Competent Person's Report for core GBA resources

RNS Number : 0627P

Jersey Oil and Gas PLC

08 October 2019

 

8 October 2019

Jersey Oil and Gas plc

("Jersey Oil & Gas", "JOG" or the "Company")

Competent Person's Report for core Greater Buchan Area resources

Jersey Oil & Gas (AIM:JOG), an independent upstream oil and gas company ‎focused on the UK Continental Shelf ("UKCS") region of the North Sea, is pleased to announce that an independent assessment of resource and valuation estimates in relation to certain oil and gas interests held by Company in the Greater Buchan Area, has been completed by Rockflow Resources Ltd ("Rockflow"). These assets include the previously produced Buchan Devonian oil field, the J2 and Buchan Andrew oil discoveries and the Capri prospect.

Highlights

·     Technically Recoverable Oil Resource Volumes of 94.7 MMstb net to JOG

·     Mid case Contingent Resource valuation (NPV10) of P2498 together with a valuation of JOG's 18% share of the Verbier discovery: £791 million

The tables below provide key extracted information from Rockflow's cover letter to the CPR, which is included in full below.

Technically Recoverable Oil Resource Volumes for P2498

Technically Recoverable Oil Resource Volumes	Net Attributable JOG (MMstb)
Asset	Low	Mid	High
Buchan Devonian oil field	58.5	81.2	99.3
Buchan Andrew oil discovery	1.5	3.0	5.1
J2 Sgiath oil discovery	6.0	11.9	24.3
Probabilistic Total for Licence P2498	71.3	94.7	114.4

Note: The total is a probabilistic sum (and hence will not sum arithmetically) of the contributing assets as development is to be through a single project. This is consistent with SPE-PRMS recommendations on aggregation (PRMS section 4.2.5).

SENSITIVITY OF NPV TO OIL AND GAS PRICE OF THE MID VOLUMETRIC ESTIMATE for P2498 and P2170 assets

AS AT 30th September 2019

	Gross			Net Attributable JOG
Parameter	Low Price Scenario	Mid Price Scenario	High Price Scenario	Low Price Scenario	Mid Price Scenario	High Price Scenario
Oil Price ($/bbl)	50.00	62.50	75.00	50.00	62.50	75.00
Gas Price ($/MMbtu)	4.80	6.00	7.20	4.80	6.00	7.20
Post-tax NPV P2498 Licence (GBP Millions)	495	762	1019	489	757	1010
Post-tax NPV P2170 Licence (GBP Millions)	123	183	243	22.2	33.4	44.3
Post-tax NPV Both Licences (GBP Millions)	618	945	1262	511	791	1054
Post-tax NPV Both Licences (US$ Millions)	773	1,181	1,578	639	989	1,318

Note: US$/GBP FX rate: 1.25

Andrew Benitz, CEO of Jersey Oil & Gas, commented:

"We are very pleased to provide the key findings of the independent Competent Person's Report, which confirm Technically Recoverable Oil Resource Volumes of 94.7 MMstb. Together with JOG's 18% share of the Verbier discovery, this gives a total of nearly 100MMstb net to JOG and provides a contingent resource valuation (NPV10) of nearly US$1 billion net to JOG for Buchan, the J2 discovery, Buchan Andrew and the Company's share of Verbier in the adjacent licence. This independent valuation supports the significant value proposition for developing the base case discovered volumes that JOG owns within its core Greater Buchan Area assets."

Enquiries:

Jersey Oil and Gas plc	Andrew Benitz, CEO	C/o Camarco: Tel: [phone]
Strand Hanson Limited	James Harris Matthew Chandler James Bellman	Tel: [phone]
Arden Partners plc	Paul Shackleton Benjamin Cryer	Tel: [phone]
BMO Capital Markets Limited	Jeremy Low Tom Rider	Tel: [phone]
Camarco	Billy Clegg James Crothers	Tel: [phone]

Full cover letter to CPR produced by Rockflow:

The Directors,                                                The Directors,

Jersey Oil & Gas plc,                                      Nominated Adviser to Jersey Oil and Gas plc,

9 The Esplanade,                                           Strand Hanson Limited,

St Helier, Jersey,                                            26 Mount Row,

Channel Islands.                                             London W1K 3SQ.

                                                                                                                        7^th October 2019

Dear Sirs

Competent Person's Report on Licence P2498 (Blocks 20/5a & 21/1a), Greater Buchan Area, UKCS

Jersey Oil & Gas plc (JOG) has engaged Rockflow Resources Ltd (Rockflow) to assess certain oil and gas interests licensed by JOG. These assets include the previously produced Buchan Devonian oil field, the J2 (well 20/05a-10Y) Sgiath and Buchan Andrew oil discoveries and the Capri Prospect. The Effective Date of this assessment is 30^th September 2019.

JOG is listed on the AIM Market of the London Stock Exchange.

The assessment was undertaken by a team of Rockflow professional petroleum engineers and geoscientists based on data supplied by JOG. Rockflow has relied on the completeness and accuracy of the data supplied by JOG. The data comprised details of licence interests, seismic and well data, technical interpretations, reports and presentations. Rockflow has exercised due diligence and independent analysis where appropriate on all technical information supplied by JOG. Rockflow is not aware of any omission which may materially affect the conclusions of this CPR.

No site visits were undertaken. Rockflow are not in a position to comment on any aspect of health, safety or environment of the assets.

The Resources reported in this document are in accordance with the definitions of the Petroleum Resources Management System (PRMS) approved and updated in June 2018 by the Society of Petroleum Engineers (SPE), the World Petroleum Council (WPC), the American Association of Petroleum Geologists (AAPG), the Society of Petroleum Evaluation Engineers (SPEE), the Society of Exploration Geophysicists (SEG), the Society of Petrophysicists and Well Log Analysts (SPWLA) and the European Association of Geoscientists & Engineers (EAGE).

There are numerous uncertainties inherent in the estimation of reserves and resources. The process of estimating resource volumes is a subjective assessment and cannot be measured directly in an exact way. Estimates carried out by third parties may differ from the estimates presented here. The accuracy of any estimate is subject to the quantity and quality of available data, as well as the geological and engineering interpretation. Results from drilling, testing and production that post-date the preparation of this report may lead to revisions, some, or all, of which may be material. As a result, estimates are often different from the quantities of oil and gas actually recovered, and the timing and cost of those volumes that are recovered may differ from that assumed.

Reserves are those volumes of petroleum that may be recovered by the application of development projects to known accumulations from a given date under defined conditions. Reserves must be discovered, recoverable, commercial and remaining. Reserve estimates of the recoverable oil as of a given date (the Effective Date) may be assigned to certain categories as 1P (Proved), 2P (Proved plus Probable), and 3P (Proved plus Probable plus Possible) Reserves. Reserves may be further divided into various sub-classes, based on the project maturity, development status or production status. All categories of Reserves have been subjected to an Economic Limit Test (pre-tax and before any depreciation allowance) prior to any Net Present Value (NPV) analysis.

Contingent Resources are those volumes of petroleum that may recovered by the application of potential development projects which are subject to one or more contingencies. Contingent Resources may be assigned to a property where there may be, for example, no viable means of production, or to a property where a certain technology is under development, or where a property may be marginally economic under current assumptions, or where an external condition must be satisfied. Contingent Resources can be categorised as Low (1C), Mid (2C) and High (3C) estimates. Contingent Resources may be further divided into various sub-classes, based on the project maturity and/or economic status.

By their very nature, Contingent Resources are less certain to be produced than Reserves, due to technical and/or commercial uncertainties. There is no certainty that any part of the Contingent Resources will be developed.

Prospective Resources are those volumes of petroleum that may recovered from undiscovered accumulations by potential future development projects. Prospective Resources have both an associated Geological Chance of Success (GCoS) that estimates the likelihood of the presence of hydrocarbons, as well as a Chance of Development (CoD). Prospective Resources can be categorised as Low (1U), Mid (2U) and High (3U) estimates, and can be further sub-divided into various sub-classes.

There is no certainty that any part of the Prospective Resources will be developed. If a prospect is drilled, and demonstrates the presence of hydrocarbons, it may then be re-classified as Contingent Resources. The property would then need to be reassessed as to its status and chance of development before any decision can be made as to the likelihood of a potential development project, and whether such a development would be economically and technically viable.

Volumes of oil are quoted in this report at stock tank conditions. Volumes of natural gas quoted herein are volumes of sales gas, after an allowance for fuel gas and process shrinkage. Standard conditions are 60º Fahrenheit and 14.696 psia.

It should be noted that any NPV calculation carried out by Rockflow is not an estimate of the market value of the property. Any such market evaluation would have to consider the risks to the potentially recoverable volumes, any potential for further upside, and geo-political risk, and the state of the market at the time, as well as other factors. Rockflow has not considered any of these risks in assessing the NPV of the properties listed herein.

TABLE A

ASSET SUMMARY TABLE

Asset	Operator	JOG Interest	Status	Licence Expiry	Licence Area
Licence P2498	JOG	100%	Extant	29th August 2041	174.4 km2

Notes:  

1.   The P2498 licence has been awarded on a "straight to second term basis".

2.   Rockflow has a reasonable expectation that the licence would be renewed in 2041, provided that there is ongoing operation/production activity based on similar agreements in the UKCS.

 

TABLE B

SUMMARY OF GROSS AND NET OIL CONTINGENT RESOURCES AS AT 30^th September 2019

Contingent Oil Resources	Gross (MMstb)			Net Attributable JOG (MMstb)			CoD
Asset	Low  (1C)	Mid  (2C)	High  (3C)	Low (1C)	Mid (2C)	High (3C)
Contingent Resources (Development Pending)
Buchan Devonian field	45.0	70.5	96.9	45.0	70.5	96.9	70%
Buchan Andrew discovery	1.5	3	5.1	1.5	3	5.1
J2 Sgiath discovery	6.2	12.3	25.1	6.0	11.9	24.3
Total for Licence P2498	58.0	84.4	112.3	57.8	84.0	112.0
Contingent Resources (Unclarified)
Buchan Devonian field	13.5	10.7	2.4	13.5	10.7	2.4	50%
Buchan Andrew discovery	0.0	0.0	0.0	0.0	0.0	0.0	N/A
J2 Sgiath discovery	0.0	0.0	0.0	0.0	0.0	0.0	N/A
Total for Licence P2498	13.5	10.7	2.4	13.5	10.7	2.4	50%
Total Contingent Resources (All sub-classes)
Buchan Devonian field	58.5	81.2	99.3	58.5	81.2	99.3
Buchan Andrew discovery	1.5	3.0	5.1	1.5	3.0	5.1
J2 Sgiath discovery	6.2	12.3	25.1	6.0	11.9	24.3
Total for Licence P2498	71.5	95.1	114.7	71.3	94.7	114.4

Notes:

1.   The CoD (Chance of Development) indicates the probability that the full field development will be undertaken.

2.   Net attributable is based on JOG working interest of 100% (Buchan Devonian field and Buchan Andrew discovery) and 97% (J2 Sgiath)

3.   There is a single project currently proposed which will jointly develop the Buchan Devonian field, the Buchan Andrew discovery and the J2 Sgiath discovery.

4.   The Buchan Area project is currently in the "Concept Select" phase. The Contingent Resources would be classified as "Development Pending" under SPE-PRMS 2018 definitions.

5.   The total is a probabilistic sum of the contributing assets as development is to be through a single project. This is consistent with SPE-PRMS recommendations on aggregation (PRMS section 4.2.5).

6.   The Total Contingent Resources (All sub-classes) include all Technically Recoverable Resource Volumes, without any economic cut off applied.

7.   The Contingent Resources (Development Pending) have passed an Economic Limit Test, with mid oil-price assumptions.

8.   The Contingent Resources (Unclarified) have not passed an economic limit test with the proposed project, but may be recoverable via additional projects.

9.   The Contingent Resources (Unclarified) are the difference between the Technically Recoverable Volumes and the Contingent Resources (Development Pending), and results in "low" estimates which are greater than the "high" estimates.

10.  The valuation has been based on the Contingent Resources (Development Pending), only.

 

TABLE C

SUMMARY OF GROSS AND NET GAS CONTINGENT RESOURCES AS AT 30^th September 2019

Contingent Gas Resources	Gross (bcf)			Net Attributable JOG (bcf)			CoD
Asset	Low (1C)	Mid (2C)	High (3C)	Low (1C)	Mid (2C)	High (3C)
Buchan Devonian field	2.3	6.6	8.9	2.3	6.6	8.9	70%
Buchan Andrew discovery	0.3	0.4	0.6	0.3	0.4	0.6
J2 Sgiath discovery	3.0	5.7	10.6	3.0	5.5	10.3
Total for Licence P2498	6.6	12.6	17.8	6.5	12.5	17.4

Notes:

1.   The CoD (Chance of Development) indicates the probability that the full field development will be undertaken.

2.   Rockflow has excluded any gas volumes which are Consumed in Operations.

3.   Net attributable is based on JOG working interest of 100% (Buchan Devonian field and Buchan Andrew discovery) and 97% (J2 Sgiath)

4.   There is a single project currently proposed which will jointly develop the Buchan Devonian field, the Buchan Andrew discovery and the J2 Sgiath discovery.

5.   The Buchan Area project is currently in the "Concept Select" phase. The Contingent Resources would be classified as "Development Pending" under SPE-PRMS 2018 definitions.

6.   The total is a probabilistic sum of the contributing assets as development is to be through a single project. This is consistent with SPE-PRMS recommendations on aggregation (PRMS section 4.2.5).

TABLE D

SUMMARY OF GROSS AND NET OIL PROSPECTIVE RESOURCES AS AT 30^th September 2019          

Prospective Oil Resources		Gross (MMstb)			Net Attributable JOG (MMstb)
Block	Prospect	Low (1U)	Best (2U)	High (3U)	Low (1U)	Best (2U)	High (3U)	GCoS
21/1a & 21/1d	Capri	2.73	11.8	34.5	1.68	7.28	21.29	0.19

Notes:

1.   The Geological Chance of Success ("GCoS") reported here represents the estimate of the probability that the drilling of this prospect would result in a discovery, which would permit the re-categorisation of that volume as Contingent Resources.

2.   Net attributable is based on JOG working interest of 68.61%.

TABLE E

SUMMARY OF GROSS AND NET GAS PROSPECTIVE RESOURCES AS AT 30^th September 2019         

Prospective Gas Resources		Gross (bcf)			Net Attributable JOG (bcf)
Block	Prospect	Low (1U)	Best (2U)	High (3U)	Low (1U)	Best (2U)	High (3U)	GCoS
21/1a & 21/1d	Capri	2.05	15.3	51.8	1.27	9.44	31.97	0.19

Notes:

1.   The Geological Chance of Success ("GCoS") reported here represents the estimate of the probability that the drilling of this prospect would result in a discovery, which would permit the re-categorisation of that volume as Contingent Resources.

2.   Net attributable is based on JOG working interest of 68.61%.

An economic valuation of the Buchan Area project was undertaken and the mid case price scenario results are given below:

TABLE F

CONTINGENT RESOURCE VALUATION AT THE MID CASE ($62.50/bbl AND $6.00/MMbtu) REFERENCE PRICES for P2498 assets AS AT 30^th September 2019

	Gross NPV10 GBP millions			Net Attributable JOG NPV10 GBP millions
Asset	Low	Mid	High	Low	Mid	High
Buchan Devonian field	240	589	738	240	589	738
Buchan Andrew discovery	15.1	29.1	47.4	15.1	29.1	47.4
J2 Sgiath discovery	61.3	151	310	59.5	146	301
Total for Licence P2498	364	762	944	362	757	936

Notes:

1.   The NPV valuation should not be considered as an estimate for the market value of the property.

2.   Net attributable is based on JOG working interest of 100% (Buchan Devonian field and Buchan Andrew discovery) and 97% (J2 Sgiath).

3.   The valuation is a post-tax valuation.

4.   This valuation includes tariff income from the tie-back of the Verbier field, in which JOG has a working interest of 18%.

5.   The production profile for the Verbier field has been received from the operator (Equinor) through JOG. The resource volumes (22.9 MMstb of oil and 11.4 bcf of gas) for Verbier have not been independently assessed by Rockflow.

6.   There is a single project currently proposed which will jointly develop the Buchan Devonian field, the Buchan Andrew discovery and the J2 Sgiath discovery.

7.   The Buchan Area project is currently in the "Concept Select" phase. The Contingent Resources would be classified as "Development Pending" under SPE-PRMS 2018 definitions.

8.   The total is a probabilistic sum of the contributing assets as development is to be through a single project. This is consistent with SPE-PRMS recommendations on aggregation (PRMS section 4.2.5).

TABLE G

CONTINGENT RESOURCE VALUATION AT THE MID CASE ($62.50/bbl AND $6.00/MMbtu) REFERENCE PRICES for P2498 and P2170 assets AS AT 30^th September 2019

	Gross NPV10 GBP millions			Net Attributable JOG NPV10 GBP millions
Asset	Low	Mid	High	Low	Mid	High
Total for Licence P2498	364	762	944	362	757	936
Verbier field (P2170)	183			33.4
Total for Licences P2498 & P2170	547	945	1126	395	791	969

Notes:

1.   The NPV valuation should not be considered as an estimate for the market value of the property.

2.   Net attributable is based on JOG working interest of 100% (Buchan Devonian field and Buchan Andrew discovery) and 97% (J2 Sgiath).

3.   The valuation is a post-tax valuation.

4.   The production profile for the Verbier field has been received from the operator (Equinor) through JOG. The resource volumes (22.9 MMstb of oil and 11.4 bcf of gas) for Verbier have not been independently assessed by Rockflow.

5.   The Buchan Area project is currently in the "Concept Select" phase. The Contingent Resources would be classified as "Development Pending" under SPE-PRMS 2018 definitions.

6.   The Verbier field, with its different licence interests will be subject to a separate, incremental investment decision. It has been considered as a subsea tie-back to the Buchan Area project.

TABLE H

SENSITIVITY TO NPV OF THE BEST ESTIMATE TO OIL AND GAS PRICE for P2498 and P2170 assets

AS AT 30th September 2019

	Gross						Net Attributable JOG
Parameter	Low Price Scenario		Mid Price Scenario		High Price Scenario		Low Price Scenario		Mid Price Scenario		High Price Scenario
Oil Price ($/bbl)	50.00		62.50		75.00		50.00		62.50		75.00
Gas Price ($/MMbtu)	4.80		6.00		7.20		4.80		6.00		7.20
Post-tax NPV P2498 Licence (GBP Millions)	495		762		1019		489		757		1010
Post-tax NPV P2170 Licence (GBP Millions)	123		183		243		22.2		33.4		44.3
Post-tax NPV Both Licences (GBP Millions)	618		945		1262		511		791		1054

Notes:                                                                                                  

1.     The NPV valuation should not be considered as an estimate for the market value of the property.

2.     The valuation is a post-tax valuation.                                                                                                           

3.     Oil and gas prices are stated in real terms as at January 2020. Prices, and costs have been inflated at 2% p.a. thereafter.

4.     The valuation for the P2498 Licence includes the Buchan Devonian field, the Buchan Andrew discovery and the J2 Sgiath discovery.  All valuations are based on the P50 estimate of Contingent Resources (Development Pending).  

5.     The valuation for the P2170 Licence includes the Verbier field as an incremental project to the P2498 Licence Buchan Area Project. The resource volumes for Verbier have not been independently assessed by Rockflow.     

6.     The total for both licences is an arithmetic sum.                                                                                                           

7.     Net attributable is based on JOG working interest of 100% (Buchan Devonian field and Buchan Andrew discovery), 97% (J2 Sgiath) and 18% (Verbier field).

Qualifications

Rockflow is an independent consultancy specialising in petroleum reservoir evaluation and economic analysis. Except for the provision of professional services on a fee basis, Rockflow does not have a commercial arrangement with any other person or company involved in the interests that are the subject of this report. Rockflow staff have no interest in any assets or share capital of JOG or in the promotion of JOG. Rockflow's remuneration was not in any way contingent on reported estimates.

In estimating Petroleum Resources, Rockflow has used standard petroleum engineering techniques. These estimates are made in accordance with the definitions and guidelines of the Petroleum Resources Management System (PRMS) approved in June 2018 by the Society of Petroleum Engineers (SPE) et al.

In accordance with the guidelines of the London Stock Exchange, the technical information contained in this announcement has been reviewed and approved by Tom Gunningham, a chartered petroleum engineer and Reserves auditor for Rockflow, who has over 30 years industry experience and meets the criteria of a qualified person under the AIM guidance note (2009) for mining and oil and gas companies. Rockflow has conducted valuations for many energy companies and financial institutions.

Basis of Opinion

The evaluation presented in this report reflects Rockflow's informed judgement based on accepted standards of professional investigation and Rockflow's understanding of petroleum legislation, taxation and the regulations that apply to the properties but is subject to generally recognised uncertainties associated with the interpretation of geological, geophysical and subsurface reservoir data.

Rockflow has not made any field examination of the properties. No consideration was given in this report to potential environmental liabilities that may exist nor were any costs included for potential liabilities to restore and clean up damages, if any, caused by past operating practices.

It should be understood that any evaluation of hydrocarbon volumes and associated NPVs, particularly one involving exploration and future petroleum developments, may be subject to significant variations over short periods of time as new information becomes available. Rockflow does not warrant that the opinions expressed here will be any form of guarantee of the outcome.

Yours faithfully,

Tom Gunningham MA(Oxon) CEng MEI,

Chief Reservoir Engineer,

Rockflow Resources Ltd

Qualified Person's Statement:

The information contained in this announcement has been reviewed and approved by Ronald Lansdell, Chief Operating Officer of Jersey Oil & Gas, a qualified Geologist and Fellow of the Geological Society, who has over 40 years' relevant experience within the sector.

Notes to Editors:

Jersey Oil & Gas is a UK E&P company focused on building an upstream oil and gas business in the North Sea. The Company holds a significant acreage position within the Central North Sea referred to as the Greater Buchan Area, which includes Operatorship and 100% working interests in blocks that contain the Buchan oil field and J2 and Glenn oil discoveries, as well as an 18% working interest in the P2170 licence, Blocks 20/5b & 21/1d, operated by Equinor UK Limited ("Equinor") that contains the Verbier oil discovery.

JOG's acreage is estimated by management to contain more than 120 million barrels of oil equivalent ("mmboe") of discovered mean recoverable resources net to JOG, in addition to significant exploration upside potential.  JOG is currently progressing the appraise and select phases of a Field Development Plan ("FDP") for the Greater Buchan Area, with first oil, subject to funding, targeted for 2024.

JOG is focused on delivering shareholder value and growth through creative deal-making, operational success and licensing rounds. Its management is convinced that opportunity exists within the UK North Sea to deliver on this strategy and the Company has a solid track-record of tangible success.

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014.

 

END

 

 

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