By Alex MacDonald

 

LONDON--Shares in Jersey Oil & Gas PLC (JOG.LN) rose Tuesday after it agreed to give Norwegian oil major Statoil ASA (STO) a 70% stake in a series of U.K. North Sea projects in return for a $2 million up-front cash payment and the promise to spend up to $25 million on drilling a new well.

Jersey Oil and its partner CEICO Exploration and Production own 60% and 40%, respectively, of License P.2170, Blocks 20/5b and 21/1d. Once the deal is completed, Statoil will own 70% of the assets and become the operator. Jersey will retain an 18% stake, of which 10% will continue to be carried by CIECO, and CIECO will retain a 12% stake in the assets. Jersey Oil will earn $1.2 million of the up-front cash payment.

At 0733 GMT, Jersey Oil's shares were up 20% at 36.5 pence a share, resulting in a market capitalization of 3.1 million pounds ($4 million).

"We are delighted to have secured a farm-out partner of the calibre of Statoil," said Andrew Benitz, Chief Executive of Jersey Oil.

The project is estimated to hold over 500 million barrels of oil across two prospects estimated at 300 million and 212 million barrels each.

Statoil will fund all costs up to $25 million to drill the first exploration well on the P.2170 License. Planning of the well is expected to start this year, with drilling potentially planned for 2017.

"This is very encouraging for the story and suggests much more materiality to the portfolio than anticipated," said FirstEnergy Global Research, which has Jersey's rating under review. The broker said it hasn't yet applied a value to the proposed well.

 

Write to Alex MacDonald at alex.macdonald@wsj.com

 

(END) Dow Jones Newswires

August 23, 2016 04:17 ET (08:17 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
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