A North Sea-focused oil and gas firm has cleared an important hurdle in its efforts to bring a vintage field back into production after regulators approved a related deal with Norwegian investors.
Jersey Oil & Gas said the North Sea Transition Authority has approved its request to assign a 50 per cent stake in acreage containing the Buchan field to NEO Energy in accordance with the farm-out transaction agreed by the firms in April.
Analysts estimated at the time that the deal could be worth up to $170 million (£135m). It is the latest in a series of North Sea investments that NEO has agreed to make in a campaign for which it won backing from the HitecVision private equity business.
READ MORE: Jobs in prospect as Norwegian firm buys into fields off Aberdeen
The deal provided a notable vote of confidence in Jersey’s plan to restart production from the Buchan field in the Moray Firth. Buchan was shut down by Repsol Sinopec in 2017 but Jersey reckons it could contain more than 100 million barrels of oil.
The Buchan development is expected to form part of a wider scheme that will also involve bringing finds into production.
Interest in North Sea assets was stoked by the surge in oil and gas prices fuelled by Russia’s war on Ukraine. Prices have fallen since last summer amid concerns about the outlook for the global economy.
READ MORE: North Sea sentiment hit as 'severe gas market volatility' takes toll on pioneer
However, the farm-in deal with Jersey signalled that NEO had confidence in the longer-term prospects for the North Sea industry. It was struck five months after the UK Government increased the rate of the windfall tax, which it introduced in May last year.
Jersey noted the NSTA had also granted an extension to the licence for the area covering Buchan. It said this will provide the time required to prepare a Field Development Plan for the redevelopment of the field, which is planned for submission to the authority next year.
“Following these approvals, the Company has now satisfied the conditions precedent associated with the farm-out of the 50% interest in licence P2498 to NEO,” said Jersey. It expects to satisfy the conditions attached to the farm out of a stake in the licence containing the Verbier find to NEO in coming weeks.
Jersey said it believes opportunity exists within the UK North Sea to deliver value and growth for investors.
Shares in Jersey Oil and Gas closed up 5p at 197.5p.
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