REG - Jersey Oil & Gas PLC - Selection of GBA Development Solution

Jersey Oil and GasAnnouncement

04/07/2023 07:00

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RNS Number : 8277E  Jersey Oil and Gas PLC  04 July 2023

4 July 2023

 

Jersey Oil and Gas plc

("Jersey Oil & Gas", "JOG" or the "Company")

 

Selection of GBA Development Solution

 

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 finalised the Greater Buchan Area ("GBA") development
solution.

 

Highlights

§ Redeployment of a Floating, Production, Storage and Offloading ("FPSO")
vessel selected as the preferred GBA development solution - lowest cost and
lowest full-cycle carbon footprint option

§ The North Sea Transition Authority ("NSTA") has completed its review of the
selected development solution

§ Key commercial terms agreed for the potential acquisition of a high-quality
FPSO, subject to negotiation and execution of fully termed agreements

 

GBA Development Solution

JOG and NEO, as the incoming operator of the GBA licences, have determined
that the preferred development solution is via the redeployment of an FPSO.
This solution benefits from being both the lowest cost development option and
the one that results in the lowest full-cycle carbon footprint of all the
potential options evaluated.  This is driven by the ability to re-use
existing infrastructure that can be located directly at the Buchan field and,
with limited modifications, make the FPSO "electrification-ready" upon its
redeployment.  This will enable the vessel to have the potential to be
connected to one of the anticipated 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.

 

The preferred development solution aligns with the NSTA's obligations to
maximise the economic recovery of reserves and assist with achieving the UK
government's net zero target.   The NSTA has issued a letter confirming it
has no objections to the Concept Select Report submitted to support the Buchan
re-development programme.

 

With the GBA development solution now identified, work is progressing on the
engineering studies that are required prior to submission of the development
plan in 2024.  The Company estimates that the total capital expenditure for
the Buchan field re-development, including the cost of acquiring the FPSO,
will be in the region of $900 million (gross cost).  This estimate will be
assessed and refined with NEO as part of completing the Front End Engineering
and Design and contract tendering activities that precede Field Development
Plan ("FDP") finalisation.

 

Following the recently completed farm-out transaction with NEO, the Company
has a 50% working interest in the GBA licences.  Through the expenditure
carry arrangements agreed with NEO, JOG will be carried for 12.5% of the
Buchan field re-development costs (equivalent to a 1.25 carry ratio).  In
line with JOG's stated strategy to farm-out a further interest in the GBA
licences, it is targeted for the Company to ultimately retain a fully carried
20-25% interest in the Buchan re-development.

 

Further information on the core components of the development programme and
execution schedule will be provided as the work progresses.  The Company is
also planning to commission an independent reserves evaluation as part of its
end of year financial reporting process.

 

 

Proposed FPSO Acquisition

In tandem with the specification of the preferred development solution, the
GBA partners have agreed the key commercial terms for the proposed acquisition
of an existing FPSO.  The proposed acquisition is conditional on the
negotiation and execution of relevant transaction agreements, including a sale
and purchase agreement.  The acquisition would form part of the carry
arrangements agreed between NEO and JOG.

 

Andrew Benitz, CEO of Jersey Oil & Gas, commented:

"We are delighted to have finalised the GBA development solution and agreed
key commercial terms for securing an FPSO for redeployment on the Buchan
field.  This marks a major step forward for the project, not least by
providing the GBA partners with a solution that minimises the overall carbon
footprint of the project and provides the opportunity to be an early
participant in the UK oil and gas industry's offshore electrification plans.
We look forward to working closely with NEO, as the incoming operator of the
GBA licences, on preparing the overall Buchan field re-development plan that
is anticipated to be submitted to the NSTA during the first half of 2024."

 

 

Enquiries:

 Jersey Oil and Gas plc  Andrew Benitz        C/o Camarco: 020 3757 4980

 Strand Hanson Limited   James Harris         Tel: 020 7409 3494

                         Matthew Chandler

                         James Bellman

 Zeus Capital Limited    Simon Johnson        Tel: 020 3829 5000

 finnCap Ltd             Christopher Raggett  Tel: 020 7220 0500

                         Tim Redfern

 Camarco                 Billy Clegg          Tel: 020 3757 4980

                         Rebecca Waterworth

- Ends -

 

 

Farm-Out Transaction Summary:

In exchange for entering into definitive agreements to divest a 50% working
interest and operatorship in the GBA licences to NEO, the Company will
receive:

§ $2 million cash payment on completion of the transaction - now received

§ $9.4 million cash payment upon finalisation of the GBA development solution
- execution of the fully termed FPSO acquisition agreement

§ a carry for JOG's 50% share of the estimated $25 million cost to take the
Buchan field through to FDP approval

§ $12.5 million cash payment on approval of the Buchan FDP by the NSTA

§ a 12.5% carry of the Buchan field development costs included in the FDP
approved by the NSTA; equivalent to a 1.25 carry ratio

§ $5 million cash payment on each FDP approval by the NSTA in respect of the
J2 and Verbier oil discoveries

 

 

 

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 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.

 

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.

 

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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