Sign up United Kingdom
Proactive Investors - Run By Investors For Investors

VSA Capital Market Movers - Independent Oil & Gas

VSA Capital Market Movers - Independent Oil & Gas

Independent Oil & Gas (LON:IOG)#

Independent Oil & Gas (LON:IOG) has announced that following the successful reprocessing of seismic data at Harvey the company has increased its estimates of Prospective Resources and closed the previously announced £15m loan facility from London Oil & Gas, the proceeds of which will be used to drill the appraisal well. The terms of the funding are as previously announced.

The Pre-Stack Depth Migration reinterpretation work has resulted in an optimised resource estimate with a 93%, 13% and 44% increase in the respective low, mid and high resource estimates to 85/129/199 BCF. Most significant, in our view, is the strong increase in the low case to 85BCF from the CPR estimate of 44BCF. This strengthens the case for Harvey being an important part of the Southern North Sea gas project and ultimately being tied into the Thames Pipeline. The data has increased IOG’s confidence in the prospect and increased its internal geological chance of success to 63% from 50%.

The funding closure confirms IOG’s ability to carry out the appraisal well which is targeted for January 2019 providing a key potential catalyst for a further rerating of the stock. Fraser Well Management has been contracted to manage and operate the appraisal well, and the rig and offshore service providers are expected to be confirmed shortly.

UK natural gas prices rallied 33% during august peaking at over 75p/therm. Our analysis of IOG was conducted based on a UK natural gas price of 45p/therm yet indicates significant further upside potential. The severe winter last year resulted in destocking of UK gas reserves which owing to the closure of major infrastructure and high Asian gas prices are unlikely to rapidly replenished. With FID and further value catalysts, such as the Harvey appraisal well upcoming we believe that IOG is well placed to benefit and is an important asset for the UK energy market.
We maintain our Chance of Success estimate ahead of the appraisal well although adjust our reserve base to the updated figure of 129BCF. This has a 1p impact on our target price which increases to 92p/sh.

We reiterate our Buy recommendation although increase our target price to 92p/sh. 

Disclaimer: This research report has been prepared by VSA Capital Limited and is solely for, and directed at, persons who are Professional Clients as defined under Annex II of the Markets in Financial Instruments Directive, Directive 2004/39/EC, or as defined in the FCA Handbook. Persons who do not fall within the above category should return this research report to VSA Capital Limited, New Liverpool House, 15-17 Eldon Street, London EC2M 7LD, immediately.
This research report is not intended to be distributed or passed on, directly or indirectly, to any other class of persons. It is being supplied to you solely for your information and may not be reproduced, forwarded to any other person or published, in whole or in part, for any purpose, without out prior written consent.
This research report is exempt from the general restriction on the communication of invitations or inducements to enter into investment activity and has therefore not been approved by an authorised person, as would otherwise be required by Section 21 of the Financial Services and Markets Act 2000 (the "Act"), as amended by The Financial Services and Markets Act 2012.
Neither the information nor any opinion expressed constitutes an offer, or an invitation to make an offer, to buy or sell any securities or any options, futures or other derivatives related to such securities.
The information and opinions contained in this research report have been compiled or arrived at by VSA Capital Limited (the "Company") from sources believed to be reliable and in good faith but no representation or warranty, express or implied, is made as to their accuracy, completeness or correctness. All opinions and estimates contained in the research report constitute the Company's judgments as of the date of the report and are subject to change without notice. The information contained in the report is published for the assistance of those persons defined above but it is not to be relied upon as authoritative or taken in substitution for the exercise of the judgment of any reader.
The Company accepts no liability whatsoever for any direct or consequential loss arising from any use of the information contained herein. The company does not make any representation to any reader of the research report as to the suitability of any investment made in connection with this report and readers must satisfy themselves of the suitability in light of their own understanding, appraisal of risk and reward, objectives, experience and financial and operational resources.
The value of any companies or securities referred to in this research report may rise as well as fall and sums recovered may be less than those originally invested. Any references to past performance of any companies or investments referred to in this research report are not indicative of their future performance. The Company and/or its directors and/or employees may have long or short positions in the securities mentioned herein, or in options, futures and other derivative instruments based on these securities or commodities.
Not all of the products recommended or discussed in this research report may be regulated by the Financial Services and Markets Act 2000, as amended by The Financial Services and Markets Act 2012,  and the rules made for the protection of investors by that Act will not apply to them. If you are in any doubt about the investment to which this report relates, you should consult a person authorised and regulated by the Financial Conduct Authority who specialises in advising on securities of the kind described.
The Company does and seeks to do business with the companies covered in its research reports. Thus, investors should be aware that the Company may have a conflict of interest that may affect the objectivity of this report. To view our policy on conflicts of interest and connected companies, please go to: http://www.vsacapital.com/policies/conflict-of-interest-policy.
Investors should consider this report as only a single factor in making their investment decision.
The information in this report is not intended to be published or made available to any person in the United States of America (USA) or Canada or any jurisdiction where to do so would result in contravention of any applicable laws or regulations. Accordingly, if it is prohibited to make such information available in your jurisdiction or to you (by reason of your nationality, residence or otherwise) it is not directed at you.

© Proactive Investors 2018

Proactive Investors Limited, trading as “Proactiveinvestors United Kingdom”, is Authorised and regulated by the Financial Conduct Authority.
Registered in England with Company Registration number 05639690. Group VAT registration number 872070825 FCA Registration number 559082. You can contact us here.

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use