Independent Oil and Gas (IOG), the North Sea focused oil and gas company, will delay the Skipper appraisal well until there is greater stability and clarity in the oil market. This follows recent oil price movements and bad weather in the North Sea.
“Whilst it has been a very difficult decision, it has undoubtedly become prudent to postpone the Skipper appraisal well given the significant further oil market weakness in recent weeks, as well as unsettled weather conditions in the North Sea,” said Mark Routh CEO of IOG.
The existing timetable for drilling Skipper in Q1 2016 requires the announced loans and contractor deferral funding to be repaid by IOG at the end of 2016.
IOG now anticipates the Skipper appraisal well to be drilled later this year. To achieve this revised timetable, IOG will need agreement from its principal lenders and contractors and agreement from the Oil and Gas Authority to extend the Skipper license beyond 30 March 2016. These critical discussions are ongoing.
To facilitate this rescheduling and also to provide capital for potential acquisitions, London Oil and Gas Ltd (LOG) has agreed terms in principle with IOG to provide a further US$14.4 million (£10 million) of convertible debt funding. This funding is subject to the execution of legally binding documentation which is expected to be completed shortly.
The further loan funding would be in addition to the existing $3.9 million (£2.75 million) and $1.1 million (£0.8 million) loans from LOG, as announced on 7 December 2015 and 11 December 2015 respectively, both of which remain undrawn as certain conditions precedent to their drawdown have yet to be satisfied.
The contemplated additional financing agreements envisage that LOG would also potentially provide access to significant additional funds for acquisitions and developments. Reaching a position acceptable to LOG with certain existing creditors of IOG will be a condition precedent to the new loan. The $14.4 million (£10 million) loan would be secured against IOG’s assets and fully convertible at LOG’s election into IOG ordinary shares at a conversion price of 10p.
From this new funding, $4.3 million (£3 million) would specifically cover G&A and license fees for the next 30 months. The IOG board is confident that subject to this agreement proceeding and IOG being able to drawdown on the sums committed, the company will obtain immediate working capital and have financial security until at least mid-2018.
The $10.08 million (£7 million) balance of the proposed funding would be used to add value to the IOG portfolio, both organically and via acquisitions.
It is proposed that the loan would need to be drawn in full within three years of completion. Each drawing would then need to be converted into ordinary shares in IOG three years after drawing. If committed, the funding would not be able to be used for debt repayments.
Subject to completion of the loan agreement and satisfactory regulatory due diligence, IOG will invite two members of the LOG team to join the board.
Read more
Subscribe
