Jadestone Energy Share Discussion Threads

[mount teide] 11/12/2018 15:05

Hi Spangle - 'I don't recall the shutdown being planned, with its cost and lost in production revenue, when JSE came to market.'

It seems to have come about following the start of the operator transition process in early October, identifying a backlog of maintenance and inspection activities largely as a result of the incumbent operators poorly managed MMS; since rebuilt by Jadestone.

Recent events suggest NOPSEMA will likely be keen to effect the transfer of operatorship of the Montara field to Jadestone sooner rather than later - "Jadestone has also completed the secondment of a number of key operational leaders, both onshore and offshore, and is now well positioned to advance a seamless transition over the next few months while the Jadestone safety case and environment plan are under review, prior to acceptance by NOPSEMA."

Although Jadestone previously expected the transfer of operatorship to proceed in H1/2019 - the above comments suggest it may well now come forward into Q1/2019 as a result of the work carried out during the last month or so.

[spangle93] 11/12/2018 10:31

It's always sad when Malcy has a wonderful opportunity for a 1:1 with a CEO, and ends up regurgitating what's in RNS's. Still, it may open the eyes of some of his subscribers who have overlooked it to date.

For instance, you could look at today's RNS, which has a positive spin about greatly increased uptime, setting the asset up for the future, etc, but I don't recall the shutdown being planned, with its cost and lost in production revenue, when JSE came to market.

I'm not saying it's the wrong thing to do. Quite the opposite, it seems that the company has acted quickly and delivered a turnaround on a facility they are only just getting to know, on time and close to budget, which many of the majors would be proud of achieving. They must have established a positive rapport with NOPSEMA as a result (and previous experience on Stag). And if you're going to have to shut the facility down, then get as of the identified long term activity, especially hot tie-ins, done in that period as you possibly can.

So looking forward, it promises to advance the progress to the promised uptime improvements, but it must have led to a change of thinking driven by a change in cash flow expectation. Maybe this was asked in the conference call - I was also travelling on vacation at the time.

Anyway, it's good that it will soon be back on stream, and disappointing that Malcy couldn't add any detail to what was already known.

[zengas] 10/12/2018 20:11

Thanks ifthecapfits. Nice to be in a stock where you've done your research and then oil analyst Malcy comes along some months later and recognises it's potential also. Personally believe this will be a very successful growth story. Director last week picking up further stock to an already substantial holding.

[mount teide] 10/12/2018 14:37

ITCF - thanks for posting Malcy's meeting with the management - good to see that he too considers the Montara acquisition as a complete steal on every metric.

[dorset64] 10/12/2018 13:26

ifthecapfits10 Dec '18 - 13:01 - 222 of 222



Thanks for posting the interview ITCF.

[ifthecapfits] 10/12/2018 13:01

Malcy FWIW.

I met with Paul Blakeley, CEO and Dan Young, CFO of Jadestone last week, I had been looking forward to this as the former Talisman team are experienced in the area and with the Montara acquisition looking like a complete steal it merited further investigation. The management are indeed impressive and the strategy of putting together a portfolio of production assets to start with, that whilst seemingly goes against the trend, gives it a strong platform for growth.

When you delve more deeply into the Montara deal it looks more and more like a no-brainer on almost every metric. Production is being increased with gas lift installation and general optimisation, with facilities uptime expected to rise from 72% to 84% in two years, operating costs being reduced by 20%and corporate charges by 50% this really is low hanging fruit. With infill drilling and exploration upside inevitable as there is spare capacity in the FPSO any success can be brought on and paying back extremely quickly.

In addition to Montara the company has attractive assets elsewhere in the area with its Southwest Vietnam gas assets providing a range of possibilities for both near term and longer term growth from the asset. It is worth remembering that many of the key people at Jadestone are ex Talisman staff who worked in the area and are therefore able to use this knowledge to bring the project through the development stage.

Jadestone is generating significant cash flow from its portfolio at current oil prices and with strong gas demand in the region markets are hungry for energy. It is fully funded for a busy work programme over the next few years and has even suggested that by the end of next year might pay a dividend from its strong free cash flow. This will not impede current strategy to do further deals as the balance sheet is ungeared and could be used if appropriate.

Jadestone has every chance of being one of the big stories in coming months and years as the London market get to see more of the management who are indeed very impressive and I am sure will deliver the goods. The arrival on the Aim market was a wise move and the company raised money from what I can see is a wide range of quality investors across the board. As well as institutions I am aware that a large number of retail investors have looked at Jadestone and they would be wise to climb aboard whilst the company is so cheap as it surely won’t remain so for very long…

[mount teide] 10/12/2018 01:19

After the first two weeks of a three week 'investment research' visit travelling around SE Asia the observations that have most influenced my thinking, in terms of future commodity demand(since a previous visit three years ago), is the massive increase in vehicle and smartphone(4G networks) ownership and property development/modernisation and national transport infrastructure development.

Incredibly, the phenomenal increase in demand for oil, gas and industrial metals by this fast growing region over the last decade is still in its infancy, accelerating and likely to remain highly elevated for decades more. Even today the per capita consumption of copper and oil compared to the West, is still barely ONE SEVENTH ACROSS THIS HIGH POPULATION REGION AND ONE FIFTEENTH IN INDIA.

Since, the fast growing and developing Nations of China, SE Asia and India have a population more the 4 times greater than the West, from what i've seen on this visit to date, at this stage of the latest commodity market cycle i am very comfortable indeed having over 80% of my investment portfolio currently in oil and industrial metals equities.

What many unfamiliar with this fast developing region may be overlooking, is that the average 4.50% to 6.75% GDP growth today generates a much greater annual increase in demand for oil and copper than the 7% to 10% growth achieved 15 years ago since, most of the economies are now more than twice as big.

AIMHO/DYOR

[mount teide] 02/12/2018 10:12

Sometimes you just get lucky in life - JSE took out the Montara oil price hedges on 1st October when Brent was $84.75 - from a timing perspective it could not have been better to lock in an optimum rate deal.

[mount teide] 29/11/2018 15:25

Zen - Thanks for the feedback - was on route to Singapore so missed the Conference call.

Very interesting news ref: the historical well performance versus expectation from the Montara Field - an acquisition which the more we learn, increasingly supports the management's 'deep value' claim/assertion it has the potential to largely self fund JSE's 3-5 year SE Asia asset development plan to transform the company into a mid cap, second phase, regional specialist.

Following the long oil sector recession and decade low 2016 oil price, the Montara acquisition looks an extremely well timed and negotiated deal for a high quality, previously poorly managed asset in the World's fastest growing and highest price energy market.

[zengas] 28/11/2018 09:05

Rig for Stag was estimated for finishing with Vermilion around 18th Dec but depends on whether any of Quadrants 2 well options are exercised and if it can go to JSE first before going back to Quadrant should their 2 well options be taken up.

Enscos end of November fleet status report has not been released yet, but the 29th October report stated 107 was "contracted for 160 days with Quadrant (estimated
duration May 18 to Oct. 18). Assigned to Vermilion for two wells (estimated duration Oct. 18 to Dec. 18). Plus two 1-well options with Quadrant thereafter".

From JSE today on both Stag and Montara drilling - "Infill drilling programme to commence in 2019. Based on the operators' latest rig availability schedule infill drilling at Stag will commence in Q1 2019, with infill drilling at Montara to begin following completion of regulatory approvals, which are anticipated in H1 2019;"

[zengas] 28/11/2018 07:53

Not counting the $22.45m of materials and spare parts, the company had $74.28m of cash and restricted cash, plus $22.5m of oil inventory at end of September. Not far off the loan amount. Rig delay will preserve cash and see it build and Montara start up again hopefully within 14 days from now.

[mount teide] 27/11/2018 20:17

Montara Capped Swap Summary

Swaps cover approximately 50% of planned 2PD production for first 24 months on a Monthly settlement basis:

Average swap prices
— US$78.26/bbl for Q4/2018
— US$71.72/bbl for all of 2019
— US$68.45/bbl for Q1-Q3 2020

Upside participation secured on 66% of swapped barrels in 2019/2020 via purchased calls
— US$80/bbl strike in 2019
— US$85/bbl strike in 2020


Source: Latest Presentation dated November 2018

[alan00] 27/11/2018 15:16

I bought the Canadian listed line, prior to them listing on Aim. I have a simple formula that shows the difference between the two lines. Seems just a minute ago London line was about 9% higher, at a point when both markets are open. Anyone else looking at this? Seems a bit wide.

[mount teide] 26/11/2018 14:57

Energy Risk Asia awards, 2018 - Commodity finance house of the year: Societe Generale

'Standout financing deals reflect growing appetite for renewables and new approach to risk

Societe Generale (SG) takes the award for commodity finance house of the year on the back of a portfolio of standout deals in the region, across renewables and power, mining and metals and oil and gas, which combine capital-raising, structuring and risk management expertise.

One of the standout 'new approach' financial deals cited by the Awards Committee was Jadestone Energy, a Singapore-based oil and gas development and production firm, for which Societe Generale extended a 2.5-year, US$120 million reserve-based loan that allowed it to acquire the Montara oil field in Australia. Hedging “a meaningful portion of production” forward allowed Jadestone to maximise the debt it was able to raise.'

The icing on the cake for SG will be the $100m+ of cash that has already been returned to or generated by JSE since Montara's effective 1st Jan 2018 acquisition start date.


'UBS - May consider diluting equity interest NamDu/U-Minh upon final investment decision' - good spot Zen - the project is on schedule for FDP approval and FID during H2/2019

[zengas] 26/11/2018 14:16

UBS - May consider diluting equity interest NamDu/U-Minh upon final investment decision.

Results update tomorrow. (edit sorry Wednesday 28th).

M/cap at 37p = 39% of Montara/Stag 2P value.

M/Cap at 37p = 27% of Montara/Stag + Nam Du/U-minh conversion Q3/19 value.

[wanobi] 26/11/2018 13:12

just bought 10K shares as a starter position here, cheers Wan

[fozzie] 26/11/2018 12:42

I will second that, thanks for sharing info and your thoughts, top man.

[ifthecapfits] 26/11/2018 12:37

Great work MT.

[ifthecapfits] 26/11/2018 12:36

"In the opinion of two shipping industry colleagues and myself the present market value of the FPSO Montara Venture is close to the current market cap of JSE."

wow.

[mount teide] 26/11/2018 12:07

Interestingly, although Q4 will see Montara production drop from to an average 6.6 bopd from 10.3, as a result of the planned shutdown and extended maintenance programme - it will likely mean in a worst case scenario circa 80% of Q4 production will be underpinned by the $72 hedge.

[mount teide] 25/11/2018 15:05

Cost of FPSOs vary mostly according production handling performance and storage capacity. Capital expenditure for a high production purpose built FPSO for a large offshore field can exceed $700 million, with the hull costing $100 to 120 million, the topsides $500 to $600 million.

The Girassol FPSO, now operating off Angola, cost $756 million. The hull cost $150 million, topsides $520 million and project management and delivery comprised the balance.

A more recent project, the Erha FPSO being built for offshore Nigeria, carries a total contract price of $700 million, with the hull costing $110 million, topsides and delivery the balance.

At the other extreme, an FPSO for a 5 year contract for a low production marginal field utilising a small, converted oil tanker and fitted with a 25,000 b/d plant would entail a much lower capex. The operator of the Okwori field off Nigeria is planning to use an FPSO for production, but only if the total vessel topside capex for development is within $120 million.

[mount teide] 25/11/2018 13:36

Oil Price hedging - 50% of the Montara Field's production is hedged at an average swap strike of US$72/bbl, with upside protection via calls at US$80/bbl in 2019 and US$85/bbl in first 9 months of 2020.

The production performance of the Montara field between the effective transaction date of 1st Jan 2018 and the 28th September closing date resulted in the transfer to JSE of $92m of cash and crude oil.

During that nine month period the production averaged 10.3k bopd during Jan and Feb, 7.0k bopd during March to June (due to statutory facility shutdown in March/April and loss of production from the Skua and Swift/Swallow subsea tie-back wells being shut-in until June due to a failure of a subsea well communication umbilical, and 10.3k bopd during July -September.

Consequently, during Jan-Sept 2018 an average production rate of 8,830 bopd and an average Brent price of $73 was sufficient to generate a transfer of $92m of cash and oil on completion.

Operating Costs: Jan-Sept 2018
Operating costs in Q1,(excluding corporate G&A and legal fees which are for the account of the Seller) were US$22.8/bbl. Operating costs increased in Q2 and Q3 due to the routine annual shut down and non-routine activities referenced above - they are expected to return to circa US$22/bbl in Q4 2018 before declining further once Jadestone starts to implement its practices.

The current programme of maintenance and remediation work at Montara is expected to generate a 12% increase in uptime and circa 25% decrease in operating costs within 12 months of assuming the operatorship, which is expected in Q1/2019. Jadestone estimates this will increase annual production by circa 1.7k bbls/d in 2019.

In addition, a well intervention program is planned to reinstate gas lifting at the Swift 2 and Skua 11 wells, and also add a perforation in Swallow 1. This is expected to result in the restoration of peak production to approximately 5.6 mbbl/d from these wells.

The incredible 'hidden' value of the Montara Field acquisition is without doubt the gem that is the FPSO - having ownership of FPSO Montara Venture means that even at 10.3k bopd the field operating costs are just $22/bbl with the potential to reduce this by a further 25% to circa $17/bbl over the next 12 months.

Some technical information on the Montara FPSO: Montara Venture

The Montara Venture was converted from an oil tanker into an FPSO at the Juring Shipyard in Singapore and went into production operation on the Montara Field in 2013. It is designed to operate beyond 2030 without statutory dry-docking and is capable of handling a production capacity of 40,000 bopd and 60 million cubic feet a day of gas compression for re-injection/lift, and has a storage capacity of 900,000 barrels of oil.

Ownership of the FPSO Montara Venture was transferred to JSE on completion of the deal in September 2018 - the JSE management achieved an outstanding result by getting the FPSO asset included in the deal for a total price of $195m, considering the long term charter cost of a similar specification FPSO on the open market today.

By way of example, Premier Oil signed a 10 year contract with BW Shipping to charter an FPSO for their Catcher Field which recently went into production - the FPSO BW Catcher has a processing capacity of 60,000 b/d and an oil storage capacity of 650,000 bbl.

Like JSE's Montara Venture the BW FPSO has a design life of 20 years of uninterrupted operations, and will be moored using a submerged turret production system. Under the terms of the FPSO Charter Contract Premier Oil will pay a FIXED charter rate of $230m A YEAR during the 10 year initial period of charter - a rate of $630,000 A DAY FOR 10 YEARS! ( On the Montara field today such a charter rate would be equivalent to a $60/bbl cost just for the FPSO!).

JSE's production development plan for the Montara Field over the next 2-3 years is targeting circa 15,000 bopd - this would equate to a potential average field operating cost of just $13-$15/bbl.

In the opinion of two shipping industry colleagues and myself the present market value of the FPSO Montara Venture is close to the current market cap of JSE.


Data Source: Latest Presentation / AIM Listing Document / Lloyds List

AIMHO/DYOR

[mount teide] 21/11/2018 10:34

With the current volatility in oil pricing, commencing the planned one month extended Montara shutdown from 1st November when Brent was above $75 has been timely, particularly with the flexibility of 3 months of field production storage capacity (900,000 barrels) on the FPSO.

Following recommencement of field production at Montara - with an empty FPSO, that would mean the first production lifting from the FPSO would not need to occur until late February 2019 at the earliest.

[homebrewruss] 20/11/2018 10:00

fozzie agree.
I have RRE which has gone up well and stayed up due a Tender offer being fortuitously announced during the market volatility. However I'm now wondering if it might fall once the tender offer is over (even though it's still great value and is 50% gas).

I have bought some more HUR and a couple of small oilers with near term news flow but am wondering if that will make any difference in this current market.