Jadestone Energy Share Discussion Threads

[nigelpm] 20/6/2024 08:46

Into the "window" from the RNS on 6th June -


The project remains on schedule for gas into the Facility in approximately two weeks time and for commercial gas, LPG and condensate sales following shortly thereafter.

[ashkv] 19/6/2024 17:31

This likely is for the Montara gas :)

For Tahbilk-1, there is a potential path to commerciality with another operator which has not yet concluded. The EP states that “Jadestone plan to de-risk and develop to commercially produce from the existing Tahbilk-1 well. By the end of this EP’s Validity period, in 2027, one of the following criteria will be
met.

[sea7] 19/6/2024 14:08

On montara..from the recently updated and resubmitted environmental plan - accepted by NOPSEMA June 11 2024..

there is a lot about decomissioning in the document, plus...



page 31..

The EPBC approval is due to expire in 2028, which is before the current expected end of field life date. Therefore, Jadestone have prepared and submitted to DCCEEW an extension of the EPBC Act approval (refer Appendix G) to 2040 to allow for flexibility in the end of field life and for decommissioning activities to be completed. No amendment to any other conditions of approval has been requested.

page 63...

Suspended wells

Jadestone plans to undertake monitoring of the two temporarily abandoned (suspended) wells, Sea Eagle-1 and Tahbilk-1 via vessel-based activities. These wells are intended to be used for future hydrocarbon exploitation in the Montara field. The ongoing monitoring of these wellheads is described within the
NOPSEMA accepted Sea Eagle-1 and Tahbilk-1 Vessel Based Activity EP (TM-50-PLN-I-00004). This EP is valid until the end of 2024, a decision on the next steps for these wells will be made in Q4 2024 under the purview of the decommissioning working group

page 88...

The EP states that ”Jadestone plan to develop and commercially produce from the existing Sea Eagle-1 well in the 2027-2028 time period or sooner. Jadestone commit to that by the time this EP’s validity has expired (5 years following acceptance i.e. in 2027), the well will either be sanctioned for development with the
permissioning cycle started or permissioned for decommissioning.” Therefore, an EP to plug and abandon or develop Sea Eagle-1 is planned for submission at least 12 months prior to that (i.e. by May 2026).

For Tahbilk-1, there is a potential path to commerciality with another operator which has not yet concluded. The EP states that “Jadestone plan to de-risk and develop to commercially produce from the existing Tahbilk-1 well. By the end of this EP’s Validity period, in 2027, one of the following criteria will be
met.

1. The well will be permissioned for Permanent Abandonment.
2. If not already concluded, a commercial agreement will be in negotiation between Jadestone and the third-party Operator with a view to sanction for development. The expected date for a decision is Q2 2027 and it is anticipated that the commercial agreement would be in place, however this is dependent on third party operator timelines as well. Therefore, prior to the expiry of this EP, it is expected that the permissioning cycle will have started for decommissioning or development (additional approvals will be submitted).”

Therefore, submission of an EP to plug and abandon Sea Eagle-1 is planned for submission at least 12 months prior to that (i.e. by May 2026) if development is not planned. As a decision on both of these wells is expected by mid-2027, regulatory approvals for the next stage (either development or permanent abandonment) will be submitted in 2026

[ashkv] 19/6/2024 13:32

What is up no love most of my E&P firms!!! Oil on a tear and JSE plus others languishing in the doldrums!!!

JSE Enteprise Value of USD 276 million for 23,000 Boe/d Production in H2 2024 once Akatara online!!!!

JSE Share Price -> 30.50p
Brent Current Price -> $85.50
JSE Current Share Price vs 52 Week low of 21p on 18 Aug 23 -> 45.24%
JSE Current Share Price vs 52 Week High of 39.5p on 7 Sep 23 -> -22.78%
Shares Outstanding -> 540,817,144
GBPUSD -> 1.2700
JSE 2024 Production Mid-Guidance Revised Apr 24 (20,000-22,000 Boe/d) -> 21,000
JSE Average Production YTD 31 May 24 -> 17,200
JSE Production Average for 2023 (Montara Curtailed for a period) -> 13,800
JSE Production Average for 2022 (Montara Curtailed for a period) -> 11,487
Debt (USD) (USD 200 Million Reserves Based Lending (RBL) Draw) -> NA
Cash (USD) -> NA
Net Debt (USD) 31 May 24 -> $66,000,000
Available Credit (Remaining USD 200Million RBL Available + USD 35Million Standby Facility) -> $169,000,000
Available Liquidity -> #VALUE!
Market Cap (GBP) -> £164,949,229
Market Cap (USD) -> $209,485,521
ENTERPRISE VALUE (EV) (Market Cap + Debt - Cash) (USD) -> $275,485,521
EV/Barrel(USD) 2024 Mid Guidance Production 21,000 Boe/d -> $13,118
EV/Barrel(USD) Q1 2024 Average Production -> $16,017
EV/Barrel(USD) Jadestone Production Average for 2023 (Including Montara Shut-Down) -> $19,963
JSE Decommissioning Expense Provision i.e. Asset Restoration Liability per FY 2023 Results -> $603,902,000
EV/Barrel (USD) JSE 2024 YE Exit Boe/d 23,000 Boe/d Production (Q1 Avg + Akatara 6k boe/d H2 24) [Added Decommissioning Provisions Per FY 2023 Results to EV] -> $38,234
EV/Barrel (USD) JSE 2024 YE Exit Boe/d 26,000 Boe/d Production [Added Decommissioning Provisions Per FY 2023 Results to EV] -> $33,823
2P Reserves (Boe) as of 31 December 2023 -> 68,000,000
2P Reserves (Boe) YE 23 + 6.8 mmBoe Second CWLH Acquisition H1 2024 -> 74,800,000
EV/2P -> $3.68
EV(Including Decommissioning Costs)/2P -> $11.76
Bloomberg Analyst Summary -> JSE Target Price (Avg of all 5 Analysts Reviewing JSE per BBG) as of 16 Jan 2024 -> 71.50p
% Upside to 12 Month Analyst Target Price -> 134.43%

Asset Decommissioning year per 2023 Annual Report Published 27 April 2027 ->

Asset Decommissioning year
1. Montara 2031 [Likely to be extended if Gas assets developed as management has mentioned]
2. Stag 2036 [A long long way to go - 12 years!!!]
3. Lemang 2036 [Minimal cost USD 5.5Mn Provisioned as onshore and Per JSE likely to be extended]
4. PenMal 2024 onwards [Decommissioning expense provisioned in current year, however, majority of Penmal fields are producing assets and JSE is looking to redevelop a field that was shut due to a FPSO issue]
5. CWLH 2035 [Per JSE likely to be extended even further]

[ashkv] 19/6/2024 13:13

Super we agree for once :)

Is this the beginning of something special ;)

1AJM19 Jun '24 - 13:12 - 21918 of 21918
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JSE are in a good position with reference to their current decom liabilities agreed.

[1ajm] 19/6/2024 13:12

JSE are in a good position with reference to their current decom liabilities agreed.

[ashkv] 19/6/2024 13:10

Note 37 of the 2023 Annual Report for Asset Retirement Details -> (A snippet from the same)

The Group’s ARO comprise the future estimated costs to decommission each of the Montara, Stag, Lemang PSC, PenMal Assets and CWLH Assets.

The carrying value of the provision represents the discounted present value of the estimated future costs. Current estimated costs of the ARO for each of the Montara, Stag, Lemang PSC, PenMal Assets and CWLH Assets have been escalated to the estimated date at which the expenditure would be incurred, at an assumed blended inflation rate. The estimates for each asset are a blend of assumed US and respective local inflation rates to reflect the underlying mix of US dollar and respective local dollar denominated expenditures. The present value of the future estimated ARO for each of the Montara, Stag, Lemang PSC, PenMal Assets and CWLH Assets has then
been calculated based on a blended risk-free rate. The base estimate ARO for Montara, Stag, Lemang PSC, PenMal Assets and CWLH Assets remains largely unchanged from 2022. The blended inflation rates and risk-free rates used, plus the estimated decommissioning year of each asset are as follows ->

Asset Decommissioning year
1. Montara 2031 [Not 2030 as the troll 34d was conveying - also likely to be extended if Gas assets developed as management has mentioned]
2. Stag 2036 [A long long way to go - 12 years!!!]
3. Lemang 2036 [Minimal cost USD 5.5Mn Provisioned as onshore and Per JSE likely to be extended]
4. PenMal 2024 onwards [Decommissioning expense provisioned in current year, however, majority are producing assets and JSE is looking to redevelop a field that was shut due to a FPSO issue]
5. CWLH Assets 2035 [Per JSE likely to be extended]

2023 Annual Report Published 27 April 2024

[ashkv] 19/6/2024 12:49

From JSE Annual Report re Asset Retirement Estimates ->

The Group reviews and updates its decommissioning obligations at least annually, and estimates are subsequently reviewed by third-party experts.
The annual review process is on a three-year cycle based on a detailed bottom-up cost assessment followed by two years of top-down assessments. This ensures at least once every three years the portfolio of assets has a full detailed cost assessment performed that is independently and resources by a third-party expert.
Legislative changes are monitored, and changes discussed with relevant bodies including regulators and industry bodies. From time to time, the Group obtains independent legal opinions, as required.
When reviewing acquisition opportunities, any required acceleration of funding of decommissioning liabilities generally decreases the net present value of the opportunity, which is incorporated in the Group’s purchase price consideration.

[ashkv] 19/6/2024 12:49

Asset Retirement Obligations are Discounted to Present Value based on future estimates.

This all audited / and overseen by regulators / auditors [It is applicable for every firm and given JSE production the asset retirement obligations are in the lower quartile] [Reference Ithaca, Tullow, Harbour etc]

Anecdotes that I recall from my asset retirement / decommissioning provisions review of JSE assets ->

CWLH Decom all paid for per payments from JSE as part of both bolt on acquisitions -rest of liftings are pure upside!!! No further liabilities other than any Capex!!!

Penmal - Original operator / developer has already paid the major amount into the the decommissioning fund!!! JSE has minimal obligations!!!

Montara -> The major asset retirement obligation!!!

Sinuphorm -> Minimal obligations

Akatara -> Onshore / long lived / minimal retirement obligations!!!

Stag ->

[1ajm] 19/6/2024 12:29

These funds that sit there for a decade after needing to be filled ASAP are;

1. probably being used by goverments and banks

2. then have to pay for services at a rate that has say 10 years of inflation added to it. the sheer cost of havimg to put cash away potentially for a decade from a buying power point of view is silly, oil companies hopefully get a fair interest rate.

3. When the big oilers start moving out of an area roughly the same time there hopefully will not be an influx in the amount of assets that need decom activites at certain periods, would only serve as justification for companies to hike costs.

[1ajm] 19/6/2024 11:51

To be fair to JSE they are very good at paying into them and have the decom liabilities seemingly under good control.

It seems a bit rushed sometimes, the speed into which they payed into the CWLH fund was amazing at a time where cash was tight and they were needing to increase the RBL size just to get by.

Who benefits from having this mountain of cash locked away for decades? goverments/banks?

I'm not sure JSE have any say over the size of the decom liability fund.

I'd expect it would be wholey figured out from a unbias heavily regulated third party company.

If any oil company were to set the decom fund themselves in any way that would be alarm bells ringing for me personally.

I would probably be just as baffled looking at the size of other companies decom funds for assets, not having a jab at JSE specifically.

just the example of a 1,000day operation at a cash burn of $600k a day or 500 days at $1.2mn a day to decomission CWLH blows my mind.

[mount teide] 19/6/2024 11:49

1AJM- 'Montara and stag are barely hanging on being called assets at this point IMO, Partly due to the asset itself but also the concern on how JSE handle such events if they arrise.'

Like most offshore mid/late life fields operating with an FPSO, the overwhelming majority have the FPSO on long term charter. This is a very expensive way of operating, particularly once the field enters mid/late life.

By way of example:

Harbour Energy's North Sea Catcher Field has an FPSO on long term charter at an annual cost of $210m for the first 8 years of the Contract, with annual Inflation uplifts. The contract options to extend the charter beyond the fixed period does, in practice, usually result in only a modest reduction in the charter rate.

At Jadestone's current circa 5,500 bopd Montara production level, if they had the BW Catcher sitting over the Montara field(rather than a fully owned FPSO which was included in the net $82m completion price of the Montara asset), the OPEX/bbl JUST for the FPSO would today be $105/bbl!

Montara Venture - Under the inspection oversight of a DNV Classification Surveyor, once the highly expensive in-situ inspection, repair and maintenance work on the Montara Venture is finally completed in H2/2024, I think an average ongoing OPEX/bbl of $40-$50bbl for the Montara Field would be a very reasonable target across the remainder of this decade.

AIMHO/DYOR

[34adsaddsa] 19/6/2024 11:41

So you think they may benefit by overestimating decom costs, overpaying into abandonment funds and then getting the surplus back later?

I'd really like to know what the decom liability is for each asset, how much has been paid into the abandonment fund and what the expected deficit is.

[1ajm] 19/6/2024 11:35

CWLH abandonment trust fund, up to $102mn for 16.67%. Over $600mn

1,000 days, basically 3 years of $600k cash burn a day equivalent to decom an FPSO, subsea infastructure, well heads.

[34adsaddsa] 19/6/2024 11:24

"The decom liabilities I do still believe are mainly just a massive tax vehicle"

Can you explain this?

[fardels bear] 19/6/2024 11:22

Thing is, we can actually see you grinding your axe. We don't need to hear you as well..

[34adsaddsa] 19/6/2024 11:22

I guess we'll have to wait and see whether the net equity explodes upwards.

I think it's fair to assume Montara production will trend down to 2030. Do you think they're going to produce 5-6K bopd in 2029 and then cease production in 2030?

You say they'll be swimming in cash, but those same analysts whose target prices you're relying on are forecasting a net debt position up to 2026. Granted that is due to very high capex but still..

I don't think it works for shareholders with those OPEX levels at Montara & Stag. A big acquisition could offer a route out.

[ashkv] 19/6/2024 11:08

Montara has a drill scheduled for end year 2024/Early 2025 that WILL INCREASE PRODUCTION

From 2023 Full Year Results -> "On 4 October 2023, pressure was lost from the A annulus in the Skua-11 well, likely as a result of gas in the annulus escaping from a shallow leak point. The well was immediately shut in. A replacement operation, which includes a sidetrack to target volumes associated with Skua-11 and additional reserves in the vicinity is currently being planned and is expected to commence in Q4 2024."

34adsaddsa19 Jun '24 - 10:54 - 21900 of 21902
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It's true that OPEX is expected to be lower next year, but it's still high and Montara's production likely falls up to 2030 so OPEX per barrel increases.

[mount teide] 19/6/2024 11:07

UK O&G Industry - Beware of unintended consequences!

Labour's proposed policy to increase the total tax take to 78% and end the deductibility of Capex, is very likely to lead to the complete collapse of exploration activity and most production development.

The financial distress of most small/mid cap UK focused E&P companies is a near certainty, with many likely to fail(who would want to buy their 'assets'?), thereby increasing the risk of a very substantial minority of the North Sea O&G sector's eyewatering decommissioning costs becoming the responsibility of the taxpayer.

What a contrast to the forward thinking governments of Angola and Malaysia - who this decade have made their O&G industries some of the most competitive in the world to attract foreign investment - with predictable results: a tsunami of new investment to enable the natural divestment of mid/late stage assets from NOC's and the Majors to second phase small/mid cap's with a proven track record of safely operating these type of assets.

AIMHO/DYOR

[34adsaddsa] 19/6/2024 10:54

It's true that OPEX is expected to be lower next year, but it's still high and Montara's production likely falls up to 2030 so OPEX per barrel increases.

Ithaca's position:

Total assets: $6,246,613,000
Total liabilities: $3,802,187,000
Net equity: $2,444,426,000
Market cap: £1.27B

Jadestone's position:

Total assets: $1,089,134,000
Total liabilities: $1,035,364,000
Net equity: $53,770,000
Market cap: £166M

The assets could be understated for Jadestone and overstated for Ithaca, but those are the positions at end of year and the difference is quite obvious.

That's why I wanted the - probably quite risky - acquisition to happen. Without it I think the company will really struggle.

"Given what JSE recently paid for CWLH assets, Sinuphorm, Akatara, Penmal etc and even taking Montara and Stag at ZERO value (not so in reality) JSE sum of parts valuation is significantly more than current share price reflects accounting for liabilities"

Then why don't the accounts reflect that? Why is the net equity $54M?