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Jersey Oil & Gas consolidating Verbier to advance Greater Buchan project

Snapshot

  • North Sea junior taking GBA project to development
  • Consolidating Verbier into GBA
  • Assessing broader co-operation
  • Seeks a farm-out
North Sea

Quick facts: Jersey Oil and Gas PLC

Price: 97 GBX

LSE:JOG
Market: LSE
Market Cap: £21.17 m
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​​​​​​How is it doing

Greater Buchan

Jersey owns 100% of the Buchan oil field and the J2 oil discovery which now along with the adjacent Verbier discovery comprise the Greater Buchan Area (GBA).

A CPR by contractor Rockflow previously estimated the recoverable resources in The Greater Buchan Area at 94.7mln barrels, including the parts within P2170. That estimate, at that time, valued Jersey’s ‘mid-case’ contingent resources at some £791mln.

The consolidated Greater Buchan venture, comprising Buchan field (80mln barrels), Verbier (c25mln barrels), J2 (c20mln) and Glenn (14mln) discoveries.

The next steps will be for Jersey to advance the GBA project to a ‘concept selection’ decision.

Thereafter, it intends to take the project to potential industry partners via a farm-out process.

In March, Jersey told investors it is fully funded as it continues to progress the GBA project.

In a statement addressing market weaknesses in light of the coronavirus (COVID-19) pandemic, the company said that it has no debt and, on current plans, it has sufficient working capital through to the end of 2021.

That is before any proceeds from an envisaged partial sale of project equity in the GBA.

Jersey recently bolstered its team, hiring project delivery specialist Dr Chris Haynes as an advisor to the board.

This spring also saw Jersey launch a technical and commercial evaluation of the project. As part of this work it intends to assess whether a collaboration between the companies holding licences in the vicinity would result in a decrease in cost and an increase in value.

Verbier

On 27 January 2020, Jersey announced it is to consolidate Equinor’s 70% interest in Verbier in a deal with no upfront costs. Instead it committed to a package of future contingent payments which will only kick in if it can make a success out of the project.

The plan is now to fold Verbier into an expanded version of the Greater Buchan Area development.

Verbier was discovered in October 2017 by an Equinor-led exploration well. The initial well result was positive albeit the discovery’s potential scale was pitched in a wide range, of between 25mln and 130mln barrels. A subsequent appraisal well result in April 2019, led to a lowering and narrowing of that range.

Jersey will pay US$3mln to Equinor should a field development plan be sanctioned by the UK Oil & Gas Authority and a further US$5mln will be payable upon ‘first oil’ from Verbier and Equinor also retains rights to royalty payments on the first 35mln barrels of oil.

What the CEO says

"Acquiring further discovered oil volumes enhances JOG's project value considerably and at the same time strengthens our plan to bring Verbier into future production through the GBA development, which is a truly exciting opportunity to showcase what is possible with new developments in the UKCS,” Benitz added.

“We are working closely with the OGA and leading contractors to introduce technologies to enable the GBA development to be at the forefront of the energy transition as well as being a new area hub that encourages regional industry collaboration to maximise the economic recovery of resources in this prolific part of the Central North Sea."

What the brokers say

Stockbroker WH Ireland this morning described the deal as “incrementally positive” for Jersey.

Analyst Brendan Long said that the transaction with Equinor the ownership and operatorship of the P2170 licence area, and, in doing so, it will facilitate the eventual broad farm-out effort.

He also notes that it will add some 17.5mln barrels of discovered resources to Jersey’s net resource base.

“We note that although the company’s centre of gravity is the Buchan field (with a net resource potential of 81.2 mmb – mid-case estimate), the value of the company’s smaller satellite fields may exceed that of Buchan on a per barrel basis due to the ease with which they can be tied back to the forthcoming facilities at little incremental cost (via capital efficient subsea tie-backs),” Long said in a note.

“The news is incrementally positive and increased clarity of the key forthcoming catalysts, for which the company is well funded, should also be well received by the market in our opinion.”

Elsewhere, SP Angel analyst Sam Wahab in a note commented: “The company has been very active over the past 12 months in consolidating its North Sea position, culminating in a significant resource base relative to its market cap. in our view.

“Clearly, funding will be crucial (with the company reporting a FY/19 cash position of £12mln) as JOG progresses development plans through concept select, before launching a farm-out process to attract industry partners to the Greater Buchan Area.”

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Jersey Oil & Gas's Benitz: North Sea an exciting place to explore again

Andrew Benitz of Jersey Oil & Gas PLC (LON:JOG) says pre-funding the seismic being shot over the Verbier acreage in North Sea allows the data to be optimised and is cheaper. Capex for the appraisal programme will be at the upper end of £9-11mln including seismic. Drilling at...

on 26/4/18

4 min read