Jersey Oil and Gas PLC (LON:JOG)

P2170 BLOCKS 20/5B & 21/1D (VERBIER) – JOG 18%

On the 9th October 2017 JOG announced an oil discovery in the Verbier sidetrack well, 20/05b-13Z drilled in Licence P2170. The well was drilled safely and within budget to the planned total depth of 3811m and a suite of log data had been acquired via Logging While Drilling (“LWD”), including pressure data.

PRELIMINARY ANALYSIS INDICATES

• The well has proven a hydrocarbon accumulation in good quality sands, up dip of the water bearing sands encountered in the initial well
• Evaluation of the well results, together with the existing 3D seismic data is ongoing
• Initial Operator estimates of gross recoverable resources associated with the Verbier discovery are between 25 and 130 million barrels of oil equivalent, with a minimum proven recoverable volume, in the immediate vicinity of the wellbore, of 25 million barrels of oil equivalent

In addition to confirming the presence of oil in the Verbier prospect, this discovery provides valuable information to help better understand the prospectivity of the licence area, which includes the Cortina prospect and the Meribel lead.

BACKGROUND

Blocks 20/5b and 21/1d were awarded as a Traditional Licence in the 28th Licencing Round. The blocks lie approximately 100km northeast of Aberdeen, close to the Buchan and Tweedsmuir North and South oilfields and straddle the western end of the North Buchan Trough.  On licence award, Trap Oil Ltd., a fully owned subsidiary of Jersey Oil and Gas Plc (“JOG”) became Operator with a 60 per cent. working interest of which 10 per cent. was carried by CIECO Exploration & Production (UK) Limited  (“CIECO”) with a 40 per cent working interest. A Drill-or-drop election was required by 30th November 2016.

Prospectivity was identified in the Late Jurassic and the technical studies undertaken since award were focused on seismic reprocessing, remapping and petroleum charge studies. The completed work programme improved the delineation and risking of the identified prospectivity.

Further to a farm out campaign undertaken in the early part of 2016, JOG and CIECO completed, on the 7th October 2016, a sale and purchase agreement (“SPA”) with Statoil (U.K.) Limited (“Statoil”), a leading multinational oil and gas company, for the farm-out of, in aggregate, a 70 per cent. working interest and operatorship in Licence P2170.

In accordance with the terms of the farm-out, JOG received a cash consideration of US$540,000 from Statoil. The balance of the US$1.2 million cash consideration, due to JOG as part of the farm-out agreement, was paid to the Company’s co-venturers in the Athena asset, in accordance with the Company’s historical settlement agreement.

Post completion of the Farm-out, Statoil funded all costs up to US$25 million in respect of the first exploration well.  The Company retained an 18 per cent. interest, of which 10 per cent. continued to be carried by CIECO, pursuant to the pre-existing arrangements between the parties, through the first two wells to be drilled in the Licence, and CIECO retained a 12 per cent. interest.

Subsequently, Statoil confirmed to the OGA that a well to test the Verbier prospect would be drilled in 2017.  Both JOG and CIECO confirmed participation in the well.  A site survey was acquired during October – November 2016 and well planning was completed.

On the 27th March 2017, JOG announced that an independent assessment of resource estimates in relation to Licence P2170, Blocks 20/5b & 21/1d had been completed by ERC Equipoise Ltd (“ERCE”).

Highlights of the CPR

• Mean Prospective Resources attributed to Licence P2170 for the Verbier prospect increased to 162 Million barrels of oil equivalent (“MMboe”) from 118 MMboe and the chance of success increased to 29% from 26%
• Contingent Resources relating to discovery well 20/5a-10Y identified
• Mean Prospective Resources for the Cortina prospect increased to 124 MMboe from 91 MMboe with a chance of success of 19%

On the 4th April 2017 JOG announced that Statoil had awarded a contract to Transocean Drilling UK Limited (“Transocean”) for the semisubmersible rig Transocean Spitsbergen.  The Transocean Spitsbergen rig was scheduled to drill the Verbier prospect as part of a Statoil operated three well drilling programme, with the Verbier well planned to be drilled in summer 2017.

Effective the 14th August 2017 and further to internal restructuring, CIECO changed its name from CIECO Exploration and Production (UK) Limited to CIECO E&P (UK) Limited to CIECO V&C (UK) Limited.

On the 14th August 2017 JOG announced that drilling operations had commenced on the Verbier prospect with the drilling programme including a provision for the drilling of a sidetrack well, dependent on the results of the initial well, which was expected to take up to 70 days.

On the 11th September 2017 JOG announced that the Statoil operated 20/05b-13 exploration well drilled to test the Verbier prospect had been safely drilled, reaching the planned target Total Depth of 4,267m on 10 September 2017. The well encountered water-bearing Upper Jurassic sands, deeper than anticipated. A decision on whether to drill a sidetrack would be taken after evaluation of wireline logs, although at the time JOG considered this to be unlikely.

On the 18th September 2017 JOG announced that, further to the Company’s announcement of 11 September 2017, the wireline log data from the initial exploration well, received late on 12 September 2017, had been evaluated by the P2170 Joint Venture led by the operator Statoil. Indications of the potential for hydrocarbons to be present in a smaller accumulation up dip of the 20/05b-13 Verbier exploration well could not be ruled out. Accordingly, agreement was reached by the P2170 Joint Venture to target this resource with a sidetrack exploration well.

On the 29th January 2018 JOG announced the P2170 Licence Group had approved a work programme and budget for 2018. The approved work programme and budget included the appraisal of the recent Verbier oil discovery and contingent well planning including the acquisition of a site survey to progress exploration activity in the licence area.

JOG also advised that negotiations were advanced with respect to contracting a rig for the Verbier appraisal well programme, with plans for one well and an option for a sidetrack well, to be drilled in late Q3 / early Q4 2018.

JOG further advised the Company’s share of the work programme would be funded from its existing cash reserves. Further to the successful fundraising completed in November 2017, cash balances were estimated to be approximately £25 million as of 31 December 2017.  Capex for 2018 was estimated to be £9 million to £11 million for the Company.

On the 1st March 2018 JOG announced that Statoil had awarded contracts to Seadrill North Atlantic Drilling UK Ltd. and North Atlantic Norway Ltd. for the semi-submersible rig, West Phoenix, to drill a well on the Norwegian Continental Shelf followed by three wells on the UKCS. The West Phoenix rig would drill the Verbier appraisal well, with the possibility for a sidetrack well, as the first of Statoil’s planned UKCS wells, in the summer of 2018. The purpose of the planned appraisal well being to constrain the potential volume range in the discovery.

On the 24th April 2018 JOG announced that the co-venturers in respect of UKCS Licence P2170 (Blocks 20/5b & 21/1d) had committed to pre-fund a 3D seismic survey over the P2170 licence area and certain offset acreage (the “Area of Interest” or “AOI”), which was to be conducted as part of a wider GeoStreamer MultiClient 3D seismic survey by Petroleum Geo-Services ASA (“PGS”) during Q2 2018 in the Moray Firth area. Delivery of the final imaged data by PGS from the survey is expected in late Q1 2019.

The anticipated timing for delivery of the final imaged data from PGS will facilitate integration with the results from the Verbier appraisal well that, in a success case, will be an important step for strategic planning as the project progresses into a potential future development phase.

JOG further advised the Company’s share of the survey costs in respect of the AOI was to be funded from its existing cash reserves, with total Capex for 2018 now expected to be towards the upper end of the previously announced range of £9 million to £11 million.

Effective the 16th May 2018 operator changed its name from Statoil (U.K.) Limited to Equinor UK Limited (“Equinor”).

On the 28th June 2018 JOG announced that the 3D seismic survey had been completed on time and without any HSE incidents.

On the 24th July 2018 JOG announced that it had been advised by Equinor that the Verbier appraisal well with the possibility of a sidetrack well will now likely be the third well in the sequence for the UK drilling campaign with the contracted West Phoenix rig as opposed to the first. The most likely timing of the Verbier appraisal well is now expected to be mid to late Q4 2018, rather than late Q3 to early Q4.

 

P1293 BLOCK 14/18B (ATHENA)

Block 14/18b is located in the North West Witch Ground Graben in the Moray Firth and contains the Athena oil field. On 21st December 2012 Trapoil completed the acquisition of a 15 per cent working interest in Athena from Dyas UK Limited.