Jersey Oil & Gas PLC on Thursday said it agreed to farm-out a 50% interest in its Greater Buchan Area licences to NEO Energy Ltd.
Shares in Jersey Oil & Gas fell 6.7% to 278.00 pence each in London on Thursday morning.
The UK continental shelf-focused upstream oil and gas company said the transaction involves a $2 million cash payment upon completion. It also involes $9.4 million upon finalisation of the Greater Buchan area development solution, $12.5 million upon approval of the Buchan field development plan by the North Sea Transition Authority and $5 million on each field development plan approval by the NSTA regarding the J2 and Verbier oil discoveries.
This is alongside a minimum 12.5% development expenditure carry to first oil for the 50% interest retained by the company.
Jersey Oil & Gas said the deal ‘unlocks the route’ to finalising the GBA development solution and monetisation of resources in excess of 100 million barrels of oil equivalent.
It noted NEO Energy as a ‘major UK North Sea operator’ producing around 90,000 barrels of oil equivalent per day, alongside being backed by Europe offshore energy-focused private equity investor HitecVision, which has around $8 billion of assets under management, according to Jersey Oil & Gas.
It added both it and NEO Energy are committed to evaluating options to give the GBA development flagship status, relating to its low carbon credentials, through the use of existing infrastructure and potential low carbon electrification options.
Jersey Oil & Gas said it also intends to farm-out additional equity in the GBA licences in order to ultimately retain a 20-25% carried interest in the development following FDP approval.
NEO has an option to increase its 50% interest in the Buchan licence by up to an additional 37.5% in exchange for a further cash payment, Jersey Oil & Gas added.
‘We are delighted to announce this transaction with NEO Energy, a well-funded industry heavyweight and the fifth-largest producer in the UK [continental shelf]. The farm-out marks a major value creation moment for [Jersey Oil & Gas], a significant de-risking of the GBA development programme, from both an operational and funding perspective, and provides the springboard from which to grow the long-term value of the business,’ said Jersey Oil & Gas Chief Executive Officer Andrew Benitz.
‘We are looking forward to working collaboratively with NEO Energy to select the optimal development solution for the GBA and taking the project through to sanction and on into future production.’
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