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Independent Oil & Gas IOG has announced that the Harvey appraisal well spudded yesterday and is expected to take around 60 days to complete. It has a 63% COS looking for 85/129/199 BCF of prospective resources and also to demonstrate reservoir deliverability. More importantly post the recent farm-out of IOG’s core project Cal Energy has the right to farm-in to 50% of the Harvey licences within three months of completion. If this option is exercised, CER will pay an additional £20 million to IOG and a £0.95/MCF royalty on all of CER’s life-of-field net gas production from Harvey (equivalent to £61.3 million if Harvey produces IOG’s 129 BCF Best Estimate Prospective Resources). This would maintain full alignment between IOG and CER across IOG’s entire SNS Assets. Harvey has always been crucial to the IOG plans in the SNS and with this farm-out potentially adding this well to the process the result just got that bit more interesting.
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