Massive news today with the award of new licenses in the 31st SLR.
Massively undervalued now…
Massive news today with the award of new licenses in the 31st SLR.
Massively undervalued now…
Cash 13m GBP
Tax losses carried forward 25m GBP
Cash plus tax losses carried forward = 38m GBP
Current market cap 23m GBP
Current market cap below cash plus tax losses carried forward…
Current oil of 104.5MMBO proven valued at… minus 15m GBP…
…Jersey Oil and Gas also intends to leverage the £25m of tax losses gained by the company through the Reverse Take Over of Trap Oil in August 2015, through the successful acquisition of UK North Sea production assets…
A good read from Simon Thompson…
Director buys now…one director buying 50K GBP worth of stock. This is still massively undervalued.
Will be subject to a cheap takeover bid if it does not rise above 450p levels in the coming weeks and months.
IC Recap on the JOG news:
Jersey gushes higher on transformational licensing award
by Simon Thompson
(JOG:137p), a UK North Sea-focused upstream oil and gas company that owns an 18 per cent interest in the P2170 licence (Blocks 20/5b & 21/1d), Outer Moray Firth, which contains the Verbier oil discovery, has been awarded three blocks in UK Oil & Gas Authority’s 31st Supplementary Offshore Licensing Round. I anticipated this would happen when I reiterated my buy stance, at 63p, a couple of months ago(‘Share price catalysts on Jersey’s horizon’, 20 May 2019). Jersey’s share price has surged by 86 per cent on today’s licensing awards.
That’s because it is a transformational development for the company and one that has prompted analyst Daniel Slater at house broker Arden Partners to almost double his target price from 230p to 450p based on a risked net asset value (NAV) estimate of 537p a share, using a US$65 a barrel long-term oil price. That’s because the acreage awarded to Jersey in the licensing round includes the Buchan oil field that was discovered by BP in the mid-1970s and came onstream in 1981. Production continued until May 2017, when the Buchan Alpha platform was no longer compliant with the current Safety Case, by which point a total of 148m barrels had been produced.
Buchan oil is a light 33.5° API oil with a low gas-oil ratio (GOR) GOR (285 scf/bbl), a term that quantifies the amount of gas dissolved in the oil. Jersey estimates that over 80m barrels of recoverable oil volumes remain to be produced from the field. The field was not developed by previous owner, Repsol Sinopec, but is development ready.
In addition, Jersey has been awarded 100 per cent working interests and ownership of Buchan Andrew, an undeveloped discovery above the main Devonian Buchan reservoir, and J2 Sgiath, an undeveloped discovery. These discoveries are estimated to have unrisked gross recoverable mean resources of 20m and 3m barrels, respectively, according to Jersey management and independent work completed by Rockflow Resources on behalf of the company.
And here’s the really smart part of today’s announcement. Jersey has entered into a three month option agreement under which Equinor, the is operator of Verbier, has been granted an option over a 50 per cent equity interest in respect of the two blocks containing the Buchan oil field and J2 oil discovery. Should the option be exercised, Jersey will act as licence operator and Equinor will reimburse the company for its 50 per cent share of costs in relation to the licence applications.
The plan is to submit a field development plan (FDP) to encompass initial redevelopment of Buchan (including new wells), followed by a tie-in with the nearby J2 discovery and Verbier. Subject to funding, first oil is targeted for 2024 and Jersey’s current net cash position of £15m (Arden estimate) should fund it through the FDP process depending on any further drilling that may occur on P2170.
The point being that prior to these three awards, Jersey’s net share of the Verbier discovery was estimated at 4.5m barrels of oil equivalent (boe). Today’s awards add an estimated 105m boe of discovered resources net to Jersey, making this “the most significant event for the company since its inception”, says chief executive Andrew Benitz. I completely agree.
Furthermore, Jersey’s interests in other blocks in the Greater Buchan Area hold in excess of 300m barrels of oil equivalent (boe) mean prospective resources. These include Jersey’s nearby Cortina prospect on the P2170 licence which has a minimum resource of 39m boe and a risked NAV of $25m (85p a share) based on Arden’s analysis.
Importantly, Jersey’s management maintain their view that that Verbier is commercially viable at the lower end of the initial resource estimate of 25m to 130m barrels of oil equivalent (boe). Today’s licensing awards mean that progression of the Buchan development is likely to be highly supportive of the development of Verbier too, a field that Mr Slater at Arden attributes a risked value of $37m (125p a share) in his aforementioned risked NAV estimate of 537p (unrisked NAV estimate of 1,231p a share).
In other words, although Jersey’s oil price surged this morning, the value in Verbier, Cortina and all the other Buchan oil fields are effectively in the price of just 69p a share given that Jersey’s net cash pile is estimated to be 68p a share.
True, Jersey’s share price has been volatile this year and is stillthe laggard in my market beating 2019 Bargain Share Portfolio. However, the investment risk looks heavily skewed to the upside given the likelihood of a raft of positive news flow emerging in the next six months as the company makes progress on commercialising its acreage. That’s because Equinor can be expected to exercise its option on the Buchan Blocks before the end of October, thus improving the chances that the fields will be developed; a new competent person’s report should be filed in the fourth quarter this year; and we can expect a decision on the 2020 work programme onthe P2170 licence (Blocks 20/5b & 21/1d), Outer Moray Firth, before the year-end, too.
All of these announcements have potential to materially lower Jersey’s unwarranted 74 per cent share price discount to analysts’ risked NAV estimates.
…BP discovered Buchan the mid-1970s and production started in 1981, continuing until May 2017 when the Buchan Alpha platform no longer complied with the current Safety Case. By that point 148 MMbbl had been produced.
Buchan has light 33.5° API oil with a low gas-oil ratio of (285 cf/bbl), and an estimated 80 MMbbl-plus could still be produced, according to Jersey’s estimate…
The current Market Cap (35m) is below Cash (13m) and Tax Losses Carried forward to use against future production(25m) totaling 38m GBP.
Therefore we are below Cash and TL…and all the 104.5MMBO of proven oil is in the price for nothing.
So the share price could double again today, and it will still be undervalued significantly. Thats how cheap it was and still is.
Another director buy, this time at 185.5p levels.
They know, as we all do, this is massively undervalued based on that now they own 100% of 104.5MMBO recoverable proven oil.
Need to churn the weak holders out and allow profit taking before the next let upwards in the share price happens.
A good summary post on LSE by dickupham which is worth posting here.
I’ll try to explain again why JOG’s present SP is an aberration. Feel free to comment on my logic.
When the Verbier appraisal well was being drilled and JOG’s SP was 240p (which was felt by many to be too low given it had c.5m barrels of confirmed reserves in Verbier, the Cortina prospect and a load of cash) it was generally thought that on the appraisal drill being successful and Verbier oil showing up near the top estimate of 130m barrels - 23m barrels to JOG including the 5m already confirmed - JOG’s SP would increase to somewhere between £5 and £8.
When the appraisal showed no more oil than JOG presently held (still holds), the share price was trashed down to 70p or thereabouts, giving a total value of the Company of less than the cash it had in the bank. Utterly daft .
JOG has recently been awarded 100m barrels + of top quality oil in Buchan and J2, without having to do any exploring. Most of this oil is known to flow, because it WAS doing until as recently as late 2017. The oil won’t have run away. Furthermore, there is already some useful infrastructure in place that will reduce the cost of getting back to production and shorten the timescale. No doubt JOG (and probably Equinor) will be giving considerable thought as to how to maximise what has come their way at no cost to them so far.
So today, with 110m barrels of top quality oil (apv33) JOG’s SP hasn’t even recovered to the level it was at when it only owned 4.5m barrels in Verbier.
Discovered oil in the North Sea has recently been changing hands at prices per barrel of between $7 and 15$ per barrel. Buchan is at the heart of the GBA and it offers enormous potential not only for the future delivery of hundreds of millions of barrels more than has been discovered (and flowed). It can also act as a ‘hub’ for nearby producing fields to tie into for onward tie in to the Forties pipeline, which makes Verbier and Cortina even more viable: https://www.energyvoice.com/oilandgas/north-sea/193585/ineos-to-pump-500m-investment-into-forties-pipeline/.
Work can immediately start of a field development plan that sets out exactly how the field will operate. JOG might not need to take things beyond that as, by then, it will be a very attractive proposition indeed. Both main directors have significant holdings and the one thing no-one says on their deathbed is: “I wish I’d worked for longer”.
Mr Market thinks JOG is worth less than it was before any of this happened. Good for Mr Market.
If you didn’t think Mr Market was born without a brain, you do now. Mr M comprises a whole lot of desperate for money dimwits who don’t know their proverbials from their elbows, are fixated only on ‘price’, have no interest in value and wouldn’t know what it was if it jumped up and bit them.
JOG is ‘worth’ the min price its oil would fetch on a sale (post 50% to Equinor). $275m - c.£10 ps.
Price is about supply and demand. The supply will stop as the reality sinks in.
My targets are :
3D seismic news in August. This propels JOG into the 250+ area.
Deal with Equinor in September. This propels JOG into the 325+ area.
CPR in December. This propels JOG into the 400+ area.
Just need to be patient and those who are are going to be richly rewarded imo.
I think when AB said there are “multiple catalysts” in the remainder of 2019, it means we are going to get lots of news flow…this from the results statement.
Andrew Benitz, CEO of Jersey Oil & Gas, commented:
"JOG continues to benefit from our initial Verbier oil discovery announced in 2017, notwithstanding the recent appraisal well results. We look forward to delivery of the new 3D seismic data and working with our co-venturers on assessing potential future appraisal and exploration drilling opportunities on the licence area. Additionally, we are excited by the potential for a new area hub catalysed by the 31st Supplementary Offshore Licensing Round and the positive impact we believe this will have for Verbier.
"The Company benefits from a strong funding position and we are optimistic that we can create value for shareholders through our core asset base, with multiple catalysts that exist for the Company through the remainder of 2019."
Worth re-reading these articles discussing the Greater Buchan Area when it was up for grabs. This is the exciting opportunity which can be put into production with tie backs to existing pipelines…which JOG was awarded.
I largely agree with everything you say, Pro_S. One point I would make, however, is that the cash value of the losses is the tax rate that applies when the losses are used to reduce future taxes. At present the tax rate in the UK for oilcos is 30%, so £25m of losses are worth £7.5m, not the gross figure of £25m.
JOG’s SP is so far below what anyone with any ability to understand fundamentals would say it should be that what the tax losses are worth is immaterial.
imo JOG is only at the starting line.
Write up on JOG. PDF file in the link below.
Some useful links re-posted :
OGA announcement and links to GBA downloads:
PGS announcing they have good 3D over the whole GBA and its available:
Wood-Mac write up on the GBA potential pre-award:
AC write up of JOG post GBA award:
Simon Thompson (IC) write up on JOG early July:
29th July further comment by ST at the Investors Chronicle:
Just to give some figures for reference.
The House Broker believes :
Current cash level is 15m GBP.
JOG to end 2019 with 10m GBP cash.
Unrisked NAV is 2462 pence per share - reducing to 1231 pence per share when Equinor take their 50% (current share price only just over 200 pence per share)
Risked NAV of 1074 pence per share - reducing to 537 pence a share when Equinor take their 50%.
JOG have the funds for the FDP and also a well on p2170 in 2020. Drilling plans for 2020 should be known by end of 2019.
CPR will be coming in Q4 2019.
In effect, what I take, keep on accumulating JOG shares and when Equinor exercise their option in the coming months the share price should move up much closer to the Risked NAV of 537 pence a share post Equinor option.
Q4 will see the CPR released and also drilling plans for 2020 and so Q4 should also see a significant uplift to the Risked NAV from 537p up to ??? and so the share price should rise as well with that.
Basically, anything below 300p should see a decent profit when Equinor take the option in a month or two and should rise further come Q4 and the CPR/drilling plans.
Broker current target price pre-Equinor taking their option is 450p.
If anyone wants to download and read the Arden Partners note on (Jersey Oil and Gas) JOG then you can in the link below:
Another 14 MMBO to JOG.
JOG now has 123.5 MMBO of proven recoverable oil.
(ECO has less than 40MMBO by the way…compare the market caps)
Nice post on LSE… someones summary of JOG. I would agree that ultimately JOG will be 1000p before too many moons pass, it will come in stages and reward those who keep holding and wait :
RE: Time for some simple maths.Today 08:12
I get your gist PC01, but not your maths
I work on a conservative value of $7 per barrel. This is an estimated selling price achievable for discovered resources in the ground pre-infrastructure spend, in an area of the NS that’s close to the Forties Pipeline for tie-back purposes (recent evidence is there to support this price - higher actually).
JOG has 18% of Verbier’s minimum of 25m barrels, which is 4.5mmboe. Add to that the 52.5mmboe (net of likely transfer to Equinor) in Buchan & J2 and this gets us to 57mmboe (ie 57 million barrels of oil equivalent -‘oil’ - in simple terms). Today’s addition takes us to 71mmboe.
71mmboe alone (ignoring the value of hundreds of millions of barrels of prospective resources across JOG’s five contiguous licences) gives us a value of $497m - say $500m. I don’t really see a reason to discount the $7pb but, even if one did, it would still leave a value of the discovered resources alone of $250m - or £200m using a $/£ rate of 1.25.
This is £9.16 per share (I think much higher because I wouldn’t discount my $7pb by 50%). Throw in 84p for the rest of what JOG has (not least extremely talented and committed management and staff) as we’re being ultra conservative - and £12m of cash, plus the prospective resources referred to above, and say £10 a share. I’m doubtful the directors would entertain a bid at that level.
One day the penny will drop
Jersey claims 120m barrel Buchan opportunity after latest block award
by Mark Lammey
23/08/2019, 7:00 am
Jersey Oil and Gas has taken the next step in its mission to amass a major resource base in the outer Moray Firth after clinching the block containing the Glenn discovery.
Block 21/2a is an additional award from the Oil and Gas Authority’s 31st supplementary licensing round, which focused on the Greater Buchan Area.
London-listed Jersey previously announced that it had been handed acreage containing the Buchan and J2 discoveries during that bidding round.
At the time, Jersey described those awards as the “most significant event since its inception”, while the firm’s shares skyrocketed.
The assets are in the same vicinity as licence P2170 containing the Verbier discovery, in which Jersey holds an 18% stake.
Equinor-operated Verbier underwhelmed in April when an exploration well showed the field contained closer to 25 million barrels of oil, not the 130m barrels partners had hoped for.
Jersey said today that the addition of Glenn to its existing Greater Buchan acreage provided an opportunity to develop a major new area capable of producing 120m barrels of oil equivalent net.
Chief executive Andrew Benitz said: “We are delighted to announce this further licence award within the Greater Buchan Area.
“This additional acreage completes a 100% success rate of awards across all of the acreage we applied for in the 31st supplementary offshore licensing round.
“The Glenn oil discovery contained therein adds additional discovered resources net to Jersey as well as operatorship of another discovered resource in the area of our Buchan-centred development hub plans for the GBA.”