Jersey Oil&gas Regulatory News (JOG)

22 September 2022

Jersey Oil and Gas plc

("Jersey Oil & Gas", "JOG" or the "Company")

Interim Results for the Six Month Period Ended 30 June 2022

Jersey Oil & Gas (AIM: JOG), an independent upstream oil and gas company ‎focused on the UK Continental Shelf ("UKCS") region of the North Sea, is pleased to announce its unaudited Interim Results for the six month period ended 30 June 2022.

Highlights

§ Favourable fiscal and macroeconomic developments have further bolstered interest in our on-going "Greater Buchan Area" ("GBA") farm-out process

§ GBA farm-out process advancing as planned, with continued active engagement with multiple counterparties

§ Substantial progress has been made, with the majority of interested parties forecast to complete their technical due diligence in October 2022

§ Constructive commercial discussions are taking place with potential counterparties

§ Cash position of approximately £8.7 million, with no debt, as at 30 June 2022 - well ahead of the group's forecast

Andrew Benitz, CEO of Jersey Oil & Gas, commented:

"Great progress is being made with our GBA farm-out process - the key activity for the Group in 2022. Interest is strong, technical studies across the various development solutions are well advanced and commercial discussions are ongoing with serious, well-funded counterparties. Since launching the process, the Company's engagement strategy has been broadened to advance a range of competing development solutions, thereby providing increased optionality."

Enquiries:

Jersey Oil and Gas plc

Andrew Benitz, CEO - c/o Camarco Tel: 020 3757 4983

Strand Hanson Limited

James Harris / Matthew Chandler / James Bellman Tel: 020 7409 3494

Arden Partners plc

Rory McGirr Tel: 020 7614 5900

finnCap Ltd

Christopher Raggett / Tim Redfern Tel: 020 7220 0500

Camarco

Billy Clegg / Rebecca Waterworth Tel: 020 3757 4983

Notes to Editors:

Jersey Oil & Gas is a UK E&P company focused on building an upstream oil and gas business in the North Sea. The Company holds a significant acreage position within the Central North Sea referred to as the Greater Buchan Area ("GBA"), which includes operatorship and 100% working interests in the P2498 Licence Blocks 20/5b and 21/1d that contain the Buchan oil field and J2 oil discovery and a 100% working interest in the P2170 Licence Blocks 20/5b & 21/1d, that contain the Verbier oil discovery and other exploration prospects.

JOG is focused on delivering shareholder value and growth through creative deal-making, operational success and licensing rounds. Its management is convinced that opportunity exists within the UK North Sea to deliver on this strategy and the Company has a solid track-record of tangible success.

Forward-Looking Statements

This announcement may contain certain forward-looking statements that are subject to the usual risk factors and uncertainties associated with an oil and gas business. Whilst the Company believes the expectations reflected herein to be reasonable in light of the information available to it at this time, the actual outcome may be materially different owing to factors beyond the Company's control or otherwise within the Company's control but where, for example, the Company decides on a change of plan or strategy.

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014 as it forms part of United Kingdom domestic law by virtue of the European Union (Withdrawal) Act 2018, as amended.

Chairman & Chief Executive Officer's Report

GBA Farm-out Process Update

Encouraging progress continues to be made on our GBA farm-out process, and the Company remains actively engaged with multiple counterparties. Joint technical studies for the various different development solutions are now at an advanced stage.

As previously highlighted, since launching the farm-out process, a broad range of competing development solutions has been generated to supplement the initial work on the proposed installation of a new processing platform. The alternative solutions include tiebacks to existing platforms and the re-use of available floating production, storage and offloading ("FPSO") vessels.

Since confirming the technical and economic attractiveness of the potential GBA development solutions earlier this year, JOG's most recent operational focus has been centred on completing confirmatory pre-Front End Engineering and Design studies for the various options with the different counterparties. The studies are being undertaken in collaboration with the infrastructure owners and cover areas that serve to validate and de-risk the different solutions and associated capital expenditure forecasts. While the precise studies are specific to each potential solution, they broadly cover work on flow assurance, host facility "brownfield" modification requirements and potential future electrification workscopes. This technical work is expected to conclude in October 2022.

Whilst there can be no certainty of a successful conclusion, constructive commercial discussions are also now well underway.

Regional Electrification Opportunities

The different GBA development solutions that are being assessed all have the potential to be a component of the future Outer Moray Firth offshore wind electrification plans that are currently being considered as part of the Government's Innovation and Targeted Oil and Gas ("INTOG") leasing round process. As such, we were pleased to provide a leading offshore wind developer with a letter of support as a potential power user to assist them in their application for a lease in the upcoming INTOG offshore wind licence round. This operator has experience in both development and operations for floating offshore wind. In addition to the GBA being a potential off-taker of locally sourced wind power, there are also complimentary investment opportunities in offshore wind that require further evaluation.

Licensing activity

JOG continues to work closely and constructively with the North Sea Transition Authority ("NSTA") on our licence commitments. On Licence P2498, which includes the Buchan field as well as the J2 and part of the Verbier discoveries, our milestone related to delivery of a Field Development Plan ("FDP") has been adjusted to align with the current scheduled licence expiry in August 2023 and, pending conclusion of a successful farm-out, we are on track to deliver on this. Upon approval of an FDP, the licence would then move into the "third phase", which covers all future development and production activities. On Licence P2170, there is a requirement to submit an FDP for the Verbier discovery in order to advance the licence into the third term. Verbier is part of our phased area wide GBA development plan, with production scheduled to commence following the start of production from the Buchan field. The P2170 Licence is due to expire on 22 November 2022, therefore we are in close consultation with the NSTA to agree an appropriate way forward.

JOG's Acquisition Strategy

JOG's priority is to secure a GBA farm-out and any M&A activity has been focused around this objective. We have evaluated potential asset swaps as part of our ongoing discussions, but remain of the view that an industry farm-out provides the best solution to advance the planned GBA development and thereby deliver greater value for shareholders. Building a full cycle upstream business focused on the UKCS remains the ultimate goal for JOG.

Financial Review

JOG's cash position was approximately £8.7 million as of 30 June 2022. The cash spend of the business will continue to be comfortably below the £1.5 million per quarter run rate previously forecast. As an oil and gas exploration and development company, JOG had no production revenue during the period and received only a small amount of interest on its cash deposits.

The loss for the period, before and after tax, was approximately £1.2m (2021: £1.9m). The Company's main expenditure during the first half of 2022 related to technical studies assessing parallel development options for our GBA Development project. The Company remains well funded to fulfil its farm-out objective.

Tax

The Energy Profits Levy ("EPL") that was introduced by the Government in May 2022 caught the industry off guard, particularly those that have invested and built production portfolios in the UKCS over the past few years. Fiscal instability has made some question their North Sea investment strategy. The silver lining, however, was the introduction of a generous investment allowance that is specifically ring fenced to attract capital spend into new investments. A full taxpayer in the North Sea now has the ability to secure 91% tax relief through investing into new projects, essentially meaning that for a cost of only 9p a company can get £1 of investment value. Projects of the scale of the proposed GBA development should benefit from this investment allowance.

Summary and outlook

A significantly improved macroeconomic outlook for the oil and gas sector compared to last year has ushered in significant profits for the oil majors. The pandemic and terrible events in Ukraine have masked the underlying issue that is challenging the upstream sector - namely, a looming supply crunch. The industry has been starved of capital since 2015 and this has led to chronic under investment. Energy transition is an important issue and the oil and gas industry is at the forefront of the challenges that this evolution brings. It must be managed appropriately as hydrocarbons continue to provide the world with approximately 80% of its daily energy supply. Unfortunately, inflationary pressures resulting from a restricted energy supply are already being seen and, in turn, the even more concerning prospect of energy poverty. The world needs urgent and responsible investment upstream to address the supply shortfall against a backdrop of significantly increasing global demand for energy. Consumers, industry and Governments deserve access to affordable energy to go about their lives during the energy transition.

It will take time for the supply side to increase, and in the meantime continued high oil prices are highly likely. The GBA is a vital resource and is estimated to be the third largest oil development opportunity in the UKCS. We look forward to concluding the farm-out process and thereby securing investment to take this project into development and contributing to ensuring long term energy supply and security for the UK economy.

We appreciate the ongoing commitment of our dedicated team and the professionalism they have displayed throughout our industry and stakeholder engagement. We also thank our shareholders for their ongoing and unstinting support as we continue to advance our GBA farm-out process.

22 September 2022

JERSEY OIL AND GAS PLC

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 30 JUNE 2022

The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.

JERSEY OIL AND GAS PLC

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2022

The above consolidated statement of financial position should be read in conjunction with the accompanying notes.

JERSEY OIL & GAS PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED 30 JUNE 2022

The following describes the nature and purpose of each reserve within owners' equity:

Reserve Description and purpose

Called up share capital Represents the nominal value of shares issued

Share premium account Amount subscribed for share capital in excess of nominal value

Share options reserve Represents the accumulated balance of share based payment charges recognised in respect of share options granted by the Company less transfers to retained deficit in respect of options exercised or cancelled/lapsed

Accumulated losses Cumulative losses recognised in the Consolidated Statement of Comprehensive Income

Reorganisation reserve Amounts resulting from the restructuring of the Group

The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes

JERSEY OIL AND GAS PLC

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED 30 JUNE 2022

The above consolidated statement of cash flows should be read in conjunction with the accompanying notes

JERSEY OIL AND GAS PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 JUNE 2022

1. GENERAL INFORMATION

Jersey Oil and Gas plc (the "Company") and its subsidiaries (together, "the Group") are involved in the upstream oil and gas business in the UK.

The Company is a public limited company incorporated and domiciled in the United Kingdom and quoted on AIM, a market operated by London Stock Exchange plc. The address of its registered office is 10 The Triangle, ng2 Business Park, Nottingham, NG2 1AE.

The Group's half year condensed financial statements for the six months ended 30 June 2022 were authorised for issue in accordance with a resolution of the Board of Directors on 22 September 2022.

2. BASIS OF PREPARATION AND ACCOUNTING POLICIES

Basis of Preparation

The interim condensed consolidated financial statements for the six months ended 30 June 2022 have been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting".

These unaudited interim consolidated financial statements of the Group have been prepared following the same accounting policies and methods of computation as the consolidated financial statements for the year ended 31 December 2021. These unaudited interim consolidated financial statements do not include all the information and footnotes required by generally accepted accounting principles for annual financial statements and therefore should be read in conjunction with the consolidated financial statements and the notes thereto in the Company's annual report for the year ended 31 December 2021.

The financial information contained in this announcement does not constitute statutory financial statements within the meaning of section 435 of the Companies Act 2006.

Consolidated statutory accounts for the year ended 31 December 2021, on which the auditors gave an unqualified audit report, have been filed with the registrar of Companies. The report of the auditors included in that 2021 Annual Report was unqualified and did not contain a statement under either Section 498(2) or Section 498(3) of the Companies Act 2006.

Going Concern

The Group has no material firm work commitments on any of the Group's licences, other than ongoing Operator overheads and licence fees. Other work that the Group is undertaking in respect of the GBA licences and surrounding areas is modest relative to its current cash reserves. The Group expects to be able to manage its estimated cash outflows such that its current cash reserves are expected to more than exceed its estimated cash outflows in all reasonable scenarios for at least 12 months following the date of issue of these interim financial statements. Based on these circumstances, the Directors have considered it appropriate to continue to adopt the going concern basis of accounting in preparing these interim financial statements.

Accounting policies

The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31 December 2021. No new standards, amendments or interpretations have had a material impact on the Group's interim consolidated financial statements for the period ended 30 June 2022.

The impact of seasonality or cyclicality on operations is not considered significant on the interim consolidated financial statements.

3. SEGMENTAL REPORTING

The Directors consider that the Group operates in a single segment, that of oil and gas exploration, appraisal, development and production, in a single geographical location, the North Sea of the United Kingdom and do not consider it appropriate to disaggregate data further from that disclosed.

JERSEY OIL AND GAS PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 JUNE 2022

4. TAX

Jersey Oil and Gas plc is a trading company but no liability to UK corporation tax arose on its ordinary activities for the period ended 30 June 2022 due to trading losses. As at 31 December 2021, the Group held tax losses of approximately £57 million (2020: £46 million).

On 26 May 2022, the UK Government announced the introduction of an Energy Profits Levy ('EPL') on the UK ring fence profits of oil and gas producers with effect from 26 May 2022. The legislation introducing the EPL was substantively enacted on 11 July 2022. The EPL is charged at the rate of 25% on taxable profits in addition to ring fence corporation tax of 30% and Supplementary Charge of 10%, making a total rate on ring fence profits of 65%.

Qualifying capital expenditure may be offset against the 25% EPL at an uplifted rate of 1.8 times. When combined with the existing Investment Allowance uplift of 6.25% this results in an overall 91.25% tax relief on new qualifying capital expenditure.

5. EARNINGS/(LOSS) PER SHARE

Basic loss per share is calculated by dividing the losses attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period.

Diluted loss per share is calculated using the weighted average number of shares adjusted to assume the conversion of all dilutive potential ordinary shares.

JERSEY OIL AND GAS PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 JUNE 2022

6. INTANGIBLE ASSETS

This represents the work capitalised on the GBA assets.

7. PROPERTY, PLANT AND EQUIPMENT

This represents the capitalised cost of computer equipment and fixtures.

JERSEY OIL AND GAS PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 JUNE 2022

8. TRADE AND OTHER RECEIVABLES

As at 30 June 2022, there were no trade receivables past due nor impaired. There are immaterial expected credit losses recognised on these balances.

9. CASH AND CASH EQUIVALENTS

The amounts disclosed in the consolidated statement of cash flows in respect of cash and cash equivalents are in respect of these consolidated statement of financial position amounts:

10. CALLED UP SHARE CAPITAL

11. TRADE AND OTHER PAYABLES

JERSEY OIL AND GAS PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 JUNE 2022

13. POST BALANCE SHEET EVENTS

None.

14. AVAILABILITY OF THE INTERIM REPORT 2022

A copy of these results will be made available for inspection at the Company's registered office during normal business hours on any weekday. The Company's registered office is at 10 The Triangle, ng2 Business Park, Nottingham, Nottinghamshire NG2 1AE. A copy can also be downloaded from the Company's website at www.jerseyoilandgas.com. Jersey Oil and Gas plc is registered in England and Wales with registration number 7503957.