Beleaguered North Sea operator IOG (LON: IOG) has cancelled a rig contract and suspended drilling plans in order to focus on rebuilding its balance sheet.
A fall in gas prices, along with numerous operational issues, has hit the London-listed firm, which told investors this month it was likely in breach of one or more covenants of its 100m euro bond – and was seeking a waiver.
The firm then said it had secured a one-month deferral on the loan – from June 20 to July 31.
IOG said today it has cancelled a contract for the Shelf Drilling Perseverance jack-up rig (formerly the Noble Hans Deul) – which was on-contract until September and an extension option had already been exercised.
The firm has therefore deferred plans to drill appraisals at its Kelham and Goddard prospects, which are both part of its wider “Saturn Banks” hub in the UK North Sea.
CEO Rupert Newall said the firm has “been assessing next steps for the business very carefully”.
“Mindful of current gas market and balance sheet risks, we have decided to pause drilling activity for now in order to maximise near-term cash flow.”
Along with partner CalEnergy Resources, IOG said it will continue to assess options to drill the appraisal wells by March 31 2024, per its licence terms.
It also highlighted that it is offering partners up to 50% of the Goddard licence (P2438) via a previously-announced farm-out process.
Shares in IOG are down 37% in the last month.
H2 intervention for IOG
The IOG plan is to produce solely from its Blythe field H2 well, which came onlin this month.
IOG said today that an intervention on H2, which has been struck by operational issues, has been successful and stabilised at a rate of 42 million standard cubic feet of gas per day, slightly above guidance of 30-40mmscf/d.
Production will now be managed up from 20 mmscf/d to the maximum rate.