UK's IOG drops plan to make offer for North Sea gas peer Deltic

London — UK-listed Independent Oil and Gas -- which is developing a major hub of gas fields in the UK North Sea -- said Oct. 5 it had dropped plans to make a takeover offer for its peer Deltic Energy and would continue to focus its efforts on achieving first gas in the third quarter of 2021.

IOG said on Sept. 11 it was considering an offer for Deltic, which is working with Shell to develop a number of gas prospects in the North Sea.

IOG made an initial approach to Deltic on Aug. 26, which was rejected, followed by a second approach on Sept. 25 with improved terms that was also rejected, it said.

"IOG believes that, at the right level, a transaction would have considerable industrial logic, consolidating and scaling up two complementary portfolios," it said in a statement.

"However, the board of IOG is clear that it will remain disciplined in its approach to consolidation opportunities and will not pay over risked fair value for assets."

IOG said it remained firmly focused on the execution of its Phase 1 development, which continues to progress on track for first gas in Q3 2021.

The first phase of IOG's core project will see gas produced from the Southwark, Blythe and Elgood fields.

IOG is looking to become a "substantial" UK gas producer, with plans for peak output from the project, including a second phase in 2023, of 140 MMcf/d (4 million cu m/d). That would amount to around 4% of current UK gas production.

IOG said it would look to growth within its existing Southern North Sea gas portfolio, including several further proven gas discoveries, multiple nearby potential incremental investment assets and two further gas discoveries in the recently released UK offshore bidding round.

Deltic rejection

Deltic said Oct. 5 that the terms of both approaches from IOG undervalued the company.

The IOG approaches came after Deltic in July also rejected an unsolicited approach from upstream investment company Reabold for a potential takeover offer.

"IOG's announcement on Sept. 11 is the second time a company has made an announcement regarding a possible offer for company in recent months and in both cases the board has concluded the offers have materially undervalued the company," Deltic said.

Deltic said it would continue to focus on developing its recently expanded portfolio of assets and strengthening its strategic position in the Southern North Sea gas basin.

It has 10 licenses in the gas-rich Southern North Sea stretching from the area south of the Breagh gas field to the Cygnus gas field covering close to 3,000 sq km.

Deltic remains committed together with Shell to drill at two existing North Sea gas prospects -- Pensacola and Selene.

At Pensacola, a first exploration well is expected to be drilled in the second half of 2021, while at Selene a first well is expected in 2022. Deltic and Shell have formed joint ventures to develop both prospects.

Pensacola -- in which Shell holds 70% and Deltic 30% -- is estimated to hold some 309 Bcf of gas .

Selene, meanwhile, where Shell and Deltic are 50:50 partners, saw its gas-in-place estimate upgraded in August to 629 Bcf.

"The Shell-Deltic partnership remains on track and committed to meeting the license terms of the company's Pensacola prospect, with drilling expected in the second half of 2021," Deltic said.

"Importantly, the company remains fully funded for the drilling of these two wells with Shell, with success on either being transformational for the company."