On Monday, the Jersey Oil and Gas (LSE:JOG) share price dipped over 7pc to 230p on news that drilling of the Verbier appraisal well is now underway. Although a drill proceeding is a positive development, it’s not uncommon for a bout of selling on the announcement of a well spudding, as more risk-averse investors opt to take part or all of their stake off the table.
For those in-it-to-win-it, the potential prize in the event of success lies somewhere between 25-130m barrels of oil equivalent (mmboe). Jersey holds an 18pc interest in the license with operator Equinor holding 70pc and Cieco, the remaining 12pc share.
The much-anticipated drill was originally planned for last year, but a schedule-switch by Equinor moved it back to Q1 2019. This actually gave investors another opportunity to take a pre-drill position with the share price dipping below 150p.
Should the well deliver results at the upper end of expectations, it would make it one of the most significant North Sea oil discoveries in the last 20 years. Assuming continued success on Verbier Jersey expects first oil to come in 2022 with lifecycle costs estimated at $35 per barrel of oil equivalent (boe).
Alongside Verbier, Jersey has as other exploration opportunities at P2170, the most significant being the Cortina prospect. Cortina has estimated recoverable resources of 39-240MMboe according to an independent CPR commissioned in 2017.
The second, smaller opportunity is the Meribel lead, which has estimated recoverable resources of 6-19MMBoe. Other exploration opportunities across the block are being interpreted on the back of the Verbier success, leading to possible further exploration drilling during 2019/2020. Jerseys share of the three sites combined have a net present valuation (NPV10) of between £83.7-400.5m.
Andrew Benitz, CEO of Jersey Oil & Gas, commented:
“Further to the Verbier oil discovery announced in October 2017, we are delighted to announce that drilling operations to appraise Verbier have now commenced and look forward to participating in a safe and successful well programme, with well results expected by mid Q2 2019.”