Hi All
Jersey Gas and Oil presented on a proactive webinar this evening – here is their presentation:
https://wp-jerseyoilandgas-2020.s3.eu-w ... ebsite.pdfIt was an upbeat affair
It was highlighted that they had increased their portfolio in the Greater Buchanan Area by 40x through – licence awards, exploration and acquisitions.
They have completed their concept design (stressing thousands of hours of work) and have moved onto the front end engineering design (FEED) to be completed by Q3 this year.
A recent oversubscribed fund raising/ book building exercise at 1.65p has added £15m to their balance sheet and this will:
1. Add power to their arm in farm-in negotiations.
2. Means that they can maintain momentum progressing FEED
They plan a low carbon (electric) platform at the centre with the capacity to act as a hub to the wider area. Stressing these ESG credentials.
Both gas and oil export routes are well established for the area.
They have run up to date modelling built on well established historic data and then extrapolating forward. The Buchanan Oil Field has a long history of successful production before being abandoned when the platform finally gave out.
They predict 172mm/boe 2C recoverable resources and at peak production costing less than $10/boe.
The upfront costs (£1billion is their estimate) will be covered in 3-4 years by the free cash flow.
They are currently active in looking for a partner suggesting that this will take 4-8 months. And this would:
1. Bring major funding
2. Give industry validation to the project
First oil is predicted at the end of 2025.
They also suggested that successful exploration at Wengen would significantly add to the economics with pre-tax cash flow of $3.3 bn.
All very positive.
Less positive has been the pre-raise leak of information dropping the share price from 230p to 160p. Without this the raise could have been at a higher price and hurt current shareholders less.
Their comments on this were that they did not know who was responsible but were investigating.
Apart from the affects of the leak market sentiment is with them and the share price has already bounced back to over 180p.
As I have said before this is an expensive project, in a world where oil will be replaced largely by renewables in the future, though perhaps not for a number of years.
They need a partner with deep pockets and have given themselves a timeline of 8 months or less.
If they achieve this it will be a major milestone and the share price will reflect this.
I suspect they won’t manage this in the time-frame they have set.
There will also be inevitable delays and extra costs – projects of this kind never run to schedule with management always being too optimistic.
I reduced my holding in JOG by 2/3rds recently and have been debating what to do with my residual shares.
Positive sentiment, management confidence, a progressing farm-out process and share price momentum means I will hang on in for the moment while looking for a better exit price probably before the 8 months is up.
Regards
Iron