In a significant move within the oil and gas sector, Jersey Oil & Gas (AIM: JOG), an independent company focusing on the UK Continental Shelf, has announced a landmark agreement with Serica Energy (UK) Limited. This farm-out deal involves a 30% interest in the Greater Buchan Area (GBA) licenses, marking a pivotal moment for both companies in the North Sea.

Deal Highlights and Value Creation

The deal, highly advantageous for JOG, results in a fully funded 20% interest in the ongoing Buchan redevelopment project. Serica Energy, known for producing over 40,000 barrels of oil equivalent per day, becomes a strong industry partner in this joint venture. The arrangement includes milestone payments totaling $18 million of the $38 million from the two GBA farm-outs upon completion.

Financial and Developmental Benefits

JOG benefits from a clear path to development sanction and first oil, with no capital expenditure for flowing barrels. Future cash generation is assured as JOG retains a 20% production share from the Buchan field. The deal also emphasizes low carbon development, utilizing an existing FPSO vessel for the lowest full-cycle carbon footprint.

Transaction Summary and Future Prospects

The Serica Farm-out mirrors the terms of an earlier deal with NEO Energy, cumulatively securing JOG’s 20% interest in the GBA licenses. The transaction promises over $18 million in cash payments, with additional payments due upon Buchan Field Development Plan approval.

In return, JOG receives significant financial and developmental support from Serica, including a carry of the estimated $25 million cost for Buchan field development and multiple cash payments on various approvals.

Buchan Development Plan Overview

The Buchan field will be developed through up to five subsea production wells and two water injection wells, connected to the “Western Isles” FPSO. The FPSO will be modified for potential connection to future floating wind power developments, aligning with innovative and eco-friendly energy solutions.

The total capital expenditure for the Buchan redevelopment is estimated at approximately £850-950 million, covering over 70 million barrels of oil equivalent. JOG’s share of this expenditure will be fully carried by NEO and Serica, streamlining the route to monetizing the GBA resources.

CEO’s Statement

Andrew Benitz, CEO of Jersey Oil & Gas, expressed enthusiasm about the deal, highlighting its value creation and the transformational impact on JOG. He emphasized the strategic significance of this collaboration for long-term shareholder value and the company’s growth in the oil and gas sector.

This deal not only underscores the evolving dynamics in the North Sea oil and gas industry but also exemplifies strategic collaborations aiming for sustainable and profitable energy development.

  Andrew Benitz, Greater Buchan Area, Jersey Oil & Gas, North Sea, Serica Energy, Serica Energy UK