Jersey Oil & Gas PLC (LON:JOG) is on a steeply positive trajectory, according to stockbroker WH Ireland, which with a 268p per share fair value estimate sees some 106% upside.
It comes after Jersey expanded its North Sea footprint in the UK’s latest offshore licensing round, effectively bolting on further acreage to its Greater Buchan Area (GBA) field development project.
WH Ireland analyst Brendan Long, in a note, said Jersey is exceptionally well placed to create shareholder value.
Though the broker’s fair value is pitched more than double the AIM-share’s current price of 130.4p, it still only factors a small portion of a success-case modelled by Long.
“Our 268p fair value estimate includes only 10% of our full, success-case valuation estimate of the company’s 100% held Buchan Field, which has been ascribed a recoverable resource estimate of 82 million barrels by Rockflow (best estimate contingent resources),”
“We have ignored, for the purposes of our valuation, the potential of circa 60 million barrels of discovered recoverable resources in the Buchan Field’s immediately neighbouring satellite fields (all held 100% by Jersey Oil & Gas).
“As the Buchan Field development increases in definition via the ongoing concept select stage, we believe there is potential to increase the scope of our valuation.”
Long said WH Ireland is structurally bullish on crude oil in the short-term, mid-term and long-term.
“We premise this view largely on the structural decline of US shale oil production – the driver of oil production growth of the last decade,” he added.
“We are also structurally bullish on conventional oil assets for the same reason; the focus on shale oil having hugely diverted interest and capital away from conventional oil assets over the last decade, which we expect to reverse in the 2020s.”
As a company with large-scale, high-quality and discovered conventional resources, Long believes JOG is Gas is exceptionally well placed to create value in this setting.
He looks to the completion of concept selection for the Buchan project as a critical and price material upcoming milestone.
Expansion of Buchan via licensing
JOG expanded its position in the North Sea, securing an area that will become part of the Greater Buchan Area (GBA) development project.
The company announced it has been awarded a 100% interest and operatorship of, part-block 20/5e. It noted that the acreage contains an extension of the oil discovery of the J2 well.
"I am pleased that JOG has been awarded part-block 20/5e, which represents a further step towards delivering on our strategy of progressing the proposed future development of the Greater Buchan Area," Andrew Benitz, Jersey Oil & Gas chief executive said in a statement.
JOG owns 100% of the Buchan oil field and the J2 oil discovery, which along with the adjacent Verbier discovery comprise the Greater Buchan Area (GBA).
A CPR by contractor Rockflow previously estimated the recoverable resources in The Greater Buchan Area at 94.7mln barrels, including the parts within P2170. That estimate valued Jersey’s ‘mid-case’ contingent resources at some £791mln.