Jadestone Energy Share Discussion Threads

[fozzie] 01/10/2018 07:25

Yes a thank you from me too MT. Great posts across the oil sector from you always. My portfolio is 75% oil stocks now so i am hoping that we are in a very sweet spot. Got into AAZ sub 40p, no debt and now a divi, that too is a good one to hold.

[mount teide] 30/9/2018 21:54

Mr R - thanks for the heads up.

[mr roper] 30/9/2018 17:28

Have this one on my watchlist, mt. Thanks for bringing it to my attention. You might want to have a look at Aaz, still seriously undervalued and a very good board.

[mount teide] 30/9/2018 16:48

This thread is a little similar to the TXP thread following its AIM listing last June - there were 3 posts in 2 months over the summer and TWO of them were mine!

TXP is up over 100% (been as high as 153% up) and is benefitting from having a top class management, falling operating costs, strongly rising production and strong oil price environment.

If the management successfully execute the 2019 operational programme and oil continues to average in the $75-$85 range, JSE has the assets, management and potential to deliver a similar level of s/p% upside to TXP in its first year on AIM.

AIMHO/DYOR

[mount teide] 29/9/2018 08:04

Brent closed at $82.88 - this will see JSE getting North of $85 with the $2.50 regional light oil premium.

[mount teide] 28/9/2018 15:09

L2 continuing to strengthen: 3(45,000) v 2(17,500) / 40.0p v 41.4p

[mount teide] 28/9/2018 13:55

Next move up looks to be getting underway.

[mount teide] 28/9/2018 09:32

The $92 million cash and inventory transfer on completion gives a very strong indication as to the highly accretive nature of the acquisition and its commercial potential, particularly in a $80+ Brent oil price environment(JSE get a $2.5 premium to Brent) - since this sum was generated with:

* An average Brent price of circa $73 Jan-Sept 2018)
* Field uptime of 72%,
which JSE in 2019 is targeting an increase to 84% while:
* Increasing annual production by circa 1.7 mbbl/d and
* Reducing operating costs by circa 20% and corporate charges and overheads by >50%.


'Upon completion, Jadestone paid to PTTEP the purchase price of US$195 million and certain customary closing adjustments.

Upon completion, cash and inventory totalling US$92 million was transferred to Jadestone as a result of the accumulated economic benefits of the Montara assets for the period from the effective date of January 1, 2018 to completion.'

"I'm delighted to have completed the Montara acquisition in just two-and-a-half months after announcing the deal. This reflects our deep in-region commercial expertise, nimble approach to decision-making and close working relationship with PTTEP. Today's news is an excellent example of how we can deploy our unique skill-set to deliver material value for our shareholders through growth in the opportunity-rich Asia Pacific region.

"I'm also pleased with the purchase price we have paid for Montara, which allows us the opportunity to add significant value by reducing costs and adding reserves through further activity. The acquisition is highly accretive from day one, with metrics further enhanced by the cash coming with the asset as a result of the effective date of the transaction being January 1, 2018." '


'Additionally, Jadestone has initiated a capped swap oil hedging programme designed to mitigate the potential impact of lower oil prices on its ability to service debt and ensure liquidity. The Company retains the ability to fully participate in price upside beyond US$80/bbl for the great majority of its hedged barrels.'

Smart move - locks in current pricing while benefitting fully from pricing upside

[king suarez] 28/9/2018 09:29

Yes, I realise they have the Stag field as well :) Looking highly cash generative atm.

Montara is a great aquisition for the price. Amazing that the company can pick up an asset like this, which will have paid the cost by end 2019. Seems awfully cheap to me, even with anticipated declines and potential extra costs based on oil price, production etc. Hopefully scope to increase production and/or slow declines too so this will be a very highly cash generative aquisition for years to come.

Is it expected that the Ogan Komering PSC will continue as a 50-50 split between Jadestone and Pertamina? If so, that adds another c1,500 BOEPD 66:33 oil/gas?

[zengas] 28/9/2018 08:45

That's just Montara.

Stag has about 30% production relative to Montara.

Ogan Komering May 2018 producing PSC expected to be through this coming quarter.

[king suarez] 28/9/2018 08:11

Nice - generating c$10m of cash a month then :)

[zengas] 28/9/2018 07:34

Post 17 - 28th August

"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."
-----------------------------------------------------------

RNS Completion today 28/9/18

"Cash and inventory totalling US$92 million was transferred to Jadestone as a result of the accumulated economic benefits of the Montara assets for the period from the effective date of January 1, 2018 to completion".

As the CEO says "Highly accretive from day one"

[mount teide] 26/9/2018 10:53

L2: 4 v 1 / 39.4p v 40.0 (rest 41.4p and above)

[mount teide] 25/9/2018 08:30

Brent continuing to strengthen - $81.40 - JSE will be getting close to $84 with their regional premium.

[mount teide] 24/9/2018 20:38

In its latest note, JP Morgan raised its Brent Crude forecast to $85 over the next six months, up from a previous forecast in the low $60s, expecting the Trump Administration to be tougher on Iranian sanctions than previous administrations. According to JP Morgan, a spike of Brent to $90 is likely, the analysts said in a note, as carried by Business Insider.


JP Morgan: Expect Brent Oil To Reach $90 On Iran Sanctions - OilPrice.com



'JP Morgan expects Brent Crude to hit $85 a barrel over the next six months—with a spike to $90 likely—as the investment bank raised its oil price projections to reflect expectations of more Iranian oil barrels coming off the market when U.S. sanctions on Iran return in early November.

The investment bank now sees the U.S. sanctions cutting Iran’s oil exports by 1.5 million bpd due to the tougher U.S. policies on Iranian oil customers as they succumb to U.S. pressure and cut off oil trading with Iran, and it sees the U.S. Administration less likely to grant waivers to Iranian oil buyers.

“The main driver of this revision is a higher estimate of how much Iranian crude exports might decline due to multi-country respect for US sanctions that should come into effect on November 4th,” JP Morgan said in the note.

The U.S. equity market resilience and the strong economy could embolden U.S. President Donald Trump on all fronts, including NAFTA negotiations, tariffs, and Iran, according to JP Morgan analysts. The result of this overconfidence would be a risk of “a major miscalculation from sanctions that are tough to calibrate,” according to the investment bank.

While initial estimates of Iranian oil export losses were closer to 500,000 bpd, now more analysts are expecting that the losses could be higher than 1 million bpd.

The market will lose “well over 1 million” bpd from Iran with the sanctions, and “that can’t be made up,” John Kilduff of Again Capital told CNBC earlier this month, expecting WTI Crude prices at the end of this year at $85 to $90, and Brent Crude at $95 to $100.

RBC Capital Markets expects the losses of Iranian oil to exceed 1.2 million bpd in the first quarter of 2019, and Iran’s reaction to the U.S. sanctions in November could lead to some sort of “unintended military escalation,” which the markets are currently underestimating.'

[mount teide] 24/9/2018 14:05

450,000 trade above the offer price just gone through.

[mount teide] 24/9/2018 09:17

After flirting with $80 all last week, Brent pushed through this morning - with JSE's regional light oil premium they should be realising close to $83 presently.

The regional price premium to Brent that JSE receives at the current production of circa 15,000 bopd, will at $80 Brent generate circa US$14m a year of additional revenue.

By way of comparison my Trinidad O&G investments producing a similar grade of oil currently receive a price of a 12%-14% discount to Brent for wellhead collection. This means at 15k bopd JSE will be generating US$72m a year more gross revenue than a T&T producer at the same production level.

[mount teide] 23/9/2018 16:19

Shieldbug - 'The management clearly have a great deal of experience and can probably deliver but on the basis of their shilly shallying on the number makes me suspicious. Or am I missing somewhere else where JSE are clearly acknowledging the figure?'

If you read page 36 of the London AIM Listing Document you may well find you're doing the excellent management a huge disservice.



Trigger Event Payments

'(a)US$5 million
Montara 2018 Production is equal to or greater than 3.55MMbbls but less than 3.75MMbbls.

(b)US$10 million
Montara 2018 Production is equal to or greater than 3.75MMbbls but less than 3.95MMbbls.

(c)US$15 million
Montara 2018 Production is equal to or greater than 3.95MMbbls but less than 4.15MMbbls.

(d)US$20 million
Montara 2018 Production is equal to or greater than 4.15MMbbls but less than 4.35MMbbls.

(e)US$25 million
Montara 2018 Production is equal to or greater than 4.35MMbbls but less than 4.55MMbbls.

(f)US$30 million
Montara 2018 Production is equal to or greater than 4.55MMbbls.

(g)US$20 million
The Average Dated Brent Price in calendar year 2019 is US$80/bbl or higher.

(h)US$10 million
The Average Dated Brent Price in calendar year 2020 is US$80/bbl or higher.

(i)US$20 million
Total quantity of hydrocarbons produced from the Montara infill well during the first 12 month period following first commercial production (being sustained production for sale and not for testing or commissioning) from the Montara infill well is equal to or greater than 1.5 MMbbl.

(j)US$20 million
First commercial gas.

(k)US$60 million
Any final investment decision to approve a project development plan or development work plan and budget or similar or analogous decision to proceed with development or developments of the Montara Assets where such development or developments have 2P reserves greater than 15.0 MMbbls. '


Add that lot together and in the best case scenario for the sellers it totals a maximum additional payment of US$160m

[tim000] 23/9/2018 13:26

Thanks MT, a very comprehensive response. I know very little about Indonesia, but I know Churchill Mining have had major problems with their government. Not all governments have supportive relationships with overseas investors. I think I will dip my toe in the water, but political risks are hard to assess and can be very costly, hence my caution.

[mount teide] 23/9/2018 13:07

tim000 - Montara - Prospective Liabilities

Some research we came across during our look at this:

Following the news that legal proceedings were filed against PTTEP by the Government of Indonesia in Jakarta, PTTEP put out the following statement:

“The company has not been served with proceedings and has not received any notification of the substance or extent of the claim. PTTEP has always acted cooperatively and in good faith in our past discussions with the Government of Indonesia, and will continue to do so.”

“PTTEP Australasia maintains its position, based on extensive independent scientific research overseen by the Australian government, that no oil from Montara reached the shores of Indonesia and that no long-term damage was done to the environment in the Timor Sea.”


The oil spill incident was further complicated by the totally inept performance of the Australian Maritime Safety Authority(AMSA) who carried out the 'Clean-Up' using a number of dispersants that included two that should never have been used since they were both known to be highly toxic, and have since been found by scientists to amplify the toxicity of oil 52 fold.

Successive Australian governments have largely swept the Montara oil field spill under the carpet - presumably conscious that the Nation may have a case to answer and material/shared responsibility as a result of the incompetency of their Marine Safety Authority, should new evidence come to light that proves the extensive independent scientific research overseen by the Australian Government to be incorrect and that the Montara incident which saw between 4750 tonnes and 23,630 tonnes of oil released into the sea can in fact be shown by the Indonesian Authorities to have created some long term damage to the marine environment of Timor Sea.


What shone like a beacon during reading the various reports of the Montara incident is the sheer incompetence of the Thai operator PTTEP with respect not just to responsibility for the Montara oil spill(along with the poor oversight of the Australian Regulatory Authority) but the extremely high operating costs and low productivity achieved as the field operators. The potential scale of the improvements in terms of field and FPSO uptime/production growth and reductions in running costs mentioned in the various Jadestone news releases could well prove highly conservative considering the shockingly inept operational and business performance by industry norms of the Montara field operator over many, many years.

By way of example - Among many operational deficiencies Jadestone's team of surveyors found during a forensic inspection of the field infrastructure and FPSO, was that the FPSO(Floating Production Storage and Offloading vessel/platform) was actually being operated out of CLASS! - due to a lack of maintenance. A CLASS Certificate issued by a Classification Society recognised by the proposed ship register is required for a ship/oil platform owner to be able to register the operating asset and obtain marine insurance, and is required to be produced before an FPSO enters - never mind is operated! - coastal/offshore waterways, and will be of particular interest to prospective charterers and potential buyers.

For the Montara purchase to complete, the Sale Contract requires the FPSO Class deficiency and many other deficiencies/issues highlighted by Jadestone during their field asset inspection to be rectified and at the owners/operators cost.

AIMHO/DYOR

[tim000] 23/9/2018 09:06

Thanks MT for this tip. I have invested significantly in CAML at least in part from following your commentary on the share. JSE looks interesting. My only concern with JSE would be the prospective (and drawn-out) liabilities to the company associated with the 2009 Montara incident. shieldbug's link above mentions that the Indonesian government is suing PTTEP for $2 bn. The text below is taken from JSE's admission document.


The Montara incident indemnity may be insufficient or the Seller may be unable to satisfy any claims under the indemnity. The Acquisition Agreement contains an indemnity from the Seller in relation to any latent liabilities incurred or suffered by Jadestone Energy (Eagle) Pty Ltd (as buyer) as a result of the major oil and gas leakages which occurred at the Montara site in 2009 (the ‘‘Montara Incident Indemnity’R17;). Although the Directors have grounds to believe that the Montara Incident Indemnity will be sufficient to cover any liabilities which the Group may incur in future, there is no guarantee that the Montara Incident Indemnity will be sufficient to cover all potential liabilities which may arise. In
addition, there is no guarantee that PTTEP Australasia (as seller) and/or PTTEP Offshore Investment Company Limited (as seller’s guarantor) will be able to satisfy any claim which the Buyer successfully makes pursuant to the Montara Incident Indemnity.

[shieldbug] 23/9/2018 08:43

JSE seem a little coy about the $160m contingent consideration number that is being reported against PTTEP's sale. I cannot see any mention of $160 million in their announcements but the only way I can calculate a price of $6.9/bbl for the 2P reserves is by adding $195 cash consideration with $160 million of additional contingent consideration. This $6.9/bbl is from the recent webcast

45.3 million bbls @ $6.9/bbl = $355 million ($195m + $160m)


The management clearly have a great deal of experience and can probably deliver but on the basis of their shilly shallying on the number makes me suspicious.
Or am I missing somewhere else where JSE are clearly acknowledging the figure?

PTTEP must have put out the $160m figure in their press release as sell side reports include it

[king suarez] 21/9/2018 18:27

Great news. I think this company is still very under the radar?

Going to be a significant cash cow with this aquisition.

[highly geared] 21/9/2018 07:48

Surprised the share price hasn’t moved at all on the RNS...

[spangle93] 21/9/2018 06:21

Good news Friday - all CP's met.



Let's hope for similar traction with Pertamina for Ogan Komering, and then it's green for go for 2019