JOG agrees 30% GBA farm-out with Serica

Jersey Oil & Gas plc has agreed to farm out a 30% non-operated interest in the Greater Buchan Area (GBA) licences to Serica Energy (UK) Ltd.

PARTNERS

The GBA contains several oil and gas accumulations, 150km northeast of Aberdeen, of which the largest is the Buchan field.

Buchan prouced for 30 years before operations stopped in 2017 at the end of the useable life of the floating production facility.

Completion of the deal will leave JOG with a 20% non-operated interest in P2498 and P2170 and a full carry on the capital expenditure needed to bring the Buchan field into production.

Operator NEO Energy retains 50% interest.

JOG said it would receive $18 million of the $38 million cash attributable to the two GBA farm-outs on completion of the deal.

A further $20 million will be paid to JOG on approval of the Buchan field development plan.

Chief executive Andrew Benitz added that the agreement unlocked “exceptional value” and delivered JOG’s overall objectives for the GBA farm-out strategy.

“The transaction provides JOG with multiple cash payments, but most importantly, a fully funded 20% working interest in the Buchan redevelopment project, transforming the company and providing us with the springboard from which to realise long-term shareholder value.”

The farm-out is subject to consent from the North Sea Transition Authority.

STRENGTH

Serica said that first production was targeted for late 2026, with peak production rates expected to be around 35,000 barrels per day.

“Gross development costs are estimated to be in the order of £850-950 million, which under the current fiscal terms, are expected to qualify for tax relief at a rate of approximately 91%.”

Chief executive Mitch Flegg added that the company would have a “significant interest” in the GBA, potentially adding a third production hub and “further resilience” to its North Sea portfolio.

“The transaction demonstrates the benefits of Serica’s strong balance sheet.

“Our financial strength enables us to take advantage of suitable opportunities to expand the portfolio and we will continue to take a very proactive approach to business development, while also investing in our existing portfolio and paying dividends to shareholders.

“The transaction is structured such that most of the consideration payable by Serica is contingent and linked to making progress in the project.

“Our participation will also be financially efficient with Serica benefiting from tax reliefs on its investment.”