23rd August 2016
Jersey Oil and Gas plc
("Jersey Oil & Gas" or the "Company")
Farm-out of an Interest in UK Seaward Licence P.2170, Blocks 20/5b and 21/1d to Statoil
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 alongside its co-venturer, CIECO Exploration and Production (UK) Limited ("CIECO") it has entered into a binding, conditional sale and purchase agreement ("SPA") with Statoil (U.K.) Limited ("Statoil"), a leading multinational oil and gas company, for the farm-out to Statoil of, in aggregate, a 70 per cent. working interest in UK Seaward Licence P.2170, Blocks 20/5b and 21/1d (the "P.2170 Licence") located in the UK Central North Sea (the "Farm-out").
The Company currently holds, through its wholly owned subsidiary, Trap Oil Limited, a 60 per cent. interest in the P.2170 Licence with CIECO holding the remaining 40 per cent. interest. On completion of the Farm-out, Statoil will hold 70 per cent. as operator, the Company will retain an 18 per cent. interest (via Trap Oil Limited), of which 10 per cent. will continue to be carried by CIECO pursuant to the pre-existing arrangements between the parties, and CIECO will retain a 12 per cent. interest.
Highlights
- Under the terms of the SPA, Statoil will acquire an aggregate 70 per cent. working interest in the P.2170 Licence from the Company and CIECO, and will be appointed the designated operator for a total up-front cash consideration of US$2 million, of which US$1.2 million will be payable to Jersey Oil & Gas (the "Initial Consideration").
- The P.2170 Licence area contains two medium risk independent oil prospects identified with unaudited estimated mean in place volumes of 300 and 212 million stock-tank barrels ("Mmstb") respectively.
- Statoil will fund all costs up to US$25 million in respect of the first exploration well to be drilled on the P.2170 Licence (the "Exploration Well"), with any cost over-runs to be satisfied by each party in proportion to their working interests.
- Planning of the Exploration Well is expected to commence this year, with drilling potentially planned for 2017.
- All parties will now work towards obtaining the customary regulatory approvals to complete the Farm-out comprising, inter alia, the consent of the Secretary of State for Business, Energy and Industrial Strategy (the "Secretary").
Andrew Benitz, CEO of Jersey Oil & Gas, commented:
"We are delighted to have secured a farm-out partner of the calibre of Statoil. The P.2170 Licence area has significant exploration potential for the discovery of oil and we look forward to drilling one of the prospects with our partners, potentially next year. This farm-out deal exposes our shareholders to 18% of a prospect with significant potential and a carry in respect of the costs of the budgeted Exploration Well. Individual prospects of this materiality are increasingly rare in the North Sea and to have a leading international operator such as Statoil joining our partnership group, serves to demonstrate the significant value-potential of this asset.
"The Company continues to deliver on its strategy of managing and de-risking its existing exploration portfolio whilst actively seeking to acquire interests in more mature producing assets."
The P.2170 Licence
The P.2170 Licence was awarded in the Department of Energy and Climate Change's 28th Seaward Licensing Round. The blocks concerned are located in the UK Central North Sea in water depths of between 100-128m which would facilitate production of any discovered hydrocarbons as either a stand-alone development or via nearby existing infrastructure. Prospectivity has been confirmed following extensive geological and geophysical evaluation by Jersey Oil & Gas, with two medium risk independent oil prospects identified with unaudited estimated mean in place volumes of 300 and 212 Mmstb respectively. The P.2170 Licence has a drill-or-drop option which can currently be exercised until 30 November 2016, under which the licensees can commit to drill a well within a further two year period.
Further Details on the SPA
Completion of the SPA is conditional on (i) the written consent of Ithaca Energy (UK) Limited as required under the settlement agreement with certain historical creditors, as announced by the Company on 25 June 2015; (ii) the Joint Operating Agreement being amended and restated on terms acceptable to the parties acting reasonably; and (iii) the consent of the Secretary.
In the event that Statoil ultimately decides not to drill a well, it has undertaken to (i) pay Jersey Oil & Gas and CIECO a total of US$2.5 million in cash as an exit fee and then (ii) withdraw from the P.2170 Licence; provided that its obligation under (i) shall be contingent on the Secretary approving an extension to the current 30 November 2016 drill-or-drop date should an extension be required.
In the event that Statoil proceeds to commit to drilling a well and either Jersey Oil & Gas or CIECO (or both parties) do not wish to participate in the drilling of such well, the party or parties not wishing to drill shall withdraw from the P.2170 Licence.
Payment of the Initial Consideration is due on completion, being 10 business days after all conditions precedent are satisfied.
Use of Proceeds
Further to the Company's settlement agreement with certain historical creditors (as announced on 25th June 2015), 60 per cent. of, inter alia, the net proceeds to Jersey Oil & Gas derived from the P.2170 Licence will be payable to the Company's partners in the Athena asset (the "Athena Consortium"). As a result, the Company will be entitled to retain 40 per cent of the net proceeds which will be utilised by the Company for its general working capital purposes
Strategy
The Company's strategy remains focused on maintaining, developing and exploiting a portfolio of North Sea assets, with a greater focus on producing assets in order to seek to unlock the value in the group's existing tax losses. The Company is currently seeking to acquire additional targeted North Sea oil and/or gas producing assets and is currently undertaking due diligence on a number of assets in the North Sea. Any potential acquisitions that are taken forward are intended to be financed from equity and/or debt capital raises as appropriate.
The Company's preferred target acquisition profile includes mature oil and/or gas production assets with long tail-end production profiles and upside potential principally from satellite fields with production-based tariff agreements, limited exposure to host platform costs, low operating costs and manageable decommissioning liabilities.
Enquiries:
Jersey Oil & 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 |
FirstEnergy Capital LLP |
Hugh Sanderson David van Erp |
Tel: 020 7448 0200 |
Camarco |
Billy Clegg Georgia Mann Sean Blundell |
Tel: 020 3757 4983 |
The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ("MAR").
