Proactive Investors - Jersey Oil and Gas PLC (LON:JOG) said it has partnered with one of the largest North Sea operators to exploit the potential of one of its licences in a deal that analysts say could ultimately be worth US$170mln.
NEO Energy will receive a 50% interest in the Greater Buchan Area (GBA), offshore northern Scotland, under the terms of the ‘farm-out’ agreement.
The transaction delivers “material value”, JOG told investors, including cash payments, and funding through to field development plan (FDP) approval.
A total of US$28.9mln of staged payments were outlined in the update. However, there are also the capital costs likely to be shouldered by NEO, which are substantial.
With this in mind, analysts suggest the real deal value is closer to US$170mln when the 'carry' on the field development is factored in. And of course, JOG still has a 37.5% holding in GBA that it can 'farm-down', the number crunchers noted.
“The farm-out marks a major value creation moment for JOG, 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 the group’s chief executive, Andrew Benitz in a statement.
“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," he added.
NEO, a North Sea operator producing 90,000 barrels of oil equivalent per day, is backed by private equity group HitecVision, which has US$8bn assets under management.
The Greater Buchan Area, 120 miles northeast of Aberdeen, is estimated to be host to a resource of at least 100mln barrels of oil equivalent.
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