Jersey Oil and Gas has completed its £133 million farm-out deal for one of the UK North Sea’s biggest potential new oil and gas developments.
Neo Energy is joining London-listed Jersey as a partner in the project.
Both companies now hold a 50% interest in the licences that together make up the Greater Buchan Area (GBA), with London-based Neo poised to become operator.
The new partnership for the Moray Firth assets was agreed by private equity-backed Neo, the fifth-largest producer in the UK North Sea, earlier this year.
Done deal boosts Jersey’s shares
Jersey sold a 50% working interest in Buchan in return for up to £26.5m in cash, £9.8m to take the project through to sanction and 12.5% of the total capped development costs.
First phase development costs to first oil are likely to come in at up to £782m.
Studies to find a suitable solution for redeveloping the area are well advanced, Jersey said, adding an update on this would be made shortly.
The company’s shares rose several per cent following today’s announcement.
Our attention now turns to unlocking further value by securing an additional GBA partner.”
Andrew Benitez, Jersey Oil and Gas
Jersey chief executive Andrew Benitz said: “We are delighted to have completed the farm-out transaction and to be swiftly moving forwards with finalisation of the GBA development solution.
“With the route and the funding secured for preparation of the Buchan field development plan, our attention now turns to unlocking further value by securing an additional GBA partner.”
Mr Benitz also said Jersey aimed to retain a 20-25% stake in GBA’s development.
Oil firms target 162 million barrels
The assets include the Buchan oilfield and Verbier discoveries. The area boasts potentially recoverable resources estimated at 162 million barrels of oil equivalent.
This makes it one of the biggest potential new developments in the UK North Sea.
Buchan previously came on stream in 1981, but production stopped in 2017. Its Alpha platform was deemed unsafe and had to be removed by Repsol Sinopec Resources UK, the operator at the time.
Jersey has been working on plans for the area for several years, but extended its development timeline in late 2021 to allow for further studies on electrification.
First oil is targeted for 2026, with Jersey planning to use existing infrastructure to export the crude.
Neo’s growing matrix
Neo, backed by Norwegian private equity firm HitecVision, has built itself up through merger and acquisition deals in recent years. It is now one of the UK North Sea’s biggest producers.
Earlier this year the firm unveiled oil and gas industry veteran Paul Harris as its new chief executive. Mr Harris, a former president at Nexen Petroleum USA, replaced dealmaker Russ Alton in the top job.