IOG eyes Skipper well spud date

Independent Oil and Gas plc (IOG), the North Sea-focused oil and gas company, has secured funds and set a spud date for its Skipper appraisal well, in the UK North Sea. 

Namely, on December 4, 2015, the company and its subsidiary IOG North Sea Limited entered into two loan agreements with GE O&G and London O&G according to which the lenders will provide loans of, in aggregate, up to £4.75 million ($7.2 million) to help fund the drilling of the Skipper appraisal well.

IOG says that, of this sum, GE O&G is providing £2 million and London O&G is providing £2.75 million. An interest of 9% per annum is payable on amounts of the loans drawn by IOG North Sea and both the principal and interest are repayable by December 30, 2016.

IOG and IOG North Sea have granted the lenders a fixed and floating charge over the company and the assets of IOG North Sea as security for repayment of the loans. IOG has also agreed to grant warrants to each of the lenders to subscribe respectively for up to 5,777,310 ordinary shares in the capital of the company at a price of 11.9p per ordinary share. The total of 11,554,620 warrants may be exercised at the lenders’ discretion at any time up to December 30, 2016, said IOG.

The company also says that the drawdown of the loans is subject to the satisfaction or waiver of certain conditions precedent including the Oil and Gas Authority approving IOG as licence operator and AGR Well Management Limited (AGR) as well operator and completion of the rig contract.

Mark Routh, CEO of IOG commented: “We are delighted to have secured this loan funding along with very significant contractor deferrals, demonstrating industry’s support for the Skipper project. Subject to completion of certain contracts we are now fully funded to drill this transformational well early in 2016 and look forward to reverting with the final details shortly.”

Rig contract

In relation to a rig contract for the Skipper well, IOG said that an agreement with a service contractor has now been executed with significant deferral.

Now that the loan agreements are in place, the company is well placed to conclude contract negotiations on the Skipper rig, the North Sea-focused oil and gas company explained.

The company has agreed, but not yet executed a well management contract with AGR. The company says it anticipates that AGR’s fees pursuant to this contract will be part satisfied by the issue of ordinary shares and part satisfied by payment in cash.

Initial payments at IOG’s election of £657,220 may be satisfied either in cash or by the issue of new ordinary shares at an issue price equal to the volume-weighted average of the price of the ordinary shares for the calendar month prior to issue.

Deal with Alpha & Weatherford

Furthermore, IOG says that as a consequence of the progress that the company has made toward drilling the Skipper well, Alpha Petroleum Resources Limited has agreed to extend the deadline on the Skipper sale and purchase agreement to December 21, 2015.

As part of the funding arrangements, Weatherford Technical Services Limited has agreed to extend the maturity date for its outstanding loan of approximately $2 million until December 30, 2016. IOG says that, as consideration for the extension, Weatherford will share in the same security package as that granted to the lenders and the contractors providing services on a deferred payment basis.