Jersey Oil and Gas PLC (LON:JOG) shares soared on Monday, rising more than 200p to trade at 265p, on the news that Statoil has hit an oil discovery in the Verbier side-track well - yet, WH Ireland reckons the price could go as high as 441p.
Statoil revealed the success of the side-track to the originally unsuccessful Verbier well hitting hydrocarbons.
JOG owns an 18% stake in the Statoil led exploration venture which has now proven the oil accumulation in good quality sands, and the results are now being evaluated.
Statoil’s initial estimate of the discovery puts the size of the new discovery between 25mln and 130mln barrels of oil, and it added that there was a minimum of 25mln barrels proven recoverable oil in the immediate vicinity of the well bore.
"The results show that we made the right decision to sidetrack the well and this discovery proves that there could be significant remaining potential in this mature basin,” said Jenny Morris, vice president for exploration for Statoil UK.
“We are convinced of the remaining, high-value potential on the UK continental shelf and the Verbier result certainly gives us the confidence and determination to continue our exploration efforts."
Andrew Benitz, Jersey chief executive, meanwhile, added: “We are delighted by the positive outcome of the Verbier sidetrack.”
WH Ireland analyst Brendan Long, in a note, takes a mid-point assumption from the Statoil estimate for new discovery, pitched by the Norwegian firm between 25mln to 130mln barrels, valuing some 77.5mln barrels at 855p per share for JOG’s 18% stake.
Given that the discovery is still in its early stages, Long includes only half of that potential value into his target price.
“This is a very material and highly positive result, that will take time to fully appreciate, but in our opinion, the market is far from recognising the materiality of this successful discovery,” Long said, whilst repeating a ‘buy’ recommendation.