Jadestone Energy Share Discussion Threads

[mount teide] 22/10/2018 23:47

Stag Field - First of the 3 in-fill wells to be drilled by Q3/2019 is due to spud in Q4/2018 - The Ensco 107 drilling rig is scheduled to arrive at the Field in December for an estimated 34 day well.

From Admission Document:

'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 work-overs) to US$25.9/bbl and enhance cash flow resiliency, even at low oil prices.'

Initial expected production rate from the first in-fill well is targeting an increase in field production of 36%, while reducing operating costs per bbl by 22%.

[mount teide] 22/10/2018 08:44

Cash flow development - Brent has averaged 11% higher since the beginning of September compared to the three month prior period. Gross revenue will have increased by circa $3.3m(Monthly)/$40.0m(on an Annualised basis).

Average Brent Price:
$73 June - Aug
$81 Sept - to date

[basem1] 22/10/2018 08:21

Buying price 41p - just taken 20,000

[mount teide] 21/10/2018 18:07

World oil and liquids supply surpassed 100 million barrels a day for the first time in Q3/2018 - IEA

Global supply rose to 100.3 million bpd in Q3 the IEA said on Friday in its monthly oil market report. Output, which includes crude oil, natural gas liquids, biofuels and refinery processing gains, was 2.3 million barrels a day higher than Q3/2017 when Brent average circa $53.

So, despite increasing global oil and liquids production some 2.3% over the last year while Cushing stocks fell from circa 60m bbls to circa 25m bbls; such was the demand the price of Brent still rose over 60% from $53 to more than $85 at the recent peak - suggesting a much tighter market than the "adequately supplied" political language used by the IEA.

[mount teide] 21/10/2018 16:31

Asia's 4.6 billion population set to see it's oil deficit surge 30% to 35m bopd by 2025 - a forecast growth of 8 million bopd in just 6 years. They have got to find a supplier for an additional 1.3 times the North Sea's annual oil production EVERY year through to 2025.


Asia’s Thirst for Oil will Continue - Oil & Gas Bulletin - 15 October 2018

'Asia’s oil deficit will widen to 35 million barrels per day (bpd) by 2025, up about 30% from the current 27 million bpd, amplifying global trade flow imbalances, a senior executive at French oil and energy group Total said on Tuesday.

At the same time, Europe’s imports will be stable at 10 million bpd, while exports from North America and the Middle East will increase, said Thomas Waymel, the company’s president of trading and shipping.

The United States will export shale oil, but its refineries will continue to import medium and heavy sour grades, Waymel said during the Asia Pacific Petroleum Conference (APPEC) in Singapore.

Regulatory changes like IMO 2020, which will cap sulfur content in ship fuel, will be another driver for growth and changing trade flows, he said.

“The fuel oil flows will be reduced. At the same time, the shipping industry will need distillates … so Europe and Singapore will attract more distillates,” Waymel said.

New trade flows might emerge for high sulfur fuel oil either in coker capacity or power plants switching back from coal or gas to high sulfur fuel oil.

Light sweet crude will be more in demand, while heavy sour grades will need to be processed by complex refineries, he said.

“Regulatory changes will dramatically affect an increase in flows of both crude and products. It should also have positive impact on freight rates which is finally good news for ship owners,” he said.'

[zengas] 17/10/2018 16:03

Updated with Charts

[zengas] 17/10/2018 12:24

In the latest presentation (page 24) and the 5 year illustration depicting 30,000 boepd production.

2018 post Montara acquisition currently 13,900 bopd.

Next years 2019 graph moves up and if you apply a scale to the 2018 graph and 30,000 boepd used for 2023 graph then production should be around 17,300 bopd next year. Notably this states from "First Two Infills".
There is in fact 1 infill this year and 4 next year on the previous page schedule.

Further infills for 2020 and the graph increases and would translate to around 19,000 bopd and 23,000 boepd the following year.

OK gas fields are shown as coming on in 2022 but makes no allowance for the possible current net production which was recently 1400 boepd (65% oil). PSC terms awaited and expected this quarter (not guaranteed until signed off). This could and should add additional production when/if signed off.

Given the cash flow and their previous experience at Talisman in growth via acquisitions, could they make a further one in the next year or so perhaps adding a few extra or similar Montara scale thousand barrels in the process ?

"Well positioned to take advantage of the retrenchment by majors and independents in the region"

"Leveraging managements proven track record of accretive business development"

[zengas] 11/10/2018 22:42

Brent 2018 YTD 9 months = approx $72/b

My estimate from the chart gives Q1 average circa $66.50/b. Q2 $74/b. Q3 $75.50/b.

Plus a $2/b premium lifts the average to $74/b so imo has run at an approx 12% premium to $66/b used for 2018 with payback by Q4 next year for Montara. ($67/b being used for next year 2019, then $68/b thereafter).

[dorset64] 11/10/2018 22:40

Some great posts guys, great to have a 'quiet' board with some quality 'technical' input from you guys too. :)

[spangle93] 11/10/2018 22:01

Mount T - I think the acquisition price looks increasingly better for JSE with the oil price having gained after the deal was struck, though as Zengas says, there are additional burdens in this case (that I hadn't included in those rough payback calculations, thanks Zengas!)

Unlike some deals where majors exit an asset to allow a niche, low cost operator to manage late life field extension, as far as I can see, PTTEP has no decommissioning obligations. That's quite a prize for them.

[mount teide] 11/10/2018 21:36

Zen - great posts - 'transformative potential' are much over used words these days with respect to acquisitions but, increasingly Montara does look like the Thai's priced the asset to sell.

With the previous safety history of the field under their operator-ship in mind - selling out to a buyer that specialises in facilities management of mid life and mature fields capable of taking on the operator-ship of the field and FPSO within a short timeframe to enable a clean exit looks like it was reflected in the sale price.

[zengas] 11/10/2018 15:47

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.
-----------------------------------------------------------

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 15:11

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 12:48

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 12:35

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 02:39

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 01:44

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] 11/10/2018 00:47

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 18:28

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 14:03

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 12:51

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 12:34

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 12:22

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