New UK operator taking the helm at North Sea oil project

UK-headquartered Jersey Oil & Gas plc has completed the farm-out deal for a partial stake in an asset on the UK Continental Shelf (UKCS) to the HitecVision-backed NEO Energy. As a result, the latter will become the new operator of this oil project.

This comes weeks after Jersey received approval from the North Sea Transition Authority (NSTA) for the sale of a 50 per cent working interest in both licence P2498 and licence P2170 to NEO Energy, as part of the Greater Buchan Area (GBA) farm-out transaction, which was disclosed in March 2023.

Located in the Central North Sea, the GBA project covers blocks that contain the Buchan oil field and J2 oil discovery along with the P2170 Licence Blocks 20/5b & 21/1d, which include the Verbier oil discovery and other exploration prospects.

In exchange for entering into the agreements to divest half of its working interest and operatorship in the GBA licences to NEO, Jersey has received a $2 million cash payment on completion of the transaction and will get a full carry for its 50 per cent share of the estimated $25 million cost to take the Buchan field through to the FDP approval.

In addition, the company will receive a $9.4 million cash payment upon finalisation of the GBA development solution; a $12.5 million cash payment on approval of the Buchan FDP by the NSTA; a 12.5 per cent carry of the Buchan field development costs included in the FDP approved by the NSTA, equivalent to a 1.25 carry ratio; and a $5 million cash payment on each FDP approval by the NSTA in respect of the J2 and Verbier oil discoveries.

While confirming the completion of the farm-out deal with NEO Energy, Jersey Oil & Gas reported that the GBA partners were in an advanced stage of the Buchan re-development solution selection. The company expects to be able to provide an update on this shortly.

Andrew Benitz, CEO of Jersey Oil & Gas, commented: “We are delighted to have completed the farm-out transaction and to be swiftly moving forwards with the finalisation of the GBA development solution. With the route and the funding secured for the preparation of the Buchan field development plan, our attention now turns to unlocking further value by securing an additional GBA partner ahead of FDP approval and retaining a fully carried 20-25 per cent interest in the development programme.”

The NSTA approved an extension to the second term of the P2498 Buchan licence, which is now valid until 28 February 2025. This extension gives the licensees more time to prepare a field development plan for the redevelopment of the Buchan field, which is planned for submission to the NSTA in 2024. 

The total GBA acreage is estimated to contain 172 million barrels of oil equivalent (MMboe) of discovered P50 recoverable resources net in addition to the significant exploration upside potential of approximately 168 MMboe of prospective resources close to the firm’s planned Buchan platform.