Shares in North Sea driller Independent Oil & Gas (IOG) slumped today as it delayed plans to drill an appraisal well at the Skipper discovery.
The firm said it had taken the decision in the wake of bad weather in the North Sea and “recent oil price movements”, which have seen crude fall below $30 a barrel.
The company said: “IOG believes that it is in the best interests of shareholders that the Skipper appraisal well is delayed until there is greater stability and clarity in the oil market.”
IOG had planned to drill a well at Skipper in the first quarter of this year, but said “critical discussions” are under way with lenders, contractors and the Oil & Gas Authority to extend the licence beyond 30 March and carry out drilling later this year.
In the meantime, the Aim-quoted firm has agreed terms in principle with London Oil & Gas (LOG) to provide a further £10 million of convertible debt funding, on top of existing loans of £3.55m. The £10m loan would be secured against the driller’s assets and fully convertible into IOG shares at a price of 10p, while two members of the LOG team would be invited to join its board.
Securing the funds would give IOG “financial security” until at least mid-2018, the company said, but it warned that it would face an “urgent funding requirement” if it did not close the deal.
Following the update, shares in IOG slid more than 40 per cent.
Chief executive Mark Routh said: “Upon completion, this £10m funding deal with LOG would be a major milestone for IOG, ensuring that we would be in the best possible position not only to survive this severe industry downturn but also to capture some of the opportunities that it creates.
“Whilst it has been a very difficult decision, it has undoubtedly become prudent to postpone the Skipper appraisal well given the significant further oil market weakness in recent weeks, as well as unsettled weather conditions in the North Sea.”