Proposed Placing & Subscription to Fund Appraisal of Incremental High-Return Southern Hub

Source: www.gulfoilandgas.com 9/23/2021, Location: Europe

IOG plc, the Net Zero UK gas and infrastructure operator focused on high return projects, announces a proposed placing (the "Placing") and Subscription (as defined below, and together the "Fundraise") to raise gross proceeds of approximately 8.5 million through the issue of new Ordinary Shares of 1 pence each in the capital of the Company (the "New Ordinary Shares"). The New Ordinary Shares will be issued to existing and new investors pursuant to the Placing ("Placing Shares") at a price of 25 pence per Ordinary Share (the "Issue Price") through finnCap Ltd ("finnCap") and Peel Hunt LLP ("Peel Hunt"), acting as joint bookrunners (together the "Joint Bookrunners").

The Fundraise is being conducted on a non-pre-emptive basis. In addition to the Placing, the Company intends to enter into subscription agreements with certain of its directors and senior executives who have indicated that they intend to subscribe for 200,000 New Ordinary Shares (the "Subscription Shares") at the Issue Price (the "Subscription"). Together, the total number of New Ordinary Shares to be issued pursuant to the Fundraise will be less than 10% of the Company's existing issued share capital.

The Placing will be conducted in accordance with the terms and conditions set out in the Appendix to this announcement (which forms part of this announcement, such announcement and the Appendix together being this "Announcement") through an accelerated bookbuild process (the "Bookbuild") which will be launched immediately following release of this Announcement. The Placing is not being underwritten.

The net proceeds of the Fundraise will primarily be used by the Company to pursue a high-return incremental opportunity in addition to its existing development assets portfolio, by funding its 50% net share of the cost of drilling a dual-lateral appraisal well at the Kelham North and Kelham Central prospects in licence P2442 (Block 53/1b). Management estimates that Kelham North and Kelham Central contain gross mid-case resources of 36 Billion cubic feet equivalent ("Bcfe") and 42 Bcfe respectively, while the wells have geological chances of success ("GCoS") of 80% and 70% respectively. If successful, these assets would form the basis of a new Southern Hub that, with the Abbeydale discovery tied back subsea, has an estimated IRR of 47% at the Company's base planning case gas price of 45p/therm, directly benefitting from the existing Saturn Banks infrastructure. In the Company's view, successful appraisal would also significantly de-risk the other discoveries and prospects in the P2442 licence, enhancing the commercial potential of the area.

By conducting the Fundraise now, the Company will be able to elect to continue into the next phase of the licence and also exercise an extension option embedded in its Noble Hans Deul jack-up rig contract, which was executed in 2020 at a time of historically low rig rates. If the option is exercised by 30 September 2021, this would enable the Company to drill this well at the same rig rate as the Phase 1 development programme. The Kelham North and Kelham Central well is planned to follow a Goddard appraisal well in licence P2438 to be financed out of existing resources and drilled directly after the first two Southwark production wells, enabling the Company to benefit from significant drilling efficiencies. As previously announced, the Noble Hans Deul jack-up rig is drilling the Blythe production well at the present time, further details of which are provided in the operational update below. The Company's Joint Venture ("JV") partner CalEnergy Resources (UK) Limited ("CER") holds the other 50% non-operated stake in both P2438 and P2442 and is aligned with plans to maximise returns from these licences.

Assuming the Placing is subscribed in full, the Fundraise proceeds are intended to be used as follows:
- Kelham North & Central appraisal well (50% share) 6.25m
- Additional drilling contingency 1.20m
- Accelerated technical evaluation of licence P2589 0.55m - Transaction fees and associated costs 0.50m
- Total 8.50m

The Fundraise is being conducted out of the authorities to issue and allot Ordinary Shares in the capital of the Company granted to the Directors by shareholders at the Company's annual general meeting on 27 April 2021. Accordingly, the issue of the New Ordinary Shares is not subject to the approval of shareholders.

The Issue Price represents a discount of approximately 8.3% to the closing mid-market price of an Ordinary Share of 27.25 pence on 22 September 2021 (being the last practicable date prior to this Announcement). The New Ordinary Shares will represent approximately 6.5% of the Company's Enlarged Issued Share Capital.

Fiona MacAulay, Neil Hawkings, Andrew Hockey and Rupert Newall (the "Participating Directors") alongside David Gibson and James Chance (PDMRs of the Company) have indicated their intention to invest 50,000 in aggregate for 200,000 Subscription Shares pursuant to a direct subscription with the Company at the Issue Price. The Subscription is conditional on admission of the New Ordinary Shares to trading on AIM becoming effective and the Placing Agreement not being terminated in accordance with its terms.

Further details of the Terms and Conditions of the Placing are set out in the appendix to this Announcement. This announcement should be read in its entirety. In particular, you should read and understand the information provided in the "Important Notice" section and the detailed terms and conditions of the Placing described in the Appendix 1.


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