Jadestone Energy Share Discussion Threads

[mount teide] 28/8/2018 16:28

Some Notes from today's Conference Call:

Montara acquisition likely to close Sept/Early October. Effective date of 1st Jan 2018, with an expected payback by end of 2019. Circa $80m+ of cash will be due to Jadestone under the terms of the contract by expected completion date. Targeting operatorship of Montara 2-3 months post closure of the deal.

Montara has excellent reservoir characteristics - currently producing circa 12,000bopd - company is maintaining guidance of an average of 10,300 bopd during the remainder of the year. Targeting an increase in annual production of 1,900 bopd in 2019 with 12,000 - 14,000 bopd the medium term target.

Working on increasing field uptime from 72% to 84%, with 90% the target over the medium term.

Stag - currently producing at 3,300 bopd. Total production cost down 52% compared with Q2/2017 - the last quarter under the old field operator. Life of field recently extended to 2034. Eleven days of major maintenance work carried out in the quarter(effectively deferring 38,000 bbls/422 bopd); work which will not need to be repeated until earliest 2022/23.

Under expiring contract Ogan Komering PSC generated $5.2m free cash flow in 14 months - contract currently being renewed with Pertamina. This is upside that was not included in the CPR. In addition, it has 3 undeveloped gas discoveries they wish to move with Pertamina to the approvals process. Over 45 mmboe P2 with another 30 mmboe P2 to be added in Q3 2019.

Montara/Stag fully funds Q3 2019 Vietnam phased gas project start up to production.
Almost $1billion of potential value in the company assets so huge upside from current m/cap of $165m - this does not include any contribution from SC56, Tho Chu or Ogan Komering.

Oil sales are currently achieving a $2.30 premium to Brent.

The economics of the 2-3 year asset development plan is based on $50 Brent.

Business Development team actively monitoring a number of other early stage opportunities, some of greater scale.

[captainfatcat] 28/8/2018 14:29

Zengas thanks for the feed back

[zengas] 28/8/2018 14:10

Excellent 2pm Conference call.

Montara acqusition. Given the effective date is Jan 1 2018, payback on this should be acheived before end next year. There is about $77m cash due to JSE at end July 2018.

Ogan Komering PSC generated $5.2m free cash flow for 14 months under prior contract and currently being renewed with Pertamina. This is upside that was not included in the CPR. Also in addition to current production - it has 3 undeveloped gas discoveries that they wish to move them with Pertamina to the approvals process and bring them to market.

Over 45 mmboe P2 with another 30 mmboe P2 to be added in Q3 2019.

Montara/Stag fully funds Q3 2019 Vietnam gas project start up to production.
Almost $1b of current value in the company assets so huge upside from current m/cap of £165m. (Doesn't include SC56, Tho Chu or Ogan Komering).

Question asked about M&A activity - Answer from Micheal in Business Dev Team saying We will look at opportunities of greater scale. We are looking - A number are early stage.

[euclid5] 28/8/2018 09:52

GMP note today

"Jadestone Energy (JSE LN/CN); BUY, £0.70: 2Q18 results – Net cash at 30th June was c. US$7 mm (GMPFEe: c. US$9 mm) plus a further US$10 mm of cash in support of a bank guarantee. Overall 2Q18 production was 4.2 mboe/d (GMP FEe: 4.8 mboe/d). 2Q18 production from the Stag Oilfield in Australia was 2.8 mbbl/d (GMP FEe: 3.5 mboe/d) however current production at Stag is 3.3 mbbl/d. In Indonesia, at Ogan Komering the cooperation contract expired 49 days into the quarter over which period production was 1.4 mboe/d (GMP FEe: 1.3 mboe/d).

Market Reaction: neutral. Cash is broadly in line and the lower production at Stag was due to a larger effect of maintenance shutdown than we had carried but we note that current production is back closer to expected levels. Attention will now focus on the closing of the Montara acquisition in
September/October. There will be a call at 2pm (London) today

[mount teide] 27/8/2018 12:00

spangle - interesting - thanks for your thoughts.

[spangle93] 26/8/2018 22:17

MT - true enough, but it's important to make the improvements you can and not rely on the oil price, i.e. plan based on a price that's genuinely low. During the early years of this decade, investments were made with low case and high case sensitivity assumptions that were much smaller than the drop that happened, or indeed, had happened previously.

The Stag opex/bbl will decrease if they pump at a higher production rate, following capex-funded sidetracks. That requires identification and execution of attractive infill or workover opportunities, not all of which will deliver as expected (the flip side being some will exceed plans). The key, as they show on slide 14, is to make sure the production flows as continuously as possible through field management and debottlenecking, while trying to seek ways of cutting extraneous opex, i.e. if you can grow production and keep total opex flat, then you're doing well :-)

Although the company cites its niche as a SE Asia acquirer of unloved, undervalued assets, the region is somewhat immaterial when oil is a global commodity. Australia is one of the higher cost countries in which to do business. The Vietnam gas (and potentially the PSC), on the other hands, talks much more to local markets which may be prepared to pay a premium if there are shortages. I think they will look for more deals like this.

[mount teide] 26/8/2018 18:29

MrT% - yes, i am expecting a significant improvement in the next quarter's results.

This is based on an analysis of the trend between the price of Brent and the operating cost per bbl of Stag - the data(below)clearly shows the huge impact that a rising oil price and reducing operating cost per barrel is having on the profitability of the business since Jadestone took over operator-ship of the Stag Field in H2/2017.

In H1/2017 under the prior operator the differential averaged $8.00, rising to $24.00 in H2/2017, and now $43.50 in Q2/2018 (all rounded to nearest 0.50 cents)

Brent average Prices - Jadestone get a $2-3 premium to Brent
$39.00 - H1/2016
$48.50 - H2/2016
$51.50 - H1/2017 - Stag (Op Cost/bbl: Q1/$45.84 - Q2/$41.23) - Prior Operator
$56.50 - H2/2017 - Stag (Q3/$32.99 - Q4/$32.15) - Jadestone Operator
$66.75 - Q1/2018 - Stag Q1/$34.27
$76.50 - Q2/2018 - Stag Q2/$33.09
$76.50 - Current Spot Price

[mrtenpercent] 26/8/2018 16:36

@Mount Teide:

I haven't done as much research as you so I don't know the full history. I believe the current team have taken this business over from previous directors- is that true?

The accounts at 31/12/17 (for the 21 months from 01/04/16) show that shareholders equity (share capital + share based payments and warrants) of 386.321mln had reduced to 108.198mln because of accumulated losses of 278.123mln, and in that period the company had a GAAP loss of 51.427mln (33c/share). More positively, the annualised loss for the 9 months to 31/12/18 reduced from -36.497mln to -19.906mln - but still a loss, and their current assets (including cash) were only 24.779mln (reduced from 32.318mln at 31/03/18.

The most recent financial statement for the 3m to 31/03/18 shows net equity reducing further to 91.063mln. Current assets only slightly down but losses continuing - a loss of -16.593mln for the 3 months, shown as -7c/share.

I've read all the good stuff about what they are doing, and the potential, but the way I'm reading the accounts if they don't become profitable soon they won't last long enough to reap the rewards of the work they are doing. Are you expecting the 3 month results on 28 August to show a big shift towards profitability?

[mount teide] 26/8/2018 12:17

Jadestone Vietnam - Natural Gas Development Assets

The long term growth potential for Natural Gas in SE Asia is huge and growing much faster than any other region in the world - the result of a move to clean energy sources to deal with appalling pollution issues, very high populations, and the rapid move towards urbanisation across the region.

As a result, the energy hungry but resource/production lite SE Asian region pays a very significant premium for its Natural Gas imports much of which is in form of very expensive LNG by sea.

Average Natural Gas pricing over the last 5 years in the various major consuming markets:
US$ per MMBtu
$3 - US
$6 - UK/Europe
$9 - Japan/SE Asia(peak period LNG spot cargoes can reach $15)

More than 50% of all LNG spot cargoes currently shipping into South East Asia are from the US - the current average profit margin per cargo is an astonishing $4 per MMBtu / 133% of the current US spot rate!

In common with Japan, most other SE Asian Nations are raising their consumption forecasts for natural gas for the decade ahead as a result of a planned shift from coal and Nuclear - this will help keep the region's huge "Nat Gas Price Premium" well underpinned.

South Korea, the world’s third-largest liquefied natural gas (LNG) importer behind Japan and China has previously forecast natural gas demand remaining static at around 34.65 million tonnes of LNG equivalent in 2029. However, after a public outcry over pollution levels, they recently revised this forecast upward to 40.49 million tonnes in 2031, to demonstrate a greater commitment to clean energy sources. In common with much of SE Asia the country has long been reliant on coal and nuclear power to produce electricity. The share of gas-fired power generation made up about 17% of the country’s total electricity needs in 2017 and is estimated to increase to 18.8% by 2031 - leaving plenty more potential for a further shift away from coal to cleaner energy.

The region has the World's three largest LNG importing Nations - Japan, China and South Korea - combined they currently import the majority of their Nat Gas via ships. This trend is not only set to continue but rapidly accelerate with all three committed to very large capital expenditure increases to massively expand their gas supply infrastructure, storage facilities and pipelines. Japan's new $40bn Ichthys LNG terminal is the latest to commence operations in the region this year.

However its viewed - the SE Asian region is planning to have a much greater reliance on Natural Gas imports for their energy needs in the future(the region is forecast to consume 75% of global nat gas production by 2030), and since much will increasingly be in the form of expensive LNG by sea, this will effectively maintain a permanent price premium for natural gas supplied by pipeline in the region.

Having a rising tide(commodity cycle, market and company fundamentals) gently flooding behind an industry significantly helps to minimise the investment downside risk. Similar to the LNG suppliers into the region, Jadestone expects to negotiate a long term fixed price gas supply contract for its Vietnam gas field production with the Vietnam Government and fertiliser industry, with annual fixed price uplifts.

The more two friends and i research Jadestone Energy the stronger our impression grows of a company being: "In the right place, at the right time, with the right product and management". We see Jadestone as an early stage 'Venture Production'(of North Sea second phase O&G field fame) of the SE Asian / Pacific Rim O&G Basins.


AIOHO/DYOR

[mount teide] 26/8/2018 09:53

mr.oz - GMP Securities research Note was published on the 24th July, a week or so after the announcements of the Montara Project Acquisition and notification of the intention to raise the cash to fund it through an AIM Market Listing and Senior Debt Financing were made on 16th July.

[mr.oz] 26/8/2018 09:03

What date was the upgrade pls

[mount teide] 25/8/2018 22:51

GMP Securities has upgraded Jadestone Energy from a speculative BUY rating to a BUY rating in a new research note following the Montana Oil Field Acquisition - the Canadian firm has a C$1.40/£0.84 target price on the stock, up from their prior target price of C$1.10/£0.66.

[mount teide] 25/8/2018 08:44

In the 12 months post the Stag acquisition off the Northern coast of Australia the management's operational performance in terms of raising production and reducing operating costs has been remarkable and bodes very well for the Montara assets which they believe also holds similar potential.

From the AIM Admission Document:

Stag

'Jadestone is the 100% owner and operator of the producing Stag oil field located offshore Western Australia in the Carnarvon Basin. Stag and its associated infrastructure were acquired by Jadestone on 11 November 2016 for a headline price of US$10 million plus customary working capital adjustments and potential contingent payments. At acquisition Stag had 2P reserves of 14.6 MMbbls oil and since that time Jadestone has increased 2P reserves to 17.1 MMbbls (gross and net), net of circa 1.6 MMbbls of production between the acquisition and 31 December 2017.

Since completing the Stag acquisition in November 2016 the focus of the Jadestone operating team has been to optimise production operations, reduce costs and identify and execute a work programme to increase production.

In executing these initiatives, Stag has seen production stabilise and then increase to a current level of 3.6 mbbls/d (up from an average of 2.6 mbbls/d in Q2 2017), operating costs (excluding workover) reduce from US$43/bbl (for the first half of 2017) to US$32/bbl (for the second half of 2017, following transfer of operatorship to the Company in July 2017) and workover and other sustaining capital costs reduce by circa 50 per cent.

The Company has been able to achieve these gains through a re-organisation of management structures and processes; incentivisation of the workforce towards safe production operations; re- negotiation of contracts; and a reduction in workover duration and cost.

The Company is now focused on increasing production and intends to drill five in-fill wells by the end of 2020 (being four producers and one water injector), targeting an average of 1.1 MMbbls of oil for each producing well, which also provides additional reserves from the field as a whole through field life extension. The initial production rate of each well is expected to be circa 1.2 mbbl/d before following a natural decline rate. The additional production derived from the first infill well to be drilled is expected to further reduce 2019 per unit operating costs (excluding workovers) to US$25.9/bbl and enhance cash flow resiliency, even at low oil prices.'

'Reflecting on the savings obtained at Stag to date, the Company is confident of its ability to deliver significant additional value creation at the Montara Assets following a successful transition period and subject to the required investment by the Company.'


Montara

'The Company has already identified multiple operational improvements at the Montara Assets and believes it can execute these improvements to increase production, whilst also reducing fixed operating costs by up to 20%. The Company has already made significant cost savings at Stag, reducing fixed operating costs by 35%, cutting sustaining capital expenditure and stabilising production. The Company is now focused on increasing production at Stag through drilling infill wells over the next two years and completing well workovers.

The limited number of qualified offshore operators in Australia looking to deploy second phase specialisation, and Jadestone’s recently proven ability to obtain regulatory approvals, in particular approval as operator culminating in the transfer of operatorship of Stag in July 2017, proved a significant competitive advantage when engaging with the seller.

Reflecting on the savings obtained at Stag to date, the Company is confident of its ability to deliver significant additional value creation at the Montara Assets following a successful transition period and subject to the required investment by the Company.'

[dorset64] 24/8/2018 15:39

Many thanks MT, will take a look over the w/end & into next week. Cheers.

[mount teide] 24/8/2018 14:18

Brent rebounding strongly this week currently up a further 1.86% today to $76.52.

Jadestone with their South East Asian market $2-$3 premium to Brent will be getting close to $80.

[mount teide] 24/8/2018 13:03

Hi Dorset - the best info i could offer would be to point you in the direction of the very recent 25 minute Jadestone O&G Conference Presentation / latest website Presentation / AIM Listing Document / and Executive Chairman's Bloomberg Interview - links below.

[dorset64] 24/8/2018 11:21

Interesting one MT, I shall look into these over the coming days. Apart from the obvious, website/google etc and short cuts you have to info that explains concisely ?

[mount teide] 24/8/2018 10:36

The demand for energy in high population South East Asia is growing at 5%-7% a year - such is the level of demand Jadestone receives a $2-$3 PREMIUM to Brent for its current production as opposed to the other end of the oil industry spectrum where the Canadian shale oil drillers currently receive a $31 discount to WTI.

Market/sector timing is often everything with an investment - i am attracted to the long term highly cyclical oil market being in the early years of a new recovery stage and having Jadestone based in a maturing oil and gas regional industry where the majors are starting to dis-invest, offering opportunities to exploit for small/medium size companies with the relevant management skills and experience.

In this respect Jadestone's management has a track record second to none having done it before with Talisman in the mature oil and gas industries of the North Sea and Middle East, and so are ideally equipped/positioned with Jadestone to take early user advantage of another maturing energy industry in the early stage of dis-investment by the majors, in a region hungry for energy for which it is willing to pay top dollar.

AIMHO/DYOR

[mount teide] 24/8/2018 08:13

Spangle - 'any reason why it's shown as a green commodity, rather than a blue stock?'

Most probably my error when initially setting up the thread - on inspection it appears to be a one-off choice made during initial set-up that cannot be changed afterwards.

Having said that, its green coloured thread title text on the free BB listing page certainly gets it noticed against the sea of blue and black all around!

[spangle93] 24/8/2018 07:49

Mount Teide - thanks for the thread.

I shouldn't comment, cos I've no experience in setting up a thread, but any reason why it's shown as a green commodity, rather than a blue stock?

TIA

[highly geared] 24/8/2018 07:06

Looks a good prospect with NAV potential at 4x current market cap. Bought a few, let’s see how it goes.

[crooky1967] 23/8/2018 16:34

Watching as well, thanks MT for the heads up over at TXP.

[mount teide] 23/8/2018 12:57

New thread with charts - header text courtesy of Zengas.

This is a first attempt at creating an ADVFN thread so would appreciate being cut some slack on its initial appearance and content.

[spangle93] 22/8/2018 23:49

Thanks, LCwanderer - the link in the Jadestone website investor page is now similarly filled

Ref the Indonesian asset - it seems that the previous PSC in which JSE participated as a legacy Talisman asset just expired in Feb this year. It's my understanding from reading e.g. AIM admission that there is no value ascribed from this asset, no legacy cost, nothing, in the company financials?
"The carrying value of the Ogan Komering PSC under oil and gas properties on the Company’s balance sheet is fully depleted"

Going forward
"the Board expects to reach satisfactory binding terms during Q4 2018, with participation to be effective from the commencement of the new PSC on 20 May 2018. To the extent Jadestone participates in the PSC, it will not be the operator of Ogan Komering and it would have less than a 40 per cent interest in the PSC. However, until definitive documentation is entered into, there can be no assurance that Jadestone will be successful in its negotiations for participation in the PSC or the terms on which any such participation may be available to Jadestone."

If all is concluded satisfactorily, is there any significant cost to participation in the revised PSA, or merely just the resumption of payment as per the agreed equity for opex and capex.