Selection of GBA Development Solution

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:

- 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.