IOG gains tighter North Sea grip with Vulcan acquisition

Independent Oil and Gas (IOG) has tightened its grip on the Vulcan oil fields in the North Sea with an acquisition of up to £5m for four UK licences.

AIM-listed IOG has acquired Oyster Petroleum, which on completion will own the four 'Vulcan Satellite' licences in the southern North Sea with estimated recoverable resources of 320.7bn cubic feet of gas, from Verus Petroleum for an initial £1m drawn from its loan facilities from London Oil & Gas.

An additional £0.75m will be due nine months after the deal's completion, plus further payments of up to £3.25m when certain milestones have been achieved.

However, one licence, Vulcan East, has a suspended well requiring decommissioning which IOG's said had been independently estimated to cost £3m.

The Vulcan licences, which lie 30-45km east of IOG's 100%-owned Blythe field, require no further appraisal.

Once this and other pending transactions complete, IOG estimated that it will own licences over more than 100m barrels of oil equivalents (mmboe), of which roughly two thirds will be gas.

"These assets will more than double our 2P and 2C recoverable resources at a very compelling price and come with substantial pre-trading expenditure," said chief executive Mark Routh.

"This acquisition expands our hub strategy; to gain control over a number of dormant discoveries that can be developed through common existing infrastructure, thereby generating significant economies and capturing many synergies."

Simon Hume-Kendall, chairman of London Oil & Gas, added: "The company is now clearly able to expand and develop its portfolio in innovative ways by seeking to commercialise these sizeable developments.

"Furthermore and most critically, LOG is pleased to be in advanced discussions with IOG and other parties regarding the development funding required to unlock the considerable value in their portfolio, which we believe to have multi-billion dollar revenue potential."