Jersey Oil & Gas (JOG:63p), a UK North Sea-focused upstream oil and gas company that owns an 18 per cent interest in the P2170 licence (Blocks 20/5b & 21/1d), Outer Moray Firth, is the laggard in my 2019 Bargain Share Portfolio, a reflection of last month’s disappointing results from the company’s appraisal drilling programme on its flagship Verbier discovery in Block 20/5b (‘Jersey’s drilling disappoints’, 3 April 2019). As a result the shares are trading on a massive discount to house broker Arden Partners’ risked net asset value (NAV) per share estimate of 233p (833p on an unrisked basis) using a long-term Brent crude price of $65 a barrel, or 10 per cent below the current market price.
Annual results for 2018 released today reveal that Jersey had net cash of £19.8m at the end of 2018, a sum worth 90p a share, of which £4m to £5m will be utilised in the first six months of 2019, largely to settle its share of the Verbier appraisal well results. This implies a minimum net cash position of £14.8m at the end of June 2019, a sum worth 68p a share, so effectively nil value is being attributed to the company’s exploration assets.
This is incredibly harsh given that that Jersey’s management still believe that Verbier is commercially viable at the lower end of the initial resource estimate of 25m and 130m barrels of oil equivalent (boe). House broker Arden Partners places a risked value of $37m (125p a share) on Verbier on this basis, or double Jersey’s current share price. Importantly, there are catalysts on the horizon to narrow the huge share price discount to risked NAV.