Independent Oil and Gas Plc (LON:IOG) has announced a US$15mln funding for the proposed high impact Harvey appraisal well, due to be drilled in the fourth quarter.
Associate and partner London Oil and Gas (LOG) is to provide a new non-convertible loan facility.
The loan will carry interest at LIBOR plus 9% per year, and, LOG will also receive share warrants that give them the opportunity to acquire 20mln new IOG shares, at a price of 32.18p per new share.
IOG plans to start drilling in December and it is now progressing preparation work - well management, rig and services talks are very well advanced, with contracts due to be agreed in coming weeks.
The well aims to prove gas across the Harvey structure which was estimated last year between 45bn to 286bn cubic feet of gas, with a mid-case of 114bn. The well is seen to have a 50% geological chance of success.
"A successful Harvey appraisal well could nearly double the proven reserves in our Southern North Sea gas portfolio in the high case of 286 BCF, which the board of IOG considers to be a reasonably likely outcome,” said Andrew Hockey, chief executive.
“The 114 BCF mid-case result would still make it our largest gas asset, significantly enhancing the company's value.
“This would enable a fast-track Harvey development to follow in direct continuation from Phase 1 of the development of our proven gas assets at the Blythe Hub and Vulcan Satellites Hub, which is approaching final investment decision.”
Hockey added: “Being fully funded for the Harvey appraisal well, with its excellent risk-return profile, provides a very exciting catalyst for the company to come soon after FID on the development assets. Investors will now enjoy significant near-term upside on top of the high-value development project, without being required to fund it.”