Pipeline maps related documents

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    Daniel Slater daniel.slater@arden-partners.com 020 7614 594726 May 2017 Oil & Gas Producers (AIM) IOG.LIndependent Oil and Gas# Buy Initiating coverage 18pIOG is a UK E&P company focused on the southern North Sea. It Key Data has established a 389bcf portfolio of development-ready assets, Market Capitalisation 20.0m Shares in Issue 109m and recently agreed to acquire the nearby Thames pipeline, Free Float 72% which connects to the Bacton terminal. The development could Average Daily Volume 1.0m be onstream in Q2 2019, though significant funding will be 12-Months Trading Range 11.9p 34.8p required. There is a risk/reward balance in the asset position versus the funding, and overall we initiate coverage with a Financial Forecasts Yr to 31 December 2016A 2017E 2018E speculative Buy recommendation. Sales 0.0m 0.0m 0.0m Development-ready assets. IOG holds five development-ready gas Operating Profit (1.0m) (2.7m) (2.8m) Adjusted PBT (1.9m) (3.6m) (4.9m) fields in the UK southern North Sea, with combined 2P/2C resources of Adjusted EPS (2.0p) (3.3p) (4.5p) 389bcf. The company is advancing plans to bring these onstream over the EPS Growth nm nm nm next two years, with first gas planned for Q2 2019. P/E nm nm nm EV/EBITDA nm nm nm Hub strategy in action. IOG is pursuing a hub strategy, aimed at tying Dividend - - - smaller fields together to make up economic developments. Its Yield - - - Blythe/Elgood and Vulcan Satellites clusters follow this principle, with Dividend Cover - - - shared infrastructure and a shallow water location helping to keep costs Net Cash/(Debt) (14.3m) (20.5m) (24.1m) down and boost returns. Interest Cover nm nm nmPipeline ownership gives control. IOG recently agreed to acquire the Thames gas pipeline, which it can use to transport gas from its Price Performance 1 Month -2.7% developments to shore. This, and 100% ownership of its assets, gives IOG 3 Months +5.9% control of its developments and offtake route going forward. 12 Months +37.1% Experienced management and technical team. IOG has, and continues to augment, a team with strong North Sea and acquisition Price Performance (p) experience. 4035Upside from other assets, acquisitions. The Harvey asset provides 3025 follow-on development potential close to IOGs other projects. IOG is also 20 targeting new acquisitions, including production. 1510 Supportive operating environment. UK regulator the OGA has 5 been supportive of IOG, and the history of the North Sea means there is 0 May 14 Nov 14 May 15 Nov 15 May 16 Nov 16 May 17 significant expertise and services capacity for the company to draw on.Funding required. IOG will need significant funding (296m) to Source: Bloomberg.progress development. Existing debt from partner LOG is, we believe, also likely to be highly dilutive (10m facility plus interest converts at 8p/share).Valuation and recommendation. At 40p/therm and fully diluted, our IOG NAV is 62.2p/share risked, 138.6p/share unrisked. IOG has a strong asset portfolio, but the