Jadestone Energy Share Discussion Threads

[mount teide] 01/1/2022 10:25

Australian oil exports rose 19% year on year on in October on the back of very high demand by Asian buyers for heavy sweet crude, which were expected to continue to contribute heavily to its refinery feedstock exports in 2022, according to Asian crude traders and refinery sources.

Singapore was the destination for almost half of the total. September and October were two of only three months on record that Australian exports to Singapore have been above 4 million barrels/month; the third was in October 2011. Monthly volumes since then have only breached 3 million barrels/month on nine occasions.

Most of the shipments to Singapore were heavy sweet crude grades. Australian producers were expected to continue registering strong sales to the Asian oil trading hub due to strong demand for low sulphur bunker fuel in the region, crude traders said.

Australian heavy sweet crudes including Vincent, Pyrenees and Van Gogh, (and Stag) are seen as ideal for blending into low sulphur marine fuels due to their rich fuel oil yield, very low sulphur content and unique specifications such as low pour point and high flash point, industry and Asian refinery sources said.

Latest reported premiums to Brent for Australian heavy sweet crudes were in the $12-15 /bbl range. Premiums have also surged for Australian and Malaysian sweet crudes which are now in the $3-6/bbl range.

Data Source: Lloyd's List & Shell

[tim000] 01/1/2022 08:55

Joe (“Let’s Go Brandon”) Biden is not only a certified crook (extorting money from Russian and Chinese billionaires via his son Hunter) but also is patently senile. He signs whatever executive order is put in front of him by his minders, without any decision making by himself. In no sense is he a functioning President. So who actually is controlling the administration is an interesting question. I’ve heard it said that it is the senior people from the Obama administration, who are doing everything they wanted to do but were unable to, during his tenure. Hence the breakdown in law and order across the nation (record homicide rates in every city with a large black population for example), and open borders, resulting in a massive inflow of millions of Haitians etc. The stated aim of the Democrats is to make the country minority white asap, and hence a one party state. At the same time importing millions of unskilled, violent people who are a drain on the resources and cohesion of the nation. Just look at what is happening to San Francisco for example. But these are the policies supported by people like Soros, who fund the Democrats.

[fardels bear] 31/12/2021 21:57

Leo Tolstoy, eat your heart out.

[mount teide] 31/12/2021 18:17

The U.S. oil industry is facing a sharp increase in production costs, according to the Dallas Fed energy survey’s latest report.

The survey found that while activity in the oil&gas sector continued to recover during the fourth quarter and production rose faster, costs also rose, for the third quarter in a row, and they rose sharply. The fourth-quarter reading is a record high.

Chronic Underinvestment Could Push Oil Prices Higher In 2022 - Oilprice.com

'Long-suffering Americans grappling with runaway inflation are finally enjoying some reprieve. After a relentless climb, prices at the pump have been heading south, with national average gas prices tumbling to a 10-week low of $3.28 a gallon, according to AAA.

Fuel prices started leveling out after President Joe Biden announced on November 23 the biggest-ever release from the Strategic Petroleum Reserve, though experts have dismissed it as a mere band-aid. Whereas many people have placed the blame for high gas prices on the Biden administration, the real culprit has more to do with Wall Street than Pennsylvania Avenue.

The genesis of today's high gas prices can be traced back to financial pressure on oil companies from a decade of devastating losses and poor shareholder returns that have forced them to dramatically alter their business models. For years, Wall Street has pressured oil and gas companies to cut capex, and shift their cash to financial goals like boosting dividends and buybacks, paying down debt, as well as decarbonization, after the fracking revolution left the U.S. shale patch bleeding cash and deeply indebted.

Consequently, investment in new wells has crashed 60% since its peak in 2014, causing U.S. crude oil production to plummet by more than 3 million barrels a day, or nearly 25%, just as the Covid virus hit, and then failed to recover with the economy.

With Wall Street breathing down its neck, U.S. shale is literally running on empty: according to the U.S. Energy Information Administration's latest Drilling Productivity Report, the United States had 5,957 drilled but uncompleted wells (DUCs) in July 2021, the lowest for any month since November 2017 from nearly 8,900 at its 2019 peak. At this rate, shale producers will have to sharply ramp up the drilling of new wells just to maintain the current production clip.

The EIA says the sharp decline in DUCs in most major U.S. onshore oil-producing regions reflects more well completions and, at the same time, less new well drilling activity--proof that shale producers have been sticking to their pledge to drill less. Whereas the higher completion rate of more wells has been increasing oil production, especially in the Permian region, the completions have sharply lowered DUC inventories, which could sharply limit oil production growth in the United States in the coming months.

The two main stages in bringing a horizontally drilled, hydraulically fractured well online are drilling and completion. The drilling phase involves dispatching a drilling rig and crew, who then drill one or more wells on a pad site. The next phase, well completion, is typically performed by a separate crew and involves casing, cementing, perforating, and hydraulically fracturing the well for production. In general, the time between the drilling and completion stages is several months, leading to a significant inventory of DUCs that producers can maintain as working inventory to manage oil production.

According to S&P Capital IQ data, 27 major oil makers tripled capital spending between 2004 and 2014 to $294 billion and then cut it to $111 billion by last year. Once old wells were capped, new ones haven't been available to fill the production gap quickly. The question is how long the restraint by publicly traded oil companies will last. Capital spending is expected to clock in around $135 billion next year, good for a 21.6% Y/Y jump but still less than half 2014's level.

Other than severely limiting new drilling activity, U.S. shale has also been keeping its pledge to return more cash to shareholders in the form of dividends and share buybacks.

A recent report by progressive advocacy group Accountable.us says that 16 of 24 large U.S. energy companies have raised their dividends this year, while 11 made special dividend payouts totaling more than $36.5 billion. That's a pretty impressive payout ratio considering that the sector has so far reported $174 billion in profits this year. Indeed, "variable dividends" that allow companies to hike dividends when times are good and to lower them when the going gets tough has become a favorite tool for oil and gas companies.

Meanwhile, oil and gas companies have spent a more modest $8 billion in share buybacks, though ExxonMobil and Chevron have pledged to buy back as much as $20 billion of stock in the next two years. The energy sector has made robust share gains in the current year, which could explain the reluctance to spend too much on share repurchases.

The most important reason, however, why oil prices are likely to remain high in the coming year is OPEC discipline:

"You have a cartel that is traditionally as disciplined as Charlie Sheen's drinking, and for the last year, they've been as disciplined as Olympic gymnasts," Tom Kloza, president of Oil Price Information Service, has hilariously told CNBC.

According to the IEA, crude consumption is expected to improve to 99.53 million barrels per day (bpd), up from 96.2 million bpd this year, leaving it just a hair short of 2019's daily consumption of 99.55 million barrels. That will, of course, depend on the world bringing the new Omicron variant of Covid-19 quickly under control.

Higher oil demand will put pressure on both OPEC and the U.S. shale industry to meet demand. But let's not forget that numerous OPEC nations have already been struggling to add to output, while the U.S. shale industry has to deal with investor demands to hold the line on spending. So far, the U.S. shale industry has not responded to higher oil prices as they had done previously, with overall U.S. production averaged 11.2 million bpd in 2021 compared with a record of nearly 13 million bpd in late 2019. U.S. production is expected to only increase by 700,000 b/d in 2022 to 11.9 b/d, according to Rystad Energy's senior vice-president of analysis, Claudio Galimberti.

Canada, Norway, Guyana, and Brazil could try to bridge the supply-demand gap, but several Wall Street punters are betting it will not be enough and oil prices will remain elevated.

In fact, Barclays has predicted that the WTI contract price will increase from the current rate of $73 to an average price of $77 in 2022, noting that the Biden administration's sale of oil from the Strategic Petroleum Reserve isn't a sustainable way to bring down prices. Barclays says prices could go even higher than that forecast if COVID-19 outbreaks are minimized and thus allow demand to grow more than expected.

Goldman Sachs shares that bullish outlook and has predicted a Brent price of $85 per barrel by 2023 compared to the current $76.30.'

[mount teide] 31/12/2021 17:57

mb - Good to hear you've joined us - the timing at the current valuation following the recent doubling of production, a 20% fall in OPEX/bbl and, a rising Brent and regional oil price premium looks prescient.

[multibagger] 31/12/2021 09:18

Good morning MT and all :)

The economics is compelling...

I have put in an order for about £67k worth of JSE shares...

Good luck all !

Edit: Picked up 78778@86p :)

[croasdalelfc] 30/12/2021 10:40

Sorry I meant $100m not $150m

[croasdalelfc] 30/12/2021 10:39

Imo Maari completion is unlikely until end of Q1. By which time accrued barrels owed to JSE will be 4.5m . And revenue in 2022 ~ $150mThe regulator is closed until Jan 5th and then will engage with JSE as the first mover in the process to change operator post legislative change.Those regulators will be getting used to the new regs and legal sticking points are likely.Also a decomm fund needs to be set up. Horizon oil says liability is $31m which suggests JSE would be $81m .That is easily payable (say $12m a year for 5 years which is end of field life) But JSE prediction is extension until 2037 - so decomm fund could be as low as $5m for 15 years

[mount teide] 29/12/2021 14:37

With the company currently generating circa $55m and $40m per month of revenue and cash flow respectively .... Maari, while still an excellent acquisition at the price negotiated, will have recently seen its overall impact on production growth reduce from the position in H1/2021.

The net circa $75m of consideration from the effective economic date of the deal, and the ultra low cost re-investment potential to increase production by developing the P2 reserves and considerably extending the life of the field are now the juiciest cherries on the Maari cake at near $80 Brent.

[lord gnome] 29/12/2021 10:21

I don't think the volume, or lack of it, points to a Mari news leak, HD. This looks like a bit of PI buying. We have someone dumping 50k blocks into a rising share price, so whoever it is clearly hasn't heard any news - or perhaps they have.

[hiddendepths] 29/12/2021 10:11

It would be good to get Maari finally done and dusted. I wonder if someone's heard something about that?

[mount teide] 29/12/2021 09:58

Now 1 v 5 / 84p v 85p (rest between 86p and 90p)

[mount teide] 29/12/2021 09:07

Moved again to 1 v 6 / 82p v 85p (rest between 86p and 89p), cutting straight through the 50 and 100 day MA's.

[lord gnome] 29/12/2021 08:51

Thanks for the L2 updates, MT. Greatly appreciated. How many MMS are active on JSE?

[mount teide] 29/12/2021 08:32

L2: Opened 2 v 1 / 79p v 81p, quickly moved progressively to 1 v 4 / 80p v 82p, then 2 v 1 / 80p v 82p,

Now 1 v 5 / 81p v 84p (rest on 85p and 86p).

[mount teide] 26/12/2021 19:50

With Brent back to $75.5/bbl, production doubling in H2/2021 to circa 20,500 bopd, and OPEX dropping $6/bbl(21%) to circa $22.50/bbl, Jadestone Energy's high denomination bank note printing press business will have moved into overdrive!

At $75 Brent, the quality end of the recession leaned oil and gas industry, according to latest results, is now churning out operating cash flow equivalent to when oil was $100+/bbl during 2010-2015.

At today's $76.5 Brent, Jadestone's Stag production should now be realising circa $89/bbl inclusive of the most recent regional premiums to Brent, while the light sweet Montara and PM grades around $81/bbl inclusive of the Tapis premium.

Marine Fuel Oil and Major Oil Benchmark pricing - change compared to pricing on 9th December 2020 in brackets - (all prices rounded to nearest whole number)

$116 / (+37) - Marine Gas Oil - APAC Average
$100 / (+36) - VLSFO - APAC Average
$89 / (+32) - Jadestone / STAG
$81 / (+29) - Jadestone / Montara
$81 / (+29) - Jadestone / Peninsula Malaysia
$81 / (+29) - Maari
$76 / (+28) - Brent
$76 / (+32) - High Sulphur Fuel Oil - APAC Average
$74 / (+26) - WTI

Such is the demand for all grades of marine fuel oil, HSFO is now changing hands for the same price as premium grade light sweet Brent.

At today's Brent price, management guided current OPEX of $22.50/bbl and the latest IMO 2020 heavy sweet and Tapis premium to Brent, Jadestone should be realising a staggering circa $60/bbl of operating cash flow for its combined circa 20,500 bopd Stag, Montara and PM production.

Suggesting the business should currently be realising circa $450 million/yr of operating cash flow(pre Capex), with the potential to increase to $520 million/yr by Q1/2022 on completion of the Maari acquisition.

Current market cap: $497m.

Estimated Annual Revenue at $76.5/Brent:
$617m - Current
$715m - On Maari Completion (plus a circa $75m net consideration cheque)

Assuming Maari completes in Q1/2022, Jadestone Energy may well then have over $200m in cash, no debt, and generating $520m/yr of operating cash flow at $76.5 Brent - now there's a thought worth raising a glass to the management and staff over the festive season.

AIMHO/DYOR

[mount teide] 24/12/2021 16:07

As Warren Buffett has always explained, the best way to value anything is by the cash flows it produces. If you can’t value something, it’s inherently speculative. To buy something without having some idea of its intrinsic value is akin to flying without radar. You may think you know the way, but once clouds set in you realise you’re flying blind.

The Wall Street Journal recently explained how value stocks could be the best antidote to inflation. As the WSJ points out, value stocks beat growth stocks in the 40s, 70s, 80s and 00's — all times of higher inflation.

History has also shown that one of the best hedges against inflation is undervalued stocks WITH pricing power.

Inflation can seriously impact an unprotected equity portfolio - the good news is that long history has shown holding commodities, especially oil and copper and their equities offers the best protection against rising inflation.

Over the last 25 years oil and its equities have outperformed every major asset class as a hedge against inflation - it's a type of asset that tends to increase rapidly during inflationary periods.



O&G equities 'pricing power' in 2022

* The underlying asset(Oil) has the best long term hedge performance against inflation

* The 2020 pandemic driven record low oil price has seen the leading survivors of the industry become very lean, low cost producers - generating record operating margins that provide great investment upside potential and downside protection.

* Operating Cash Flows within the sector have already bounced back strongly to record levels off the back of oil recovering to average just $73/bbl in 2021 - a price that is less than 40% of its inflation adjusted 2008 peak and, still more than $15 below its 10 year trailing average price adjusted for inflation.

Outlook Summary

With the O&G equities sitting close to 20 year low valuations - combine the tremendous inflation hedge potential and 2022 'pricing power' of the underlying asset together, with a very low cost O&G sector generating record cash flows; and it strongly suggests O&G equities look extremely well positioned(at an average of the current $70-75 Brent price), for a very strong, perhaps even explosive performance in 2022.

AIMHO/DYOR

[fardels bear] 24/12/2021 15:04

I knackered ours driving home from the pub at 90mph up the A49 when I was 18. I learned to drive in it. It had no synchro on second. It sat on the drive until it rotted away.

[ngms27] 24/12/2021 14:33

My next door neighbour had a Zephyr and it was rotten and fell to pieces. Like the front seat though that seated 3 people.

It's not one that's peeked my interest TBH.

[croasdalelfc] 24/12/2021 13:00

Sorry for o/t : last post on Zphyr. The one paradox well that they have drilled shows 2.85m boe EUR . An average Permian well gets half that and that is mostly gas : oil would be 250k cumulative after 3 years as shown here https://shaleprofile.com/blog/permian/permian-update-through-september-2021/They have dozens of drill locations ZPHYr have production to pay for development and management that have stated they are likely to sell up in a few years

[croasdalelfc] 24/12/2021 12:54

Yes as US gas gets $4/5 an mcf and it's always a hassle to get it to market aka TXP .

[fardels bear] 24/12/2021 12:26

My dad used to have a Zephyr.

[king suarez] 24/12/2021 09:54

Is that really a downside at current gas prices, Croasdalelfc?

[croasdalelfc] 24/12/2021 09:03

I have a small holding in Zephyr - it's got excellent management and it's an interesting play - downside is it's 2/3rd gas 1/3 oil though that might change as they drill an sort reservoir management . Also multiple reservoirs on each play - 8 levels