NORTH sea gas company IOG saw its shares fall around 20 per cent after warning of production delays at three of its gas wells.
The company, which is backed by billionaire US investor Warren Buffett, said “planned and unplanned downtime scenarios” would lower production from its Blythe and Elgood wells.
Chief executive Andrew Hockey said he also expected a “potential variation” to the timing of the first gas expected from IOG’s Southwark well.
As a result, IOG has lowered expected gas production to “a more conservative” 30 to 50 million standard cubic feet per day in the second half of the year. This is down from IOG’s previous production estimates of between 45 and 60 million standard cubic feet per day.
Blythe and Elgood are part of a cluster of gas fields off the Norfolk coast called Saturn Banks that IOG operates in a joint venture with CalEnergy Resources, an Iowa-based investor in upstream oil and gas projects that is owned by Mr Buffett’s investment company, Berkshire Hathaway.
IOG said an “unexpectedly high” amount of seawater mixed with mono-ethylene glycol, or MEG for short – a chemical used to make polyester and other products – was coming onshore from the two wells.
To identify the source of this fluid and “inform next steps,” the wells are currently being operated one at a time.
On the Southwark gas well, IOG said “important progress” was being made around this and that, when it comes on stream with first gas, this would be a “major milestone” for the business.
A spokesperson for IOG, which has 52 staff, said very few oil and gas fields come on stream as expected in the energy industry.
IOG became the UK’s newest gas producer in March this year when Blythe and Elgood produced their first gas.
Mr Hockey said the current energy crisis meant producing more gas domestically was “the right thing” for the UK to do, from both from an energy security and environmental perspective.
For the six months to the end of June 2022, IOG reported first revenues of £30.2 million, compared to nil for the previous pre-revenue period.
Pre-tax profits were £11.4m for the period, compared to £209,000 for the first half of 2021.
IOG’s shares closed down 21.5% at 30.85p.
On the UK government’s new windfall tax on oil and gas producers, Mr Hockey said companies needed a “stable fiscal environment” to be able to re-invest cash flows.
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