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Jersey Oil & Gas PLC - Interim Results for the Six Months Ended 30 Jun 19

RNS Number : 7095N
Jersey Oil and Gas PLC
26 September 2019
 

 

 

26 September 2019

 

Jersey Oil and Gas plc

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

 

Interim Results for the Six Months Ended 30 June 2019

 

Jersey Oil & Gas (AIM: JOG), an independent upstream oil and gas company ‎focused on the UK Continental Shelf ("UKCS") region of the North Sea, is pleased to announce its interim results for the six months ended 30 June 2019 (the "Period").

Highlights:

·      Strong cash position of approximately £15.5m at period end

·      Drilled the 20/05b-14 Verbier appraisal well which, although failing to encounter Upper Jurassic sands, provided the P2170 JV partners with valuable well data

·      Received the final instalment of the processed data from the 2018 PGS 3D seismic survey, which will be incorporated with data from the 20/05b-14 Verbier appraisal well to provide a Verbier licence full re-evaluation

·      Received £750,000 in settlement from Total E&P UK Limited ("TEPUK") in relation to the termination of its 2013 farm-in to licence P2032

 

Post Period End:

·      Transformational licence awards in the Oil and Gas Authority's ("OGA") 31st Supplementary Offshore Licensing Round in the UK North Sea

·      Greater Buchan Area awards include 100% equity and operatorship of the Buchan Field together with the J2 and Glenn discoveries

·      Awards add an estimated 119 million barrels of discovered mean recoverable resources net to JOG

·      Three month 50% option granted to Equinor for Blocks 20/5d and 21/1a (the "Buchan Blocks")

 

Outlook:

·      Field Development Planning ("FDP") work underway on the Greater Buchan Area hub development project

·      Adopting key Environment, Social and Governance principles to ensure that we develop our resources in a sustainable, low carbon and responsible manner

·      Hiring key project team members to enhance our technical and project management capabilities

·      Appointing key contractors to undertake Appraise and Select phases of the FDP work

·      Commissioned a new independent Competent Person's Report ("CPR") for the Buchan Blocks, which contain the Buchan Field and J2 discovery

·      Progressing full subsurface re-interpretation / validation of licence P2170 using the new final processed data from the 2018 PGS 3D seismic survey

·      Undertaking independent work in respect of licence P2170 to support potential future drilling activity

·      Potential production acquisition opportunities continue to be pursued

 

 

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

"The first half of 2019 has been transformational for JOG, we have begun work on a full re-evaluation of the P2170 licence area and after significant effort and investment JOG was awarded 100% working interest and operatorship of four blocks in the Greater Buchan Area. This has significantly enhanced the Company's resource base of discovered oil volumes.

The Greater Buchan area is a very material and scalable project, which has the clear potential to deliver significant shareholder value beyond what we have already achieved. We are dealing with well-known, good quality, light oil fields and discoveries in a relatively benign and shallow part of the Central North Sea, which are located within UK waters, near good surrounding infrastructure for export and represent a potentially valuable energy resource for both JOG and the UK.

The board and I look forward to develop this vital resource sustainably and would like to thank shareholders for their ongoing support and look forward to updating them on further progress."

 

Enquiries:

Jersey Oil and Gas plc

 

Andrew Benitz, CEO

C/o Camarco:

Tel: 020 3757 4983

Strand Hanson Limited

James Harris

Matthew Chandler

James Bellman

Tel: 020 7409 3494

Arden Partners plc

Paul Shackleton

Benjamin Cryer

Tel: 020 7614 5900

BMO Capital Markets Limited

Jeremy Low

Tom Rider

Tel: 020 7236 1010

Camarco

Billy Clegg

James Crothers

 

Tel: 020 3757 4983

 

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 owns an 18% interest in the P2170 licence, Blocks 20/5b & 21/1d, Outer Moray Firth, in which the operator, Equinor UK Limited, owns a 70% interest and CIECO V&C (UK) Limited owns a 12% interest. This licence contains the 2017 Verbier oil discovery.

 

The Company plans to build an upstream E&P portfolio via both organic development and acquisitions coinciding with the cyclical recovery in the oil price and the opportune buying market in the North Sea. The Company is involved in multiple acquisition opportunities and intends to draw on its management team's considerable experience, knowledge and expertise to deliver shareholder value from its stated growth strategy.

 

 

 

CHAIRMAN'S STATEMENT

 

 

 

Overview

The first six months of 2019 was a busy period for Jersey Oil and Gas ("JOG" or the "Company") as we drilled the Verbier (P2170) appraisal well, made a detailed application to the Oil and Gas Authority ("OGA") in respect of acreage adjacent to P2170 offered in its 31st Supplementary Offshore Licensing Round ("31 SLR"), and commenced work on the interpretation of the 3D seismic survey's processed data over the P2170 licence area.

 

This was against a backdrop of the Brent Crude oil price starting 2019 at approximately US$55 per barrel and increasing to US$65 per barrel as at 30th June 2019.

 

Verbier and the Greater Buchan Area Development

To our great disappointment, the Verbier appraisal well did not encounter the anticipated Upper Jurassic sands. Nonetheless, we remain committed to the P2170 Licence area, particularly in the context of: a) the operator's estimate of 25m barrels of discovered contingent resources at Verbier; b) potential additional resources in the area located to the north west of the earlier Verbier discovery (the 20/05b-14 well) which remain untested; c) the further untested resource potential in a deeper horizon beneath the Verbier discovery; and d) the Cortina prospect.

 

During the first half of 2019, we also continued to work very hard on our application for acreage on offer under the 31 SLR, which included the Buchan oil field and the J2 oil discovery (well 20/5a-10Y), both of which are located in areas contiguous to P2170 in the UK North Sea.

 

In July 2019, we were delighted to announce that JOG had been awarded various licence interests, including Blocks 20/5d and 21/1a (containing the Buchan field and the J2 discovery), new exploration acreage with the award of Block 20/4c and, subsequent to the initial awards, a further award including Block 21/2a (containing the Glenn oil discovery).  These awards, when combined, provide JOG with licence acreage with an additional estimated 119 million barrels of oil equivalent ("mmboe") of discovered mean recoverable resources.

 

The 31 SLR awards represent a huge opportunity for JOG, bringing us operatorship of most of the key discovered oil fields within the Greater Buchan Area, whilst additionally enhancing the potential development of the Verbier discovery, as part of an overall area development project.

 

Further details of the 31 SLR awards are contained in the Chief Executive Officer's Report.  As Chairman, I would like to take this opportunity to acknowledge the huge amount of effort that has been put into achieving these licence awards by the entire JOG team, which is the culmination of preparatory work that has been ongoing for much of the last two years.

 

Financial Position

The Company's total cash reserves at 30 June 2019 were approximately £15.5 million.

 

Going forward, we now have a much enlarged portfolio of assets, which we expect will continue to grow in the future, each with interdependent funding considerations.

 

Outlook

Following the recent 31 SLR awards, we have started to work on the development project for the Greater Buchan Area with vigour and look forward to delivering significant shareholder value as this workstream progresses.

 

Marcus Stanton

Non-Executive Chairman

 

26 September 2019

 

 

 

CHIEF EXECUTIVE OFFICER'S REPORT

 

 

 

Overview

In January 2019, the OGA launched the 31st Supplementary Offshore Licensing Round ("31 SLR"), covering the Greater Buchan Area ("GBA").  The acreage offered in the 31 SLR centred around our existing P2170 licence area, where the Company made the Verbier oil discovery in October 2017.  We referred to the 31 SLR in our 2018 annual report and accounts, recognising the potential for a new area hub development to produce the material discovered oil volumes that exist within the GBA. Looking at the GBA in a wider hub context has been part of JOG's strategic thinking for the past two years, and it was this foresight that has helped to transform the Company to where we are today - a North Sea focused upstream business with in excess of 120 million barrels of discovered oil across multiple high quality oil fields that, tied together, could form a major new JOG-operated development hub within the Central North Sea.

 

During the first half of 2019, the Verbier appraisal well was drilled, in which JOG holds an 18% non-operated working interest. Unfortunately, after the success of the initial exploration discovery in late 2017, this initial appraisal well did not encounter the anticipated Upper Jurassic reservoir sands. Whilst this was a temporary setback for the Company, it is important to note that such an outcome does not factor in elements of additional resource potential within the P2170 licence area which include an area to the north west of Verbier, a deeper objective beneath the Verbier discovery and the Cortina prospect to the east of Verbier.  Together with our co-venturers, Equinor UK Limited ("Equinor") and CIECO V&C (UK) Limited ("CIECO"), we have begun work on a full re-evaluation of the licence area, including an assessment of additional prospectivity in the deeper targets and the other previously identified exploration opportunities.  This additional prospectivity provides material upside potential for JOG's area development plans within the GBA.

 

Operations

The Verbier appraisal well programme was part of a larger Equinor-operated drilling campaign which began in September 2018 and moved into UK waters in January 2019 in order to commence the drilling of two exploration wells for Equinor prior to Verbier. This had cost benefits for JOG, in that certain costs were shared, such as mobilisation and demobilisation, across the whole campaign. The 20/05b-14 Verbier appraisal well commenced drilling on 4 March 2019 and its results were announced by JOG on 3 April 2019. The well, which was drilled ahead of schedule and under budget, did not encounter the anticipated Upper Jurassic reservoir sands and, as a result, our contingent resource volumetric estimates have been revised towards the lower, 25 mmboe end of the operator's initial resource estimate range. The original 20/05b-13Z Verbier discovery well encountered excellent quality oil bearing reservoir sands.  A full suite of wireline logs was acquired during the 2019 appraisal well programme, the data from which, together with all the previous well results, is being integrated into the final processed 3D seismic survey data, which was delivered during June and July 2019. The resulting analysis will be used to evaluate fully the upside potential for further Verbier appraisal activity. A large part of the mapped area of the Verbier discovery, located to the north west of the recent 20/05b-14 appraisal well, remains untested and further additional resource potential, which was not tested with this appraisal well or the 20/05b-13Z discovery well, has also been identified in a deeper horizon beneath the Verbier discovery. These prospects, along with the Cortina prospect, also situated within the P2170 licence area, will be re-evaluated, utilising the new seismic data and considered for potential future drilling.

 

The Greater Buchan Area - A transformational event for Jersey Oil and Gas

In July 2019, after expending significant time, effort and investment on an application, JOG was awarded 100% working interests and operatorship of four blocks in the 31 SLR. The acreage awarded includes the Buchan oil field and the J2 and Glenn oil discoveries and additional exploration upside and is contiguous with JOG's existing interest in Licence P2170 that contains the Verbier discovery. JOG's acreage interest in the GBA, including P2170, is estimated to contain in excess of 120 mmboe discovered mean recoverable resources in addition to in excess of 300 mmboe identified mean prospective resources. Work has now commenced on preparing an FDP for the Greater Buchan Area development project with, subject to funding, first oil targeted for 2024. By way of a low-risk accumulation of discovered resource volumes, this is by far the most significant event for JOG since its inception and we are excited that work on this new project is underway.

 

The Buchan oil field was discovered in the mid-1970s and was brought onstream by BP in 1981 with nine development wells with initial production peaking at 54,537 barrels of oil per day ("bopd"). 148 million barrels ("mmbbls") of oil were produced under natural depletion with aquifer support through to May 2017, at which point the field went into early cessation of production because the Buchan Alpha platform was no longer compliant with the current safety rules and regulations.  Buchan oil is a light 33.5° API oil with a low gas/oil ratio ("GOR") (285 standard cubic feet per barrel ("scf/bbl")).  Buchan benefits from a significant oil column in excess of 1,900 ft (well 21/1a-6) and a number of in-depth studies compiled since 2014 have concluded a strong case for Buchan to be redeveloped.  JOG has already spent two years investigating the subsurface attributes of Buchan and estimates that over 80 million barrels of recoverable oil volumes remain to be produced from the field. Additional oil has been discovered in the Andrew Sandstone, a recognised shallow reservoir

Quick facts: Jersey Oil and Gas PLC

Price: 102

Market: LSE
Market Cap: £22.27 m
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