TIDMJOG
RNS Number : 9341A
Jersey Oil and Gas PLC
27 January 2020
27 January 2020
Jersey Oil and Gas plc
("Jersey Oil & Gas", "JOG" or the "Company")
Acquisition of Equinor UK Limited's interest in Licence P2170
and Corporate Update
Jersey Oil & Gas plc (AIM:JOG), an independent upstream oil
and gas company focused on the UK Continental Shelf ("UKCS") region
of the North Sea, is pleased to announce that it has entered into a
conditional Sale and Purchase Agreement ("SPA") to acquire
operatorship of, and an additional 70% working interest in, Licence
P2170 (Blocks 20/5b and 21/1d) ("Licence P2170") from Equinor UK
Limited ("Equinor") (the "Acquisition"). The consideration for the
Acquisition consists of two milestone payments and a royalty based
on potential future oil volumes produced from the Verbier Upper
Jurassic (J62-J64) reservoir oil discovery (the "Verbier Field"),
as further detailed below.
Acquisition Highlights:
-- Acquisition of an additional 70% interest in, and
operatorship of, Licence P2170 including the Verbier oil
discovery
- Contingent payments of:
-- US$3 million upon sanctioning by the UK's Oil & Gas
Authority ("OGA") of a Field Development Plan ("FDP") in respect of
the Verbier Field; and
-- US$5 million upon first oil from the Verbier Field
- Certain royalty payments on the first 35 million barrels of
oil produced from the Verbier Field calculated on the basis of a
70% working interest for on-block volumes
-- Increases total 2C discovered resources across the Greater
Buchan Area ("GBA") by 17.5 mmboe to 142 mmboe net to JOG
- Increases ownership of multiple high-impact exploration opportunities within Licence P2170
- Acquisition simplifies licence ownership structure ahead of GBA farm-out process
-- Adds an estimated US$506 million of post-tax cashflow, taking
the GBA development estimate of post-tax cashflow to US$3.17
billion net to JOG and increases the estimated net NPV of the GBA
development project to US$1.15 billion
Corporate Update:
-- Highly experienced Project Team hires made to advance the planned GBA development
- Concept Select underway
-- Detailed subsurface and engineering workstreams progressing
to deliver a development concept
-- Key project gate of concept selection due Q3 2020
-- Year-end 2019 cash position of approximately GBP12m
- Fully funded through Concept Select and into Q2 2021
-- Planned launch of GBA farm-out process post Concept Select
- Including the Buchan oil field, the Verbier, J2 and Glenn oil
discoveries and a material portfolio of nine exploration
prospects
-- Integration of 2018 3D seismic data into regional mapping significantly progressed
- Materially improved imaging of subsurface across the GBA
- Revised net prospective resources increased to in excess of
230 mmboe including new prospects identified within Licence
P2170
-- In line with our strategy to provide cleaner, safer energy
JOG is progressing a number of initiatives
- JOG is now a proud signatory of the United Nations Global
Compact, the world's largest corporate sustainability
initiative
- Progressing studies for platform electrification and for the
GBA development potentially to be a regional power hub
Andrew Benitz, CEO of JOG, commented:
"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. 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."
"We are now well placed to progress our development plans
through Concept Select, before launching a farm-out process to
attract industry partners to join us in unlocking the significant
value that exists within the Greater Buchan Area."
Enquiries:
Jersey Oil & Gas plc Andrew Benitz, CEO C/o Camarco:
Tel: 020 3757 4983
Strand Hanson Limited James Harris Tel: 020 7409 3494
Matthew Chandler
James Bellman
Arden Partners plc Paul Shackleton Tel: 020 7614 5900
Benjamin Cryer
BMO Capital Markets Limited Jeremy Low Tel: 020 7236 1010
Tom Rider
Camarco Billy Clegg Tel: 020 3757 4983
James Crothers
ADDITIONAL INFORMATION
Terms of the Acquisition
The consideration for the Acquisition consists of two milestone
payments and a royalty based on future volumes of oil produced from
the Verbier Field, as outlined below:
-- Milestone Payments:
- US$3 million upon the UK's Oil & Gas Authority sanctioning
a Field Development Plan ("FDP") for the Verbier Field
- US$5 million upon first oil from the Verbier Field
-- Royalty Terms:
- A gross revenue royalty on the oil production generated from
the Verbier Field calculated on a 70% working interest for on-block
volumes at the following levels:
-- 5% for the first 12 million barrels of oil produced and
sold
-- 4% for the subsequent 13 million barrels of oil produced and
sold
-- 2% for the next 10 million barrels of oil produced and
sold
The Acquisition is conditional on OGA approval, anticipated in
Q1 2020.
Background to the Acquisition and GBA Development Plans
JOG holds a significant acreage position in the GBA within the
Central North Sea. The Company's interests in the GBA include
operatorship and 100% working interests in blocks that contain the
Buchan oil field and the J2 and Glenn oil discoveries, as well as
Licence P2170 in which JOG holds an existing 18% working interest,
which contains the Verbier Field discovery, assessed at 25 million
barrels of contingent recoverable oil in addition to multiple
exploration prospects. On completion of the Acquisition, JOG will
assume operatorship and secure a further 70% interest in Licence
P2170 from Equinor taking its total working interest in the licence
to 88%.
For JOG, the Acquisition will add an estimated 17.5 million
barrels of discovered oil volumes to its existing resource base
within the GBA. This material addition will result in JOG owning in
excess of 140 million barrels of contingent recoverable oil, being
98% of all discovered oil within the GBA. The Verbier Field is
located 6km to the North West of Buchan and, following completion
of the Acquisition, JOG will own and operate all of the three
initial core components of its planned Buchan hub development,
being the Buchan oil field together with the J2 and Verbier oil
discoveries.
JOG has worked collaboratively with Equinor since the latter
farmed into Licence P2170 in 2016, which led to the Verbier oil
discovery being drilled in October 2017. In the Competent Person's
Report ("CPR") completed by Rockflow Resources Limited for JOG in
October 2019, the gross post-tax cashflow associated with a Verbier
Field tie back to Buchan was assessed to be US$723 million. This
Acquisition consequently adds an estimated US$506 million of post
tax cashflow to JOG and the estimated NPV of the GBA development
project, net to JOG increases to US$1.15 billion with the estimated
post tax cash flow increasing to US$3.17 billion.
It is JOG's vision to provide cleaner, safer energy in the most
responsible way. JOG is now a proud signatory of the United Nations
Global Compact, the world's largest corporate sustainability
initiative. As a fundamental deliverable for Concept Select for the
GBA development project, JOG contracted KBR Ltd, a leading
engineering consultancy, to evaluate power solutions for the GBA.
The study is assessing the best location and mode for the
generation of power for the Buchan hub and the potential
distribution of electric power, from Buchan, as a regional power
hub. Phase 1 of this study evaluated and confirmed the technical
feasibility of platform electrification. JOG will seek to introduce
technologies to enable the planned GBA development to be at the
forefront of the energy transition.
Subject to receiving approval from the OGA for the Acquisition,
JOG will initiate a work programme to advance the Verbier Field
discovery to an FDP decision with the primary objective being to
develop it as part of JOG's overall GBA development plans. In
parallel with the Acquisition and as part of its wider funding
strategy, the Board considered further strengthening the Company's
balance sheet. In light of the anticipated level of industry
appetite for a potential farm-out and the fact that the Acquisition
has nominal up-front consideration, the Board has concluded that
now is not the optimum time to do so.
In light of the size and materiality of the planned GBA new area
hub development project, the Company will seek to actively
collaborate with industry partners, both regionally, to attract
more discovered resources to the hub, and commercially, through the
introduction of one or more potential new project partner(s) via
value-enhancing development carry farm-ins.
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulation (EU) No. 596/2014.
This information is provided by RNS, the news service of the
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contact rns@lseg.com or visit www.rns.com.
END
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