GreenRoc Accelerates their World Class Project to Production as Early as 2028. Watch the full video here.
I spent the last 3 hours going through this. I find it odd: “investors” buy a stock I front of an event with no clarity and then sell it on the news, good or bad. I think this is a v good deal better than I expected and am buying the stock because worst case it’s a double. Here is my JOG deal math:
Buchan NPV is c$1bn. Using a discount rate of 10%, first spend $1bn, then discount the subsequent oil produced. An NPV is thus after tax $2bn of oil sold LESS $1bn of capex. (using $65 oil which my view is way too low). First oil is 2026 – surprisingly quick – but ill assume its 4 years from now. That means 4 years the $1bn is spent, but the $2bn of oil sales is four years closer, and has unwound to $2.9bn (ie each year you remove a 10% discount – but at same time you have to compound the capex up as you spend up front and have a funding cost, or cost of equity – but in practice the NPV is going up in value at the discount rate of 10%). But let’s park the issue of the discount for now.
NEO – the most dynamic energy play in the region now with deep PE pockets - will now fund 62.5% of the CAPEX in return for 50% of the revenues. So $625m CAPEX gets them $1bn (50% of $2bn) revenue. So a 60% uplift on its CAPEX PLUS the discount rate annualised. If we assume it funds 50% debt (or $250m being 50% debt to share of NPV), then it puts up $375m of equity, and in production it has invested $375m equity, $250m debt and has an asset of $1bn. It doubles ist money from now to 2026. The IRR is 19% (2x money achieved in 4 years), based on oil at $65 (too low). That is in today’s money – in 4 years time its another 50% more in discount unwind. Discount rates are important as you take the discount and then accretes back to you.
It is the same maths for JOG – assume it does another 20% farm out on same terms. What I like is that they have a secured a deal and from a position of strength can select high value farmouts. Let’s say the new operator takes 20%, but funds $250m of the capex. Residual capex to JOG is $1bn LESS 625 (neo) LESS 250 = $125m (so the debt to NPV 40%, below the 50% assumed for NEO). No equity is required, this capex can be debt funded, but it has 30% of $2bn of oil revenue =$600m. less debt $125m = $475m / 1.25 FX rate = £380m. Assume shares issued up to 40m = £9.50 fair value in 2026. Plus discount rate unwind, which is leveraged for JOG as it ends up with only 12.5% of the cost for 30% interest in future revenues.
Briggs. I’m intrigued with your opinion. JOG is certainly a binary investment/gamble. Does it successfully achieve a farmout, or not. I think it will. The asset, demand for oil, location etc and then recent RNS does have to be reasonably truthful, all of which I find encouraging.
You’re right, it’s a gamble. IMO, the odds are in my favour. Potential upside and chances of an agreement. I’d like to understand why you say me and other holders/gamblers are delusional? Do you know something we don’t?
5 mornings to go for some sort of RNS. I believe that the company would’ve announced by now if some sort of commercial agreement wasn’t going to occur.
So assuming it’s coming, let’s try and work out what we need to value the company.
For starters,
In this environment , any deal is a good deal.
Quality of partner
Cash upfront of does JOG need to raise capital
Percentage JOG keeps of economics
Likelihood of company being acquired going forward
What other metrics?
Let’s work together and be constructive
sales of £2.25bn vs £2.38bn est. Growth drivers were THG Beauty & THG Nutrition. Implemented cost savings of c£100m in FY22, with a further c£30m planned. Ingenuity close to agreeing further contracts. Expect adj EBITDA to be in line with mkt exp. This has been helped by discounting a proportion of Ondemand sales. Medium margin guidance reiterated. They are to review parts of the business. Overall they have missed revs est in every division and after the run they have had, not good enough.
I suggest we all grow up. Perhaps re-read the IC article:
With Brent Crude surging though $100 a barrel, then this bodes well for Jersey Oil & Gas (JOG:135p), a UK North Sea-focused upstream oil and gas company that is in the process of farming out its 100 per cent owned Greater Buchan Area (GBA) project, which holds 172mn barrels of oil equivalent (boe) of discovered P50 recoverable resources (net to Jersey). A further 168mn boe of prospective resources have been identified close to the Buchan field, too.
At an oil price of US$65 a barrel, the GBA project is forecast to produce US$840m cash profit in the first full year of production and total pre-tax free cash flow of US$6.4bn over its life. Moreover, with operating costs estimated at US$8-$9 boe during plateau production on the drill-ready exploration targets, the $1bn capital expenditure required to reach first oil would be paid back in less than three years. The spot oil price is $103 a barrel, and the spot gas price equates to an eye-watering $193 a barrel, so the payback could be less than two years at current prices.
Bearing this in mind, Jersey has strengthened its board by appointing the former management team from Ithaca Energy who transformed what was a junior producer by acquiring the Greater Stella Area (GSA) before selling the company for $1.2bn in 2017. GBA is more than five times the size of GSA in terms of expected recovery. Jersey’s board is now chaired by Les Thomas, Ithaca’s former chief executive. Graham Forbes, former finance director of Ithaca, has taken the same role at Jersey and Richard Smith, Ithaca’s former corporate development director, is the company’s new chief commercial officer. It’s quite some coup and shows serious intent from chief executive Andrew Benitz. Farm-out talks with multiple counterparties are ongoing, and although a standalone concept remains the preferred route, Jersey is also in talks with nearby infrastructure owners.
If the directors pull a farm-out off, then expect a dramatic re-rating of Jersey’s equity. To put the current undervaluation into perspective, Arden Partners’ oil and gas analyst Daniel Slater has a risked valuation of $384m (870p a share) after factoring in a long-term natural gas price of 48p a therm (spot price 250p) and $65 a barrel for Brent Crude (spot $103). WH Ireland’s fair value estimate of 622p a share is more than 3.5 times the company’s current share price. The 15 per cent share price drift since I covered the half-year results is not only unwarranted, but offers a potentially highly lucrative entry point. Jersey has net cash of around £9.6mn, so is in a strong position to seal a deal. Buy
IMO the article is reasonably logical, it certainly gives me confidence when the stock price is under pressure. All shareholders want a Farmout, logically the company can get a far better deal today that they could have got six months ago. I hope for a deal soon, but it's a missive expenditure, so requires time.
On the 3rd March, 2021, the company stated
'With its Concept Select Report finalised, JOG is now in a position to launch its previously announced farm-out process to seek to secure an industry partner for the GBA Development Project. JOG's Board anticipates that this will be well received by the industry as an exciting investment opportunity, in light of its scale, economics and low carbon production approach, and currently intends to conclude this process before the end of 2021.'
Since then, the company has raised money, changed executives and is now 3 months after date they expected to conclude the process. Andrew Benitz needs to update the shareholders.
dick! imo you totally miss the point. be realistic and important to work out downside risk.
if JOG keeps a lot more than 18%, hallelujah. But returns pretty good with only the number i used in example.
what number do you use for fully funded producing assets? Perhaps you don't know the answer? If so, even less than 1 out of 10 for you.
for dreamers, at first oil, companies are trading at approximately $15 for every barrel of oil in ground.
So if JOG did farm out, without any requirement for capex,
10% would equate to 18 million barrels x $15
20%, 36 x $15 etc
I'm guessing 18% is realistic. equals a market cap of $480 million.
That's a stock price of £10.80 at first oil, five years?
I'd add that chances of farmoutz are better than 50/50 and reasonably soon. Decent odds? And then what happens if oil is $120 next year?