Malcy’s Blog: Flash blog: JOG, Eco, UOG.

A flash blog today as I’m in town doing an interview, as usual I’m making brief comments and will flesh them out as necessary later. 

Jersey Oil & Gas

Jersey Oil & Gas has provided a corporate update and outlook for the year ahead.

Highlights

§ Outcome of the UK Government’s regulatory and fiscal consultations have been set – providing an opportunity to optimise the investment programme for development projects like Buchan

§ Work planned to assess the optimal Buchan development solution within the re-set investment horizon

§ Buchan joint venture partners are materially growing through further corporate consolidations – Buchan well positioned

§ JOG’s solid financial position maintained – the business is right-sized for its current activities and focused on achieving its growth potential 

UK Oil & Gas Industry Landscape

§ Following the lengthy regulatory and fiscal consultations carried out by the UK Government during 2025, clarity was finally obtained in the latter part of the year on both the future application of environmental regulations and the longer-term fiscal framework for the oil and gas industry.  The environmental consultation confirmed the need for oil and gas developments like Buchan Horst (“Buchan”) to assess the Scope 3 emissions arising from the project as part of its regulatory approval submissions.  In terms of the fiscal regime, the consultation resulted in the continued application of the Energy Profits Levy (“EPL”) in its current form until 1 April 2030, which implies a marginal tax rate of 78% for the industry.  The successor regime, the Oil and Gas Price Mechanism (“OGPM”), replaces the EPL with a revenue-based model for calculating windfall profits, that levies a 35% tax only on the revenues generated above applicable commodity threshold prices (in addition to the corporate and supplementary tax rate of 40%). 

§ Under the OGPM two independent threshold price points will be set annually, one for oil (in dollars per barrel) and one for gas (in pence per therm).  The thresholds in financial year 2026-27 have been set at $90/bbl for oil and 90p/therm for gas – they will be adjusted annually in line with CPI inflation and are projected to be around $98/bbl and 98p/therm by 2030.  When in effect the OGPM restores the tax rate to the 40% headline rate in the permanent regime, with the OGPM only applying to oil or gas revenues in the event the respective commodity price is unusually high.

§ The interplay between the EPL and OGPM regimes provides tax paying companies with the opportunity to continue securing a 78% tax offset (including 38% attributable to the EPL) for every pound invested between now and 2030 (or 84.25% when including the investment allowance available on the Supplementary Charge Tax), alongside the potential to generate revenue from those investing activities post 2030 with just the permanent 40% tax rate applicable so long as commodity prices remain under the OGPM threshold prices.  This points to it being optimal for long term investments being undertaken between now and the end of the decade.

§ Alongside the changes in the regulatory and fiscal landscape, 2025 was also marked by a step change in the scale of both our Buchan joint venture partners.  NEO Energy Limited, the operator for the Buchan development project, not only combined its business with the UK subsidiary of Repsol S.A., but in December 2025 it announced a subsequent merger with the UK business of TotalEnergies S.A., to create NEO Next+ (“NEO”). 

§ Upon completion of the NEO Next+ transaction, NEO will become the leading operator and producer in the UK North Sea, with an expected production portfolio of over 250,000 barrels of oil equivalent per day (“boe/d”). 

§ Serica Energy (“Serica”) (AIM: SQZ) also announced a series of strategic acquisitions during the year, establishing the business as the leading mid-tier UK North Sea producer.

Greater Buchan Area

§ The major transformations that have taken place with NEO and Serica places the growth prospects that the Buchan project provides within two high-quality, UK North Sea focused asset portfolios.  Access to a project with estimated gross mid case proven and probable resources of approximately 70 million barrels of oil equivalent represents a material prize at this stage of the UK North Sea lifecycle. 

§ There continues to be active engagement between the Buchan joint venture partners, particularly around the key strategic engineering decisions and plans for the development.  Work is progressing to prepare the necessary addendum to the Buchan Environmental Impact Assessment incorporating the requirements of the updated guidance regarding the inclusion of Scope 3 emissions, as well as setting out the socio-economic benefits to the UK that the development will deliver. Value engineering work is also being completed, particularly with respect to drilling and subsea infrastructure scopes of work, as part of the pre-sanction technical work aimed at optimising the capital expenditure programme for developing the field.

§ NEO’s recent strategic moves also provide the Buchan joint venture with the means to assess the development solution for the field with a wider lens.  While the “Western Isles” floating production, storage and offloading (“FPSO”) vessel has been set out as the development solution in the draft Field Development Plan (“FDP”), the passage of time resulting from the delays caused by the Government’s industry consultations means other potential production solutions warrant further screening and consideration.  As such, the FPSO represents one of several options for Buchan.  Additional development engineering activities to evaluate these alternatives will now form part of the project work programme to be completed during 2026.

§ The Greater Buchan Area (“GBA”) partners elected to partially relinquish a portion of the P2170 “Verbier” licence acreage in late 2025.  This enabled an approximately 40% reduction in licence fees, attributable to the cost of the area that contained the highest risk exploration prospect on the licence (the retained licence area still contains the Verbier and J2 discoveries and the “Verbier Deep” and “Cortina” exploration prospects).  The Company’s P2170 licence costs are not carried by its Buchan joint venture partners.

§ The P2498 (“Buchan”) and P2170 licences are both in the Second Term, the period in which licencees need to obtain FDP approval in order to subsequently move into the Third Term, which covers the development and production phase of activities for the life of a field.  The end of the Second Term of the P2498 licence is 28 February 2027 and 29 August 2026 for the P2170 licence.  Significant progress has been made on the Buchan development, which facilitates unlocking the wider GBA resource base contained in licence P2170, and an application to extend the Second Term duration of both licences will be made to the North Sea Transition Authority (“NSTA”) during the current year.  With the draft FDP and associated Environmental Impact Assessment for the Buchan development already submitted to the NSTA, the regulator is fully briefed on the joint venture’s plans for the GBA and NEO is well placed to continue its engagement with the regulator on the proposed extensions. 

Strategic Focus

§ The Company’s vision is centred on successfully growing the business in a smart and sustainable way, developing important domestic energy supply in response to society’s energy needs and creating value for our stakeholders.  The organisation is “right sized” for the stage and scale of its activities and maintains a nimble approach to advancing its key strategic objectives.

§ The Company remains sharply focused on unlocking the organic value of its existing assets in the GBA, combined with the pursuit of potential accretive asset acquisitions that bring cash flow, diversity and quality investment opportunities into the portfolio. 

§ With over £100 million of UK tax allowances, including an element of EPL losses, UK North Sea opportunities continue to be thoroughly assessed in terms of their potential strategic fit.  The Company is also evaluating international producing asset opportunities which have the potential to sensibly deploy the financial resources of the business.                                                                                             

Solid Financial Position

§ The Company’s cash balance at the end of 2025 was approximately £11 million with no debt.

§ The cash running cost of the business were reduced by approximately 50% at the end of 2024, as a result of the actions taken following the slowdown in activities on the Buchan project.  As a result total cash expenditure in 2025 is expected to be approximately £1.5 million, with the corresponding cash cost for 2026 currently projected to be a little under this level absent any changes in the underlying activities of the business.

§ Per the terms of the farm-out agreements executed with NEO and Serica, the Company’s 20% share of Buchan project expenditure is fully carried by its two joint venture partners.  A further $20 million cash payment is payable under the terms of the agreements following approval of the FDP by the NSTA and receipt of the associated regulatory and legal consents. 

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

“It is clear that the regulatory and fiscal consultations the Government has undertaken since coming into office in July 2024 have disrupted the UK North Sea oil and gas industry and stifled investment activities.  However, the outcome of the consultations have now been finalised and the fiscal terms within which to best optimise investment decisions have been set.  These terms point to a longer investment cycle over the coming years, which maximises value across the applicable fiscal regimes.  For Buchan, taking the time now, to verify and engineer the best possible development solution within that cycle, should ultimately enhance the overall value of the project for all parties.

While the Government has been working to set the overall parameters in which the industry operates, the corporate landscape has also evolved.  Most notably our joint venture partner and Buchan field operator, NEO Next+, on completion of its latest deal, will establish itself as the largest operator and producer in the UK North Sea.  This represents an exciting step, both for us to be working alongside the leading player in the basin and to be part of one of the key growth opportunities in its asset portfolio.  The Greater Buchan Area, with estimated gross resources of over 100 MMboe and significant exploration upside, represents a material opportunity on a standalone basis and within the outlook of the UK sector as a whole.

JOG can now positively put behind them the fiscal uncertainty the industry has had to endure and with the consultations now put to bed, can start to look forward.  The replacement of the EPL does provide an opportunity for development investment in the window from now until 2030, timed right to produce back in a 40% tax rate. 

Work is planned to assess the optimal Buchan development solution within the re-set investment horizon.  Buchan is a material growth asset and I am encouraged that the JV partners have strengthened, with operator NEO Next+ on completion of its latest deal cementing itself as the largest oil and gas producer in the UK North Sea.

I remain convinced that the significant upside case is very much still in place and that with patience shareholders will be rewarded.

Eco (Atlantic) Oil & Gas

Eco has provided the following update regarding its offshore position in Guyana.

The Company is pleased to announce that, together with Navitas Petroleum LP (“Navitas), it is engaged in ongoing, constructive discussions with the Ministry of Natural Resources (“MNR”), Government of Guyana, regarding the continuation of Eco’s appraisal and exploration programme on the Orinduik Block area. While the Orinduik Licence reached the end of its second renewal term on 14 January 2026, the provisions under the Petroleum Act allow the Company to maintain rights to the Jethro-1 and Joe-1 discoveries pending approval of the submitted appraisal programme.  To this effect, the MNR and Guyana Geology and Mines Commission are in receipt of the relevant joint submissions from Eco Atlantic and Navitas.  Eco Atlantic and Navitas continue to pursue the most efficient and value-accretive path forward that will be acceptable to the Ministry.

Eco and Navitas’ appraisal and new exploration work programme discussions are part of a customary regulatory process under the existing legislative framework.  This dialogue reflects Eco’s long-standing commitment to responsible exploration and potential development in collaboration with the Government of Guyana, and its new framework agreement with Navitas.  The Company will update the market as and when appropriate.

Gil Holzman, President and Chief Executive Officer of Eco Atlantic, commented:

 “We continue to engage constructively with the Government of Guyana and our partners as we work through the next phase of our exploration and appraisal work in the basin. Our focus remains on preserving access to existing discoveries, progressing appraisal activity, and evaluating opportunities to enhance the Block configuration in a manner that is aligned with both shareholders’ values and as importantly Guyana’s Government national objectives.”

It should be clear from this that Eco are continuing to appraise their existing discoveries in Guyana whilst in parallel in ‘positive discussions’ with the Government to continue to explore the light oil potential. 

At present I think that Navitas and Eco will be awarded an extension which means that my positive take on the company is fully justified.

United Oil & Gas

United has provided the following operational update to shareholders.

TDI-Brooks International has advised the Company that their current work programme has been completed and the R/V Gyre is now undertaking pre-mobilisation preparations in Trinidad ahead of its upcoming work programme for United. They are guiding that the vessel will commence mobilisation during the next week for United’s planned offshore piston coring and surface geochemical survey on the Walton Morant Licence, offshore Jamaica.

The offshore survey programme will include multibeam echo sounder (MBES) mapping, heat-flow measurements and the collection of seabed piston cores, designed to confirm the presence of thermogenic hydrocarbons and further de-risk the basin.

United continues to coordinate closely with TDI-Brooks and the relevant Jamaican authorities in preparation for mobilisation. A further update will be provided to shareholders once mobilisation from Trinidad has occurred and the vessel is en-route to Jamaica.

Brian Larkin, CEO of United Oil & Gas, commented:

“We are pleased that the R/V Gyre has completed its prior survey programme and is now preparing to mobilise for United. We continue to work closely with TDI-Brooks and the relevant authorities as we move toward mobilisation, and we look forward to providing a further update once the vessel departs Trinidad.”

Not much to add here and the slight delay won’t make any difference given the extended timeframe already.