TIDMJOG
RNS Number : 8277E
Jersey Oil and Gas PLC
04 July 2023
4 July 202 3
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 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
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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END
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