NORTH Sea-focused Jersey Oil & Gas has highlighted the strong competition for acquisitions in the area where it sees potential to develop a major new production hub.
Jersey shot to prominence in 2017 when it made a find in the Moray Firth it was thought could contain up to 130 million barrels.
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The firm has faced complications since with the results of appraisal drilling indicating the field, called Verbier, might only contain around 25m barrels.
Jersey said yesterday that it had been outbid for a range of assets in recent months.
However, with directors convinced that now is a good time to invest in the North Sea, the company remains focused on growth.
“We see potential growth in shareholder value being achieved both through organic and inorganic means,” said chief executive Andrew Benitz. “JOG remains committed to scaling up its business in the UK North Sea and sees this as a good sector in which to build a profitable full cycle upstream oil and gas business.”
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Mr Benitz held out the prospect of developing facilities that could be used to bring a range of fields in the Verbier area into production.
He noted the P2170 licence containing Verbier lies close to the Greater Buchan acreage that regulators reckon could contain around 300 million barrels oil equivalent recoverable.
This is a “material volume that potentially could lead to an area hub development, thereby enhancing the commercial viability of volumes discovered within P2170,” observed Mr Benitz.
Jersey said it is involved in multiple acquisition opportunities.
The company has been in the market for producing assets in the UK for some time.
Its experience suggests there has been a big shift in the market amid an apparent change in attitudes to the North Sea.
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The area appeared to fall out of favour during the slump triggered by the crude price fall from 2014 to 2016. Many assets were put on the market as firms looked to raise cash, leaving buyers with the upper hand.
The partial recovery in the crude price since late 2016 has stoked bid interest in the North Sea while making some owners more willing to retain assets.
“The Company bid competitively on the sales of multiple producing assets during the year, but on each occasion, we were outbid,” said Mr Benitz.
Jersey’s progress will be watched closely in the North Sea. It is one of a band of relatively small independents that have helped encourage exploration activity in the area.
The company persuaded Norwegian giant Equinor to buy in to the licence containing Verbier in 2016. Equinor, formerly called Statoil, paid Jersey $1.2m and agreed to fund up to $25m well costs.
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The farm-in represented a coup for Jersey, which had a market capitalisation of £6m before the Verbier find was announced in October 2017.
The deal and subsequent drilling success have helped Jersey’s directors in their attempts to realise value from the rump of the North Sea portfolio that Trap Oil developed.
Trap bought Banchory- based Reach Oil & Gas for £30m in 2011 but lost £44m in 2014 when the producing Athena oil field became significantly loss making following the fall in the oil price.
Mr Benitz and Ronald Landsell took charge of Trap in 2015, when the firm was renamed after acquiring the Jersey Oil & Gas business they ran in a £500,000 deal. Mr Landsell is Jersey’s chief operating officer.
Mr Benitz yesterday noted the partners in Verbier will assess fresh survey data covering the wider area, which contains other prospects, with a view to completing further drilling.
He said Jersey is in a strong funding position. The company had £20m cash at the end of 2018, around £4.5m of which will be used in the first half, mainly to cover costs associated with Verbier.
Jersey lost £2m in 2018. It made £0.7m profit in the preceding year after some costs were reimbursed by licence partners, which include Japan’s CIECO.
Shares in Jersey Oil & Gas closed up 20 per cent, 11.5p at 69p, leaving the firm with a market capitalisation of around £15m.
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