Event in Progress:
View the latest research on other companies in the sector.
Since November, the JOG share price has moderated from a high of 250p to current levels of 149.5p. This is despite JOG having now made significant progress towards FID on its c.70mmboe Buchan project, with FID upcoming later this year. In our view this share price move is unjustified, with current levels further enhancing the value on offer, and making an attractive opportunity for investors.
Jersey Oil & Gas PLC
JOG has announced the completion of the second of its Greater Buchan Area (GBA) farm-outs to Serica Energy, receiving a further US$6.8m cash milestone payment. JOG has now received US$18m of the US$38m in cash milestone payments related to the two GBA farm-outs to NEO Energy and Serica, with the final US$20m payment due on approval of the Buchan Field Development Plan, expected in H2 2024. The two farm-outs are worth c£215m (660p/sh), strongly underpinning our 755p/sh risked NAV and price target.
Serica farm out now closed. JOG has announced closure of its Buchan farm out to Serica Energy. Serica has taken a 30% interest, and JOG has now received a milestone payment of US$6.8m.
JOG has released a corporate update, reconfirming expected FID and first oil timing for its Buchan development project, and the end 2023 cash holding, which will be augmented by significant further farm out payments during 2024.
Jersey Oil & Gas had a transformative 2023 having secured two successful farmouts such that the company now retains a 20% interest in the Greater Buchan Area (“GBA”) on a fully carried basis until first oil is achieved at the Buchan field. We are putting forward an updated fair value estimate of 705p (see Table 1). For reference, including only the value of the Buchan field, adjusted for balance sheet items, would result in a fair value estimate of 641p.
The Buchan JV recently submitted the environmental statement for the development to the UK regulator, demonstrating further project progress since the initial JOG farm out to NEO was announced in April 2023.
Last week, JOG successfully secured its second GBA farmout, locking in a path to delivering zero-capex barrels. The surprisingly muted share price response to the farm-out leaves JOG trading at an unjustifiably large discount to our valuation. With a material fully funded development project under its belt and a clean balance sheet, JOG presents a very low-cost way to access high quality development barrels for investors and potential acquirers alike. If the threat of M&A does not narrow JOG’s valuation discount, further progress towards FID and first oil surely must.
Jersey Oil & Gas, Serica Energy, Trinity Exploration & Production, Longboat Energy, Ithaca Energy, Neptune Energy, Pantheon Resources, Nostrum Oil & Gas, Kufpec, ORLEN.
JOG LBE TRIN
Energy prices flat ahead of US Thanksgiving holiday
Jersey Oil & Gas PLC Serica Energy PLC
Jersey Oil & Gas announced it has farmed out a 30% interest in the Greater Buchan Area (“GBA”) to Serica Energy. Upon completion of the Serica farm-out, Jersey will hold a 20% interest in the GBA and a full carry on the capital expenditures required to bring the Buchan field into production. The company stated that the Serica farm-out terms are on identical pro-rata terms to the farm-out previously completed with NEO Energy. As such the company stated it has received total cash payments amounting to $18m in respect of both farmouts upon completion of the Serica farm-out. All-in cash payments amounting to $38m will be due under milestone farmouts. $20m will be due to be paid to Jersey upon completion of the Buchan field development plan.
JOG has announced a second farm out on its GBA project in the UK North Sea, to peer Serica Energy. This is on directly equivalent terms to JOG’s existing farm out to NEO, and will leave the company with a 20% interest fully carried to first oil on Buchan, alongside substantial upfront cash payments. This is excellent news for JOG, and goes to further underpin successful progression of the Buchan development to FID in 2024.
Jersey Oil and Gas announced on 17 November 2023 that the owners of the Buchan field, namely, Jersey Oil and Gas and NEO Energy have executed agreements to acquire the Western Isles floating production, storage and offloading (“FPSO”) vessel. The FPSO is intended to be used as the processing facility for the redevelopment of the Buchan oilfield. We are updating our fair value for Jersey Oil & Gas to 703p (from 684p) mainly to reflect the passage of time relative to our unchanged assumed first oil timing for Buchan in late 2026. For reference, our fair value estimate for Jersey Oil & Gas is premised on i) a long-term oil price assumption of $85/b inflated at 1% p.a., ii) the assumption that a further farmout is achieved on identical terms to the first farmout to (NEO Energy) such that Jersey retains a 20% working interest in the GBA and is fully carried to first oil from the Buchan field, and iii) the inclusion of 75%, 50% and 50% , of the successcase values of the Buchan, Verbier and J2 oilfields, respectively.
JOG has announced the agreement for acquisition of the FPSO for its Buchan field development. The company announced earlier this year that it was expecting to redeploy an existing FPSO for development of Buchan, and has today confirmed that this will be the Western Isles vessel. This is an important step forward for JOG and for the Buchan development, further defining the development plan, moving this closer to FID, and potentially helping facilitate JOG’s planned second farm out deal.
Peer UK North Sea operator Ithaca Energy, along with JV partner Equinor (operator), this morning announced FID on its Rosebank field development project.
Jersey Oil & Gas released its interim results for the period ended 30 June 2023 indicating that it had a period-end cash position of £5.6M, with no debt. The company stated that further cash receipts amounting to $9.4M will be due on completion of the FPSO acquisition agreement and $12.5M on Buchan FDP approval (from NEO Energy, pursuant to the farm-out agreement).
JOG has released its H1 2023 results, alongside providing an update on operational progress on the company’s GBA development project activities.
JOG’s GBA development is a large project of material significance in the UK North Sea.
Jersey Oil & Gas announced that it has finalised the Greater Buchan Area development solution.
JOG continues to progress its Greater Buchan Area oil development, finalising the preferred development solution for the project. The partners intend to redeploy a FPSO vessel on the field, which delivers both the lowest cost and lowest full-cycle carbon footprint option. Key commercial terms have been agreed for the acquisition of the FPSO, with gross development costs for the first phase of the project (Buchan re-development) put at US$900m. The project now moves into the engineering phase with a Field Development Plan planned for submission to the NSTA in H1 2024 and first production targeted for 2026.
JOG has announced that the JV now expects to develop the Buchan field using a re-deployed FPSO, which is expected to drive significant CAPEX savings compared with the previous platform concept, alongside being the lowest full-cycle footprint option
JOG has completed the 50% farm-out of its GBA licences to NEO Energy despite the tough industry environment, a testament to both management’s capabilities and the quality of the project. Management are now pursuing an additional farm-out(s), with the ultimate aim of retaining a 20-25% fully carried stake in the development. We have updated our valuation to reflect JOG retaining the low end of management’s ambitions, which drives a 14% increase to our risked NAV and price target to 755p/sh, with upside beyond 900p/sh if the upper end can be achieved. The muted response of the shares to the farm-out is more a reflection of the political backdrop than the success of this transaction. It opens up a considerable valuation gap and leaves risk/reward heavily skewed to the upside if JOG can secure a further partner(s) for its GBA development.
JOG has announced completion of its recent farm out of its GBA assets to NEO Energy. NEO has acquired a 50% interest in JOG’s GBA licences (which contain the Buchan field and J2 and Verbier discoveries), in exchange for providing a full carry based on field development CAPEX on 12.5 percentage points of JOG’s remaining 50% interest, plus cash full carry on FEED expenditure (to a gross cap of US$25m) and further milestone cash payments totalling up to US$23.9m on Buchan (including US$2m on farm out completion) plus US$5m on each of J2 and Verbier.
HMRC announced this morning an important change to the UK’s oil and gas windfall tax.
The development is positive and meaningful. The support shown by the NSTA is reassuring, even if widely expected. We anticipate that crude oil prices will strengthen materially in 2H 2023 on strong inventory draws. Today's announcement positions Jersey Oil & Gas to participate fully in the positive momentum we see for the sector in 2H 2023. We reiterate our 684p fair value estimate for Jersey Oil & Gas.
Licence permissions secured. JOG has announced that it has received approval for the extension of its P2498 licence, which contains its Buchan and J2 fields, extending this to February 2025. The company has also received permission to transfer 50% stakes in P2498 and also P2170 (which contains the Verbier discovery) to NEO Energy, under the farm out agreement announced in April.
JOG has released its full year 2022 results. These report a net cash holding of £6.6m which, alongside upcoming payments under the GBA farm out deal with NEO Energy, gives JOG a very strong funding base. The statement also reiterates the company’s focus on progressing its GBA project, including approval and closure of the farm out, progression of the Buchan development plan, likely a second farm out, and then FID in H1 2024. We expect this to represent a series of catalysts over the coming months to help highlight the value of the farm out deal to the stock market.
Jersey Oil & Gas announced the successful farmout of its interest in the Greater Buchan Area (“GBA”) to NEO Energy on 6 April 2023. We believe the transaction is the most important development in the history of Jersey Oil & Gas – it is an unambiguously positive and transformative development. We are ascribing Jersey Oil & Gas with a fair value estimate of 684p, which is premised on i) a long-term oil price assumption of $85/b inflated at 1% p.a., ii) the assumption that a further farmout is achieved on identical terms to the first farmout such that Jersey retains a 20% working interest in the GBA and is fully carried to first oil from the Buchan field, and iii) the inclusion of 75%, 50% and 50% , of the success-case values of the Buchan, Verbier and J2 oilfields, respectively (see Table 1).
Jersey Oil & Gas announced it has agreed to farm out 50% of its GBA licence to NEO, an major UK operator currently producing circa 90,000 boe/d and backed by HitecVision, a leading private equity investor with $8 billion of assets of under management.
• JOG has announced a very important farm out deal, which will materially underpin and progress the company’s GBA project in the UK North Sea, provide a base case of value for the company from the development, and retain upside on additional potential farm out deals. This is excellent news for the company, in our view.
Exciting news from JOG, with management rapidly concluding the advanced exclusive Greater Buchan Area (GBA) farm-out negotiations announced last week. JOG has agreed a 50% farm-out of its GBA licences to North Sea heavyweight NEO Energy. This provides strong industry validation from a rising force in the UKCS, delivers material value to JOG in cash and carry, and unlocks the route to monetising over 100 mmboe of resources. The shares have rallied sharply since last week, but there still remains significant upside to our re-iterated 660p/sh price target.
Jersey Oil & Gas announced that it is in advanced exclusive negotiations with a significant UK North Sea operator and that heads of terms have been agreed for the farm-out of a material interest in the GBA licences to this party. The company indicated that both parties are working towards finalising a fully terms agreement in the near future and that an exclusivity period until 30th April 2023 has been agreed. The company further indicated that the counterparty was well funded industry heavy weight.
JOG has announced an update on its GBA project farm out, where the process would appear to be nearing a positive conclusion
Jersey Oil & Gas announced the extension of the Verbier licence (P2170) to end August 2023, which is now aligned with the company's core Greater Buchan Area licence (P2498).
Verbier licence extension
Windfall tax update – GBA remains attractive
We have an increasingly positive outlook for Jersey Oil & Gas based on the positive message conveyed today in the company's interims combined with the rapidly escalating acute energy crisis. We reiterate our 720p fair value estimate for Jersey Oil & Gas. We emphasise our increased confidence in our long-standing and high-conviction call that Jersey Oil & Gas will successfully secure a farmout (or otherwise secure value) for its 100% held and operated interest in the Greater Buchan Area.
H1 2022 results and farm out update
We are increasing our fair value estimate for Jersey Oil & Gas to 720p from 660p to reflect i) a change in our long-term oil price assumption to $100/b (inflated at 1% p.a.) from $75/b (inflated at 1% p.a.) and ii) the economic impact of the newly announced Energy Profits Levy. The 60p increase in our fair value estimate is composed of an increase of 419p related to the increase in our assumed oil price, and a decrease of 359p related to the economic impact of the Energy Profits Levy. Although the mechanical economic effect of the Energy Profits Levy is negative (on the assumption that it remains in place beyond the sunset date of December 2025), we believe that the new tax regime significantly increases the prospects of successfully securing a farmout to develop the Greater Buchan Area (“GBA”), the 100% held core asset of Jersey Oil & Gas. That, more than anything else, is what really matters. Essentially, we believe that incumbent UK oil & gas producers are being forced via tax incentives to seek means of investing in projects such as the development of the GBA. Specifically, tax paying North Sea producers now have the choice to either pay tax at a rate of 65% on profit or to shelter profit from tax through new investment and receive £1 of investment value for a cost of just 25p net of cash-tax benefits that are immediately realisable (and for a cost of 8.75p inclusive of future tax benefits). In essence, we anticipate that tax paying companies operating in the UK oil & gas sector will be highly incentivised, through the new tax regime, to farmin to Jersey's GBA development.
The announcement of a UK windfall tax on oil and gas companies hit JOG and other UK upstream players’ shares. However, the new levy is specifically designed to encourage higher investment in the North Sea, which can only be good news for JOG’s GBA development farm-out ambitions.
UK windfall tax could encourage investment
Market Update: 28 April 2022
Jersey Oil & Gas PLC Valeura Energy Inc.
Jersey Oil & Gas made significant disclosure in respect of its farm-out process in the commentary published with its full year 2021 results – we are encouraged. The company also announced it had a cash balance of £13M at 31 December 2021. We are using the opportunity to increase our Brent oil price assumption to $75/b from $70/b, resulting in an increase in our fair value estimate to 660p from 620p.
JOG has reported audited results for 2021, with the company ending the year with a strong cash position and no debt. This should more than comfortably see it through the ongoing farm-out process, which has seen interest levels intensify in recent months, driven by the strong macro environment and a renewed desire for domestic energy security. JOG’s Greater Buchan Area is one of few material, ‘development ready’ North Sea projects, and multiple high-quality companies are showing interest. A successful conclusion to the farm-out should see the shares surge.
Full year 2021 results and farm out update
New UK energy strategy supportive for GBA
Strong oil price supports GBA farm out process
Jersey Oil & Gas has announced that it has recomposed its leadership team with immediate effect. Les Thomas, formerly Non-Executive Director, has assumed the role of Non-Executive Chairman. Graham Forbes has been appointed CFO. Richard Smith has been appointed Chief Commercial Officer. Les Thomas and Graham Forbes previously served, respectively, as the CEO (2013-2020) and CFO (2010-2020) for Ithaca Energy. Richard Smith spent ten years in various senior roles also at Ithaca Energy. We believe the change is transformational for Jersey Oil & Gas and positions the company to accelerate further shareholder value creation – building on the strong delivery to date. We believe the change reflects the longstanding corporate ethos at Jersey Oil & Gas that prioritises shareholder value creation – That's how you do it!
GBA project update, board & management changes
Market update - 22/09/2021
JOG STAR MEN
Jersey Oil & Gas announced its interim results of which we believe the key news items are as follows: i) The company had a cash balance of £17.06m as at 30 June 2021; ii) The company indicated its farmout process is ongoing that that the company is engaged with both industry parties and potential infrastructure funders; and iii) Regional electrification collaboration within the Central North Sea is building momentum amongst industry parties and the GBA is ideally located to be an integral part of this initiative.
No surprises in JOG’s interim results, with the market’s main focus – the company’s GBA Development farm-out process – ongoing. The resurgence of UK North Sea M&A has brought the shares back to life recently as the market is reminded of the scale of the resource and development opportunity JOG is sitting on. While JOG’s main focus remains on securing funding and a partner for its GBA Development, the company has indicated it is reviewing a number of potential acquisitions/mergers. JOG’s strong management team and supportive shareholder base should put it in a good position to capitalise on any attractive deal opportunities that emerge.
H1 2021 results
Jersey Oil & Gas has announced today, inter alia, the electrification potential for its Greater Buchan Area (“GBA”) Development project. We believe the key news is that i) there is increased stakeholder interest in working collaboratively to enable the GBA Development project to become an integral part of an area-wide electrification project ii) a regional electrification project has potential to reduce both the capex and opex of the GBA Development project iii) the company will rephase the pre-FEED development work and FID decision in respect of the GBA Development project to integrate the regional electrification strategy. The company also indicated that the “GBA Development farmout process remains ongoing” - no surprise there.
GBA development project update
Jersey Oil & Gas announced that it is relinquishing two licences that were external to the three-phased Greater Buchan Area (“GBA”) project. Having fulfilled the work commitments in respect of the licences, Jersey Oil Gas has made the decision to relinquish the respective licences because progressing them would have required committing to a firm well in each of the licence areas. Accordingly, the licences containing the Zermatt prospect (P2497; Block 20/4c) and the Glenn discovery (P2499; Block 21/2a) are being relinquished. The change is immaterial to our fair value estimate, which we reiterate to be 622p, based on our assumptions and estimates.
Licence relinquishment
Operational update
The publication of Jersey's Final Results and Annual Report today were in line with prior guidance and our expectations. Having reviewed the detail of the report we confirm our 622p fair value estimate for the company (no change). We take the opportunity to assess the Annual Report to draw out themes that further develop the company's RNS announcements.
2020 was the year that JOG’s GBA development really started to take shape. It consolidated its 100% ownership across the Greater Buchan Area (GBA) via acquisition and licencing, delivered a significant upgrade in GBA discovered and prospective resources, selected the optimum development concept, launched a farm-out process to find a development partner, and raised £16.6m to strengthen its negotiating position and keep the project on track. This investor support will allow management to maintain the impressive pace set so far in progressing this project, one of the largest remaining development opportunities in the North Sea.
Full year 2020 results
Jersey has announced a carbon emissions policy as well as its intention to position itself as an oil & gas company leading in the energy transition within the UK oil & gas sector. We believe that Jersey is a major oil & gas company disguised as a junior. The ethos, controls, management systems and ESG leadership of Jersey Oil & Gas are, we believe, setting a very high standard of best practice, even relative to major oil & gas companies. Amongst other measures, Jersey has announced its intention to target “Net Zero” emissions from its Greater Buchan Area project from the start of first oil. We believe this aligns the company with broad social objectives and the objectives of the UK Oil & Gas Authority (OGA) while making the Greater Buchan Area a more attractive farmin opportunity. We retain our 622p fair value estimate and our opinion that Jersey will successfully farmout the Greater Buchan Area project. We note that the steady strengthening of oil prices favours that outcome.
Jersey has announced a carbon emissions policy as well as its intention to position itself as an oil & gas company leading in the energy transition in the UK Continental Shelf.
Company Carbon Policy
We are updating our estimates to incorporate the result of the open offer portion of JOG’s recent fundraise and new FX assumptions. The open offer raised another £1.61m and brought the total funds from the placing, subscription and open offer to £16.61m. These proceeds will help JOG maintain the strong momentum behind its major Greater Buchan Area (GBA) Development in the UK North Sea and strengthen its negotiating hand in the ongoing farm-out process. Our risked-NAV and price target fall 5% to 542p/sh as a result, but still offers major upside potential as the GBA Development is further de-risked.
Following a general meeting of shareholders on 14 April 2021, Jersey Oil & Gas closed a placing and open offer raising £16.6M (pursuant to the results of the placing announced 17 March 2021). We believe the capital raise materially strengthens Jersey's outlook by i) securing the near-term funding to “keep the foot on the gas” into 2022 in relation to its engineering work in line with the objective of realising first oil from the Greater Buchan Area (“GBA”) project in late 2025, ii) strengthening its balance sheet ahead of farm-out negotiations and iii) displaying that it has strong equity capital market support. We are increasing our fair value estimate to 622p from 526p to reflect the equity capital raise and a corresponding change to our risking factor from 12.5% to 20%. We believe that Jersey Oil & Gas has an exceptionally compelling outlook into 2021 and 2022.
JOG has completed the acquisition of a 12% interest in UK licence P2170, announced in Q4. This transaction includes minimal upfront payment and raises JOG’s stake in the Verbier discovery and a number of high-impact exploration prospects to 100%, consolidating its Greater Buchan Area position and simplifying the recently launched farm-out process. This process should complete by year-end and is critical to unlocking the major upside potential that exists from the GBA development. No change to our 570p risked-NAV and price target.
Equity placing of £15m at 165p
JOG is raising up to £15m via an equity placing to maintain the strong momentum behind its major Greater Buchan Area (GBA) development in the UK North Sea and strengthen its negotiating hand in the recently launched farm-out process. The recent Concept Select Report for the GBA development brings additional clarity and definition to this significant project. It demonstrates both its scale and the potential prize on offer, which alongside its industry-leading carbon intensity should prove an attractive proposition for potential partners.
On 3 March 2021, Jersey announced the completion of the concept select phase in respect of the GBA development. As a result, we indicated at the time that we would place our fair value estimate under review for an upgrade to reflect that development. Having updated our model to reflect i) strengthening oil prices and ii) refinements provided by the completion of the concept select phase, we are increasing our fair value estimate to 526p (from 479p prior to placing our valuation under review). We have not reviewed our risking factor at this time and continue to include only 12.5% of the full-success case value of the company's core assets in our fair value.
AUCTUS PUBLICATIONS GeoPark (GPRK US)C; Target price of US$25 per share: Excellent financial results. Increased production guidance. Additional exploration wells – With higher oil price expectations, GeoPark is increasing its FY21 capex guidance from US$100-120 mm to US$130-150 mm. The new guidance includes US$75-90 mm for development (up from US$60 70 mm) and US$55-60 mm for exploration (up from US$40 50 mm). The new capex guidance will allow GeoPark to produce 41 43 mboe/d in 2021 (up from 40-42 mboe/d) and drill 6-8 additional wells on Llanos 32 and 34. The new programme of 7-8 exploration wells includes two wells on Llanos 32, one well at Llanos 34 , one well at Llanos 94 and three-four wells at CPO-5. We note that the new programme assumes Brent price of only US$50-55/bbl; which is well below the current price of US$65-70/bbl. We believe that if oil prices remain stable at these levels, there is scope for a further upwards revision of GeoPark’s programme. On our current Brent price assumption of US$57/bbl in 2021, we forecast the company will generate US$40 mm of free cash flow. At US$65/bbl, we forecast free cash flow of ~US$65 mm in 2021. We are increasing our target price from US$24 to US$25 per share. Vaalco Energy (EGY LN/US)C; Target price of £3.80: Better visibility on the 2021/2022 programme – YE20 gross 2P reserves were 33.7 mmbbl, broadly flat compared to YE19 (34.3 mmbbl). 2C contingent resources have increased by >15% as the company is getting a better understanding of the reservoir and the potential of the field. Gross resources that would be converted into 2P reserves on securing an extension of the licence beyond 2028 have increased from ~13 mmbbl to 18 mmbbl. The 2021/2022 work programme will include four wells and will boost gross production by 7-8 mbbl/d. The drilling programme will also include two Gamba appraisal wells targeting ~10 mmbbl gross prospective resources (=almost 30% of the YE20 2P reserves). These prospects carry very high chance of success (64-73%) with an unrisked NAV of £0.60 per share. The shares trade close to our 2P NAV of £2.15 per share that incorporates our latest forecasts. Overall we estimate the unrisked upside in Gabon at £5.25 per share (2.5x the current share price). This includes £1.55 per share for the contingent resources and is in addition to our 2P NAV. Tethys Oil (TETY SS)C; Target price of SEK85 per share: Good production update in Oman – WI production in Oman was 11,722 bbl/d, which is slightly ahead of our expectation (11,200 bbl/d). We believe that the company could increase its dividends if oil price were to remain at current levels. IN OTHER NEWS ________________________________________ AMERICAS Alvopetro (ALV CN): Reserves update in Brazil – YE20 2P reserves were 9.6 mmboe (+21% vs YE19) primarily due to the addition of development locations at the Gomo development. Canadian Overseas (COPL LN/XOP CN): Raising £14 mm of new equity – Canadian Overseas is raising ~£14 mm of new equity priced at 0.32p per share. The net proceeds will be used for working capital required post completion of the acquisition of Atomic Oil and Gas in the USA. Diversified Gas & Oil (DGOC LN): 4Q20 results – YE20 production in the USA was 103 mboe/d. The company held net debt of US$725 mm at YE20. A final quarterly dividend of US$0.04 per share has been declared. Pantheon Resources (PANR LN): Delay in Alaska – It is now unlikely that time will permit the testing of all zones at the Talitha #A well during the current drilling season. EUROPE Eni/Equinor (ENI IM, EQNR NO): Discovery in Norway – Vår Energi, (69.85% owned by Eni) and Equinor have made an oil discovery at production licence PL532 in the Barents Sea on the Isflak exploration prospect. 31-50 mmboe are estimated to be recoverable. Jersey Oil & Gas (JOG LN): Looking to raise £10-15 mm of new equity – Jersey is in discussions regarding a fundraising of between £10 to 15 mm. The net proceeds would be utilised to fund the next phase of workstreams on the project and augment existing cash reserves during farm-out discussions. Kistos (KIST LN): Dutch gas North Sea acquisition = Kistos is acquiring Tulip Oil Netherlands’ assets for EUR220 mm. This consideration will be a combination of cash, the assumption by Kistos of an existing bond instrument, the issue of a new debt instrument and the issue to the seller of equity in Kistos. Kistos will also issue warrants over EUR5 mm of ordinary shares at a premium of 30% to the price of any equity placing. In addition, contingent consideration of up to EUR163 mm is payable on certain development milestones. The acquisition comprises a 60% WI in the Q10-A offshore gas field together with interests in a suite of offshore exploration and production licences in the Dutch North Sea. The Q10-A field has 2P reserves of 19.5 mmboe and generated total net production of 5.47 mboe/d in 2020. The Q10-B, Q11-B and M10a/M11 discoveries potentially have in total 78.5 mmboe of 2C resources. NEO Energy Acquires Zennor Petroleum - NEO is acquiring Zennor for a total consideration of up to US$625 mm, including deferred and contingent payments. The Zennor portfolio adds ~40 mmboe of reserves and > 90 mmboe of un-risked resource to NEO. NEO’s production will grow from ~80,000 boe/d in 2021 to a production base in the period 2022 – 2026 of between 90,00-100,000 boe/d. Neptune Energy: FY20 results – FY20 production was 142.4 mboe/d. FY21 production guidance has been set at 130-145 mboe/d with production expected to reach 200 mboe/d in 2023. YE20 2P reserves were 601 mmboe with 452 mmboe 2C resources. Neptune plans to spend US$700 mm development capex in 2021 (in addition to US$150 mm in exploration). Neptune has net debt of US$1.8 bn at YE20. MIDDLE EAST AND NORTH AFRICA Cairn Energy (CNE LN): FY20 results, divestment of UK North Sea and acquisition of Egyptian assets – FY20 production was just over 21 mbbl/d with YE20 net cash of US$570 mm. Cairn is selling its interests in Catcher and Kraken to Waldorf Production for US$460 mm in cash (effective date of 01/01/2020 - As of 31/12/2020, working capital adjustments were US$144 mm). Cairn would also receive an uncapped cash sweep from 2021 to 2025 equivalent to 20% to 60% of production x (Brent price – US$52/bbl). The earnout payment is conditional of certain production volumes being achieved. Cairn is acquiring 50% of Shell’s upstream assets in Egypt’s Western Desert for a base consideration of US$323 mm and additional payments of up to US$140 mm between 2021 and 2024, contingent on the oil price and the results of further exploration. The transaction adds WI 2P reserves of 113 mmboe as at YE20 and FY21 WI production of 33,000-38,000 boe/d (66% gas) with an opex/boe of
JOG SNM CNE COPL DEC DNO ENI GENL GPRK TETY TGL TLW EGY DNO ENI 0MDP 0A1V
Market update - 03/03/2021
Jersey Oil & Gas PLC Reabold Resources plc
Concept select update
Jersey Oil & Gas provided a Greater Buchan Area (GBA) Concept Select Update. The concept select contains an aggregate of 172 mmboe of recoverable oil equivalent 2C contingent resources. A three-phase development centred around production facilities located at the Buchan field is proposed. The 172 mmboe of recoverable oil equivalent includes the Buchan field, the J2 field and Verbier. The company made the decision to electrify the field on ESG grounds, which is expected to reduce carbon dioxide emissions to below 1 kg per barrel.
JOG’s Concept Select Report for its GBA Development Project in the UK North Sea brings additional clarity and definition to this significant development. It further matures the project and paves the way for JOG to launch a farm-out process to find a partner to help fund the development. It demonstrates the scale of management’s ambition and the size of the potential prize on offer. After updating our model we are raising our risked-NAV and price target 22% to 700p, assisted by further de-risking and a higher oil price assumption. The shares have performed strongly YTD, but still trade at a massive discount to developed-resource peers. There is still a long way to go on this de-risking journey.
Market Update - 11/02/21
Jersey Oil & Gas PLC Star Energy Group PLC
JOG significantly increased its Buchan oil field resource estimates this week following an extensive subsurface work programme. Not only have we factored in these higher estimates, but the level of subsurface information now available has given us the confidence to also geologically de-risk the resource. As a result, our risked-NAV and price target jump sharply from 200p to 576p/sh. The market currently applies a significant discount to undeveloped oil resources. However, a successful partnering process, which is due to kick off this quarter, should go a long way to closing this valuation gap.
Jersey Oil & Gas has announced a significant increase to the best estimate contingent resource estimate of the Buchan oil field to 126 mmb of oil, from 81 mmb of oil. The increase reflects an improved understanding of the subsurface and is premised on dynamic reservoir modelling completed by Schlumberger (in conjunction with teams from Rockflow Resources and Jersey Oil & Gas). As a result of the change, the recoverable oil estimate from the Greater Buchan Area, inclusive of core satellite fields, amounts to 162 mmb. We are increasing our fair value estimate to 479p/sh from 378p/sh as a result. The increase in our fair value estimate represents a preliminary change and we expect our valuation to increase further as we gain a better understanding of the development concept for the Greater Buchan Area. As a reminder, Jersey Oil & Gas anticipates completing the concept select report of the Greater Buchan Area in Q1 2021 after which it intends to seek a farm-in partner to fund the project. All in, we believe Jersey has now entered a very exciting catalyst rich period of progress and we expect the stock will materially rerate over the course of 2021.
Buchan field resource upgrade
Looking to advance GBA development in 2021
On 14 December 2020 we put our fair value estimate of 268p for Jersey Oil & Gas under review pending a material uplift to reflect i) progress made in respect of the concept select phase of the Greater Buchan Area and ii) increased confidence in the deliverability of the Greater Buchan Area as a comprehensive multi-field development. For these reasons, we are increasing the scope of our valuation to include, not only the Buchan field (81.2mmb), but core satellite discoveries, namely, Verbier (28mmb), J2 (14mmb) and Buchan Andrew (3mmb). We have also increased the amount of the full success case value included in our target price to 12.5% from 10% to reflect: i) increased subsurface resource definition, ii) increased project definition and iii) a significantly improving sector context. As a result, we now see fair value at 378p for Jersey Oil & Gas.
Jersey Oil & Gas announced today that it has completed a comprehensive subsurface the company's existing prospectivity and identified a significant new prospect named Wengen. All in, the company now has four drill ready prospects within the Greater Buchan Area which have a combined P50 recoverable resource potential of 222 million presents the Greater Buchan Area as a picture-perfect developmental project with substantive scale in the core low-risk Buchan field, additional discovered oil in satellite fields and, now, drill-ready exploration targets. Our 268p/sh fair value estimate had been premised, not on the full 140 million boe of discovered recoverable resource in the Greater Buchan Area, but rather only on the 81.2 million barrel recoverable oil estimate for the Buchan oilfield (best estimate 2C resource). Given the subsurface work and associated project select work undertaken by the company, we believe that the Greater Buchan Area will farmout successfully as a comprehensive multi-asset project. As such, we are putting our fair value estimate under review pending a material uplift.
Greater Buchan Area exploration update
JOG has announced a sensible acreage acquisition in its core Greater Buchan Area (GBA) of the Central North Sea that consolidates and simplifies licence ownership and increases its discovered resources ahead of the planned GBA farm-out process. Our risked-NAV and price target rise 4% to 200p/sh.
Acquisition of CIECO P2170 interest
Jersey Oil & Gas announced today that is has entered into an agreement to acquire the entire share capital of CIECO V&C (UK) Limited, which is currently owned by two international entities headquartered in Japan. The acquisition secures an additional 12% working interest in Licence P2170 (Blocks 20/5b & 21/1d), which provides Jersey Oil & Gas with 100% of the licence. The licence contains the majority of the Verbier oil discovery in addition to three drill ready prospects: Verbier Deep, Wengen and Cortina. The acquired entity has approximately £15M of tax losses which will provide value to Jersey Oil & Gas. Consideration will consist of £150k in cash and contingent payments of i) £1.5M upon field development plan approval of Verbier within P2170 (as already discovered) by the OGA ii) £1.0M upon the 1st anniversary of attainment of first oil. The acquisition is conditional on OGA approval amongst other technicalities, which we do not anticipate will be problematic. The acquired entity will be free of debts.
Jersey Oil & Gas has provided a technical presentation and video which summarises much of the subsurface and developmental analysis undertaken by the company as part of the concept select stage. These materials have been made available on the company's website and we encourage investors and potential investors to watch the 5 minute video. We will review the material and comment in due course. The video is available at: https://www.jerseyoilandgas.com/media/videos/
JOG’s interims showed further good progress maturing its flagship Greater Buchan Area (GBA) project with a hub development concept utilising a new fixed platform selected. Subsurface models have been honed and checked against historical well data, boosting confidence levels in the resource and its deliverability. Strong cost controls have helped preserve cash, which stood at £8.9m at mid-year, sufficient to see JOG through next year. We have cut our risked-NAV and price target sharply from 342p to 192p – our prior estimate was stale and now reflects a US$50/bbl long-term Brent assumption. We still expect maturation and optimisation of the GBA project and surrounding prospects to drive NAV higher with future catalysts, notably the farm-out process expected in Q1 2021, offering material de-risking opportunities. Oil developments may be out of favour in these energy transition days, but the materiality of this opportunity alongside management’s sustainability-focused approach should keep the project competitive.
Jersey Oil & Gas has announced that it has selected a greenfield four-legged platform to develop the Greater Buchan Area which will utilise existing export pipeline infrastructure. We see near-term scope to increase materially our fair value estimate from 268p. We believe that today's news is price material and that it sets the scene for a near-term catalyst rich outlook for the company. It is an opportune time, in our opinion, to gain exposure to the Jersey Oil & Gas investment opportunity.
H1 2020 results; progress on concept selection
Intraday yesterday, Jersey Oil & Gas announced that it has been awarded a 100% interest and operatorship of part-block 20/5e in the Oil & Gas Authority's 32nd Offshore Licensing Round, which contains an extension of the J2 oil discovery (discovered by well 20/05a-10Y).
New UK block award
We have reviewed the key messages from Jersey's AGM held on 3 June 2020, which are outlined in this note. We are also using the opportunity to provide a sensitivity analysis of Jersey Oil & Gas' valuation relative to crude oil prices and to provide some thoughts on the near-term outlook for the company. We conclude that with upcoming catalysts as JOG advances concept select work on their Greater Buchan Area project combined with the undemanding market price relative to its potential, Jersey is a particularly attractive investment at the current time.
Jersey Oil & Gas (JOG LN): Jersey completes North Sea licence acquisition from Equinor | Mosman Oil & Gas* (MSMN LN): Mosman agrees sale of Welch for US$300k | Echo Energy (ECHO LN): Echo produces 2,250boepd on average year to date
JOG MSMN ECHO
P2170 stake acquisition completion
The 2019 financial results published today by Jersey Oil & Gas were unsurprising as the year-end cash balance of £12.3M had been pre-announced. More interestingly, we believe the annual report provides substantive strategic and forward looking financial guidance which is of a material nature.
Full year 2019 results
Jersey Oil & Gas (JOG LN): Shares currently trading at net cash | Union Jack Oil* (UJO LN): Wressle is cash flow positive down to US$17.62/bbl oil | Curzon Energy* (CZN LN): Potential RTO of Curzon by SSSIG
JOG UJO CZN
Jersey Oil and Gas has provided a business update indicating that it remains fully funded to deliver the concept select work the company is progressing on its Greater Buchan Area ("GBA") development. The company benefits from having no debt and based on its current plans has sufficient working capital through to the end of 2021, prior to any proceeds from its planned sale (farm-out) of a part interest in the company's GBA project, the process for which is expected to be launched later this year. Cost control continues to be monitored closely by the Board. The company's year-end 2019 unaudited cash position was £12.3m.
Business update
Jersey announced that it has established and will lead a Greater Buchan Area Joint Integrated Studies Agreement between neighbouring field operators, to undertake and complete technical and commercial evaluation studies for a collaborative development of the wider Greater Buchan Area, which contains discovered oil and gas resources in excess of 200 million barrels of oil equivalent
GBA Joint Integrated Studies Agreement
Buchan Asset Overview – That's How You Do It! Jersey supported by Rockflow Resources, petroleum consultants, has estimated that the development of the Buchan field has a potential to recover 58.5 mmb, 81.2 mmb and 99.3 mmb of oil under low, mid and high cases respectively. We met recently with Jersey and Rockflow to better understand the Buchan field and its forward looking production potential. We have gained confidence in the company's resource estimates and we have outlined our reasons for that in this note. We have also provided our first success case estimate of the value of the field, which is $692M or $8.52/b based on the assumptions detailed in this note and the mid-case resource estimate. Given the early stage nature of the development project (project scoping phase, unfunded and no field development plan approval from the OGA) we believe a reasonable fair value for the company would include circa 10% of our success case valuation estimate, which adjusting for balance sheet items, amounts to 268p/sh.
Jersey supported by Rockflow Resources, petroleum consultants, has estimated that the development of the Buchan field has a potential to recover 58.5 mmb, 81.2 mmb and 99.3 mmb of oil under low, mid and high cases respectively. We met recently with Jersey and Rockflow to better understand the Buchan field and its forward looking production potential. We have gained confidence in the company’s resource estimates and we have outlined our reasons for that in this note. We have also provided our first success case estimate of the value of the field, which is $692M or $8.52/b based on the assumptions detailed in this note and the mid-case resource estimate. Given the early stage nature of the development project (project scoping phase, unfunded and no field development plan approval from the OGA) we believe a reasonable fair value for the company would include circa 10% of our success case valuation estimate, which adjusting for balance sheet items, amounts to 268p/sh.
Jersey Oil & Gas (JOG) – Corporate – Comment on Market Reaction Market Cap £27.6m Share Price 126p Jersey announced on Monday that it has entered an agreement to acquire Equinor's 70% operated interest in Licence P2170, which contains the Verbier discovery. Verbier has a best estimate recoverable resource potential of 25mmb (management estimate).
Jersey Oil & Gas (JOG) – Corporate – Acquisition and Corporate Update Market Cap £30.2m Share Price 137.5p Jersey has this morning announced that it has agreed terms to acquire the 70% of Licence P2170 held by Equinor for a contingent consideration. As a result of the acquisition, subject to normal completion conditions, Jersey will hold 88% of the licence and become operator. The licence contains the company's Verbier discovery in addition to exploration prospectivity. The contingent consideration will consist of i) $3M upon OGA sanctioning a field development plan for Verbier ii) $5M upon first oil from Verbier and iii) royalty payments (ranging from 5% to 2% in respect of 70% of the oil produced from the acquired block) on the first 35 million barrels produced from the block. Wey Education (WEY) – Corporate – Appointment highlights heavy-weight strategy Market Cap £18.2m Share Price 14.85p Friday's announcement that Dr Sara de Freitas is to be appointed to WEY's executive team as Executive Director of Education highlights the company's long-standing commitment to educational quality and fostering engagement at a time when it has already flagged that it plans to grow and develop the management team. We read the appointment of a heavy-weight educationalist such as Ms de Freitas, with significant and long-term experience, as a further reflection of the strategy of growing the core business, with the Board keen to push forward from the company's position of strength. At the time of the final results in November, the company flagged new recruitment mechanisms which had already yielded important hires, and the announcement on January 24th appears well-aligned to the company's strategy and objectives. Journeo (JNEO) – Corporate – City of Edinburgh Bus Station order Market Cap £4.6m Share Price 56p Journeo is a specialist provider of both on and off-vehicle tailored solutions to the transport community. This morning, the company has released an RNS confirming receipt of its first tranche of work under the £4.8m City of Edinburgh Council bus station contract that was announced in December 2019.
JOG JNEO WEY
P2170 stake acquisition
JOG’s maiden CMD alongside the Greater Buchan Area CPR reminds us of the scale of the opportunity this company now enjoys. The market may have been disappointed that Equinor did not join the party, but there should be other buyers out there for attractively priced North Sea assets. Adopting the CPR volumetrics into our model results in our risked-NAV and price target rising from 349p to 392p/sh. Unrisked, we value JOG at over £31/sh, providing plenty of de-risking potential as the project matures. We maintain our Buy rating.
A year of two halves so far, with the Verbier appraisal well disappointment compensated for by the award of licences containing material discovered resource in the Greater Buchan Area of the Central North Sea. Management is now getting on with advancing this hub development project – Field Development Planning work is underway, with key project team and contractor appointments in progress. A new CPR for the Buchan blocks has been commissioned and licence P2170 subsurface re-interpretation is ongoing following seismic reprocessing. Future drilling plans are anticipated to be made towards the end of the year. Cash on the balance sheet at period-end stood at £15.5m, which should be sufficient to fund the compilation and submission of the requisite FDP. We maintain our Buy rating and raise our target price by 13% to 349p to reflect the recent award of additional UK acreage containing discovered resource.
Jersey Oil & Gas (JOG) – Corporate – Interim Results | Norman Broadbent (NBB) – Corporate – H1 results: profitable and growing
Jersey Oil & Gas PLC Norman Broadbent plc
JOG recently announced the award of substantial new assets in the UK North Sea. This note maps out the newsflow we would expect this to generate as the company moves towards development, while also laying out a series of valuation scenarios. This all well supports our Buy recommendation and 550p price target.
Jersey Oil & Gas (JOG) – Corporate – Additional Licence Award
Exciting news for JOG after the culmination of two years’ work results in the award of 100% interests and operatorship of three blocks in the UK’s 31st Supplementary Offshore Licensing Round. This acreage is complementary to its existing UKCS position and results in a material uplift to discovered and prospective resources. Our preliminary analysis of the Buchan redevelopment opportunity on this acreage results in our risked-NAV and price target rising from 111p to 310p/sh. We also raise our rating from Hold to Buy.
JOG has announced a set of substantial new UK North Sea licence awards from the OGA, and a three-month option agreement for Equinor to take a 50% interest in these. JOG has been awarded 100% in several blocks which contain the Buchan field (82mmboe gross mean contingent resource, expected 98% oil), Buchan Andrew discovery (3mmboe gross mean contingent resource) and J2 discovery (20mmboe gross mean contingent resource). These are located next door to JOG’s existing P2170 licence in the Outer Moray Firth.
Jersey oil & Gas (JOG LN) (not covered): Settlement in the UK | TransGlobe Energy (TGL LN/CN)1,6; BUY, £2.40: Positive update in Egypt |
Jersey Oil & Gas PLC TransGlobe Energy Corporation
JOG’s cash position remains strong, leaving it well funded for the re-evaluation and further drilling on its P2170 licence after the disappointing Verbier appraisal well earlier this year. However, the next drilling event is unlikely until H2 2020 at the earliest. Before that, it will update resource estimates through the summer, integrating the Verbier well data with 3D seismic. A new CPR is expected in Q4, when a decision on the next drilling location is also possible. M&A remains elusive, but JOG could potentially expand its UKCS acreage via a recent licencing round, which would complement its existing acreage. For now we are maintaining our Hold rating despite meaningful upside to our 111p price target – the summer looks set to be quiet for newsflow as JOG focuses on reassessing its acreage potential.
JOG has announced its 2018 results. These report an end 2018 cash holding of £19.8m, in line with our £19.7m forecast. We expect current cash to be around the £12.5m level post CAPEX spending on the recent Verbier appraisal well. EBITDA for 2018 was £2.1m, compared with our £2.2m forecast. Capex guidance for 2019 is reset from £10-11m to £6- 7m post the recent Verbier appraisal well. We have already adjusted our 2019 forecasts for the lower CAPEX, so maintain these, and also publish numbers for 2020, where we assume drilling of a further P2170 well.
JOG has announced its Verbier appraisal well result. This did not find the Upper Jurassic reservoir encountered in the discovery well, reducing expected resources for Verbier. JOG continues its programmes to progress and generate value from Verbier and its wider portfolio, offering ongoing catalyst potential in 2019 and beyond. Further details are available in the body of this note, and summarised below.
Jersey’s Verbier appraisal well (JOG 18%) failed to encounter reservoir, and resource expectations have been cut to the low end of previous guidance. We have reduced our risked-NAV and price target to 110p as a result. While a development is still feasible, this will need to be part of an area-wide development. JOG has sufficient funds for another well, although this will not be until 2020. The ongoing 31st Supplemental Licensing Round offers JOG an opportunity to add complementary acreage and could provide a potential tie-back route for Verbier. However, results will not be known until late Q3/early Q4. With little in the way of catalyst on the near-term horizon, we are reducing our rating from Buy to Hold until there is greater visibility on the next phase of drilling.
Jersey Oil & Gas (JOG) – Corporate – Verbier appraisal well results | Immotion Group (IMMO) – Corporate – Full year results – building the platform from which to scale
Jersey Oil & Gas PLC Huddled Group PLC
Jersey Oil & Gas has commenced drilling the Verbier appraisal well on Licence P2170 in the UK Central North Sea. This well is intended to narrow the 25-69-130 mmboe (Low-Mean-High) resource estimate range on this 2017 discovery. We believe there is only modest expectation priced into the shares and that the risk-reward skew around this well is attractive. JOG is about more than just Verbier, however, and an upcoming UK licensing round also provides an opportunity to add highly complementary acreage with existing resource to the portfolio. Acquisitions can also provide a step change in terms of scale for the business. We maintain our Buy rating and 315p price target.
Jersey Oil & Gas (JOG) – Corporate – Commencement of Drilling of Verbier Appraisal Well
Jersey announced that it has been advised by Equinor, operator of the P2170 licence area that the Verbier appraisal well is now expected during Q1 2019 vs mid to late Q4 2018. The West Phoenix rig is currently being utilised, as planned, on the first of four wells in an Equinor operated drilling campaign.
JOG has released its H1 results, reporting a cash holding (zero debt) of £22.1m for the end of June, from £25.4m at the end of December 2017. This continues to leave the company well funded for Verbier appraisal drilling and potential subsequent activity. Timing of Verbier spud is reiterated as mid/late 2018, in line with our expectation of December 2018. We expect the well to be the focus for the stock in the coming months. There is also news that fast track data covering Verbier and the Cortina prospect from the new 3D seismic is now expected in Q4 this year, followed by full survey data in Q2 2019, helping maintain momentum on P2170. We maintain our P&L forecasts, adjust our cash holding for CAPEX timing, and our valuation (below). Verbier drilling is becoming increasingly proximal, and we maintain our Buy recommendation and 330p target.
JOG announced in July that the expected spud date for its Verbier appraisal well had moved from late Q3/early Q4 2018, to mid/late Q4 2018. This has led to a degree of weakness in the price, with the shares now trading down at 180p. In our view, this is a good opportunity to gain exposure to the JOG investment case at an attractive price.
JOG has released a statement updating on its Verbier appraisal well on its P2170 licence (JOG 18%). The timing of spud for this has moved from late Q3/early Q4 2018 to mid/late Q4 2018, based on a decision by P2170 operator Equinor. Equinor is drilling three wells in its 2018 UK campaign: two exploration wells in JV with BP, and Verbier. Verbier had been expected to be the first of these three, but has now been swapped over to be the third, with the other two wells in Equinor's campaign remaining as a pair.
Jersey Oil & Gas (JOG) – Corporate – Verbier Apraisal Well Update
Jersey announced that it has been advised by Equinor (formerly called Statoil), the operator and 70% holder of the licence area of the the Verbier oil discovery, that the Verbier appraisal well (and potential sidetrack well) will now likely be drilled in mid to late Q4 2018 rather than late Q3 to early Q4 as previously advised. The modest change in the expected timing is not anticipated to change the well’s budget.
JOG has announced completion of the 3D seismic survey carried out across its Equinor-operated P2170 licence. The data from this is expected to be fully available in Q1 2019, and will be combined with the data from the upcoming Verbier appraisal well and the existing data for the licence in order to both increase the understanding of Verbier but also, importantly in our view, to further assess the additional prospectivity on P2170. The JV has already identified the 97mmboe Cortina prospect and the Meribel lead on the licence, and the new 3D could help further mature these, and also potentially work up other drilling opportunities.
Jersey Oil & Gas has announced that, consistent with prior statements, the 3D seismic survey over the P.2170 (Blocks 20/5b & 21/1d) and certain offset acreage as part of a wider GeoStreamer MultiClient 3D seismic survey conducted by PGS has completed. The company stated that delivery of the final imaged data by PGS from the survey continues to be expected in late Q1 2019. The company indicated that this data will be integrated with the results from the Verbier appraisal well, scheduled for drilling late Q3/Q4 this year.
We are upgrading our fair value estimate for Jersey Oil & Gas to 404p from 307p to reflect a $10/b increase in our long-term crude oil price assumption to $70/b (inflated at 1% p.a.).
Jersey Oil & Gas PLC Scirocco Energy PLC
JOG has announced that a 3D seismic survey is going to be carried out across its Statoil-operated P2170 licence during Q2 2018. The data from this (which is expected to be fully available in Q1 2019) will be combined with the data from the upcoming Verbier appraisal well and the existing data for the licence in order to both increase the understanding of Verbier but also, importantly in our view, to further assess the additional prospectivity on P2170. The JV has already identified the 97mmboe Cortina prospect and the Meribel lead, and the new 3D could help further mature these, but also potentially throw up other drilling opportunities.
Jersey Oil & Gas has announced that the co-venture partners of Blocks 20/5b and 21/1d (Licence P.2170) containing the Verbier oil discovery, have committed to prefund a 3D seismic survey over the licence area and selected offset acreage. The survey is to be conducted as part of a wider GeoStreamer MultiClient 3D seismic survey by Petroleum Geo-Services ASA (PGS) during Q2 2018. Delivery of the final imaged data by PGS from the survey is currently expected in late Q1 2019.
Jersey and its JV partner, Statoil, both announced yesterday (after markets opened) that Statoil, the operator of P2170, the Verbier licence area, has contracted the West Phoenix semisubmersible rig to appraise that discovery. Statoil has contracted the rig for four wells, the first of which will be drilled in Norway before bringing it to UK waters to drill three wells the first of which is anticipated to be the Verbier appraisal well. The companies indicated the Verbier appraisal well may include a sidetrack well, timing of the four well programme is anticipated to commence in late summer (3Q 2018) and that the purpose of the Verbier well is to determine the scale of the resource. Both Jersey and Statoil indicated yesterday that the operator’s range of estimates in terms of the recoverable resource potential of Verbier is 25-130 mb (consistent with prior estimates) with a mean recoverable resource of 69mb.
JOG has announced that operator Statoil has secured the West Phoenix rig from Seadrill to drill its Verbier appraisal well (JOG 18%) on the P2170 licence later this year. The rig is expected to begin drilling for Statoil in Norway, followed by Verbier in summer 2018 as the first well in Statoil’s UK programme.
JOG has announced its 2018 work programme to follow up on its Verbier discovery made last year on the P2170 licence. The JV, led by operator Statoil, has carried out extensive technical work post the Verbier well result, and this remains ongoing. This work has led to a decision to drill an appraisal well on Verbier, with the potential to drill a follow-on sidetrack, as the optimal course for appraising the discovery. This programme and budget have been approved by the JV, and negotiations for a rig are underway. Drilling is planned for summer 2018.
Jersey announced that the co-venturers (18% Jersey, 70% Statoil operator, Cieco 12%) in respect of the Verbier discovery and Cortina prospect have approved a work programme and budget for 2018. The approved work programme and budget includes an appraisal well for the recent Verbier discovery (77.5 mmb gross, WHI mid-case estimate) and an option for a side-track well. The company indicated negotiations are advanced to contract a rig with drilling expected in the summer of 2018. Additional site survey work is being planned for a potential exploration well within the licence.
In the UK budget yesterday, the chancellor announced that “from November 2018 we will introduce ‘Transferable Tax History’ for transfers of oil and gas fields in the North Sea”. This was originally introduced in the March 2016 budget, and again mentioned in the March 2017 budget, but this is the first time any sort of actual timeline for implementation has been given.
JOG has been transformed by its recent Verbier discovery on P2170 (JOG 18%, operator Statoil) and £23.8m fundraise. We now anticipate further drilling on P2170 starting in H2 2018, and JOG’s share should now be fully funded. Results of the full analyses of the Verbier result (including updated resources), confirmation of the new work programme and then the wells themselves provide a string of catalysts. Production acquisitions also continue to be targeted. Based upon the value of P2170 and the full newsflow schedule we have a Buy recommendation.
JOG has announced the result of its Verbier sidetrack well, drilled on P2170 in the UK North Sea, as an oil discovery (JOG 18%). The Verbier sidetrack has been drilled to target reservoir up dip of the recently drilled main Verbier well, which encountered water in Upper Jurassic sandstones. The sidetrack has now been drilled to total depth, and after evaluation of logging while drilling data (including pressure data) is being reported as a discovery “in good quality sands”. There was no pre-drill estimate for the sidetrack, but an indicative recoverable resource range of 25-130mmboe is now given, with the 25mmboe level considered as a proven recoverable volume in the vicinity of the well.
Columbus Energy (CERP LN) (not covered): Placing | Jersey Oil & Gas (JOG LN) (not covered): Discovery in the UK | Cairn Energy (CNE LN); HOLD, £2.20: Divestment of UK onshore assets
Jersey Oil & Gas PLC Capricorn Energy PLC
JOG has released its H1 2017 results, reporting corporate overheads of £758k and an expectation of a £1.8m cash holding post drilling of the Verbier sidetrack. This was in line with our expectations. The key focus for the stock in the short-term remains the currently-drilling Verbier sidetrack well. Were this to be successful we would expect it to be very positive for the company. JOG also continues to pursue its acquisition strategy, where it is finding that the North Sea M&A market is gradually improving, thanks in part to a more stable oil price environment. Timing of any deals is still uncertain, but they could transform the portfolio if and when they do appear. In the meantime the shares will be driven by the Verbier sidetrack result, which we expect to be announced in mid October. Based on the potential positive impact of this, we have a highly speculative Buy recommendation.
JOG has announced that, as a result of the full interpretation of the wireline logs from its Verbier well (which was announced last week as having hit water bearing reservoir), a sidetrack well is now to be drilled. The wireline log data, alongside updated geophysical interpretation, has led to the conclusion that the presence of hydrocarbons up dip of the main Verbier well cannot be ruled out, and on the back of this the decision has been taken to drill an up dip sidetrack well from the main Verbier well.
JOG has announced the result of its Verbier well, which has been drilled on the P2170 licence by JV partner Statoil. The well encountered Upper Jurassic sandstone reservoir, but this was water bearing, and the well will now be logged. The Upper Jurassic sands were penetrated at a greater depth than expected, and below the oil-down-to level recorded in equivalent sandstones found in the 2006 drilled 20/5a-10Y well (which tested at 4.8mbbl/d and was interpreted to be on the flank of the Verbier structure).
JOG has announced the spud of its Verbier well (JOG 18%) by JV operator Statoil, using the Transocean Spitsbergen rig. The well is expected to take between 30 and 70 days to drill: the top end of this range would be the result of drilling a side track, which would be considered on success in the initial well, and as such there could be an initial result as early as mid September.
Jersey Oil and Gas (JOG LN) (not covered) & Statoil (STL NO) (not covered): Drilling on the Verbier Prospect commences in the UK North Sea | Gulf Keystone Petroleum (GKP LN) (not covered): Payment and Operational Update in Kurdistan | Sirius Petroleum (SRSP LN) (not covered): Pre-payment & Offtake Agreement with BP | Protests in the Niger Delta
JOG DNQ GKP SRSP
JOG has released its 2016 results, reporting a cash holding of £1.9m at the end of 2016. This funds overheads into Q1 2018, and we today update our valuation, with risked NAV moving 173p/share to 192p/share and unrisked NAV from 887p/share to 1,044p/share (details below). Over the rest of 2017 the company will continue to pursue its dual strategy – drilling the Verbier exploration well and pursuing production acquisitions in the North Sea. JV partner Statoil recently secured a rig for Verbier, and North Sea asset deals continue to be announced by peers. This makes for a busy time going forward for JOG, with catalyst potential from Verbier and acquisitions. Given this potential, coupled with the valuation upside on success at Verbier, we have a Buy recommendation.
JOG has announced a CPR resource update from ERC Equipoise on its P2170 licence (JOG 18%), which contains the Verbier and Cortina prospects. Gross P50 prospective resources for Verbier move from 102mmbbl and 66bcf to 108mmbbl and 58bcf, and the P10 case increases substantially from 158mmbbl and 66bcf to 301mmbbl and 168bcf. The CPR has also added 1.8mmbbl and 1.0bcf of 2C resources based on the 2006 20/5a-10Y well. This potentially flowed oil from the eastern edge of Verbier, and inclusion of the 2C is an important endorsement of this. Chance of success is also increased to 29%, from 26% previously. This analysis not only increases resources in Verbier, it also provides important third party endorsement. An exploration well is planned on Verbier for this summer, and we expect announcement of a rig shortly. The well is the main catalyst for the stock, but the company is also looking to add production assets via acquisition. We maintain our Buy recommendation.
In the UK budget yesterday, it was announced by the Chancellor that a panel of experts is to be set up to look into the issue of tax on North Sea producers, with a discussion paper to then be published. This is likely to include consideration of decommissioning tax incentives – an important aspect for North Sea M&A.
JOG is pursuing a two pronged strategy in the UK North Sea. In addition to the company’s acquisition drive (aimed at assembling a portfolio producing 10mboe/d), JOG is also participating in the drilling of the 113mmboe Verbier well in summer 2017, funded by a US$25m Statoil farm in completed in 2016. The Verbier well provides a tangible catalyst for the stock within the next six to nine months, and would be very significant for the company if it is successful. The acquisition strategy has the potential to underpin JOG with cash generative production volumes, which would help provide funding for Verbier on success and a hedge otherwise. A recent £1.6m placing provides funding for overheads into Q1 2018, the Verbier well result should be known in the autumn, and we could see acquisitions come through before that. For these reasons we have a Buy recommendation.
Enquest announced yesterday the acquisition of 25% of the Magnus field (including stakes in related infrastructure) from BP. This pertains to JOG in that JOG is also looking to acquire late life producing assets from the super majors (amongst others), under structures that provide a return and control decommissioning liabilities.
Jersey Oil and Gas (“JOG”) is a UK E&P company focused on the North Sea. It holds 18% in the P2170 licence where it is participating in a Statoil funded and operated exploration well in summer 2017. The company is also planning to build a 10mbbl/d production portfolio via acquisitions as the supermajors trim their portfolios and debt-laden peers are forced into asset sales. We believe these two themes should create catalysts over the next 12 months and beyond: Buy.
Jersey Oil and Gas (“JOG”) is a UK E&P company focused on the North Sea. It holds 18% in the P2170 licence where it is expecting to participate in a Statoil funded and operated exploration well in 2017. The company is also planning to build a 10mbbl/d production portfolio via acquisitions as the supermajors trim their portfolios and debt-laden peers are forced into asset sales. We believe these two themes should create catalysts over the next 12 months and beyond: Buy.
Jersey is currently looking to farm out the Cortina blocks in the UK.
Share: