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Independent Oil & Gas sees shares tumble

SHARES in North Sea focused Independent Oil & Gas have tumbled 10% after the company said it faced delay on a project east of Shetland, which reflects pressure on exploration resources like drilling rigs.

Aim-listed Independent Oil & Gas said it has delayed drilling an appraisal well on the Skipper prospect off Shetland from this summer until next year citing the time required to get a suitable rig and complete preparations.

Run by North Sea veteran Mark Routh, the company said planning work on the proposed Blythe field development off eastern England has also been delayed, due to the "restricted availability of suitable vessels".

Independent Oil & Gas, which has no production, now expects to achieve first gas from Blythe in mid 2016, rather than by the end of 2015. The update from London-based Independent Oil & Gas highlighted the challenges small oil and gas companies can face operating in the North Sea.

Given the nature of the exploration and production cycle, companies can face a long wait between buying or making discoveries and starting cash-generating production.

The case of Independent Oil & Gas shows timescales can be lengthened because of factors over which companies may have little control, like the supply of essentials like drilling rigs and support vessels.

In March Oil & Gas UK highlighted a shortage of drilling rigs in UK waters amid booming activity in the North Sea.

The trade body said it feared tax changes in the Budget would drive rigs off the United Kingdom Continental Shelf.

However, Mr Routh, who grew CH4 Energy into a £154m North Sea business, said Independent Oil & Gas had made good progress since joining the Aim market in September.

He said: "The strategy adopted by the Company is a proven one and we remain committed to building a significant development and production business focused on the UKCS."

He said directors were excited by the possibility of the company winning potentially transformational licence awards, after it bid for acreage in the recent UK licensing round. He emphasised the company's interest in buying producing assets.

Independent Oil & Gas said investment company Darwin Strategic had agreed to subscribe for shares with a total issue price of £1.8m at 32p each.

The company said: "Despite best efforts, the partnership on the Skipper licence has agreed that given the time required to prepare for the appraisal well and secure a suitable drilling rig, that the Skipper appraisal well is now scheduled to take place in Q2/Q3 2015."

In March the company said it planned to drill appraisal wells on Skipper this summer and on the Cronx gas discovery near Blythe before the year end.

Yesterday it said the acquisition of 100% of the Cronx licence is ongoing. In March it agreed to buy the asset from Swift Exploration for an initial £468,000.

Independent Oil & Gas said the operator of Blythe, Alpha Petroleum Resources, had received tenders for the pipeline route and site survey for the field development. However, it said: "Due to the restricted availability of suitable vessels, the results from the survey are not expected to be available until Q3 2014."

The company said it expects to submit a Field Development Plan for Blythe to the Department of Energy in the fourth quarter of 2014. In March the company said it was working towards submitting the plan by the third quarter of this year.

Shares in the company closed down 2.75p at 26p.

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