The potential payback for IOG PLC (AIM:IOG) on its investment in the Blyth H2 well will be "less than three months", according to Peel Hunt.
The exploration and development group will move ahead with the drilling of the H2 well rather than Southwark A2 after production from the first Southwark well significantly undershot expectations.
“H2 will target Blythe’s central high and is seen by IOG as a lower risk well, not requiring hydraulic stimulation as Blythe is a more permeable reservoir,” Peel Hunt said in a note.
“In the success case, H2 is expected to produce 30-40 million standard cubic feet [of gas] per day, will reduce liquid arrivals into Bacton and will increase ultimate recovery of the Blythe gas reserves.”
The broker said it expects the work, which will take around three months to complete, to get underway next month at a cost to IOG of £13mln.
It believes the potential payback time for H2 will be “less than three months”.
At 9.45 am, the shares were changing hands for 4.82p, up 2%. In the last month they have lost around 70%, principally the result of the underperformance of Southwark 1.