Jersey Oil and Gas PLC (AIM:JOG, OTC:JYOGF) (JOG) has struck deals that give it a free carry of 20% on a North Sea project slated to have peak production of 35,000 barrels of oil a day - and is scheduled to get underway in late 2026.
Here, we get under the skin of the deal, look at its nuts and bolts and garner City opinion - looking at it from both sides of the transaction.
The top line: In return for handing over an 80% stake in the Greater Buchan Area (GBA), JOG pays nothing towards the £850 million to £900 million capital investment required to get the operation up and running.
As well as this, it will receive around £30 million in staged payments from its partners, field operator NEO Energy and Serica, a specialist in North Sea oil and gas. JOG is partially subsidised on the ancillary work done before the field is approved for development.
The kicker? At the time of the full-year results, the junior exploration company was also sitting on £62 million of usable tax losses that are valuable and which analysts at boutique investment bank SP Angel reckon could be put to work if JOG bought in production assets.
What the analysts say: At 240p a share, the company is worth just shy of £80 million. Analysts at research house Cavendish reckon the net asset value of the shares based on the fundamentals outlined above is 755p, giving a market capitalisation of £245 million.
If Cavendish’s maths is correct, then the current share price is way out of whack with the fundamentals.
Looked at from the other side, the deal provides a £96 million uplift to Serica's unrisked net present value, according to analysts at Stifel.
Peel Hunt describes it as a "nice bolt-on" deal. "This acquisition represents at attractive low-cost entry into a potentially significant, low carbon intensity future oil field redevelopment," it added.
So, the consensus in the City is that this transaction works well for both sides, creating value for JOG and its partners.