IOG defers part of Skipper well loan payment

Independent Oil and Gas (IOG) has concluded discussions with creditors for the remaining liabilities relating to the North Sea Skipper well drilled in 2016.

The Skipper appraisal well was drilled in the summer of last year for a total cost of £10 million ($13.4M at current rates).

The drilling of the well was financed in part via loans and deferred payments which were due to be repaid at the end of 2017. The total loans and deferred payments were approximately £6.8 million, and approximately £3.2 million was paid in cash or shares.

IOG intended to refinance or repay these loans in parallel with securing development funding for some or all of its SNS gas assets in 2017.

The company said on Thursday that a total of £6.78M was due to be settled by Wednesday, December 20, 2017.

A sum of £4.47M was deferred with final payments due either by the end of August 2018 or a field development plan approval for the company’s SNS developments, whichever happens first. Interest on the payment will accrue at the London Interbank Offered Rate (LIBOR) of + 9%. LIBOR serves as the first step to calculating interest rates on various loans throughout the world. IOG added that it could repay early without penalty.

Of the £6.78M, an amount of £1.87M ($2.5M) has been converted into new ordinary shares in IOG at a price of £0.19. The remaining cash element of the settlement will be paid from existing facilities. The company added that all agreements were commercially settled and that final documentation would be finalized shortly.

Conversion into shares

Baker Hughes, a GE company, agreed to convert £1.75M of the Skipper debt, plus a fee of £0.1M for the foregone interest from conversion, into 9,736,842 new ordinary shares in IOG.

If BHGE sells these shares at an average price above £0.19, any excess proceeds will be used to pay down any outstanding amount to BHGE or otherwise paid to IOG. If the shares are sold for less than £1.85M, IOG will make up the shortfall through the issue of new shares or with cash.

Should BHGE retain shares under this agreement, the price used to calculate any excess or shortfall will be the closing price on December 31, 2018.

IOG said that another creditor also agreed to convert an outstanding debt of £124,320. Including a negotiated conversion fee, the company has agreed to issue 742,418 new shares to this creditor. Should this creditor retain shares under this agreement, the price used to calculate any excess or shortfall will be the closing price on March 31, 2018.

The company has applied to the London Stock Exchange for admission of the new ordinary shares to trading on AIM. Admission is expected to occur on December 29, 2017, subject to execution of final documentation. Following the admission, there will be 120,209,629 ordinary shares in issue.

Mark Routh, CEO and interim chairman of IOG, said: “The company is pleased to have successfully concluded creditor discussions and is very appreciative of the support from the service sector both in enabling the drilling of the Skipper appraisal well in August 2016 and in terms of extending deferrals or equity conversion. This resolution enables us to maintain a firm focus on our ongoing Southern North Sea development contracting and funding processes. We look forward to securing Field Development Plan approvals in 2018 to keep us on track for significant gas production in 2019.”