WTI $64.80 -59c, Brent $68.39 -49c, Diff -$3.59b+10c, NG $2.56 +8c, UKNG 44.25p -0.45p

Oil price

Oil is dithering, whilst the weakness is down to the EU playing games with Astra Zeneca over the jab that may or not be responsible for blood clotting it is only delaying health and economic recovery, you couldnt make it up, or maybe you could.

The real reason is that the US market is waiting to hear from the two day Fed meeting and its view on inflation. Whilst there may be bumps in the road I can’t see anything other than nonchalance regarding inflation. The API stats were as expected, totally meaningless and the IEA report as usual adds nothing to the sum knowledge.

Jersey Oil & Gas

JOG has announced a placing and subscription to raise £15m through a book build and offer for subscription to raise a further £2m for qualified participants. At 165p the placing was well oversubscribed, a premium to last night’s price and directors have also added to their considerable skin in the game on this occasion.

Background to the issue is that on 3 March 2021, the Company announced the key findings of its Concept Select Report in respect of its Greater Buchan Area development project, which set out a three-phase development approach centred around a single integrated wellhead, production, utilities and quarters platform located at the Buchan field – the GBA hub. The development concept is based on P50 technically recoverable resource estimates of, in aggregate, 172 million barrels of oil equivalent of light sweet crude and associated gas within the core GBA, which includes the Buchan oil field and J2 and Verbier oil discoveries.

JOG aims to deliver production from the planned GBA development project at an industry leading carbon intensity level due to platform electrification, as seen in certain fields in the Norwegian sector. Overall carbon emissions from the proposed GBA development with platform electrification are estimated by management at <1kg/boe.

The project economic estimates by management for the core GBA development selecting platform electrification as the preferred low carbon power solution, show pre-tax free cashflow of $6.4 billion with an NPV (pre-tax) of $1.7 billion giving a payback period of under 3 years and a project internal rate of return greater than 25%.

The development costs (Capex and Opex) based on current day values are estimated by management to be approximately $30/boe with a capex estimate for Phase 1 of approximately £1 billion (including 20% contingency) and an opex estimate during plateau production of US$8/boe to US$9/boe making the project amongst the most favourable in economic metrics.

The GBA hub nameplate capacity has been set at 40,000 barrels of oil per day, with expected plateau production of more than three years. There is significant upside potential from four drill ready exploration prospects within the GBA that have combined prospective resource estimates totalling an additional 219 MMboe with low cost exploration upside. Indeed, a discovery in line with P50 estimates at any of the drill ready exploration prospects has the potential to extend plateau production significantly and materially increase project economics.

With the preferred development concept identified, as announced on 3 March 2021, Jersey Oil & Gas has recently formally launched its planned and previously announced farm-out process seeking to secure an industry partner for the GBA development project. More importantly, the Directors believe that, upon successful completion of the farm-out process, the market may value the Company at a premium relative to its current share price.

‘The net proceeds from the Fundraising, together with the Company’s existing cash reserves, will be used to strengthen the Company’s balance sheet ahead of anticipated commercial negotiations for the GBA development project during the farm-out process and to maintain momentum and ensure that time and funding pressures do not interfere in the efficient delivery of the overall project. Costs for the next stages of the GBA development project will include surveys, license fees, pre-FEED and FEED work and project management’.

In summary, the net proceeds of the Fundraising will be utilised as follows, to maintain the momentum of the GBA development project’s workstreams and to ensure that progress is maintained into the FEED phase until the farm-out process has been concluded, currently anticipated to occur during 2021.

And importantly, to preserve the value of a 2025 start-up date, with marine surveys to support the Environmental Statement required for the Field Development Plan required to be initiated imminently.

Andrew Benitz, CEO of Jersey Oil & Gas, commented:
“Over the past three years, Jersey Oil & Gas has made significant progress in developing what has become a flagship project for the North Sea. Our recently announced development concept for the Greater Buchan Area is based on 172 MMboe of 2C contingent resource estimates with significant exploration upside potential and aims to deliver initial production of up to 40,000 bopd. The GBA hub is planned to be one of the first electrified platforms in the basin as we seek to deliver future production at industry leading carbon intensity levels.

“Given this potential, it is imperative that, as we move into the next key phase for the project, namely, the farm-out process, which I am pleased to report has recently formally been launched, Jersey Oil & Gas is financially robust such that it can conduct negotiations from a position of greater strength whilst at the same time maintaining momentum on the project’s other workstreams.”

We are delighted to announce the completion of today’s oversubscribed placing, subject to shareholder approval at the forthcoming General Meeting. With the net proceeds of the fundraising, Jersey Oil & Gas can continue to develop its GBA project at pace and progress its recently launched farm-out process. This is an important period for Jersey Oil & Gas and we are highly encouraged by the significant interest we have received, as part of this fundraising, for the further development of our flagship production hub in the North Sea."

JOG is now very well placed to take advantage of its superb asset position at the GBA and this fundraise strengthens the balance sheet giving the company flexibility in its upcoming farm-out negotiating process. The company has done all the work now and ticks all the boxes after completing the concept selection, ahead of FEED work later in the year. After recent weakness shareholders deserve the upside that must be coming its way, there is plenty of scope in what is a huge portfolio of cracking assets.

Prospex Energy

Yesterday I was able to chat with Edward Dawson, CEO and Managing Director of Prospex Energy. We had a good chat about recent events and, following the fundraise his assets in Spain and Italy. Here is the link to the interview.

Core Finance CEO Interview: Edward Dawson, Prospex Energy

KeyFacts Energy Industry Directory: Maersk Drilling