WTI (Jan)* $77.10 -67c, Brent (Jan) $81.96 -49c, Diff -$4.86 +18c
USNG (Dec) $2.90 +5c, UKNG (Dec) 116.89 +3.89p, TTF (Dec) €46.15 +€1.59
*WTI December contract expired on Tuesday

Oil price

Yesterday the oil price was OK until the announcement of the delay in the Opec meeting, now moved from this Sunday until next Thursday. Whether an agreement is likely is uncertain, the KSA will roll over the deal and maybe so will Russia but as for Nigeria and Angola the jury is still out.

The inventory figures, out early due to Thanksgiving were poor, a build of 8.7m barrels of crude and a small build in gasoline stocks hid a fall in retail demand. Better was the draw of 1,018,000 in distillates.

Jersey Oil & Gas- Fully cashed and carried 

Jersey Oil & Gas has announced that it has agreed to farm-out a 30% interest in the Greater Buchan Area licences to Serica Energy (UK) Limited.  Upon completion of the Serica Farm-out, JOG will have a 20% interest in the GBA licences and a full carry on the capital expenditure required to bring the Buchan field into production.

Highlights:

• Fully Funded: The transaction delivers material value to JOG and results in the Company having a fully funded 20% interest in the on-going Buchan redevelopment project
• Strong industry partner: Serica is a leading mid-tier UK oil and gas company producing more than 40,000 barrels of oil equivalent per day, further strengthening the quality of the GBA joint venture
• Milestone payments: $18 million of the $38 million cash payments attributable to the two GBA farm-outs will have been received upon completion of the Serica transaction
• Value creation: Clear path to development sanction and first oil, with JOG's fully funded position meaning the Company is underpinned by exposure to zero-capex flowing barrels
• Future cash generation: Once onstream, JOG will be a non-operated partner entitled to 20% of production from the Buchan field
• Low carbon development: redeployment of an existing floating production, storage and offloading ("FPSO") vessel that is planned for future connection to a nearby floating wind power development makes the Buchan redevelopment solution the option with the lowest full-cycle carbon footprint

Transaction Summary

The farm-out transaction with Serica is on identical pro-rata terms to that previously completed with NEO Energy ("NEO") earlier in the year.  In aggregate, the two transactions result in JOG retaining a 20% interest in the GBA licences, a full carry on the capital expenditure required to bring the Buchan field into production and a number of milestone cash payments.  Upon completion of the Serica Farm-out, the combined cash payments received from the two farm-outs will be over $18 million, with a further $20 million due to be paid to JOG at Buchan Field Development Plan ("FDP") approval.

In exchange for entering into definitive agreements to divest a 30% working interest in the GBA licences, the Company is set to receive from Serica:

• 7.5% carry of the estimated $25 million cost to take the Buchan field through to FDP approval
• 7.5% carry of the Buchan field development costs, up to the budget included in the approved FDP; equivalent to a 1.25 carry ratio
• $6.8 million cash payment on completion, which includes a $5.6 million payment associated with the finalisation of the GBA development solution and associated acquisition of the "Western Isles" FPSO
• $7.5 million cash payment on approval of the Buchan FDP by the NSTA
• $3 million cash payments on each FDP approval by the NSTA in respect of the J2 and Verbier oil discoveries

The primary condition precedent to completing the Serica Farm-out is receipt of approval from the NSTA for the transaction.

Buchan Development Plan

Following the recent announcement regarding the acquisition of the "Western Isles" FPSO, all the main components of the Buchan redevelopment plan have now been defined.  The field is to be produced through the use of up to five subsea production wells, supported by two water injection wells.  These will be tied back to the FPSO, which will be modified to be "electrification-ready" prior to redeployment to the field.  This will enable the vessel to have the potential to be connected to one of the anticipated third-party floating wind power developments that are intended to be located in close proximity to the GBA following the recent Innovation and Targeted Oil & Gas ("INTOG") licence awards made by Crown Estate Scotland.

Work is progressing on the Front End Engineering and Design ("FEED") studies that require completion ahead of FDP approval and the development moving into the execution phase of activities.  The total capital expenditure forecast for the Buchan redevelopment is estimated by the Operator, NEO, to be approximately £850-950 million (gross cost) to bring into production over 70 million barrels of oil equivalent (95% oil), with peak production rates of approximately 35,000 barrels of oil equivalent per day.  This estimate will be refined as part of completing FEED and the contract tendering activities that precede finalisation of the FDP.  As a result of the farm-out transactions, the Company's share of the capital expenditure included in the approved FDP work programme and budget will be fully carried by NEO and Serica.  The transactions unlock the route to monetising total estimated GBA resources in excess of 100 million barrels of oil equivalent.

Approval of the Buchan FDP is scheduled for 2024, with first production forecast for late 2026.  Following the start-up of production from Buchan, subsequent phases are expected to involve the tie-back of the Verbier and J2 discoveries that lie within the GBA licence area and the potential for regional third-party discoveries to be tied back to the FPSO.

Andrew Benitz, CEO of Jersey Oil & Gas, commented:
"We are thoroughly delighted to announce the farm-out transaction with Serica Energy.  Not only does it bring a further high-quality partner into the joint venture, but it unlocks exceptional value for the Company and delivers upon our overall objectives for the GBA farm-out strategy.  The transaction provides JOG with multiple cash payments, but most importantly, a fully funded 20% working interest in the Buchan redevelopment project, transforming the Company and providing us with the springboard from which to realise long term shareholder value."

This is a truly awesome deal by JOG who continue to deliver on its promises to shareholders whilst maintaining the intense focus on proving that substantial developments in mature oil provinces can be closer to net zero than almost anywhere else worldwide. It will leave them with a 20% non-operated stake in the GBA, a development that others now share their faith in and a great deal of incoming cash. 

In my conversation this morning with Andrew Benitz it was impossible not to detect considerable pride in the trust and perseverance of his team who have negotiated a deal which is a rare thing, a genuine win-win for not only JOG but also for NEO and of course Serica. With some $38m due to come in by the time of the FDP, JOG get a fantastic return on their investment but also for their partners this is a genuinely significant tax efficient investment opportunity. 

For JOG shareholders the time has come to stop worrying and to enjoy the ride, they have great value to unlock thanks to this deal, with FDP next year and first oil in late 2026 they have protected any downside and opened up the upside and of course are in an enviable financial position with material value yet to come.

I have been a consistent believer both in JOG and of the GBA, today might be the crystallisation of all those notes and suggested values so it will come as no surprise that I genuinely believe that my Target Price, previously believed to be somewhat absurd at £10 per share to be easily achievable, I remain a big fan of JOG, its management team and of course the GBA.

Serica

Serica has announced the execution of agreements for the acquisition by its wholly owned subsidiary, Serica Energy (UK) Limited, of 30% non-operated interests in the P2498 and P2170 licences from Jersey Oil & Gas. Completion is subject to regulatory, partner and interested party approvals and is expected to occur early in 2024. Following completion, the partners in the GBA will be Serica Energy (UK) Limited (30%), NEO Energy (50% and operator) and JOG (20%).

As a result of the Transaction, Serica will have the option of participating in the re-development of the Buchan field and other potential developments in the GBA.    

Greater Buchan Area
The GBA encompasses several oil and gas accumulations some 150 km north-east of Aberdeen, in the Outer Moray Firth. The largest of these accumulations is the Buchan field which produced for over thirty years, ceasing production in 2017 owing to the end of the useable life of the floating production facility. The Concept Select Report submitted to the NSTA for the re-development of Buchan is based on a new production hub located at the Buchan field utilising the floating production, storage and offloading vessel currently operating on the UK Western Isles fields and planned to come off-station in the second half of 2024. The acquisition of the FPSO by NEO on behalf of the participants in the Buchan joint venture was announced on 17 November 2023.

A phased development is envisaged involving the re-development of the Buchan field in Phase 1 and the possible development of the J2 and Verbier discoveries in Phase 2. Mid-case contingent resources from the Buchan field alone are estimated to be in region of 70 million barrels of oil equivalent, making it the third largest pre-development field in the UKCS. There are other discoveries and prospects in close proximity which might provide additional tie-back opportunities to the FPSO. 

The NSTA has issued a no objection letter following the submission of the Concept Select Report in support of the Buchan re-development programme. A proposed Field Development Plan for Buchan is expected to be submitted to the NSTA shortly, with approval of the FDP potentially in the second half of 2024.

The development concept includes limited works on the FPSO in order to prepare it for re-deployment. These works involve the installation of water injection booster pumps, produced water injection modifications and preparation of the vessel for future electrification.  Following the recent Innovation and Targeted Oil & Gas (“INTOG”) licence awards, there is the possibility of third-party floating wind power developments located close to the GBA. It is anticipated that the FPSO will be connected to one of these, should they become available. Oil export is planned to be via shuttle tankers.

Subject to project sanction and regulatory approval, the target for first production is late 2026. Peak production rates are expected to be around 35,000 barrels per day. Gross development costs are estimated to be in the order of £850-950 million, which under the current fiscal terms, are expected to qualify for tax relief at a rate of approximately 91%.

Transaction Summary
The Transaction is structured as a farm-in, with modest up-front and contingent consideration payments, and a carry of pre-Financial Investment Decision (“FID”) and development costs.

In return for a 30% working interest in the GBA licences, on completion Serica will make a cash payment to JOG of US$ 6.8 million subject to the adjustments between buyer and seller to reflect an economic date for the transaction of 1 April 2023.

Serica is not committed under the terms of the Transaction to participate in the GBA developments. In the event of participation at each relevant stage, Serica will make further payments to JOG as follows:

• US$7.5 million on approval of the Buchan FDP by the NSTA.
• A 7.5% carry of the Buchan field pre-FID and development costs (paying 37.5% for a 30% working interest). The development cost carry is capped at 7.5% of the budget approved by the Buchan Joint Venture for the development of the Buchan field at the time of the FDP. Subject to the cap, the development cost carry equates to a 1.25 carry ratio for development costs; the same as the arrangement agreed between JOG and NEO Energy earlier this year.
• US$3 million on approval by the NSTA of a J2 FDP.
• US$3 million on approval by the NSTA of a Verbier FDP.

Mitch Flegg, Chief Executive of Serica commented:
“We are delighted with this transaction which gives Serica a significant interest in the proposed Greater Buchan Area project, potentially adding a third production hub and further resilience to Serica’s North Sea portfolio. In common with our other hubs, the GBA plan involves utilising existing infrastructure – in this case an FPSO – with the possibility of exploiting multiple accumulations in the area. Moreover, the development has been designed to deliver an industry-leading low level of carbon emissions, consistent with Serica’s objective of reducing the overall carbon intensity of its activities.

The transaction demonstrates the benefits of Serica’s strong balance sheet. Our financial strength enables us to take advantage of suitable opportunities to expand the portfolio and we will continue to take a very proactive approach to business development, while also investing in our existing portfolio and paying dividends to shareholders. The transaction is structured such that most of the consideration payable by Serica is contingent and linked to making progress in the project.

Our participation will also be financially efficient with Serica benefiting from tax reliefs on its investment.

We congratulate Jersey Oil & Gas for having created and progressed the GBA project before recently transferring operatorship to NEO Energy. We look forward to working with them and NEO, including the latter’s experienced and well-respected project team.”

Having said extensively above that this is a good deal for both sides I can hardly add much to what I have already said. Serica has availed itself of 30% of the mid-case contingent resources from the Buchan field which alone are estimated to be in region of 70 million barrels of oil equivalent, making it the third largest pre-development field in the UKCS.

It is also worth bearing in mind that the figure above does not include potential upside from either J2 or Verbier which will likely add to the development via a tie-back to the FPSO. Serica along with NEO and JOG are set to make GBA an outstanding part of the portfolio in a tax efficient way and as already mentioned at the forefront of the reduction of carbon in the North Sea.

Longboat Energy

Longboat Energy, an emerging full-cycle E&P company active in Norway and Malaysia, is pleased to provide the following operational update.

Statfjord satellites acquisition

Highlights:  

• The fourth of five new infill wells in Statfjord Øst has now been successfully drilled.
• Overall, project execution is on track with the Statfjord Øst and Sygna fields expected to be fully on stream from all wells early in the new year.
• The transaction is progressing towards completion, which is expected in in January.

On 3 July 2023, Longboat announced that it had signed a sale and purchase agreement with INPEX Idemitsu to acquire a 9.60% interest in PL 089, equating to a 4.80% unitised interest in the Statfjord Øst Unit and a 4.32% unitised interest in the Sygna Unit, for cash consideration of US$12.75 million.

Statfjord Øst is located seven kilometres to the northeast of the Statfjord field in a maximum water depth of 190 metres and produces oil and gas from two subsea production templates and one water injection template tied-back to the Statfjord C platform. The Norwegian Ministry of Petroleum and Energy approved a redevelopment plan in 2021 to drill five new production wells into potentially undrained areas of the field while also adding gas-lift to increase production levels.

Initial production for 2023 is estimated to be around 250 boepd net to Longboat JAPEX, which is slightly lower than anticipated mainly due to a delay in bringing the new wells on stream. Production is expected to increase significantly early in 2024 when all wells will be brought on stream. Gas-lift installation is completed.

The Statfjord Øst Unit partners are Equinor Energy AS (43.25%, op), Petoro AS (30.00%), Vår Energi ASA (20.55%), INPEX Idemitsu Norge AS (4.80%) and Wintershall Dea Norge AS (1.40%). The Sygna Unit partners are Equinor Energy AS (43.425%, op), Petoro AS (30.00%), Vår Energi ASA (20.995%), INPEX Idemitsu Norge AS (4.32%) and Wintershall Dea Norge AS (1.26%).

Business Development Update
Longboat remains strategically focused on delivering value-accretive M&A opportunities across both of its key regions of Norway and South East Asia. It  is actively pursuing numerous growth opportunities, which span from near-term, short-cycle developments through to current production – many with a gas-weighting.

Following the acquisition of privately held Topaz Number One Limited and the addition of James Menzies and Pierre Eliet to the Longboat organisation, as announced 13 September, the Company now has a Business Development Team for SE Asia with a proven track record, depth of knowledge and excellent relationships across the region.  

Longboat also remains focused on delivering acquisitions using innovative financing structures, such as it did in the Longboat JAPEX joint venture, which seek to minimize shareholder dilution.

Corporate Presentation
A new corporate presentation can be found on the Company’s website (www.longboatenergy.com) setting out the strategic vision for the business as it enters a major growth phase.

Longboat will also be hosting an Investor Meet Company presentation at 10:00 GMT Tuesday 28 November 2023. If you wish to attend the online presentation you should register for the event in advance via this link: https://www.investormeetcompany.com/longboat-energy-plc/register-investor

Attendees registered to attend are invited to pre-submit questions online via the Investor Meet Company dashboard up until 9.00am BST on Tuesday 28 September 2023 or at any time during the live presentation. A recording will be made available on the Investor Meet Company platform after the presentation.

Helge Hammer, Chief Executive of Longboat, commented:
“We completed an outstanding milestone transaction with JAPEX to form our new JV in Norway. The JV in Stavanger is now fully up and running and in prime position to pursue and deliver on our plans to grow production and reserves in high quality assets in Norway.

“The timing of our entry into the SE Asia region has been excellent given the exceptionally active M&A market. We are excited about the many and varied opportunities available to us and with our highly experienced team and excellent relationships. We are confident that we will deliver considerable growth and create substantial shareholder value in the period ahead.”

Good but not new news here from Longboat and Statfjord is set to continue to deliver the high quality assets in Norway.

United Oil & Gas

United Oil & Gas has issued the following Corporate and Jamaica update.

Corporate Update
The Company is pleased to announce that Simon Brett has been appointed Interim Chief Financial Officer (non board appointment) and Company Secretary, effective immediately. Simon brings a wealth of sectoral and public market experience having worked fourteen years in Barryroe Offshore Energy plc  in a senior executive position and latterly ten years as CFO. Before Barryroe, Simon held senior finance positions with Coca Cola Bottlers Ireland Limited, USC Europe Limited and Sega Europe Limited. The Company has commenced a selection process for a permanent CFO with a permanent appointment to be made in due course. Peter Dunne will step down from the Board on 15th December and will leave the Company effective 31st December in order to take up the position of Chief Financial Officer of daa plc, as previously announced.

Jamaica Update
Further to the announcement of 9th November, the Company has been informed by the counterparty that had been identified as a preferred potential partner, that they no longer wish to pursue further discussions in relation to participation in the Walton Morant Licence. The Company will now focus on the recent positive interest that has been shown by other parties in potentially participating in this high impact exploration opportunity and United and our advisors will continue in our efforts to secure a partner. The Board believes that the renewed interest in exploration opportunities worldwide which is being driven by the strong future demand for oil and gas, will support our farmout efforts.

The Company continues to engage with the Jamaican authorities to secure an extension to the current licence period which expires at the end of January 2024, with a negotiated work programme that comprises additional technical work that would further de-risk the licence prior to the drilling of the exploration well. This work is aimed at materially enhancing the risked value of the Company’s interest in the Licence. Additional updates on both the farmout process and licence extension will be provided in due course. 

United Chief Executive Officer, Brian Larkin commented:
“Although the potential partner that we had been in discussions with for a number of months has taken the decision to withdraw from the process at this time, we remain committed to delivering value from this potentially high impact exploration opportunity. Our efforts are now firmly focussed on the other parties that we have engaged positively with through our process with a view to securing a partner for United to take this project forward, in parallel to securing an extension to the current phase the licence.”

I welcome the interim appointment of Simon as CFO to the company. His appointment provides the company with the expertise and knowledge over the coming months whilst we carry out a rigorous selection process for this critical executive position.”

Nothing much to add here except to say that UOG needs to get that licence extension from the Jamaican authorities pdq.

KeyFacts Energy Industry Directory: Malcy's Blog