Shares in Jersey Oil & Gas PLC (LON:JOG) advanced around 18% on Tuesday after it revealed it is bringing Norwegian major Statoil into its North Sea exploration projects through a new farm-out deal.
Statoil is to take 70% of UK Seaward Licence P.2170, Blocks 20/5b and 21/1d, which are located in the Central North Sea.
Jersey Oil’s subsidiary, Trap Oil Limited, as a result sees its stake in the project reduce from 60% to 18% - with a 10% interest already carried by partner CIECO Exploration and Production. CIECO’s stake, meanwhile, reduces from 40% to 12%.
The project is estimated to host over 500mln barrels of oil in place, across two prospects estimated at 300mln and 212mln barrels each.
Some US$2mln of cash is being paid up front by StatOil to the partners, of which US$1.2mln is earmarked for Jersey Oil & Gas. Statoil has also committed to spending up to US$25mln on the project’s first well, which could possibly be drilled in 2017.
"We are delighted to have secured a farm-out partner of the calibre of Statoil,” chief executive Andrew Benitz said in an earlier statement.
“The P.2170 Licence area has significant exploration potential for the discovery of oil and we look forward to drilling one of the prospects with our partners, potentially next year.”
Benitz added: "Individual prospects of this materiality are increasingly rare in the North Sea and to have a leading international operator such as Statoil joining our partnership group, serves to demonstrate the significant value-potential of this asset.
"The company continues to deliver on its strategy of managing and de-risking its existing exploration portfolio whilst actively seeking to acquire interests in more mature producing assets."
On AIM, Jersey shares added 5.6p, 18.36%, to change hands at 36.10p each.
Werner Riding, analyst at Peel Hunt, in a note said: “Given Jersey has a market capitalisation of just £2.5m this news will likely have a very material impact on the share price.”
“The introduction of a high-quality fully-integrated operator such as Statoil into the JV represents a highly positive outcome for Jersey shareholders.”
- UPDATED to include broker comment and share price details -