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Running the numbers for Blythe and Elgood

Looking at three of IOG's fields and further to some analysis of the shareholders and brief history I thought I'd run some of the numbers as we have Blythe and Elgood producing first gas hopefully in early March.

Here are a few bullet points summarising each field (sourced primarily from corporate presentation 15th Dec)

Blythe 

  • platform successfully installed in Q2 -'21
  • Max gas rate of 45.5 mmscf/d in Q3 -'21
  • First gas expected a week after back gas

Elgood 

  • Max gas rate of 57.8 mmscf/d in Q3 - '21
  • First gas expected a week after back gas

Southwark

  • platform successfully installed in Q2 -'21
  • development drilling started Q4 -'21
  • Noble Hans Deul rig suspended drilling due to seabed conditions
  • Optimal plan is to resume drilling 25th Feb to 12th Mar (4-6 wks from Operational update 25 Jan)

Phase 1 capex Field Development plan
  • £305.5m
  • Overspend 20% to 25% once Southwark completed
  • 20% overspend would be FDP capex of £366.6m (extra £61.1m)
  • 25% overspend would be FDP capex of £381.9m (extra £76.4m)
CalEnergy have a 50% share in these fields. When Blythe and Elgood go into production there is a max gas rate of 45.5 + 57.8 million standard cubic feet per day which would be 103.3 mmscf/d. I'm not sure what sort of production ratio we might get, but will run the numbers at 70% and 90% of 103.3

70% of Max gas rate
This would be 72.31 mmscf/d. Our share of this is 36.155 mmscf/d
Using this handy tool to convert to therms that would be 371,814 therms per day
The current price for March delivery is £2.11 per therm
Daily revenue would therefore be 371,814 x £2.11 = £784,527
Assuming production starts 15th March that would leave 291 days
Revenue for 2022 (for the first two fields) would be 291 x £784,527 = £228m
To be on the safe side and planning for a diplomatic solution in Ukraine let's run that at 75% of the gas price i.e. £1.58 per therm. That would be £171m revenue for the year.
Based on the original planning case at £0.45 per therm that would be £48.7m in 2022

As such I think we're a little ahead of plan. No wonder the share price has risen from high teens to mid thirties.

90% of Max gas rate
This would be 92.97 mmscf/d. Our share of this is 46.48 mmscf/d
Using this handy tool to convert to therms that would be 477,928 therms per day
The current price for March delivery is £2.11 per therm
Daily revenue would therefore be 477,928 x £2.11 = £1,008,428
Assuming production starts 15th March that would leave 291 days
Revenue for 2022 (for the first two fields) would be 291 x £1,008,428 = £293m
To be on the safe side and planning for a diplomatic solution in Ukraine let's run that at 75% of the gas price i.e. £1.58 per therm. That would be £220m revenue for the year.
Based on the original planning case at £0.45 per therm that would be £62.5m in 2022

Another way of looking at this is what's the delta between 45p per therm and 211p per therm?

At 70% these 166p per therm equate to an additional £617k per day

At 90% these 166p per therm equate to an additional £793k per day

As such the overspend in the FDP of up to £76.4m would equate to 124 days of the lower production or 96 days of the higher production rate. In a project of this scale and number of years, it looks to me like we made the right decision to spend spend spend and get into production. Whilst of course we'd all prefer to have spent less than the original budget. Engineers eh! (I hope I haven't just alienated half of my audience)

I own shares in IOG, please don't take this as investment advice. IOG has a marcap of £179m as of 23rd Feb. 

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