Jadestone Energy Share Discussion Threads

[zengas] 11/10/2018 14:47

They stated about $77m cash due end July ($95m cash/inventory transferred RNS 28/9/18).

My post on the other thread at the time from the August conference call.
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Excellent 2pm Conference call.

Montara acquisition. Given the effective date is Jan 1 2018, payback on this should be achieved 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 Michael in Business Dev Team saying We will look at opportunities of greater scale. We are looking - A number are early stage.

[zengas] 11/10/2018 14:11

The Montara purchase price was $195m to be adjusted for working capital.

Paid for by $120m RBL facility and balance of $75m capital raised by issuing shares ($80m stated in the $110M raise RNS of 3/8/18).

The expected pay back was Q4 2019 based on price assumptions in the CPR by ERCE dated 15/7/2018 at $66 -$68/b.

But that's the entire $195m purchase price to the payback date because $75m of that is already borne by the issue of shares leaving a drawn $120m debt. The debt will actually be cleared sooner if they were to choose.

$92m cash/inventory was transferred to Jadestone at the end of September - 9 months after the effective transaction start date ie $10m/month.

At 10,000 bopd over 9 months to get $92m = $34/b (very rough estimate).

If at the same rate that was to continue on to Q4 2019 to have achieved pay back, it would be an additional $120m by end of December next year - ie total $232m - yet there's only $120m debt to clear.

There's $3.7b of petroleum credits so only a 30% tax on company profits.

Montara is paying for itself and that's not allowing any contribution from Stag.

Imo we may likely keep/amend the debt facility in place longer term as I expect further acquisitions to come through.

One final thing is if oil averages above $80/b for 2019 then there's a kick in bonus to PTTEP of $20m, so at 10,300 bopd unchanged at Montara we'd be paying out $5.30/b. With 15,000 bopd across the Montara/Stag assets it's $3.50/b but given the rise from $68/b it's of no consequence.

Whatever way you look at it, Jadestone is already generating substantial free cash.

[spangle93] 11/10/2018 11:48

Mount T - I came at it from the other direction, i.e. that you'd run an operation with critical spare parts cover, food supplies, material in workshops, ... and taken together this would be inventory.

But I don't see why unsold carego couldn't also be classed as valued in the way, which would certainly close the calculation gap

[mount teide] 11/10/2018 11:35

Spangle - thanks.

Inventory - is it wrong therefore to assume(as i did) much of this could be unsold oil production in storage in the FPSO?

When i bought and sold large commercial ships running a ship management company (ably assisted by some excellent S&P Shipbrokers at Clarkson's), the Ship's asset register contained all the major spare parts (stern tube etc) within the vessel price.

[spangle93] 11/10/2018 01:39

Mount T - First, those calculations were appallingly and embarrassingly blunt - I was just working on order of magnitudes to see how long pay-back might be.

For instance, I'd taken annual opex and divided by 365 to get a day rate. I'm sure in reality that opex isn't quite as uniform as that.

Second, the blurb said "In addition to acquiring the Montara assets, 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"
So I would assume that there is inventory - spare parts, maybe workover tools, etc - making up part of the difference.

[mount teide] 11/10/2018 00:44

Spangle - Interesting - Using your estimated daily gain(after tax) of $259k over 9 months(270 days) = circa $70m at $80 oil

How do you think the recent transfer of cash on completion of the deal accumulated over the previous 9 months could have been $92m at an average Brent price of $73/($75 with regional premium) ?

[spangle93] 10/10/2018 23:47

If I've done these rough calculations correctly, opex per day at Montara is $300,000 ($110/year), but daily revenue would be 10,000 * $80 = $800,000, so the company nets about $500,000 / day from sales minus cost. At this simple level it would take about 13 months to clear the $195MM purchase.

If you include the effective tax at 30%, daily gain falls to $259k, and the cost is met in 2 years. Remaining economic field life should be around 10 years, and longer if identified opex savings can be made, and if tie-back opportunities can be brought through the facilities to lower opex/bbl.

[mount teide] 10/10/2018 17:28

Another 2.7million of late reported transactions from the 8th October bringing the total on that day to close to 5.0 million.

Looks like around 2.5m were sold at circa 44.6p and then bought for circa 45.6p

Probably a 35p placing participant happy to scalp 25% in less than 2 months.

[mount teide] 10/10/2018 13:03

Spangle93 - I agree, the management made it very clear they are looking to mitigate risk by taking advantage of the huge regional demand and high prices for Nat Gas but did say if a truly exceptional deep value oil asset came along they would not hesitate to give it serious consideration.

Montara certainly looks to be in that category.

[mount teide] 10/10/2018 11:51

Look East to the ultra high population Nations of SE Asia, China and the Pacific Rim if you want to see where all the O&G consumption growth will continue to come from over the decades ahead.


Global / Regional Oil consumption 1965-2017 - 2018 BP Statistical Review of World Energy

United States consumption is 3.5 million BPD higher than in 1973, which amounts to growth of just under 15% in 45 years. Demand in the EU has declined by 13% since then.

But demand in the Asia Pacific region climbed from 9.1 million BPD in 1973 to 34.6 million BPD in 2017. This huge increase in demand is the primary reason the global demand curve has marched steadily higher.

Of course, Asia Pacific is where most of the world's population lives - therefore demand growth is being driven by billions of people who use a lot less oil per capita than the US, but whose per capita consumption is not only rising but rapidly accelerating.

Chinese demand has increased by 5.0 million BPD over the past decade, by far the most of any country. But Chinese per capita demand is still only 3.3 barrels per person per year.

The US consumes about 22 barrels per person per year. That is partially a result of a more mobile and affluent population, but US consumption also drives a larger economy.

To put the current US demand in perspective: if Chinese per capita demand were as high, it would be nearly as great as the entire current global consumption.

In second place for the largest increase in oil demand during the past decade is India, which has seen its demand increase by 1.7 million BPD and whose growth is forecast to overtake China over then next decade. Third place will probably be a surprise to many - Saudi Arabia has increased its oil demand by 1.5 million BPD during the past decade.

The largest decrease in demand over the past decade was in Japan, which saw oil demand decline by 1.0 million BPD. Second place will be another surprise, as the US saw oil demand decline by 800,000 BPD. Italy was third with a decline of 493,000 BPD, while the entire EU saw demand fall by 1.7 million BPD.

So, all the demand growth in oil over the last 30 years has come from the ultra high population Emerging Nations - the EU, USA, NZ and Australia collectively only account for 12% of the global population and this is forecast to fall to just 8% by 2030. And the good news for O&G and copper investors is that the demand growth from these regions is still in the foothills due to its very high population, very low but rapidly rising consumption per capita compared to the West and need to reduce its energy generation reliance on high polluting coal for health reasons as a result of air pollution.

[captainfatcat] 10/10/2018 11:34

lol I thought it was a bit quiet on Zengas's JSE thread. Just catching up here again.

MT thanks for setting up the new bb its always nice to have the daily and long term charts etc.

[zeusfurla] 10/10/2018 11:22

Buying opportunity at 43.66p again below mid-price. Just topped up.

[mount teide] 10/10/2018 07:56

I think many analysts in the O&G industry are overlooking or simply underestimating what 5 years of savage cost cutting has done to what was a very bloated high cost industry during the long period when oil was over $100.

For many the returns today at $80-$85 oil will be similar to what they were getting at $100.

Many are asking can oil go back to $100 - some of us would say in terms of returns its already there.

$80 oil is the NEW $100 oil! (And you can bet the industry will not be promoting that !)

Its typical commodity cycle behaviour - though it should be borne in mind the last downturn/recession stage was the longest in more than 70 years of commodity cycle history - so the potential of this new once every 15-18 year cycle recovery stage is exceptional since it's starting from a record low point in relative terms of the drop in the price of oil peak to trough (79%) and a half decade of savage industry cost cutting to survive.


When O&G sector historians and analysts look back in a decade's time it would not surprise me in the slightest (in fact it would surprise me if it were not the case) if they conclude that the sector fundamentals during the period from late 2016 through to 2019 had been staring the market in the face as the optimum time in decades to take exposure to high quality O&G sector equities.

[mount teide] 10/10/2018 07:32

Spangle - its worth bearing in mind that the huge long term potential of the Montara Field under JSE future Operatorship has already started to reveal its hand via the field performance from the effective acquisition date of 1st Jan 2019 to the late September completion:


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 today's $85 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% and over 90% in the medium term:

In 2019 under JSE's expected operatorship the plan is to:

* Increase annual production by circa 1.7 mbbl/d

* Reducing operating costs by circa 20% and corporate charges and overheads by >50%.


At the current Brent price the £92 million of cash and inventory transferred on completion would have seen a further circa $28 million(less taxes/royalties) added to it - suggesting the end of 2019 payback time could well come forward if the POO remains at/close to its current level in 2019 - which latest consensus forecasts are strongly suggesting.


AIMHO/DYOR

[spangle93] 10/10/2018 06:54

Thanks Zen

I would think that JSE are in a strong position to take on some kind of SQZ-BP format deal, where a mature field is handed over to them, and the cost is taken out of future revenue. Maybe they can acquire some gas production via this novel route.

According to the last presentation, Nam Du comes before U Minh, but regardless, it will be take some effort to deliver them before the end of 2021 if they are only in FEED now.

[zengas] 10/10/2018 06:44

It's from an earlier presentation pre listing, not the Aim doc and none of these are in the value chain. I'm expecting further acquisitions and first gas at Uminh is 24 months away and doesn't take away from the fact there will be a significant movement to 2P in the next 9 months. 'OK' isn't expected until some time in Q4 and we are only 10 days into that. Likewise the Montara acquisition took the full expected time flow to come through. No shortage of opportunities and we have major exploration potential already. Their ideal is not to move away from oil dependence otherwise they wouldn't be making oil acquisitions. It's taking advantage of a mix of both oil and gas in energy hungry markets with excellent pricing as MT points out. As for gas being produced, that's the case from current oil production but there are totally separate gas fields in the Stag/Montara group that at some point may be developed.

[spangle93] 10/10/2018 00:03

Page 26 of which document, Zengas? This page in the AIM doc is all about takeover protocol.


I think their intent is commendable, but right now, JSE is pretty much entirely dependent on the oil market.
- Stag and Montara both produce oil into tankers, and as far as I can see, the gas is disposed into the reservoirs.
- Vietnam's 2 fields will not produce until 2021 and 2023 respectively at the earliest, dependent on ullage in the host facilities
- the revised PSC for Ogen Kamerang remains unsigned


You mentioned the Teikoku opportunity doesn't look promising: elsewhere Block 127 Vietnam is relinquished, JSE was stepping away from Bone, and the Philippines SC-56 is in limbo if Total is not pursuing its obligations. At least, none of these AIM admission assets appears in company presentations, so they can't carry much weight in current valuations.

To me, Ogen Kamerang therefore becomes is critical to their strategy, at least in the short term, plus I think if they are true to the ideal of moving away from oil dependence, any further farm-ins or acquisitions have to be gas opportunities.

[mount teide] 09/10/2018 17:05

2.15 million of transaction volume from yesterday reported after the closing bell today.

Circa 1.15 million of buys at average price of 45.6p
Circa 1.00 million of sells at average price of 44.6p

[mount teide] 09/10/2018 15:09

Zen -'The gas prices are around $8/mcf or $56/boe average so a great hedge against being fully oil dependent re any future volitivity and the oil price costings are on $67/b (2019) and $68/b thereafter.'

Its not just light oil that sells for a premium to Brent in Nat Gas hungry SE Asia and the Pacific Rim where the average Nat Gas price since 2014 has been $9.2/mcf or circa $60boe - in the US Nat Gas prices have averaged $2.72/mcf over the last 4 years / $20/boe.

The huge Nat Gas price premium in SE Asia is the reason why the US is now converting former LNG import terminals into export terminals at huge cost($2 billion per terminal) to sell LNG directly into the SE Asian market.

[zengas] 09/10/2018 11:42

One positive is that JSE won't be a company that's at the mercy of oil price swings.

If you read their mission statement they hope to consolidate other opportunities.

Current development assets are targetting 30,000 boepd over next 5 years but this does not take account of acquisitions or consolidating other opportunties. "Well positioned to take advantage of the retrenchment by majors and independents in the region"

They state their development portfolio is fully funded which comprises a significant gas resource and this was before the oil price increase.

Typically long term fixed price and fixed escalation take or pay contracts providing support against oil price volativity (Page 26).

The gas prices are around $8/mcf or $56/boe average so a great hedge against being fully oil dependent re any future volitivity and the oil price costings are on $67/b (2019) and $68/b thereafter.

Asia Gas market deficit forecast of over 300,000 boepd in just over a year and expected to widen to near 800,000 boepd in next 5 years with a forecast 2.4% increase in regional oil demand.

If they are fully funded for their existing projects then I believe they'll add via the acquisition trail.

The Teikoku (Japanese Inpex Corp) farm in seems to have hit the skids and as far as I know this recently entered production. JSE were farming in for circa 30 mmboe for a cost of $14.3m + 2 possible future payments of $9.8m & $5.9m. These were fully appraised and were ready for tie in. If they have missed on this they may be looking elsewhere given the very strong cash flow now and big build in reserves.

( On February 22, 2018, Teikoku delivered to Jadestone a purported notice of termination of the SPA, despite Teikoku having received a waiver from PVN, of its statutory pre-emption rights, held under Vietnamese law. The Company has not accepted Inpex’s alleged termination, and views the obligations of both parties under the SPA as continuing. The Company maintains its rights under the SPA and is assessing its options, including remedies available through legal action.
)

[mount teide] 09/10/2018 10:59

HG - according to my calculator:

300 days field uptime
$50.00 Op cost differential to circa $80 Brent + $2.50 regional premium
15,000 bopd

Should generate net annual revenue of circa £170m

JSE could not have better timed the purchase of the Montara acquisition - into a fast recovering oil price market the huge cash flow potential should be totally transformative for the Company and its growth prospects - as, unlike the previous Montara owners, JSE specialises in optimising production processes and facilities management in mid life and mature fields.

[highly geared] 09/10/2018 10:12

MT; with net backs around $50 based on current Brent, what gross profit do you reckon , ex G&A?

[mount teide] 09/10/2018 10:03

L2: 2 v 1 / 44.4p v 44.6p (2 @ 46.0p rest 46.4p or above)

[mount teide] 09/10/2018 08:42

There is currently a line of stock available below mid-price - took a few myself at 44.58p.


At current production levels and Brent price JSE is generating gross revenue of $1.27m a day / circa $9m a week.