NORTH Sea-focused Jersey Oil & Gas has seen its shares plunge six per cent after oil giant Equinor apparently lost interest in a field development the firms were considering, which had generated excitement in the industry.

Jersey turned heads in 2017 when it made a find called Verbier in the Moray Firth with Equinor, which was initially estimated to contain up to 130 million barrels.

North Sea oil minnow in focus after making bumper find in Moray Firth

The company had persuaded Equinor to buy into the acreage.

The coup suggested a bright future lay ahead for Jersey, a relative minnow in an industry dominated by big fish.

Jersey’s success boosted hopes that independents could help stimulate interest in the North Sea amid the deep downturn triggered by the crude price plunge from 2014.

The company went on to work up plans for a major new hub in the Greater Buchan Area of the North Sea, which is expected to include Verbier.

Jersey hopes to restart production from the giant Buchan field as part of the plan, which it has suggested could help it generate $3bn cash.

However, Equinor has decided to exit the Verbier project. The company has sold its 70 per cent stake in the licence to Jersey, in a low-cost deal.

“Although considered a potential development opportunity, the Verbier discovery does not rank sufficiently high in the Equinor global portfolio to warrant prioritization,” it said.

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The sale provides the latest sign that Equinor, which was formerly known as Statoil, has had a big change of heart about the potential of the area containing Verbier.

When the Verbier find was made in 2017 Statoil said it proved there could be significant remaining potential in the mature North Sea.

Statoil said at the time: “The Verbier result certainly gives us the confidence and determination to continue our exploration efforts.”

Questions were raised about the commercial appeal of Verbier after the results of an appraisal well drilled last year indicated that it could be much smaller than hoped.

Jersey said then its estimates of the size of Verbier were likely to be revised towards the lower end of the initial range of 25 million barrels of oil equivalent (mmboe) to 130 mmboe.

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Jersey reckons a find at the lower end of the range could still be viable. Including Verbier in a wider Moray Firth hub would improve the economics of a development.

However, in October Equinor spurned an opportunity to buy in to a wider Buchan area project.

Equinor insisted yesterday that it remained committed to the potential of the United Kingdom Continental Shelf (UKCS) and would continue to explore in the area.

The company acquired a significant stake in the giant undeveloped Rosebank field West of Shetland in 2018.

But Jersey faces the challenge of having to try to find a replacement for Equinor.

Chief executive Andrew Benitz put a brave face on developments, insisting the Buchan area project was a “truly exciting opportunity to showcase what is possible with new developments on the UKCS”.

He said the acquisition of the oil volumes associated with Equinor’s stake in Verbier strengthened Jersey’s plan to bring the field into production through the GBA development.

Jersey plans to sell stakes in the GBA acreage through a farm out process after completing planning work on the development concept. Joint house broker BMO Capital Markets said the deal with Equinor could simplify the process.

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Jersey will pay Equinor $3m if the Oil and Gas Authority approves plans for a Verbier development, $5m when first oil is produced and a royalty on production.

It had a market value of £5.6m before the Verbier find was announced. Shares in the firm closed down 8.5p at 129p yesterday, leaving it with a market capitalisation of around £28m.

The Brent crude price fell to a three-month low of $58.50 per barrel yesterday amid concern about the Coronavirus outbreak.

Statoil acquired a 42% interest in the licence containing Verbier from Jersey in 2016 for $1.2m and bought a 28% stake in the acreage from Japan’s CIECO for $0.8m.

It agreed to cover up to $25m well costs.

Jersey controls the rump of the assets amassed by the Trap Oil business.

Trap developed a big North Sea portfolio helped by the £30m acquisition of Banchory- based Reach Oil & Gas in 2011 but suffered hefty losses after the crude price plunged three years later.