o In licence P2438, gross management estimated 2C contingent
resources at Goddard increased from 108 billion cubic feet
equivalent(1) ("Bcfe") to 132 Bcfe, with Southsea prospect also
identified
o In licence P2442, gross management estimated 2C contingent
resources at Abbeydale increased from 6 Bcfe to 23 Bcfe
o Kelham North and Kelham Central structures in licence P2442
with gross management estimated prospective resources of 36 Bcfe
and 42 Bcfe, with 80% and 70% Geological Chance of Success
("GCoS"), respectively
o Thornbridge prospect also identified in licence P2442 with
gross management estimated prospective resources of 58 Bcfe and 32%
GCoS
o Both the P2438 and P2442 licences are held 50:50 between IOG
and its Joint Venture ("JV") partner CalEnergy Resources Limited
("CER"), and operated by IOG
-- Further organisational strengthening in key positions,
notably Chief Operating Officer David Gibson
Financial Highlights
-- Cash balance at period end of GBP59.0 million (31 December
2020: GBP80.4 million), including restricted cash of GBP3.4 million
(31 December 2020: GBP67.0 million)
-- Post-tax profit for the period of GBP0.2 million (30 June 2020: GBP3.6 million loss)
-- Group net debt(2) at period end of GBP32.2 million (31 December 2020: GBP14.1 million)
-- Phase 1 development carry from JV partner CER fully utilised in Q2 2021
-- Further EUR65.8 million (GBP59.2 million equivalent)
drawdowns made from the senior secured bond ("Bond") escrow account
for development expenditure, against operational milestones as
planned, completing the full drawdown of the escrow account
-- These interim results are presented on a Going Concern basis
further to management's reasonable expectation that the Company
continues to have sufficient funding to deliver First Gas
Post-Period End Highlights
-- Elgood subsea well flowed successfully on clean-up at a
maximum rate of 57.8 mmscf/d gas and 959 bbl/d condensate through
an 80/64(th) inch choke
-- Blythe well spudded on 2 August 2021 and is expected to be completed within three months
-- Gas sales agreement ("GSA") signed with Gazprom Marketing
& Trading ("GM&T") for the first two years of Elgood and
Southwark production, plus Nailsworth and Elland, after a
competitive offtake process
-- Commitment to Scope 1 & 2 Net Zero from 2021 with
Emissions Assessment demonstrating the very low emissions profile
of the Saturn Banks Project Phase 1
-- Elgood umbilical laid as part of ongoing summer 2021 subsea installation campaign
-- Safety Cases for the Blythe and Southwark platforms accepted
by the UK Health and Safety Executive ("UK HSE")
Expected Future Activity
-- Phase 1 First Gas expected in Q4 2021 on completion of the
Blythe well and onshore recommissioning activities
-- Pipelay campaign to install 6km extension of the 24" Saturn
Banks pipeline to the Southwark field expected in Q1 2022, ahead of
Southwark first gas expected in Q2 2022
(1) Billion cubic feet equivalent ("Bcfe") incorporates gas plus
condensate based on a ratio of 5.8 thousand cubic feet (mcf) per
barrel of condensate
(2) Net debt is defined as restricted cash (GBP3.4 million) plus
cash and cash equivalents (GBP55.6 million) plus financial assets
(GBP1.4 million), less outstanding loans (GBP92.6 million)
Andrew Hockey, CEO of IOG, said:
"Over 2021 to date we have delivered a series of key Phase 1
progress milestones on the path to First Gas in Q4. To reach this
target two years after FID amid a prolonged global pandemic will be
a fantastic achievement by the IOG team. I would like to thank them
for their continued hard work and dedication in delivering on our
ambition to be a safe, efficient, low-carbon developer and producer
of high-value gas , whilst also recognising the support and
collaboration of our Joint Venture partner CER, contractors and
regulators.
Having installed the Blythe and Southwark platforms and
successfully tested the Elgood well at 57.8 mmscf/d gas and 959
bbl/d condensate, the Blythe development well is now progressing to
plan, with Southwark to follow. Beyond Phase 1, we are working up
the excellent potential to expand our Saturn Banks Pipeline System
with further high-return gas hubs. Alongside this, we were very
pleased to confirm our very low emissions operating model and
commitment to Scope 1 and 2 Net Zero from 2021. "
This announcement contains inside information for the purposes
of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it
forms part of UK domestic law by virtue of the European Union
(Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with
the company's obligations under Article 17 of MAR.
Enquiries:
IOG plc
Andrew Hockey (CEO)
Rupert Newall (CFO)
James Chance (Head of Capital Markets and ESG) +44 (0) 20 7036 1400
finnCap Ltd
Christopher Raggett / Simon Hicks +44 (0) 20 7220 0500
Peel Hunt LLP
Richard Crichton / David McKeown +44 (0) 20 7418 8900
Vigo Consulting
Patrick d'Ancona / Chris McMahon / Oliver Clark +44 (0) 20 7390 0230
Notes
About IOG:
IOG owns and operates a 50% stake in substantial low risk, high
value gas reserves in the UK Southern North Sea. The Company's
Saturn Banks Project targets a gross 2P peak production rate of 140
MMcfe/d (c. 24,000 Boe/d) from gross 2P reserves of 302 Bcfe(3) and
management estimated 2C contingent resources of 132 Bcfe, via an
efficient hub strategy based on co-owned infrastructure. In
addition to its 2P reserves at Blythe, Elgood, Southwark,
Nailsworth and Elland and 2C contingent resources at Goddard, it
has management estimated gross 2C contingent resources of 23 Bcfe
at Abbeydale and gross unrisked mid-case prospective resources of
36 Bcfe at Kelham North, 42 Bcfe at Kelham Central, 58 Bcfe at
Thornbridge, 31 Bcfe at Southsea, 28 Bcfe and 19 Bcfe in the two
Goddard flank structures, and 21 Bcfe at Harvey. IOG also holds a
50% operated stake in Licence P2589 containing the Panther and
Grafton gas discoveries with management estimated gross mid-case
contingent resources of 46 Bcfe and 35 Bcfe respectively. In
addition IOG continues to pursue value accretive acquisitions to
help generate significant shareholder returns.
(3) ERC Equipoise Competent Persons Report: October 2017,
adjusted by Management to account for updated project timing and
compression
Further information can be found at www.iog.co.uk
The Directors present their interim report of operations and
unaudited consolidated financial statements of IOG plc ("the
Company") and its subsidiaries ("the Group") for the six months
ended 30 June 2021. All amounts are shown in Pounds Sterling,
unless otherwise stated.
This interim financial report is the responsibility of and has
been approved by the Directors. The Directors are responsible for
preparing the Interim Report which has been reviewed, but not been
audited by the Company's auditors. In addition to the results for
the first six months of 2021 ("1H 2021"), comparative information
is provided for the six months ended 30 June 2020 ("1H 2020").
Comparative information for the Group's financial position is also
provided for the year ended 31 December 2020 ("FY 2020").
As disclosed in note 1, the annual financial statements of the
Group are prepared in accordance with International Financial
Reporting Standards ("IFRSs") as adopted for use in the UK.
Chief Executive Review
I am very pleased to release our interim report for the
half-year period to 30 June 2021, during which we delivered a
number of further key milestones for the business. It was an
exciting period for IOG as we move ever closer to our first
production later this year.
As we breathe new economic life into the former Thames area of
the Southern North Sea ("SNS"), we have given what was hitherto
referred to as the "Core Project" a fresh new identity as the
"Saturn Banks Project". The name pays tribute to a series of seabed
sandbank features in this part of the SNS. The former Thames
Pipeline and associated onshore facilities, which we are
recommissioning as the backbone of our production system, will
therefore be known as the "Saturn Banks Pipeline System". In
closing out the previous Thames chapter we are inaugurating a new
era with an economic life stretching over the next two decades.
Over t he first half of 2021 my team have continued to work
incredibly hard on the successful execution of the Saturn Banks
Project Phase 1, consisting of the Blythe, Elgood and Southwark
fields. First Gas is expected in Q4 2021, just two years after
taking Final Investment Decision ("FID"). I sincerely commend the
whole team's efforts to continue executing on such a demanding
schedule despite the challenges and disruptions the Covid-19
pandemic has imposed on both internal and external collaboration.
Driven by our three fundamental priorities - protecting our people,
delivering the project and ensuring business continuity - we have
continued to respond dynamically to the restrictions that have
lasted in various forms through most of the Phase 1 development
period.
Since joining us as Chief Operating Officer in February of this
year, David Gibson has quickly made a very positive impact on
project execution. Over more than 30 years in North Sea engineering
and project management roles, David has built up extensive relevant
experience in development and execution of business plans focused
on safe, environmentally responsible and economically sustainable
operations, and we are now seeing the benefit of this at IOG.
Importantly, we have also fulfilled our plans to transition to a
high calibre team of full-time employees across the complete range
of technical and operational disciplines, who are all working very
effectively together under David's guidance to expedite Phase 1
delivery.
Thanks to a period of intense activity we have progressed Phase
1 a long way in a short time. In April, we reached mechanical
completion of our two NUI platforms at Blythe and Southwark,
swiftly followed by the safe and successful offshore installation
of both facilities at their field locations by early June. Putting
these key facilities in place was another important milestone for
IOG, not just for Phase 1 but also as part of the foundations for
further phases of growth. They are an integral part of our
infrastructure-led hub strategy, forming pivotal links between the
pipeline network that comprises our co-owned and operated Saturn
Banks Pipeline System and associated onshore facilities at Bacton
Gas Terminal. As small, remotely-operated installations with
forecast average unmanned power demand as low as 33kW (comparable
to an electric car), the Blythe and Southwark platforms also help
to minimise both operating costs and carbon intensity as we scale
up the business.
I congratulate HSM Offshore on an excellent job, in
collaboration with our engineering team, in maintaining the
fabrication, transportation and installation schedule despite the
various challenges. Moving on to the operations and maintenance
(O&M), in May we were pleased to award the Phase 1 Duty Holder
contract for Installation and Pipeline Operator, as well as
facilities O&M, to ODE Asset Management ("ODE AM"). ODE AM have
a well-established track record in these roles in SNS gas projects
including Babbage and Tolmount. Their focus on safe, efficient and
cost-effective management will be integral to delivering low cost
and low carbon intensity production operations.
During 2021 to date we have also been very busy procuring and
installing connector lines and related subsea equipment to execute
the Phase 1 Subsea, Umbilicals, Risers and Flowlines ("SURF")
scope, in collaboration with our lead SURF contractor Subsea 7. We
now have the 12" line from Blythe to the main 24" Saturn Banks
Pipeline, 6" line from Elgood to Blythe, and the Elgood umbilical
all in place. The remaining subsea equipment is being installed as
part of the ongoing campaign on the lead-in to First Gas from the
Blythe Hub this year.
In April we also kicked off the Phase 1 drilling campaign by
spudding our first development well at Elgood, which will be
produced as a subsea tie-back to the Blythe platform. The drilling
campaign will last over a year and its success will be driven by
strong collaboration between the IOG drilling, subsurface, subsea
and HSE teams, our main drilling contractors Noble Corporation,
Petrofac and Schlumberger, ODE AM and our partner CER, and we
expect there should be some efficiency gains over the course of the
campaign.
Completing the Elgood well, post period-end in July, was a
significant milestone for IOG. The well was drilled horizontally
through the reservoir section to a Total Depth of 15,472 ft
Measured Depth (MD), intersecting 1,080 ft of high-quality Permian
Leman Sandstone reservoir. Encountering some technical challenges
was to be expected on the first well of the campaign drilled on the
smallest and only subsea tie-back field in Phase 1. What was most
important was how my team responded proactively and resourcefully
to these challenges, culminating in a successful completion.
Whilst the reservoir was encountered 39 ft deep to prognosis, it
was encouraging to see clean-up flow rates were ahead of
expectations, with a maximum rate of 57.8 mmscf/d of gas and 959
bbl/d condensate through an 80/64(th) inch choke, constrained by
surface facilities on the Noble Hans Deul jack-up rig. A full
technical review of the field based on new modelling and analysis
of early months of production will help to determine an updated
range of ultimate recoverable gas from Elgood. Combined with the
very high forward gas pricing environment, with both UK NBP spot
and Winter 2021 prices currently exceeding GBP1/therm, this
suggests that early Elgood cashflows should exceed our planning
base case.
Meanwhile, the Noble Hans Deul jack-up rig went on to spud the
Blythe development well in early August, which is being drilled
through the Blythe platform. This well has been meticulously
planned with a clear collective focus on ensuring safe and
efficient performance and integrating learnings from the Elgood
well. It is expected to take under three months to complete,
leading to First Gas in Q4 2021
As we transition into being a material gas producer, we also
remain very focused on generating further growth via incremental
investments. We expect Nailsworth to be the first Phase 2 asset to
be sanctioned for development and the team is progressing the
necessary technical and pre-engineering work to expedite the Final
Investment Decision at the earliest feasible time.
Alongside this, advancing our subsurface understanding of our
Pre-Development Assets (PDAs) is crucial to this as it helps us to
allocate capital appropriately, select suitable development
concepts, optimise drilling designs, and ultimately to generate
best shareholder value. After interpreting and mapping 1,200km(2)
of 3D seismic data newly reprocessed to PSDM, in March we issued a
technical update on our P2438 (Goddard, Southsea) and P2442
(Kelham, Abbeydale, Thornbridge) licences, operated by IOG and
jointly held 50:50 with CER.
This work demonstrated enhanced potential to create two new
incremental high-return gas hubs, a northern hub in P2438 and a
southern hub in P2442. In line with our infrastructure-led hub
strategy, these would be both be within tie-back scope of the
Saturn Banks Pipeline, providing direct access to the market and
helping to drive up returns. In the P2438 licence our 2C contingent
resource estimates at the Goddard discovery increased from 108 Bcfe
in the 2018 CPR to 132 Bcfe. Gross mid-case prospective resources
on the two Goddard flank structures were revised up to 27 Bcfe and
16 Bcfe, with GCoS increased from 48% (CPR) to 71%, while the
Southsea prospect was identified close by to the southeast of
Goddard with management estimated gross mid-case prospective
resources of 31 Bcfe and 48% GCoS.
Identification of the Kelham North and Kelham Central
structures, with management estimated gross mid-case prospective
resources of 36 Bcfe (70% GCos) and 43 Bcfe (80% GCoS)
respectively, likewise shows the potential for a valuable
multi-field gas hub in the P2442 licence. These are in addition to
the gross 2C contingent resources increased to 23 Bcfe at
Abbeydale, the partly on-block Orrell (previously Camlan) discovery
and other prospects on the licence, notably Thornbridge with gross
mid-case prospective resources of 58 Bcfe and 32% GCoS.
Post-period end we were also very pleased to confirm gas offtake
arrangements for Elgood and Southwark with GM&T after a
competitive process. Delivering gas into the Bacton terminal, the
main import hub for the UK southeast, puts IOG in a relatively
advantageous position and the gas market is currently exceptionally
strong. At the time of writing, UK NBP pricing for the coming
winter is at well over GBP1/therm and the forward curve has
strengthened considerably. This is down to several factors but
above all it reflects the renewed appeal of gas as the
lowest-carbon fossil fuel and a fundamental pillar of our modern
existence: heating homes, fuelling power stations and driving
industrial activity. All the evidence suggests that, alongside the
growth of renewable energies, gas will play a central role on the
transition to Net Zero by 2050 or before. In an increasingly
globalised gas market, healthy demand growth looks set to support
pricing in Europe over coming years.
Recognising the pivotal role of gas in the energy transition, we
have also been very active on the environmental front as well. In
line with our ambition to be a safe, efficient and low-carbon
developer and producer of high-value gas, our comprehensive
Emissions Assessment (EA), led by our Environmental, Social and
Governance (ESG) Taskforce, projected the cumulative average
intensity of the Phase 1 Blythe and Southwark platforms at just 0.4
kgCO e/boe. Phase 1 lifetime Scope 1 and 2 average emissions
intensity are estimated at 3.97 kgCO e/boe versus a North Sea
average of 20.2 kgCO e/boe, potentially saving close to 1 million
tonnes of CO e emissions versus a weighted average of gas imports
(based on OGA/BEIS data). Our emissions work will also help us to
design out emissions from future developments, but most
importantly, it enabled us to take the immediate step of committing
to Scope 1 & 2 Net Zero status as of 2021, putting IOG at the
forefront of the OGA's strategic vision for the UK upstream
industry.
As we look towards the rest of 2021 and beyond, IOG has several
core strengths: a broad but geographically focused portfolio of UK
gas assets with room for organic and inorganic growth, strong
expertise across the organisation, an outstanding partner in CER,
ownership of key offshore and onshore infrastructure, and an
exceptionally low emissions profile coupled with a Net Zero policy,
and an advantageous strategical position supplying gas into an
import-dependent UK amid a very strong gas market. We remain as
focused and committed as ever to safe and successful Phase 1
execution, working closely with our partners, contractors,
regulators and other stakeholders. We also look forward to building
further shareholder value on the foundations established in Phase 1
with successive phases of sustainable growth.
Andrew Hockey
Chief Executive Officer
26 August 2021
Operational Review
Saturn Banks Project Phase 1
The first half of 2021 saw material progression of our Phase 1
development, comprising the Blythe, Elgood and Southwark gas
fields, with First Gas expected in Q4 2021.
The strengthening of our technical and operational capability
has greatly assisted in our progress through the first half of
2021. Through the period we have built on our relationships with
our contractor partnerships and have delivered on our commitments
for the first half of the year. In the period we awarded a contract
with ODE AM to operate and maintain our assets and together have
built on our relationships with regulators and stakeholders,
gaining the necessary Environmental and HSE approvals to complete
the installations and operate the facilities.
In Q2 2021 our Blythe and Southwark unmanned platforms were
completed and installed by HSM and their subcontractor Seaway 7. At
installation both platforms had negligible carry over scope and
once installed on location, they were powered up and put in
communication with our onshore control room, manned by our
operations contractor ODE AM.
In April we spudded Elgood, our first development well. There
were a number of technical and mechanical challenges with the well
which resulted in an extension to the planned duration. However,
the broader drilling team, including key IOG personnel together
with the teams from Noble, Petrofac Well Management and
Schlumberger, worked diligently through the issues, resulting in
successful completion of the well, cementing a collaborative
approach that makes us prepared for the further drilling to come.
The Blythe well was subsequently spudded in early August and is
progressing to plan at the time of writing.
During Q1 2021, the 6" and 12" pipelay scopes that commenced in
2020 were successfully completed. In Q2 our subsea hook-up phase
recommenced and, at the time of writing, the Elgood umbilical has
been installed and the 24" Saturn Banks Pipeline has been cut ready
for installation of the manifold for connection to the Blythe 12"
pipeline. Regulatory approval for the 24" pipeline extension to
Southwark is progressing and that installation is anticipated to
commence in Q1 2022 to coincide with completion of Southwark
drilling and gas production in Q2 2022.
At the Saturn Banks Reception Facilities at Bacton terminal, the
removal of old or obsolete equipment and integrity inspection are
complete as part of preparation for recommissioning. Through Q2
2021 construction activity has gathered pace with detailed design
coming to an end and materials and fabricated items coming
available.
It is important to deliver a development that is as low impact
and environmentally sustainable as reasonably possible. With a
projected carbon intensity of less than 4kg kgCO e/boe over its
full life, Phase 1 has a fraction of the impact of the average
North Sea project and this is an advantage we aim to further
enhance when executing future IOG developments.
Pre-Development Assets
Nailsworth and Elland
IOG UK Limited has a 50% working interest and is operator of the
P039, P130 and P2342 licences, which contain the Elland and
Nailsworth gas discoveries. These fields are intended to be part of
Phase 2 of the Saturn Banks Project. In their 2017 Competent
Persons Report (CPR), ERC Equipoise assessed gross 1P/2P/3P gas
reserves to be 40/55/73 billion cubic feet ("BCF") in Elland, and
60/99/147 BCF in Nailsworth.
The discoveries are under evaluation in stage two of IOG's
Project Governance Process, which assesses the optimal development
concept for the fields within the context of the Phase 1 Saturn
Banks Project infrastructure and the wider PDA portfolio. Based on
this work, IOG will seek to submit and obtain approvals for an
Environmental Impact Assessment and a Field Development Plan for
the fields, where supported, at the earliest opportunity.
The remaining work programme commitment under the Nailsworth
licences with the OGA is the submission and approval of a Field
Development Plan prior to the end of 2021.
Goddard and Southsea
IOG North Sea Limited has a 50% working interest and is operator
of licence P2438, which contains the Goddard field, an undeveloped
gas discovery, and the Southsea gas exploration prospect. The
discovery is intended to be part of the planned Phase 2 of the
Saturn Banks Project.
Interpretation of Pre-Stack Depth Migration reprocessing of 3D
seismic data was completed over the licence in Q1 2021, and
substantially enhanced IOG's technical view of the Goddard
discovery and the surrounding area, with a clearer subsurface image
indicating a larger Goddard structure than previously mapped. As a
result of this work, IOG management assess gross 1C/2C/3C resources
in Goddard to be 57/132/258 Bcfe, representing a 22% increase in
the 2C number versus the 2018 ERC Equipoise CPR.
The Q1 2021 subsurface interpretation of the two Goddard flank
structures adjacent to the main discovery indicate a gross unrisked
Low/Mid/High prospective resource range of 14/28/68 Bcfe and
8/19/44 Bcfe respectively with 71% GCoS in each case. The Southsea
prospect as mapped indicates a gross unrisked Low/Mid/High
prospective resource range of 13/31/76 Bcfe with 48% GCoS. Further
technical work will be required to confirm these initial
estimates.
In addition to seismic reprocessing, the terms of the licence
include a firm work programme commitment to drill an appraisal well
on the Goddard structure to 3,140m TD by 30 September 2021. In
early 2021, IOG North Sea Limited formally requested a 12-month
extension to the well commitment to 30 September 2022, in order
that sufficient analysis and planning be undertaken based on the
new seismic interpretation, prior to drilling. The outcome of the
extension request is pending at the time of this report.
Abbeydale, Kelham Central, Kelham North and Thornbridge
IOG North Sea Limited has a 50% working interest and is operator
of licence P2442, which contains the Abbeydale undeveloped gas
discovery, the Kelham group of prospective gas accumulations
(Kelham North and Kelham Central), part of the Orrell (Camlan) gas
discovery and the Thornbridge exploration prospect.
Under the terms of the licence, a firm work programme commitment
was made to reprocess 150 km2 of seismic data within two years, and
to either drill and complete a well on the licence prior to 30
September 2023 or surrender the licence.
Interpretation of Pre-Stack Depth Migration reprocessing of 3D
seismic data was completed over the licence in Q1 2021. Based on
this new data, IOG management's deterministic estimate of gross
1C/2C/3C contingent resources at Abbeydale is 19/23/27 Bcfe. Gross
recoverable Low/Mid/High gas volumes at Kelham North and Kelham
Central are assessed by IOG management as 14/36/68 Bcfe (80% GCoS)
and 38/42/47 Bcfe (70% GCoS) respectively. More detailed mapping
and reservoir modelling of the Kelham group of prospective
accumulations, including Kelham Central and Kelham South, will
further clarify the wider area resource potential.
IOG has also identified an exploration prospect west of
Abbeydale named Thornbridge, with gross management estimated
Low/Mid/High prospective resources of 3/58/115 Bcfe and 32% GCoS.
Further detailed mapping is required to fully capture the
prospective resource range of the structure, with the key
geological risk considered to be the quality of the Zechstein salt
seal.
The technical work to date on the P2442 licence has identified
the potential for a "Southern Hub" development that could be tied
back to the Saturn Banks Pipeline. Any potential developments
within the licence will be assessed within the context of IOG's
development opportunities hopper, and the IOG Project Governance
Process, in order to optimise the development concept within the
context of the Phase 1 Saturn Banks Project infrastructure and the
wider PDA portfolio.
Panther and Grafton
IOG North Sea Limited has a 50% working interest and is operator
of licence P2589, which contains the Panther and Grafton gas
discoveries. The licence was awarded in the 32nd Licensing Round,
formally commencing on 1 December 2020, with a firm work programme
commitment to reprocess 79 km2 of seismic data within three years,
and to drill and complete a well on the licence by 30 November 2025
or to surrender the licence.
IOG management estimated gross 'Most Likely' contingent gas
resources in 2019 to be 46 Bcfe at Panther and 35 Bcfe at Grafton.
Reprocessing of seismic data is targeted to commence in 2021.
Harvey
IOG North Sea Limited has a 100% working interest and is
operator of licence P2085, which contains the Harvey structure, an
undeveloped gas discovery. A firm work programme commitment was
fulfilled by the reprocessing of seismic data over the licence and
the drilling and completion of the 48/24b-6 Harvey appraisal well
in 2019. The remaining work programme commitment under the licence
is to submit a Field Development Plan by 19 December 2021, or to
surrender the licence.
IOG management currently estimate gross Minimum, Most Likely and
Maximum contingent gas resources in Harvey at 12/21/35 Bcfe. A
commercial assessment of Harvey is currently ongoing, evaluating
the value of a potential "Elgood lookalike" development concept.
This entails a single subsea well, tied back to the Blythe
platform, which has been designed to have a spare 10-inch riser and
J-tube. The Harvey discovery will then be assessed in line with
IOG's Project Governance Process and ranked against the wider
opportunities in the PDA portfolio for further investment.
David Gibson
Chief Operating Officer
26 August 2021
Financial Review
The first half of 2021 saw further continued use of the capital
put in place during the Company's funding activities in 2019,
primarily comprising the Farm-out to CER ("Farm-out"), the GBP60
million Phase 1 development carry arrangement, and the EUR100
million senior secured bond ("Bond").
The Company started the period with a cash balance of GBP13.4
million plus GBP67.0 million of restricted cash, and a net debt1
position of GBP14.1 million. It ended the period with a cash
balance of GBP55.6 million plus restricted cash of GBP3.4 million,
and a net debt position of GBP32.2 million.
Over the period the Company invested GBP88.7 million on gross
Phase 1 capital expenditures, of which GBP32.8 million was net to
IOG. In the period the Company also received GBP51.3 million in
partner cash calls from CER against Phase 1 capital expenditures,
including GBP11.7 million of Phase 1 development carry, which fully
drew and extinguished the remaining available amounts under the
carry.
The net expenditures for the Company of GBP32.8 million plus an
additional GBP4.0 million of capitalised interest and GBP9.9
million of capitalised leases totalled the GBP46.4 million increase
in PP&E and intangible assets.
On achieving the relevant operational milestones during the
half-year period the Company also made three further drawdowns from
the Bond escrow account, totalling EUR65.8 million (GBP59.2 million
equivalent), which fully extinguished the account.
It also drew down a total of EUR4.8 million (GBP4.0 million
equivalent) during the period from the Debt Service Reserve Account
("DSRA") to make two quarterly interest payments, leaving a further
EUR2.4 million (GBP2.0 million equivalent) in the DSRA,
representing one further quarterly interest payment.
(1) Net debt is defined as restricted cash (GBP3.4 million) plus
cash and cash equivalents (GBP55.6 million) plus financial assets
(GBP1.4 million), less outstanding loans (GBP92.6 million)
Income statement
The profit for the first six months of 2021 was GBP0.2 million
(0.0p per share undiluted, 0.0p per share fully diluted), compared
to a loss of GBP3.6 million for the first six months of 2020 (0.8p
per share undiluted, 0.8p per share fully diluted).
The current period profit includes GBP1.8 million of net
administration expenses (1H 2020: GBP3.6 million), finance expenses
of GBP1.8 million (1H 2020: GBP1.1 million) offset by interest
income of GBPnil million (1H 2020: GBP0.1 million), foreign
exchange profit of GBP1.9 million (1H 2020: loss of GBP0.8 million)
and fair value gain of GBP0.2 million (1H 2020: loss of GBP0.3
million) on bonds held as financial assets. EUR4.8 million of bond
coupon payments were made in the period and were capitalised to the
Phase 1 development assets to which they relate.
The foreign exchange profit of GBP1.9 million for the current
period reflect fluctuations in exchange rates on the valuation of
non-GBP denominated balances.
Finance expenses of GBP1.8 million include GBP1.0 million of
finance fees and charges, consisting of GBP0.5 million unwinding of
convertible loan from London Oil and Gas Ltd ("LOG") and GBP0.2
million of amortisation of bond issuance fees, plus GBP0.1 million
of interest paid on the bond escrow and DSRA accounts.
Statement of financial position
Non-current assets at 30 June 2021 of GBP114.1 million (31
December 2020: GBP71.4 million) include development and production
assets of GBP99.6 million (31 December 2020: GBP53.4 million),
representing the Group's capital expenditures attributable to the
Saturn Banks Pipeline infrastructure and the Southwark, Blythe and
Elgood development assets; exploration and evaluation assets of
GBP1.5 million (31 December 2020: GBP1.3 million), representing
capital expenditures attributable to the Elland, Nailsworth,
Harvey, Goddard and Abbeydale pre-development assets; other
property, plant and equipment of GBP12.8 million (31 December 2020:
GBP16.5 million); and other intangible assets of GBP0.1 million (31
December 2020: GBP0.2 million).
Current assets at 30 June 2021 of GBP61.6 million (31 December
2020: GBP82.8 million) include cash and cash equivalents of GBP55.6
million (31 December 2020: GBP13.4 million), restricted cash of
GBP3.4 million (31 December 2020: GBP67.0 million), financial
assets (IOG bonds) of GBP1.4 million (31 December 2020: GBP1.3
million), and other receivables and prepayments of GBP1.2 million
(31 December 2020: GBP1.1 million).
Current liabilities comprise trade and other payables of GBP46.4
million (31 December 2020: GBP22.1 million). Non-current
liabilities of GBP105.6 million include GBP85.9 million due on the
senior secured bond issued in 2019 and the debt element of the LOG
convertible loan. In addition, provisions of GBP13.0 million
represent deferred consideration amounts payable following first
gas due in 2H 2021 from the Southwark field, as well as abandonment
liabilities for both the Elland suspended well and the Saturn Banks
Pipeline offshore infrastructure.
Cash flow
After adjustment for non-cash items cash generated from
operations, including working capital movements, for the first six
months of 2021 was GBP19.0 million (1H 2020: generated GBP15.9
million). Cash generated from investing activities, which includes
the purchase and acquisition of oil and gas properties and receipts
from restricted cash funds, amounted to GBP21.7 million (1H 2020:
used GBP9.3 million). Cash used in financing activities, which is
primarily coupon payments on the Bonds, amounted to GBP4.4 million
(1H 2020: used GBP4.6 million primarily Bond coupon payments). The
cash balance at the end of the period was GBP55.6 million (31
December 2020: GBP13.4 million).
Funding and liquidity
The Board has reviewed the Group's cash flow forecasts having
regard to its current financial position and operational
objectives.
The Consolidated Statement of Financial Position at 30 June 2021
details a net debt position for the Group of GBP32.2 million (31
December 2020: GBP14.1 million). Net debt is defined as total
loans, less restricted cash and cash equivalents, adding back the
financial asset being the Company's holding in its own bonds.
In assessing the Group's and Parent Company's current financial
position and reaching its conclusion as to going concern status up
until February 2023, the Board has utilised a set of reasonable
assumptions and sensitivities around activities, costs, timings,
asset performance and other relevant economic factors including the
potential impact of Covid-19, in order to develop an accurate
perspective.
The Phase 1 capital cost and schedule assumptions underlying the
going concern assessment flow from the baseline project plan as
recently reviewed and reaffirmed by lead project managers and the
COO. The risked mid-case forecast of final outturn Phase 1 capital
expenditure profile finishes in mid-2022, consistent with the 2020
Annual Report. Each key discipline area within the project revises
their forecast relevant Phase 1 cost estimates based on existing
commitments and on better defined future spend as the project
progresses through execution. These updated cost estimates are in
turn interrogated and subsequently approved at both executive and
Board level. Similarly, operating cost assumptions, which include
both offshore O&M costs, onshore reception facilities costs and
Bacton processing tariff costs, have been established using the
latest and most accurate available estimates provided by internal
operational personnel and relevant external parties, including
IOG's O&M contractor ODE AM and Bacton terminal operator
Perenco UK Limited (PUK). Decommissioning cost assumptions are
drawn directly from the independent Competent Persons Report (CPR)
undertaken by reserve auditor ERC Equipoise in 2017 and also the
approved Phase 1 FDP, allowing that in the period considerable
works have taken place both on and offshore.
In terms of project performance and timing assumptions, based on
the latest management assessments of project readiness and current
expectations of the development drilling programme, the timing of
field start-ups for Phase 1 are as follows: Elgood and Blythe in Q4
2021, and Southwark in Q2 2022. The Phase 1 schedule has also been
reviewed and approved by the executive and the Board based on
detailed planning schedules managed by our dedicated project
planner who has the full collaboration and oversight of the wider
project team.
The gas price assumptions underlying the base case economic
assessment are based on actual current forward UK NBP gas market
pricing over the period assessed, with an appropriate level of
reduction for the sake of conservatism. Longer-term gas pricing
assumptions are based on an average realised price of 45p/therm,
adjusted for the regular seasonal variations which are a
well-established characteristic of UK NBP pricing (higher prices
over October-March, lower prices over April-September). Management
confirms this to be a sensible baseline in the context of average
realised UK gas prices over the past decade and most likely future
realised prices.
For pre-development assets and General and Administrative
(G&A) costs, all assumptions are based on approved internal
budgets, which in turn are based on reasonable estimates derived
from comparable activities and relevant past actual costs. G&A
budgets are constructed with an iterative methodology that factors
in historical expenditure trends adjusted with appropriate
forward-looking modifications and expected trends in underlying
activity (e.g. changes in organisation headcount). Forecasts are
reviewed by the senior finance team and the CFO on a monthly basis
in order to assess the appropriateness of budget versus actual
outturn and are reviewed and discussed at Board level. The Group's
holding in its own bonds is assumed to be sold by the end of 2021
at a price no higher than the market value, which at period end was
GBP1.4 million. Since its listing in Q4 2019 the bond has seen
active trading and therefore the Board consider this to be a
reasonable assumption. Finally, prudent assumptions have been taken
in respect of the Group's management of foreign exchange exposure
risk.
Foreign exchange exposures are forecast and compared to the
available currency held as cash balances, JV cash calls and Bond
drawdowns which allows any exposure to be actively managed.
As demonstrated above, the Group uses prudent assumptions to
develop its view of most likely outcomes. In its detailed financial
modelling it also stress tests a number of different possible
future scenarios to evaluate the likely impacts of potential
schedule and cost overruns. The stress test scenarios run by
management and reviewed by the Board include changes in first gas
timing, production levels, gas pricing and cost levels. Of these
stress test scenarios the one that has most impact on the Group's
liquidity during the period reviewed is first gas timing as
revenues following first gas (across a range of production, cost
and gas price assumptions) are expected be more than the Group's
costs. Under the base case scenarios the Group is expected to be
able to stay within its current cash resources.
The nature of the Group's operations, particularly at this stage
of development of its Phase 1 project, presents the Group with an
inherent risk around funding and covenant compliance that requires
the Board to consider a range of potential outcomes and in that
context the Group has identified a range of measures to mitigate or
eliminate potential risks that may affect delivery of first gas.
Not all potential outcomes or mitigations are fully within the
control of the Group and therefore some uncertainty over the
funding status of the group does arise.
After a review of these forecasts the Board have a reasonable
expectation that the Group has adequate resources to continue in
operational existence for the period under review and therefore
consider it appropriate to continue to adopt the going concern
basis in preparing the consolidated financial statements. However,
the Directors acknowledge that at the date of approval of this
interim financial information, the potential future impact of the
reverse stress test scenarios noted above and the sensitivity of
the delivery schedule, indicate the existence of a material
uncertainty which may cast significant doubt about the Group's and
Parent Company's ability to continue as a going concern and
therefore it may be unable to realise its assets and discharge its
liabilities in the normal course of business. The Board has also
assessed any foreseeable negative impact on the Bond covenants and
are comfortable that the current forecast would not lead to any
breaches of said covenants.
The financial statements do not include any adjustments that
would result if the Group and the Parent Company were unable to
continue as a going concern. The cash resources of the Group will
be used over the coming months to deliver the Phase 1 project which
will then generate cash flow from gas production.
Risks and uncertainties
The Group operates in the oil and gas industry, an environment
subject to a range of inherent risks and uncertainties. Key risks
and associated mitigation are set out below.
Finance: Management seeks to generate shareholder returns through
monetisation of a portfolio of proven offshore gas assets. This primarily
entails construction and installation of production, transportation
and processing infrastructure and drilling of production wells. These
activities carry several key risks.
Risk Mitigation
-------------------------------------------------------------
Investor support may erode,
impacting the Company's market * Management has a clear strategy for value realisation
value and potentially hindering and creation, which is regularly communicated to
any necessary or desired shareholders
fundraising activities
* The Company's asset portfolio has robust inherent
economics as well as substantial incremental value,
as attested by third-party analyst reports
* The Company has fully funded its Phase 1 development
and is therefore not anticipating raising additional
capital in this regard
* CER's credit risk is low and kept under review
-------------------------------------------------------------
Volatility in macroeconomic
conditions may hinder delivery * The Company is funded for its Phase 1 development and
of the Company's business has an active relationship with its debt and equity
plan advisers and investors
* As a buyer of products and services, the Company
faces both risks and opportunities from economic
volatility
-------------------------------------------------------------
Each asset carries a range
of potential values * The Company has a healthily diversified portfolio of
6 proven gas fields in its Saturn Banks Project, plus
further assets which could potentially be added,
therefore there is limited financial dependence on a
single asset
-------------------------------------------------------------
The Company may not be able
to raise funds to develop * The Company successfully undertook equity, debt and
its assets Farm-out funding from CER in 2019 which funded its
Phase 1 activities and is anticipated to lead to
production revenues from operations from 2H 2021
-------------------------------------------------------------
There is a risk that the
Company breaches its Bond * The Company makes consistent efforts to be fully
terms aware of its responsibilities and obligations under
the Bond terms
* The Company makes consistent efforts to manage the
business within budget
* Management calibrates key project commitments against
bond conditions and covenants to ensure avoidance of
any breach
-------------------------------------------------------------
The administrators of London
Oil and Gas Ltd ('LOG') may * The administrators of London Capital & Finance
be obliged to divest its ("LCF"), with respect to LOG's holding in IOG, have
holding, creating downward stated publicly in December 2019 that they saw the
pressure on the Company's market value of the Company at the time as a
market value "significant discount to IOG's estimated net asset
value". Management believes the administrators intend
to maximise the value of the LOG holding in IOG
-------------------------------------------------------------
Operations: Operations may not go to plan, leading to damage, pollution,
cost overruns and poor outcomes
Risk Mitigation
--------------------------------------------------------------
There are a range of potential
performance outcomes for * Thorough subsurface mapping and reservoir modelling
each reservoir
Resource estimates may be
lower than actual reserves * High quality well design is undertaken
recovered
* Lessons learned during early wells applied to
subsequent wells
* The Company employs competent, experienced personnel,
and also commissions independent third-party reports
where appropriate
* A prudent range of possible outcomes are considered
within planning processes
--------------------------------------------------------------
Developments may deviate
from expected schedule and * The Company has hired competent, experienced
budget personnel throughout the organisation
* The Company awards contracts to competent,
experienced contractors
* Rigorous checks and controls are applied to schedule
and budget
* The Company maintains a Management of Change process
* The Company follows the gate process for project
governance and utilises peer reviews at appropriate
project stages
--------------------------------------------------------------
There are risks of failure
to sanction future phases * The Company has developed a strategic plan to develop
in a timely fashion its business and presented this both to regulators &
JV partner.
* The Company has appointed a PDA Manager to drive the
progress of portfolio assets through the Project
Governance Process and also recruited additional
subsurface resources
--------------------------------------------------------------
The Company may be vulnerable
to cyber security risks * The Company has developed an enhanced IT security
plan and supporting procedures, including in
particular:
* Improved access right to systems and protocols
* Enhanced onboarding and leaving processes
--------------------------------------------------------------
Regulatory and Legal: The Group may be unable to meet its licence
and regulatory obligations
Risk Mitigation
-------------------------------------------------------------
There may be delays in obtaining
relevant regulatory consents, * The Company has established solid relationships at
approvals and permits all levels with relevant government and regulatory
bodies, including OGA, BEIS / OPRED and HSE, and
liaises with them closely to minimise risks to
approvals
* Relevant applications are reviewed in detail and
submitted promptly
* Expedite timely submissions of consent processes and
follow up proactively
* Ensure suitable personnel are managing these
processes
-------------------------------------------------------------
Deficiency in Corporate Governance
* The Company has developed and implemented a suitable
suite of corporate policies and procedures, including
Financial Operations, Anti-Bribery and Corruption,
Travel and Expenses, Climate Change and
Sustainability
* All contracts must be authorised by the Contracts and
Procurement function, Finance, General Counsel and
above certain thresholds are subject to Tender
Committee and Board approval
-------------------------------------------------------------
Human Resources: The Company relies upon a pool of experienced and
motivated personnel to identify and execute successful investment
strategies
Risks Mitigation
-------------------------------------------------------------
Key personnel may be lost
to other companies. * The Company has established a competent, experienced
team across all key disciplines, which mitigates the
risk of losing any one key person.
* The Remuneration Committee regularly evaluates
incentivisation schemes to ensure they remain
competitive.
-------------------------------------------------------------
It may be difficult for the
Company to attract the necessary * The Company has established a competent, experienced
talent to successfully develop team across all key disciplines.
its projects.
* The Company continues to review and adopt appropriate
packages for both staff and contractors.
-------------------------------------------------------------
HSE and Sustainability: The Company faces a number of Health, Safety
and Environmental risks as an operator, and relies on several experienced
in-house HSE practitioners and suitable consultants to ensure it
meets all its related obligations.
Risks Mitigation
--------------------------------------------------------------
Risk of causing personal
harm * Compliance with the UK regulatory goal setting regime
for safety is established, implemented and maintained
through the Company management, HSE and Technical
Committee, culture and management systems
--------------------------------------------------------------
There is a risk of adverse
environmental effects including, * Strategic focus on natural gas as a transition fuel
in particular, contributing
to Climate Change
* Design and operation of low carbon footprint
facilities, including re-use of existing
infrastructure
* The Company has adopted a Net Zero policy whereby it
will invest in projects that offset its own emissions
--------------------------------------------------------------
Commercial environment: Volatility in relevant markets has the potential
to hinder the Company's business success
Risks Mitigation
-------------------------------------------------------------
There is a risk of stakeholder
misalignment * The Company undertakes regular discussions and
meetings with key stakeholders, to build and maintain
relationships.
* The Company makes due efforts to understand
stakeholders' priorities, drivers and risk tolerance
levels.
-------------------------------------------------------------
There is a risk of gas price
volatility * The Company has an established hedging policy which
it intends to execute once it has established
production
* The policy revolves around prudent management of
commodity price risks with the proportionate use of
sensible hedging structures
* Hedging strategies may also be employed to de-risk
major incremental capital commitments
* Budget planning considers a range of commodity
pricing and advice is taken from independent
third-party market experts. The company's long term
planning price is significantly below current price
levels.
-------------------------------------------------------------
There are risks relating
to fluctuations in the value * FX risks are primarily GBPEUR and GBPUSD
of relevant currencies fluctuations; exposure to adverse FX rate movements
is minimised by matching denomination of cash
holdings and liabilities to the extent possible.
-------------------------------------------------------------
COVID-19 Pandemic: The Covid-19 pandemic has created severe economic
upheaval and unforeseeable disruptions to normal working practices
around the world
Risks Mitigation
------------------------------------------------------------
Covid-19 Pandemic and associated
economic volatility may materially * The Company has implemented logistical and
disrupt the Company's ability organisational changes to underpin its resilience to
to deliver its key objectives. severe economic disruption driven by Covid-19, with
the key focus being protecting all personnel,
minimising impact on critical workstreams and
ensuring business continuity.
------------------------------------------------------------
Key performance indicators
The Group's main business is the acquisition, development and
production of gas reserves and resources in a safe, efficient and
environmentally responsible manner. This is undertaken by
assembling and managing a carefully selected portfolio of licence
interests containing a range of prospective, contingent and proven
reserves, working these up from a technical perspective, planning,
designing and executing appropriate appraisal, pre-development and
development activities and, in due course, ensuring effective
ongoing production operations. Non-financial performance is tracked
through the calibration of progress on these activities on an
ongoing basis. The Company also carefully monitors HSE KPIs,
foremost of which are to sustain no Lost Time Incidents or
environmental releases. Financial performance is tracked against
established value metrics and budgets which are set according to
carefully assessed cost estimates and the availability of funds
raised from capital providers, with the overriding objective of
creating value per share. Financial KPIs also include maintaining
full compliance with terms of debt facilities and maintaining
constructive relationships with debt providers and equity
investors.
Rupert Newall
Chief Financial Officer
26 August 2021
IOG plc
Unaudited consolidated statement of comprehensive income
for the six months ended 30 June 2021
Unaudited Unaudited
1H 2021 1H 2020
Note GBP000 GBP000
Other administration expenses (86) (1,530)
Project, pre-acquisition and exploration
expenses (44) (66)
Foreign exchange gain/(loss) 1,937 (751)
_________ _________
Total administration expenses 1,807 (2,347)
_________ _________
Operating profit/(loss) 1,807 (2,347)
Finance expenses (1,799) (1,077)
Finance income 14 96
Fair value gain/(loss) 187 (319)
_________ _________
Profit/(loss) for the period before
tax 209 (3,647)
Taxation - -
_________ _________
Total comprehensive profit/(loss) for
the period attributable to equity holders
of the parent 209 (3,647)
_________ _________
Profit / (loss) for the period per
ordinary share - basic 2 0.04 p (0.8) p
Profit / (loss) for the period per
ordinary share - diluted 2 0.03 p (0.8) p
The profit for the period arose from continuing activities.
IOG plc
Unaudited consolidated statement of financial position
as at 30 June 2021
Unaudited Audited
Note 31 December
30 June 2021 2020
GBP000 GBP000
Non-current assets
Intangible assets: exploration &
evaluation 1,539 1,309
Intangible assets: other 120 170
Property, plant and equipment: development
& production 99,626 53,422
Property, plant and equipment: other 12,802 16,541
114,087 71,442
------------- ------------
Current assets
Financial asset 1,387 1,260
Other receivables and prepayments 1,150 1,099
Restricted cash 3 3,441 67,049
Cash and cash equivalents 3 55,634 13,389
61,612 82,797
Total assets 175,699 154,239
Current liabilities
( 22,131
Trade and other payables (46,436) )
(46,436) (22,131)
------------- ------------
Non-current liabilities
Loans 4 (92,590) (95,813)
Provisions (13,019) (13,497)
(105,609) (109,310)
------------- ------------
Total liabilities (152,045) (131,441)
Net assets 23,654 22,798
Capital and reserves
Share capital 4,891 4,882
Share premium 49,989 49,989
Share-based payment reserve 6,698 6,154
Accumulated losses (37,924) (38,227)
------------- ------------
Total equity 23,654 22,798
IOG plc
Unaudited consolidated statement of changes in equity
as at 30 June 2021
Share Share Share- based Accumulated Total
capital premium payment losses equity
reserve
Group GBP000 GBP000 GBP000 GBP000 GBP000
At 1 January 2020 4,802 49,423 6,352 (20,029) 40,548)
Loss for the year - - - (19,337) (19,337)
______ _______ _______ ______ _______
Total comprehensive loss
attributable to owners
of the parent - - - (19,337) (19,337)
Lapse of warrants - - (401) 401 -
Issue of share capital 78 566 (727) 727 644
Issue of warrants - - 941 - 941
Issue of share options - - (1) 1 -
Exercise of share options 2 - (10) 10 2
______ _______ _______ ______ _______
At 31 December 2020 (Audited) 4,882 49,989 6,154 (38,227) 22,798
______ _______ _______ ______ _______
Profit for the period - - - 209 209
______ _______ ________ ______ _______
Total comprehensive profit
attributable to owners
of the parent - - - 209 209
Issue of share options - - 638 - 638
Exercise of share options 9 - (94) 94 9
______ _______ _______ ______ _______
At 30 June 2021 (Unaudited) 4,891 49,989 6,698 (37,924) 23,654
______ _______ _______ ______ _______
Share capital
Amounts subscribed for share capital at nominal value.
Share premium
Amounts received on the issue of shares, more than the nominal
value of the shares, less issue costs.
Share-based payment reserve
Amounts reflecting fair value of options and warrants
issued.
Accumulated losses
Cumulative net losses recognised in the Statement of
Comprehensive Income net of amounts recognised directly in
equity.
IOG plc
Unaudited consolidated cash flow statement
for the six months ended 30 June 2021
Unaudited Unaudited
1H 2021 1H 2020
GBP000 GBP000
Profit/(loss) after tax 209 (3,647)
Adjustments for:
Depreciation and amortisation 258 262
Fair value (gain)/loss (187) 319
Share based payments 638 391
Movement in other receivables (51) 2,952
Movement in trade and other payables 20,332 9,492
Movement in inventory - (629)
Interest received (14) (96)
Interest and financing fees 1,799 866
Effect of exchange rate changes on Bonds
payable (4,001) 6,030
_________ _________
Net cash generated from operating activities 18,983 15,940
Cash flows from investing activities
Purchase of intangible assets and property,
plant and equipment (42,005) (4,894)
Deferred consideration payments - (875)
Movement in cash and cash equivalents
from restricted cash 63,608 15,048
Interest received 14 96
Increase in financial assets 127 -
Lease liability payments - (64)
_________ _________
Net cash generated from investing activities 21,744 9,311
Cash flows from financing activities
Proceeds from issue of equity instruments 9 -
of the Group (net of costs)
Interest and financing fees paid (4,429) (4,605)
_________ _________
Net cash used in financing activities (4,420) (4,605)
Increase in cash and cash equivalents
in the period 36,307 20,646
Cash and cash equivalents at start of
period 13,389 16,197
Effects of exchange rate changes on
cash and cash equivalents 5,938 (5,279)
_________ _________
Cash and cash equivalents at end of
period / year 55,634 31,564
_________ _________
IOG plc
Notes to the financial statements
for the six months ended 30 June 2021
1. Basis of preparation
The financial information contained in this announcement does
not constitute statutory financial statements within the meaning of
Section 434 of the Companies Act 2006. The financial information
for the six months ended 30 June 2021 has been prepared using
accounting policies consistent with IFRS as applied in accordance
with the provisions of the Companies Act 2006. The same accounting
policies, presentation and methods of computation are followed in
the financial information as were applied in the Group's latest
annual audited financial statements for the year ended 31 December
2020. While the financial figures included in this financial
information have been computed in accordance with IFRS applicable
to interim periods, this financial information does not contain
sufficient information to constitute an interim financial report as
that term is defined in IAS 34 'Interim Financial Reporting'.
The comparatives for the full year ended 31 December 2020 are
not the Company's full statutory accounts for that year. A copy of
the statutory accounts for that year has been delivered to the
Registrar of Companies. The auditors' report on those accounts was
unqualified, did contain an emphasis of matter paragraph relating
to the material uncertainty in respect of going concern and did not
contain a statement under section 498(2)-(3) of the Companies Act
2006.
After a review of these forecasts the Board have a reasonable
expectation that the Group has adequate resources to continue in
operational existence for the period under review. Accordingly, the
Directors continue to adopt the going concern basis in preparing
the consolidated financial statements. However, the Directors
acknowledge that at the date of approval of this interim financial
information, the potential future impact of the reverse stress test
scenarios noted above and the sensitivity of the delivery schedule,
indicate the existence of a material uncertainty which may cast
significant doubt about the Group's and Parent Company's ability to
continue as a going concern and therefore it may be unable to
realise its assets and discharge its liabilities in the normal
course of business. The Board has also assessed any foreseeable
negative impact on the Bond covenants and are comfortable that the
current forecast would not lead to any breaches of said
covenants.
The financial statements do not include any adjustments that
would result if the Group and the Parent Company were unable to
continue as a going concern. The cash resources of the Group will
be used over the coming months to deliver the Phase 1 project which
will then generate cash flow from gas production.
2. Profit / (loss) per share
The calculation of profit / (loss) per share is based upon the
weighted average number of ordinary shares in issue during the
period of 489,082,147 (30 June 2020: 480,173,245). Diluted profit
per share is calculated based upon the weighted average number of
ordinary shares plus the weighted average number of ordinary shares
that would be issued upon conversion of potentially dilutive share
options and warrants into ordinary shares. As the result for 2020
presented was a loss, the calculation of the diluted LPS was
anti-dilutive and therefore the potential ordinary shares were
ignored for the purposes of calculating diluted LPS. The weighted
average number of ordinary shares on a diluted basis at 30 June
2021 is 604,631,191 (30 June 2020: 598,741,061).
3. Restricted cash, Cash and cash equivalents
Unaudited Audited
Group 30 December
30 June 2021 2020
GBP000 GBP000
Restricted cash 3,441 64,049
Cash and cash equivalents 55,634 13,389
Restricted cash at 30 June 2021 of GBP3.4 million (31 December
2020: GBP64.0 million) includes GBP2.0 million of restricted
deposits in Euro escrow and Debt Service Reserve Accounts following
the Norwegian Bond issue and a GBP1.4 million (31 December 2020:
GBP1.4 million) deposit secured against decommissioning provisions
of the Group's infrastructure assets. All restricted cash balances
are expected to become unrestricted and readily available for use
within 1 year.
Cash and cash equivalents comprise cash in hand, deposits and
other short-term money market deposit accounts that are readily
convertible into known amounts of cash.
4. Bonds payable
On 20 September 2019, the Company issued a EUR100 million
Norwegian Bond on the Oslo B ø rs, of which EUR100 million was
drawn down to fund the Phase 1 development program.
Unaudited Audited
30 June 31 December
2021 2020
GBP000 GBP000
Balance at the beginning of the year 87,777 82,423
Amortisation of transaction fees 277 562
Interest charged 4,046 8,668
Interest Paid (4,046) (8,668)
Currency revaluation (4,001) 4,792
_________ _________
84,053 87,777
_________ _________
The secured callable bonds were issued on 20 September 2019 by
IOG plc at an issue price of par. The bonds have a term of five
years and will be repaid in full at maturity. The bonds carry a
coupon of 9.5% plus 3 month EURIBOR with a EURIBOR floor of 0% and
were issued at par.
The Bond is callable 3 years after issuance with an initial call
premium of 50% of the coupon (i.e. repayable at a cost of EUR104.75
million if 3m EURIBOR is at zero or lower), declining by 10% every
six months thereafter.
Included within loans payable of GBP92.6 million (31 December
2020: GBP95.8 million) are GBP84.1 million (31 December 2020:
GBP87.8 million) of bonds and GBP8.5 million (31 December 2020:
GBP8.0 million) of loans.
5. Post balance sheet events
On 3 August 2021, the Company announced that the Noble Hans Deul
jack-up rig mobilised from the Elgood field location on 27 July and
jacked up at the Blythe Platform on 29 July. After preparations for
drilling the Blythe well spudded on 2 August 2021.
On 4 August 2021, the Company announced its completion of a
comprehensive Emissions Assessment (EA), undertaken by its internal
Environmental, Social and Governance (ESG) Taskforce in
collaboration with Genesis. On the basis of the EA the Company has
committed to Scope 1 & 2 Net Zero status as of 2021.
On 29 July 2021, the Company announced it had signed a Gas sales
agreement ("GSA") with Gazprom Marketing & Trading ("GM&T")
for the first two years of Elgood and Southwark production, plus
Nailsworth and Elland, after a competitive offtake process
IOG plc
INFORMATION & ADVISERS
Country of incorporation of parent company
England & Wales
Legal form
Public limited company with share capital
Directors
Fiona MacAulay
Andrew Hockey
Rupert Newall
Esa Ikaheimonen
Neil Hawkings
General Counsel and Company Secretary
Robin Storey
Registered office
60 Gracechurch Street
London
EC3V 0HR
Company registered number
07434350
Auditors
BDO LLP
55 Baker Street
London W1U 7EU
Legal advisers
Fieldfisher LLP
Riverbank House
2 Swan Lane
London EC4R 3TT
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END
IR DKPBNCBKDQFB
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