George Frangeskides, Chairman at ALBA, explains why the Pilbara Lithium option ‘was too good to miss’. Watch the video here.
MC - rest of article:-
On course for a full carry on GBA-
In the summer, Jersey completed a 50 per cent farm-out of its Greater Buchan Area (GBA) project, handing over operatorship to its new partner, NEO Energy.
Jersey retains a 50 per cent interest and is now fully carried on 12.5 per cent of gross project development capital expenditure to Buchan first oil (this element of the farm-out is worth $125mn, or £98mn), and has a 100 per cent carry on its share of front-end engineering and design (FEED) expenditure to final investment decision (worth up to $12.5mn). NEO will also pay Jersey the next deferred cash payment of $9.4mn on finalisation of the GBA project solution, possibly before the year-end when the acquisition of a floating, production, storage and offloading (FPSO) vessel is expected to complete.
So, having ended the first half with net cash of £5.6mn, Jersey’s management team is in a position of financial strength to seek a second farm-out partner with the aim of retaining a fully-carried 20 to 25 per cent interest in the GBA project. Discussions are ongoing with industry parties who are interested in farming-in the GBA licences for a non-operated working interest.
The progress NEO is making can only facilitate Jersey securing a second farm-out transaction. The large UK North Sea producer has already moved the Buchan redevelopment into the FEED phase, is preparing the environmental statement for submission before the year-end and preparing the field development plan for submission to the UK oil regulator in the first half of 2024.
Jersey’s move to completely de-risk the project comes at a time when the coffers of UK North Sea oil producers are being swelled by the surging price of Brent Crude, giving them an extra incentive to recycle excess profits into a tax shelter to mitigate the impact of the UK’s windfall energy tax. The GBA project fits the bill.
Unwarranted discount to fair valuations
The disconnect between Jersey’s current valuation and the value of its assets is even more striking given that the $147mn (362p) combined value of the full carry on 12.5 per cent of Buchan’s gross project development capital expenditure and the deferred cash payments from NEO are worth double the company’s current market capitalisation.
So, although Jersey’s share price remains below the 205p in my 2019 Bargain Shares portfolio, and has flatlined since my last article ('A bargain way to exploit a rising oil price, 14 August 2023), a second farm-out possibly before the year-end is a likely catalyst to drive an overdue re-rating. Buy.
Interesting development in Li-Ion batteries - article on Science daily.
"A research team has succeeded in developing a non-flammable gel polymer electrolyte (GPE) that is set to revolutionize the safety of lithium-ion batteries (LIBs) by mitigating the risks of thermal runaway and fire incidents."
https://www.sciencedaily.com/releases/2023/10/231018115629.htm
In the Proactive interview with Gordon Stein on 21st June he mentioned 4 -6 weeks for FB update - so in next 2 - 4 weeks time. He also mentioned initial results from Llamara - again in 4 - 6 weeks. So an interesting August approaching.
UK North Sea-focused upstream oil and gas company Jersey Oil & Gas (JOG:277p) has announced a farm-out of its GBA licenses to NEO, a major UK North Sea operator producing 90,000 barrels of oil equivalent per day. NEO is backed by HitecVision, a private equity investor focused on Europe's offshore energy industry with $8bn (£6.4bn) of assets under management.
In exchange for divesting a 50 per cent working interest and operatorship in the GBA licences to NEO, Jersey will receive a full carry on 12.5 per cent of gross project development capital expenditure to Buchan first oil (this element is worth $125mn); full carry on its share of FEED expenditure to Final Investment Decision (worth up to $12.5mn); $2mn on farm-out transaction completion (likely in the coming months); $9.4mn on confirmation of the development plan (likely in the second half of 2023); and $12.5mn on project FID (likely in the first quarter of 2024). Jersey will also receive a further $5mn on FID on each of its J2 and Verbier discoveries. Moreover, management plans to farm out a portion of its 50 per cent retained stake, with a target of ultimately holding a 20 to 25 per cent interest on a fully carried basis.
Analyst Daniel Slater at Zeus Capital values the 12.5 per cent interest on which Jersey will now be fully carried to first oil at 374p per share on a risked basis, or 468p unrisked. Assuming the company achieves similar terms to the NEO deal on a farm-out of its remaining stake to retain 22.5 per cent, Slater values this additional 10 per cent retained stake at 241p per share risked, or 344p unrisked. After adjusting for valuations of the J2 and Verbier discoveries, the upfront cash payments under the NEO farm out, and factoring in Jersey’s current net cash of £6.5mn, Zeus arrives at a total risked NAV per share of 703p, or unrisked NAV of 952p.
It looks a cracking deal that significantly de-risks the investment and should drive material share price upside once investors fully digest its full implications. The muted initial response – an 8 per cent fall, although the shares had almost doubled in the past week – is a repeat buying opportunity. Buy.
Nick11 - Yes the wait for information is frustrating, but as you point out they can't share confidential contract information. An update on the programme would be helpful.
Gooner - I haven't been sitting here watching Chariot for the last 13 years only approx. 1 - 2 years . However I have been project managing a fair few design and construction contracts (pipework recently) for the last 30 plus years. So only sharing my own view based on career experience in an engineering role. Doesn't matter who it is , theres a whole load of work involved behind the scenes.
The FEED was only completed in March. Bear in mind this isn't a finished detail design. They need to write tender documents, allow time for tendering and then assessment to be in a position to understand price, programme etc. Wouldn't expect that to be completed in less than 3 months even in a rush. So June would be reasonable to have a better understanding of CAPEX. If it was my company I'd want all those various aspects of projects costs buttoned down before signing the GSA. So it may not be the "other side" holding things up, just Chariot being sensible. Would be more worried that they rush into contracts without necessary due diligence
https://www.newpower.info/2023/04/eu-opens-joint-gas-buying-scheme-as-fears-are-raised-over-supplies-for-coming-winter/
A distraction whilst the wait continues. Positive news for anyone with Gas to offer the EU. Shame Chariot won't have Gas to sell yet but bodes well for the future.
Einbert - I think you were correct - however currently being overcharged= excessive gassing
Simon Thompson (Investor Chronicle) featured Chariot again this week. Surprised that didn't give them a little "nudge" as he is still positive its a good buy. Perhaps Royal Mail didn't deliver on time ?
Re Nuclear Power (I work in Nuclear):- Just to put into context Mr Kartoon Carcrashes comments about UK's Nuclear Industry :- For Hinkley C (HPC) -first electricity generation June 2026, compared with end-2025 as initially announced in 2016. Cost of the project between GBP22 and 23 billion.
Note the 10 year timeline - It takes approx 7 years to build a new Nuclear site - thats after years of planning, public consultation etc etc. Not going to happen anytime soon. Factor in how many additional wind turbines you could build (and how quickly) for £23Billion. His comments on "Nuclear future" may have some future relevance for security of energy supply, however not in the timescales to overtake ITM's plans. Boris came out with some rubbish with X reactors online every year. Yes if they started now, had a spare £100Billion you could have 4 in approx 2032 at the earliest. SMR's technology is not yet approved by UK regulator ( frustrating the designers) - they only replace a small proportion of what has already been shut down. If you want to see the energy mix in context look at https://www.gridwatch.templar.co.uk/ - then consider how you fix sometimes supplying up to 50% of UK's power burning gas in CCGT (Combined Cycle Gas Turbines) when the wind stops. Yes Nuclear is good longer term - but short term chuck an excess of wind turbines in the sea, and set yourself up for making Hydrogen which can be used when the wind stops.
I don't have a lot of cash in ITM, but I think H2 (and the electrolyser associated with production etc) is the future and the market will eventually recognise this instead of brief moments of excitement.