TIDMJOG
RNS Number : 3861U
Jersey Oil and Gas PLC
23 November 2023
23 November 2023
Jersey Oil and Gas plc
("Jersey Oil & Gas", "JOG" or the "Company")
GBA Farm-Out to Serica Energy
Jersey Oil & Gas (AIM: JOG), an independent upstream oil and
gas company focused on the UK Continental Shelf region of the North
Sea, is pleased to announce that it has agreed to farm-out a 30%
interest in the Greater Buchan Area ("GBA") licences to Serica
Energy (UK) Limited (the "Serica Farm-out"). Upon completion of the
Serica Farm-out, JOG will have a 20% interest in the GBA licences
and a full carry on the capital expenditure required to bring the
Buchan field into production.
Highlights :
-- Fully Funded : The transaction delivers material value to JOG
and results in the Company having a fully funded 20% interest in
the on-going Buchan redevelopment project
-- Strong industry partner : Serica is a leading mid-tier UK oil
and gas company producing more than 40,000 barrels of oil
equivalent per day, further strengthening the quality of the GBA
joint venture
-- Milestone payments : $18 million of the $38 million cash
payments attributable to the two GBA farm-outs will have been
received upon completion of the Serica transaction
-- Value creation : Clear path to development sanction and first
oil, with JOG's fully funded position meaning the Company is
underpinned by exposure to zero-capex flowing barrels
-- Future cash generation : Once onstream, JOG will be a
non-operated partner entitled to 20% of production from the Buchan
field
-- Low carbon development : redeployment of an existing floating
production, storage and offloading ("FPSO") vessel that is planned
for future connection to a nearby floating wind power development
makes the Buchan redevelopment solution the option with the lowest
full-cycle carbon footprint
Transaction Summary
The farm-out transaction with Serica is on identical pro-rata
terms to that previously completed with NEO Energy ("NEO") earlier
in the year. In aggregate, the two transactions result in JOG
retaining a 20% interest in the GBA licences, a full carry on the
capital expenditure required to bring the Buchan field into
production and a number of milestone cash payments. Upon completion
of the Serica Farm-out, the combined cash payments received from
the two farm-outs will be over $18 million, with a further $20
million due to be paid to JOG at Buchan Field Development Plan
("FDP") approval.
In exchange for entering into definitive agreements to divest a
30% working interest in the GBA licences, the Company is set to
receive from Serica:
-- 7.5% carry of the estimated $25 million cost to take the
Buchan field through to FDP approval
-- 7.5% carry of the Buchan field development costs, up to the
budget included in the approved FDP; equivalent to a 1.25 carry
ratio
-- $6.8 million cash payment on completion, which includes a
$5.6 million payment associated with the finalisation of the GBA
development solution and associated acquisition of the "Western
Isles" FPSO
-- $7.5 million cash payment on approval of the Buchan FDP by
the NSTA
-- $3 million cash payments on each FDP approval by the NSTA in
respect of the J2 and Verbier oil discoveries
The primary condition precedent to completing the Serica
Farm-out is receipt of approval from the NSTA for the
transaction.
Buchan Development Plan
Following the recent announcement regarding the acquisition of
the "Western Isles" FPSO, all the main components of the Buchan
redevelopment plan have now been defined. The field is to be
produced through the use of up to five subsea production wells,
supported by two water injection wells. These will be tied back to
the FPSO, which will be modified to be "electrification-ready"
prior to redeployment to the field. This will enable the vessel to
have the potential to be connected to one of the anticipated
third-party floating wind power developments that are intended to
be located in close proximity to the GBA following the recent
Innovation and Targeted Oil & Gas ("INTOG") licence awards made
by Crown Estate Scotland.
Work is progressing on the Front End Engineering and Design
("FEED") studies that require completion ahead of FDP approval and
the development moving into the execution phase of activities. The
total capital expenditure forecast for the Buchan redevelopment is
estimated by the Operator, NEO, to be approximately GBP850-950
million (gross cost) to bring into production over 70 million
barrels of oil equivalent (95% oil), with peak production rates of
approximately 35,000 barrels of oil equivalent per day. This
estimate will be refined as part of completing FEED and the
contract tendering activities that precede finalisation of the FDP.
As a result of the farm-out transactions, the Company's share of
the capital expenditure included in the approved FDP work programme
and budget will be fully carried by NEO and Serica. The
transactions unlock the route to monetising total estimated GBA
resources in excess of 100 million barrels of oil equivalent.
Approval of the Buchan FDP is scheduled for 2024, with first
production forecast for late 2026. Following the start-up of
production from Buchan, subsequent phases are expected to involve
the tie-back of the Verbier and J2 discoveries that lie within the
GBA licence area and the potential for regional third-party
discoveries to be tied back to the FPSO.
Andrew Benitz, CEO of Jersey Oil & Gas, commented :
"We are thoroughly delighted to announce the farm-out
transaction with Serica Energy. Not only does it bring a further
high-quality partner into the joint venture, but it unlocks
exceptional value for the Company and delivers upon our overall
objectives for the GBA farm-out strategy. The transaction provides
JOG with multiple cash payments, but most importantly, a fully
funded 20% working interest in the Buchan redevelopment project,
transforming the Company and providing us with the springboard from
which to realise long term shareholder value."
Enquiries :
Jersey Oil and Gas Andrew Benitz C/o Camarco: 020 3757
plc 4980
Strand Hanson Limited James Harris Tel: 020 7409 3494
Matthew Chandler
James Bellman
Zeus Capital Limited Simon Johnson Tel: 020 3829 5000
Cavendish Capital Neil McDonald Tel: 020 7220 0500
Markets Limited Leif Powis
Camarco Billy Clegg Tel: 020 3757 4980
Rebecca Waterworth
- Ends -
Additional Information
The Company's GBA interests comprise the P2498 and P2170
licences, which contain the Buchan oil field, the J2 and Verbier
oil discoveries and a number of exploration prospects.
The farm-out agreements contain representations, warranties and
indemnities given by the Company to Serica in relation to, amongst
other things, title and capacity to the GBA licences. The Company's
maximum aggregate liability under such warranties and indemnities
is limited to an amount equal to the aggregate of the cash payments
and costs carried by Serica under the agreement (to the extent such
amounts are received). The agreement is governed by English
law.
Notes to Editors :
Jersey Oil & Gas is a UK E&P company focused on building
an upstream oil and gas business in the North Sea. The Company
currently holds a 50% interest in each of licences P2498 (Blocks
20/5a, 20/5e and 21/1a) and P2170 (Blocks 20/5b and 21/1d) located
in the UK Central North Sea and referred to as the "Greater Buchan
Area." Licence P2498 contains the Buchan oil field and J2 oil
discovery and licence P2170 contains the Verbier oil discovery.
Following completion of the farm-out transaction with Serica Energy
(UK) Limited, the Company will retain a 20% interest in each of the
GBA licences.
JOG is focused on delivering shareholder value and growth
through creative deal-making, operational success and licensing
rounds. Its management is convinced that opportunity exists within
the UK North Sea to deliver on this strategy and the Company has a
solid track-record of tangible success.
About Serica Energy
Serica Energy is a British independent oil and gas exploration
and production company with a portfolio of UKCS assets and is
listed on the London Stock Exchange. Following the recent
acquisition of the entire issued share capital of Tailwind Energy
Investments Ltd, the Company has a balance of gas and oil
production and is responsible for about 5% of the natural gas
produced in the UK, a key element in the UK's energy
transition.
Serica's producing assets are focused around two main hubs: the
Bruce, Keith and Rhum fields in the
UK Northern North Sea, which it operates, and a mix of operated
and non-operated fields tied back to
the Triton FPSO. Serica also has operated interests in the
producing Columbus (UK Central North Sea)
and Orlando (UK Northern North Sea) fields and a non-operated
interest in the producing Erskine field
in the UK Central North Sea.
Forward-Looking Statements
This announcement may contain certain forward-looking statements
that are subject to the usual risk factors and uncertainties
associated with an oil and gas business. Whilst the Company
believes the expectations reflected herein to be reasonable in
light of the information available to it at this time, the actual
outcome may be materially different owing to factors beyond the
Company's control or otherwise within the Company's control but
where, for example, the Company decides on a change of plan or
strategy.
All figures quoted in this announcement are in US dollars,
unless stated otherwise.
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 as it forms part of
United Kingdom domestic law by virtue of the European Union
(Withdrawal) Act 2018, as amended by virtue of the Market Abuse
(Amendment) (EU Exit) Regulations 2019.
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END
MSCEAPFAAFXDFFA
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November 23, 2023 02:00 ET (07:00 GMT)
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