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..... The shares are fundamentally UNDERVALUED as things stand;
FD, your scenario, in which JOG is carried on development costs through to first oil in Buchan and J2 would make JOG's share of discovered reserves worth a lot more than $7pb. Dyas recently paid Cairn $7.4pb for a 10% interest in the Nova Field on the NCS. Nova has an approved FDP but is still at tender stage re the infrastructure. Dyas is expected to pay a 10% share of the development costs. Might not be directly comparable but acts as a guide.
The participation of Equinor, or another big player is key imv. The overall project would be seen as too big for JOG on its own and the prospect of raising the necessary funds would make a lot of people, myself inc, very nervous. Shared costs has to be the way to go. Let's hope JOG works towards realignment of interests in all 5 licences and uses the exercise to put itself in an invincible position by being carried on a good part of the development costs and cash-rich via farm down to CIECO. All the above aren't predictions btw.
Arden Partners understand JOG's and the overall position well and are conservative in the assumptions they make. Their risked assessment of 550p a share is imv by no means exaggerated. There will be further updates to make when the results of the seismic survey are released, together with the CPR in Q4.
I don't personally find the prospect of a very much higher share price 'mind-boggling'. I have been in JOG since the outset, having quickly formed the view on JOG's reversal into TRAP that JOG's two key executives (Andrew Benitz & Ron Lansdell) were exceptional people. I saw a clarity of vision that is rare and a commitment to succeed that was genuinely exciting. Whilst the plans they laid at the outset might not have played out as anticipated, what we have seen is a quickness of foot and an ability to react patiently and positively to directional changes and set-backs that has been remarkable. The team they have assembled around them would be the envy of many much larger players in the industry.
In my experience it is people, not situations, that are important when considering long term investment. Many companies have been in good situations but have failed to deliver as a result of the limitations of the people charged with exploiting them. JOG holders have no worries on this score based on events so far.
The reality is that JOG will be taken over before reaching its full potential. The shares are fundamentally overvalued as things stand; a lot can happen that would cause a dramatic re-rating of the shares in the eyes of the investing community. Presently the share price is determined by the 'don't knows' (short term traders) and it hasn't helped that both Schroders and L&G - and maybe one or two other significant holders - have been reducing their holdings which has absorbed demand and prevented the SP from getting closer to fair value. This should change.
Presentations to the City are bound to come soon. The blue touch-paper will be lit
noix, I believe my post is right, what is wrong with my post Today 13:15?
Likely negotiations are ongoing but I doubt the ratio will be 70%, 18% and 12% ( Equinor,JOG and Cieco)
noix we agree on most, any negotiation depends on the skill of the parties involved and the strength of what they have to offer..
I look at it this way, JOG have the asset and need a Partner. Equinor have the where withall.
If JOG want a free carry there will be some hard bargaining.
As always time will tell.
Arden are the JOG company broker. They will be in discussion with the board all the time. They will know the plan.
I they assume, as they do, in their latest research note yesterday, that Equinor will take up the 50% option in all the new blocks....then expect that to happen. They will not keep 100% of any of the new licenses.
Thanks for the reply. We appear to be in agreement in regards to 21/2a, ie it's up for negotiation and I would imagine that JOG would like Equinor's involvement and we are about to find out soon if the vice versa is true. But not withstanding the existing relationship on P2170, it mustn't be forgotten that this is currently a stand alone block, 100% owned by JOG. There are other discoveries in the area owned by third parties, that have the potential to eventually tie into any proposed future hub as well - at a price.
Unfortunately, I don't fully understand the rest of your post, other than the part where you state that under existing partnership arrangements JOG will be relieved of funding requirements up to first oil. I thought in my post of 12.34 that I explained why this isn't so on the current and proposed partnership splits. It may well occur that JOG attempts to negotiate down their share of development costs by giving a larger share of the licence interests to the other two partners but that remains to be seen and is for another day. At present they are on the hook as per my earlier post.
If you are going to the trouble of reminding us of the current licence and option situations, then it helps to get the basics right:
"JOG is also pleased to announce that Equinor and JOG have agreed and entered into a three month option agreement under which Equinor has been granted an option over a 50% equity interest in respect of Blocks 20/5d and 21/1a (the "Buchan Blocks"), which contain the Buchan oil field and J2 oil discovery. Should the option be exercised, JOG shall act as Licence Operator in respect of the Buchan Blocks and Equinor will reimburse JOG for its 50% share of costs in relation to the licence applications."
mpls do you believe Equinor will not want an interest in the Blocks described?
Is it also likely Equinor will drag along Cieco in any negotiations?
noix the existing agreement P2170 ( Verbier) remains in tact on the terms previously in place, unless of course primarily, Equinor, who will likely drag along Cieco, decide to review the undertaking in view of the Option on Buchan. The GBA as a whole is contiguous to Verbier, Cortina etc.
Clearly funding will be required to bring the Greater Buchan Area back on stream. It has been suggested, here, in return for the Capital Funding requirement from Equinor and Cieco, shares proportionate to those already in place (P2170) could be agreed. In so doing would relieve JOG as operator of any Funding up to first oil.
This scenario has been suggested, and so far as known is not rejected.
In so far as 21/2a , Glenn, which as you correctly state is awarded 100% to JOG, however it is known the proximity of this LIcence will rely on the Hub Infrastructure to be completed in Buchan. It is highly probable Equinor will negotiate hard to get 21/2a included in any GBA agreement.
Clearly there is a lot of negotiating to occur and any number of outcomes. The one proposed seems feasible as it relieves JOG of most if not all of the Funding requirement to get GBA up and running.
The values produced by Arden support the outcome suggested.
Cieco have not been offered any equity interest in respect of Blocks 20/5d and 21/1a .
Cieco have not been offered any equity interest in Block 21/1a.
Cieco have not been offered any equity interest in Block 20/4c.
Cieco have not been offered any equity interest in Block 21/2a.
Equinor have not been offered any equity interest in Block 21/1a.
Equinor have not been offered any equity interest in Block 20/4c.
Equinor have not been offered any equity interest in Block 21/2a.
JOG have 100% of Block 21/2a containing Glenn oil discovery at 14 mmboe.
JOG have 100% of Block 21/1a containing Buchan Capri at 19 mmboe prospective.
JOG have 100% of Block 20/4c containing Zermatt, Chamonix and Courcheval at 72 mmboe prospective.
I don't understand this comment "The ongoing relationship between Equinor, Cieco and JOG have been debated and the % share that currently exists between the partners will embrace the GBA on a basis which leaves JOG not having to find any Funding for infrastructure to bring the Field(s) to production in 2024."
Surely, unless an agreement is made to the contrary, then as things stand JOG is on the line for 18% of costs for P2170 and 50% of costs for blocks 20/5d and 21/1a, if Equinor take up the option. As far as I'm aware, for the latest award 21/2a, they are on the hook for all costs but I would imagine that this will form part of the negotiations with the other two partners going forward. At present neither Equinor or Cieco have been publicly offered any part of 21/2a.
As a LTH the spectre of £10, £20 a share is mind boggling, however for balance it should be remembered the award of the Buchan Licence, even though a game changer, does require collaboration with Equinor or a another, should they not accept the Option ( unlikely). On the face of it the option gives Equinor 50% of the Licence Production. It will not be known, until negotiations with Equinor are agreed, within 2 months, what contribution each party will put into the project.
Add in the 3rd partner, Cieco who have a 12% interest in P2170 and unless the Partnership Agreement says otherwise it is reasonable to believe they will be part of the Greater Buchan production facility. The ongoing relationship between Equinor, Cieco and JOG have been debated and the % share that currently exists between the partners will embrace the GBA on a basis which leaves JOG not having to find any Funding for infrastructure to bring the Field(s) to production in 2024.
The latest award, Glenn, of 14mmboe, is bound to become part of the integrated infrastructure in the GBA and therefore Equinor and Cieco are likely to expect an agreed share of the compounded production of the GBA on the same terms as previous.
On that basis the projected production, 120mmboe, could be divided in proportion to the P2170 agreement, 70%, 18% and 12% ( Equinor,JOG and Cieco)
If this is how the Option agreement works out JOG would have 18% of 120mmboe or 21.6mmboe, and on present values and known reserves, gives @ $7 = $152m.( £124.6m). 566p/share.
Higher values could be achieved, there are many variables and unknowns, so who knows £10 could be on the horizon, but don't spend the money yet. AIMO
Jog is undervalued , shares at today prices are cheap .