With the start of drilling on the Verbier exploration well in the North Sea, AIM-quoted Jersey Oil & Gas Plc (LON:JOG) is now positioned for major catalysts.
It was confirmed on Monday that project operator Statoil has now started drilling the Verbier exploration well in the North Sea.
The explorer owns an 18% stake in the Statoil project (it is operator, with 70% of the asset) which is targeting significant potential resources. An initial well could be expanded to include a sidetrack, and the programme is expected to take up to 70 days.
Statoil is covering all well costs, up to a cap of US$25mln, and Jersey is covered for a further 10% of well costs via a separate arrangement with the other partner CIECO Exploration and Production.
Verbier marks culmination of several years’ work
Whilst the move to drilling has come quickly since Statoil took control of the project, via an August 2016 farm-in deal, nonetheless, Jersey chief operating officer Ron Lansdell said: “The drilling of the Verbier prospect is the culmination of several years of hard and creative work by the joint venture partnership.
“The P.2170 Licence was previously operated by Jersey Oil & Gas alongside CIECO, and we significantly de-risked the prospect prior to negotiating the farm-out to Statoil, the current operator.
“Success at Verbier could provide significant impetus for potential future exploration of the neighbouring Cortina prospect within the P.2170 Licence area."
Andrew Benitz, Jersey chief executive, meanwhile, added: “We are pleased to announce that drilling operations on the Verbier prospect have now commenced,” said Andrew Benitz, Jersey chief executive.
“The Verbier prospect is estimated to have mean prospective resources of 162MMBOE and has the potential to add considerable value to our joint venture partnership."
It could be “game changer”
Oil and gas companies expert Malcolm Graham Wood, in his daily blog, reckons a success in the Verbier well would be a ‘game changer’ for Jersey Oil & Gas.
“The well is targeting mean prospective resources of 162m barrels of oil equivalent and is given a 29% COS by ERC in their CPR,” he said.
“Higher than the normal wildcat in the area this is probably due to the significance of the 20/5a-10Y well drilled by Talisman back in 2006.
“At the analyst’s presentation some months ago much was made of this deviated well, it wasn’t targeting these J64 sands but passed through them and tested oil and gas on the intersection.
“JOG clearly feel that that intersection to be within the south eastern flank of the Verbier prospect and thus the reasons for being so optimistic.”
He added: “Investors will be aware that there is potential downside if this well doesn’t come in but JOG has plenty more to offer, if however it should be successful then the shares will justify a significantly higher price, well above 500p in my estimation.”