Independent Oil and Gas Plc (LON:IOG) confirmed that an agreement has now been signed for the acquisition of the 50% stake in the Blythe gas discovery that it doesn’t already own.
With full control of the project IOG is better able to advance efforts to develop the Blythe project.
The junior oil and gas firm is buying the stake from its partner in the project, Alpha Petroleum Resources, for up to £6.5mln.
Initially, IOG will pay £1.5mln to Alpha Petroleum at the deal’s completion and a further £5mln would be payable as the project reaches the ‘first gas’ production milestone.
"We are delighted to announce the signing of the SPA to acquire the remainder of the highly attractive Blythe gas discovery,” said Mark Routh, IOG chief executive.
“This transaction not only adds material 2P reserves of 17.2 BCF at a very low cost equivalent to $2.31/Boe but also more importantly gives the company 100% ownership and full control of the future development of Blythe.
He added: “We can now move ahead to co-develop Blythe with our other assets in surrounding licences which are 100% owned by IOG in line with our hub strategy.”
Routh told investors that IOG’s next task will be to deliver a field development plan to the UK regulator for Blythe.
"Crucially, owning 100% of Blythe now allows us to optimise the wider Blythe Hub development concept.
“IOG's initial plan is to install a small unmanned platform at Blythe with pre-installed risers to tie-back nearby discoveries making Blythe the centre of a new hub.
“In addition, it allows us to evaluate further the discovered gas in the carboniferous beneath Blythe and the oil discovery above Blythe in the Zechstein fractured carbonates."
Overall, as a result of the deal, IOG will own some 40.2mln barrels of oil equivalent (boe) proved and probable (2P) reserves for Blythe and the Skipper discovery (which are its two most advanced projects).
It also has the Cronx, Elgood and Harvey discoveries, which together are estimated to have a total of 8.6mln barrels of contingent resources.
IOG’s deal for Blythe is supported by London Group, the company’s funding partner.
Simon Hume Kendall, London Group chief executive, said: “We believe that developing stranded gas fields in the Southern North Sea using innovative thinking and low cost techniques will yield excellent returns to investors.
“It is also very much in line with the Government's stated policy on Maximising Economic Recovery in the UK and increasing reliance on domestic gas production as coal fired power stations are phased out over the next few years."