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Independent Oil & Gas soars with news of US$50mln funding boost

Last updated: 21:17 07 Mar 2014 AEDT, First published: 22:17 07 Mar 2014 AEDT

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Shares in Independent Oil & Gas (LON:IOG) soared 24% after it agreed a US$50mln debt facility that will help fund its development plans.

The lender isn’t named, although IOG said it has provided funds to “several oil and gas businesses, including companies operating in the North Sea”. 

Meanwhile, the terms of the debt are described as attractive, while the facility will run for five years.

The company said US$25mln will be available to invest in the Blythe field, in the North Sea, once the group satisfies certain conditions such as approval of the field development plan. 

The shares, up 79% since Tuesday, added 8.35p to 43.85p in a busy morning session.

Chief executive Mark Routh said: "We are absolutely delighted to have received credit committee approval for this debt facility on attractive terms.  

“IOG chooses its partners very carefully and we believe that this will be a long term relationship of mutual benefit.  

“This is another important milestone in the Blythe field development but also this facility gives us great flexibility with regards to potential acquisitions and other developments such as the nearby Cronx gas discovery.  

“We are working towards submitting the Blythe Field Development Plan by the third quarter of this year, targeting first gas by the end of next year.”

It has been a busy week for Independent, which on Wednesday said it buying block 48/22a in the North Sea, which will be renamed Cronx.

The acquisition follows the group’s strategy of building production hubs, where smaller fields are developed and connected to nearby infrastructure, and will see the company become an operator.

The plan is to route production via the Blythe hub, which IOG jointly owns with Alpha Petroleum Resources.

Blythe is expected to achieve first gas by the end of 2015, and it is thought that Cronx could potentially be developed around six to nine months after that, meaning it could begin producing in 2016.

On Tuesday stockbroker Charles Stanley said the group had significant upside and claimed the stock was worth a punchy 100.4p.

At that level the broker reckons the AIM quoted share is worth around three times the current price.

Analyst Brendan Long said the target actually reflects the fair value of the company as it stands today, rather than its blue-sky potential.

IOG’s chief financial officer Peter Young said the valuation doesn’t take into account the ‘hub’ strategy; it only factors in the firm's confirmed discoveries prior to this week's bolt-on acquisition of the Cronx.

At the same time exploration and appraisal acreage on the other side of Blythe is omitted from Long’s calculation.

“[There is more upside with the] Truman and Harvey prospects to the east of Blythe, as well as Moorhouse and Theakstone prospects to the west of Skipper,” Young told Proactive Investors.

“And now we have the Cronx field … at the moment there is no value ascribed to these.”

CEO Routh pointed out Independent now has a portfolio of five licences in the North Sea with combined 2P and 2C resources of 19.5mln barrels of oil equivalent.

“We’ve removed the uncertainties vis-à-vis the operator and partner of our two main fields (Skipper and Blythe),” he added.

“We got the [licence] extensions now. Rather than just being three-month extensions, we’ve got eighteen months.  This allows us to get the activity we need on the licences done in good time and in good order.”

“All these uncertainties have gone away, but furthermore, we’re delivering on the strategy that we laid out when we came to the market.”

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