WTI $59.75 -89c, Brent $62.70 -99c, Diff -$2.95 -10c, NG $2.84 +6c, UKNG 40.05p -1.14p
Oil drifted yesterday ahead of tomorrow’s Opec+ meeting where decisions will be taken with regard to output from April onwards. Although there have been some jitters, not surprising given the current oil price, so far there have been few in real panic. Indeed the noises from the Opec+ committee have been positive with regards current production and also significant stock withdrawals expected this year.
The API stats after the close were as expected all over the place following the bad weather in Texas last week. And they were, crude built by 7.4m barrels when the market had expected a draw but products reversed that with huge draws in both gasoline and distillates of over 9m b’s. The market understood all that and the oil price is up nearly a dollar a barrel as I write.
Jersey Oil & Gas- A red letter day indeed…
JOG has announced the Greater Buchan Area Concept Select Update which gives ‘potential for 172 MMboe of 2C contingent resource estimates to be developed from a fully electrified platform’. This is indeed what the market has been waiting for, a really thorough piece of work which shows the quality of project JOG has on its hands and how it has prepared for the next momentous step, that of starting the farm-out process.
The planned development is centred on resuming production at the Buchan oil field and producing the J2 and Verbier oil discoveries as well as other existing and yet to find discoveries within the GBA as future upside. A three-phase development centred around a single integrated wellhead, production, utilities and quarters platform located at the Buchan field – the GBA hub.
The development concept is based on P50 Technically Recoverable Resource estimates of, in aggregate, 172 MMboe of light sweet crude and associated gas within the Core GBA, which includes the Buchan oil field and J2 and Verbier oil discoveries.
Critically, JOG aims to deliver production from the planned GBA Development Project at an industry leading carbon intensity level due to Platform Electrification, as seen in certain fields in the Norwegian sector and with overall carbon emissions from the GBA with platform electrification estimated by management at <1kg/boe.
The effect that these actions are immense, ‘project economic estimates by management for the Core GBA selecting Platform Electrification as our preferred low carbon power solution, are pre-tax free cashflow of $6.4 billion with an NPV (pre-tax) of $1.7 billion giving a payback period of under 3 years with a project internal rate of return (“IRR”) greater than 25%’.
‘Development costs (Capex and Opex) based on today’s values are estimated to be approximately $30/boe with Capex estimate for Phase 1 of approximately GBP1 billion (including 20% contingency) and Opex estimate during plateau production of $8/boe to $9/boe’. These numbers are incredible and are bound to garner significant interest from potential partners.
The GBA hub nameplate capacity has been set at 40,000 barrels of oil per day with expected plateau production of more than 3 years, plus significant upside potential from 4 drill ready exploration prospects within the GBA that have combined prospective resource estimates totalling an additional 219 MMboe.
In addition, close proximity of the GBA exploration prospects, will enable their development, on discovery, as low cost subsea tie-backs to the planned GBA hub and a discovery in line with P50 estimates at any of the drill ready exploration prospects has the potential to extend plateau production significantly and materially increase project economics.
This all means that with the preferred development concept identified, JOG is now ready to launch its planned and previously announced farm-out process for the GBA. That process should lead to plenty of interest in what is a state of the art, economically stunning North Sea development. Expect the farm-out process to start this month, FEED entry in Q3 2021 and FID in H2 2022, if ever there was an oven ready development this is it.
Andrew Benitz, CEO of Jersey Oil & Gas, commented:
“The GBA has the scale to be extremely low carbon through platform electrification at the same time as offering highly favourable project economics. As a result of a significant amount of work from Jersey Oil & Gas’ excellent project team, working with specialist contractors, consultants and service providers, we are well on track to deliver on our Licence commitment to deliver the Concept Select to the Oil and Gas Authority (“OGA”) by July this year.
“We now plan to launch a farm-out process, which we expect to be highly attractive to a wide range of oil companies in light of the project’s scale, economics and low carbon potential through platform electrification, characteristic of certain fully electrified fields offshore Norway.”
So, where does that leave my own thoughts about valuation of JOG going forward now that the farm-out is imminent? Well, since the company have gone to work on the concept select they have used the uplift in resources, along with a desire to make this a responsible, low carbon emissions play for the very long term which brings with it very attractive economics.
Unlocking the equity value shows that JOG shares are significantly undervalued. GBA discovered resources of 190 mmboe give only $0.31 boe and total resources of 408 mmboe only $0.14 boe, based on the current share price. Post tax NPV at say, $6.81/ boe would value the shares at some GBP38.88 per share, pre-tax NPV at $10.54/boe gives a huge GBP60.15 per share. Now, readers know that whilst there is never a normal in these cases I use a default rate of around $5 in the ground which would be perfectly conservative and give a mouth-watering valuation for JOG and in my view fully deserved.
When compiling the Bucket List in December I had little doubt that 2021 was going to be JOG’s year, I imagine that there is already early interest in the project albeit not yet engaged, the moment the flag goes down anything might happen. JOG has a valuable project here that will deliver industry leading, low carbon emissions yet in a highly profitable development, they seem to me to be teed up for good times, deservedly so.
Reabold has announced that they are selling GBP500,000 of convertible loan notes in Corallian to a group of strategic investors whilst retaining GBP500,000. I can’t honestly see this making much difference but management comments are below!
Stephen Williams, Co-CEO of Reabold, commented:
“We’re pleased to be selling GBP500,000 of our convertible loan notes in Corallian to a group of strategic investors. Their support for an IPO, RTO or other listing alternative for Corallian is consistent with our monetisation goal once Corallian has created further value. We’re also delighted to have the opportunity to work alongside these strategic investors to progress other projects within our wider portfolio.”
Last night in the Prem the Noisy Neighbours saw off Wolves 4-1.Tonight Burnley host the Foxes, Villa go to the Blades and the Eagles host the Red Devils.
The disgrace over Gordon Elliott, the disgraced trainer gets worse and jockey Rob James is added to the role of cruelty and abuse in the sad, sadistic affair. The connections have withdrawn Tiger Roll from the Grand National as apparently the weights were too high, shame that wasn’t what they said when the weights came out. It is only as Gordon Elliot’s horses will be no longer welcome in civilised society again, as honest owners withdraw their animals from Elliott.
The final test of India v England will be held on the beach tomorrow, up early to get towels on your seats for a 4 am start.