Jadestone Energy Share Discussion Threads

[fozzie] 18/3/2019 08:21

Just got around to watching the City Index presentation by PB from March 12th. I have watched hundreds of these things over the years and I liked what I saw. The phrase quietly confident comes to mind with Paul and his team. Right team right time right location. Stag profits pay for everything else plus money left over. Very positive presentation and great opportunity for us here in this off the radar company. Thanks to all the posters over the last week or so and a big thanks to MT who ploughed a loan files here for a long time and highlighted the opportunity.

[mount teide] 17/3/2019 22:13

Montara has 2c resources according to the Admission Document including: close to a half a trillion cubic feet of Nat Gas.

Some further Admission Document information:

Montara Field:
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. (This together with the Jadestone teams long regional experience and industry contacts should place them as serious contenders for future opportunities - the NOC's and IOC's are likely to consider only companies with the highest operational/safety standards when selling down their regional assets).

The acquisition price represents a 32% discount to the NPV10 of the 1P reserves as estimated by ERCE; a 59 per cent discount to the NPV10 of the 2P reserves and a 75 per cent discount to the NPV10 of the 3P reserves. Free Cash Flow pay back of the acquisition price (before adjustment and contingent consideration) is estimated to be two years based on the assumptions used by ERCE. (If they deliver on 2019 guidance - it will blow the 2yr timetable out the water by cutting the payback time in half!)

12% increase in uptime and circa 25 per cent decrease in operating costs at Montara Assets targeted within 12 months of assuming operatorship. Jadestone management estimate that this will increase annual production by circa 1.7 mbbls/d in 2019.

The successful completion of an additional producing well, Montara H5-ST2, in October 2017 increased production at the Montara Assets by 3.5 mbbl/d.

The Company plans to drill two in-fill wells targeting identified 2P reserves of 3.5 MMbbl. These wells are included in ERCE’s reserves case for the Montara Assets. A further three in-fill targets, not included in ERCE’s reserves case, have been identified by Jadestone management targeting 5.3 MMbbl. The intention is to drill these in-fill targets as part of a 2020 or 2021 work programme. The Company has also identified numerous operational improvements on the production facilities to increase efficiency.

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.

Stag Field - Jadestone received notification, on 30 April 2018, of the renewal of the Stag production licence for a further 21 years. (This provides the Company with the opportunity to further develop and invest in the field, to grow future oil production and deliver additional operational efficiency initiatives.)

[mount teide] 17/3/2019 13:03

cro - 'Also annoyed I didn’t fjnd JSE in the 30s as I see it as a £1B Mcap company in a few years.'

If the management create a £1bn company over the next 4 years - whether buying at 35p, 45p, 55p of 65p is likely to make little difference to the overall return.

Its like getting in on the 3rd or 4th floor of a 42 storey office block under construction

Blakeley and his team developed Talisman's SE Asia business unit into a $6bn company in less than 10 years - this was the primary reason he was approached by our two high performing US activist hedge fund shareholders to run Jadestone. That he has since brought over most of his Talisman team together with a number of other highly regarded individuals from within the sector, provides the best possible foundation with which to replicate Talisman's performance with Jadestone.

Add to that, for downside investment protection, the market circumstances are better than when they ran Talisman, since the SE Asia / Pacific Rim / North Australia oil and gas basins are seeing the US majors and NOC's retrenching with increased momentum as a result of 68% of regional production now coming from mid-life and mature fields.

Blakeley reckons there is a huge opportunity for smaller second phase operators, that currently are thin on the ground in the region, to grow quickly through a combination of organic growth and the selective purchase of and re-investment in mid/late stage high quality regional assets.

With the managements track record in the region and before that in the North Sea - it would take a brave man to bet against them delivering a similar performance with Jadestone, given the strong demand and premium prices paid for energy in the region, early years of the recovery stage of the market cycle, and number and quality of mid life and mature assets currently in the hands of retrenching International and National oil companies.


AIMHO/DYOR

[fardels bear] 17/3/2019 10:48

They are 815p now and may be a lot hight upon readmission following Marathon deal.

[croasdalelfc] 16/3/2019 21:54

I was first in RRE at £1.25 £18m Mcap and kicked myself for not just holding and adding. I hold a few at £6 now . Also annoyed I didn't fjnd JSE in the 30s as I see it as a £1B Mcap company in a few years.Another with a similar Modus Operandi is DGOC which I hold for the 10% dividend and growth . Junior ISA material for my kids . 71000 boepd . All reserves proved, producing, 450m barrels or so - EV about £1B comprising Mcap £650m and debt of £350.

[mount teide] 16/3/2019 14:52

2018 Container Port Traffic(TEU) at the top 25 Nations: Ranked regionally:

218 million - China
170 million - SE Asia & Pacific Rim
84 million - Europe
53 million - USA and Canada
52 million - Rest of the world

Against this backdrop, it does not take a Phd in Applied Mathematics to work out why the 4.8 billion population of the fast growing Chinese, SE Asian and Pacific rim markets has been responsible for the entire 34 million bopd increase in global oil consumption since 1980 and, where the overwhelming majority of the future growth in energy and commodity demand is forecast to come from over the next decade. China alone already consumes more than 50% of the entire global production of copper and the region is expected to consume over 75% of global nat gas production by 2030.

Data Source - Lloyd's List

[mount teide] 16/3/2019 14:26

As mentioned previously, the overwhelming majority of my equity investments are now in the Shipping, Oil & Gas and Industrial metal sectors. Almost without exception these sectors generate revenue in US$ and have their costs in either US$ or weak currencies, and being mostly London listed report in GBP.

It is not an investment strategy designed with Brexit in mind - it long pre-dates it - it's MO is the long term shipping/commodity market cycle, which bottomed after a 7/8 year decline/recession stage in H1/2016 that was longer and deeper than any previous cycle in living memory. If previous market cycles going back 70 years are a reliable guide we should see the current recovery/boom stage of this new cycle peak around 2024/25.

Following chart compares the Goldman Sachs Commodity Index(20 major commodities with a very high oil weighting) v S&P500 over nearly 50 years. The hugely cyclical nature of the GSCI Commodity chart closely mirrors the Baltic Dry Index Shipping Chart over a similar period.



Objective assessment of the current market fundamentals (increasingly supported by the consensus view of market analysts after 18 months of most forecasting further armageddon for the sector), suggests that although the joined at the hip shipping/O&G/Industrial metal markets surged off the decade lows in 2016/17, the cycle fundamentals/pricing power of these industries is likely to remain strong well into the next decade before slowly softening to a blow off peak mid decade.

After a decade of very low investment following the financial crisis many Western Nations such as the USA are now actively involved in implementing huge capital expenditure programs to rebuild their crumbling infrastructure, while high population Nations like India and much of SE Asia and most of the fast growing African and South American emerging Nation economies are implementing and accelerating infrastructure and industrialisation development programmes similar to China.

While China's spectacular growth may have softened from 10% to 6.5% over the last decade: it should not be forgotten that China's 6.5% growth today of its now more than twice the size economy, will generate considerably more demand for commodities in tonnage terms than the 10% growth at the last commodity market peak in circa 2008-2010.

The fast growing economies of China, SE Asia and India's continuing strong demand for oil and gas together with a rapidly increasing demand for industrial metals from the materially important renewable energy and global electric vehicle sectors is forecast to strongly underpin demand over the decade ahead, and long after this latest commodity cycle peaks.

As a result of low barriers to entry, the commodity and shipping markets have historically charted a remarkably reliable 15-20 year boom and bust life cycle over the last 70 years - as a consequence, investors only get 2 or 3 small windows of opportunity in an average lifetime to time an investment in the sector perfectly.

With the shipping, zinc, copper and oil markets bottoming in 2016 after more than half decade falls of 98%, 66%, 56% and 76% respectively, this current early stage cyclical recovery phase still has a long way to run for equities since, as in the early years of previous recovery stages it took 2-3 years of a recovery in the pricing of commodities and shipping before the associated equities caught a bid and took off.

Trump's high oil prices are simply not supported by the facts: Brent averaged $95 between 2008 and 2016 and $82 between 2008 and 2018, so today's $65 is still well below the level oil averaged over most of the last decade! Brent's 2008 inflation adjusted all time high price is $179.

Any who may fear a possible wider market slowdown/recession over the next few years negatively impacting the commodities sector, should check out the performance of oil and industrial metals during the last sector recovery stage of 2000-2008, which followed a 7 year commodity market recession during which the wider markets boomed.

The FTSE 100 peaked in 2000 at circa 7,000 (nearly zero nominal growth in two decades) and by 2002 had halved in value, and was still in correction territory more than 20% down by 2006. The pricing performance of copper and oil during 2000-2006 was:

+171% - Brent
+498% - Copper

So much for wider market recessions negatively impacting investment starved commodity markets in/close to deficit with Swiss watch reliable 40 year average 2.5% annual growth.

AIMHO/DYOR

[mount teide] 16/3/2019 09:58

Spangle - 'but often it's because they are frankly underestimated in the first place.'

You would think with decades of experience at operating in the North Sea, the sector will have gained sufficient first hand knowledge to accurately budget development projects.

Or is it more a case of some project teams trying to make proposed projects(in a high development and operating cost environment) look as attractive as possible with regard to total cost and build time to get them authorised?

Was surprised when BW Offshore/ Ithaca elected to convert FPSO BW Athena in a middle east yard/Dubai - while Singapore, South Korea and Japan may be marginally more expensive(circa 10%), they have a well earned and enviable reputation for carrying out highly specialised FPSO conversions and LNG new builds on time and budget.

I see the Qatar government is responding to Australia's effort to usurp them as the World's largest LNG export Nation by announcing a Plan to order 60 more liquefied natural gas carriers from mainly South Korean yards at circa $300m each, to bring their fleet up to 110 vessels. The vessels are expected to have main engines running on the cargo(LNG boil off), in order to get around the implementation of the global 2020 sulphur cap.

Interesting to see the wind and sea state forecast for the next 14 days for the Timor Sea where Montara is located - Force 1 to 3, with an average wave height of 1 foot - and average daily temp of 30 centegrade. Sea state and weather conditions the North Sea oil service industry can only dream about.

[spangle93] 15/3/2019 23:59

MT, ref Ithaca and "Most projects seem to come in late and over budget."

To be honest, I emailed JT Cod when they put out the schedule for the FPSO conversion to tell him that this was brutally optimistic. So it proved to be. I did well out of IAE, but when you say that projects come in late and expensive, part of it might be that they have been mismanaged, but often it's because they are frankly underestimated in the first place.

I don't think JSE are under the same pressure to overdeliver, but I noticed that Vietnam sanction has effectively slipped a quarter since IPO presentations

[mount teide] 15/3/2019 22:22

Yes, their reputation as mariners is hard earned and well deserved - that they managed to navigate their way across the Atlantic in open longboats without access to modern navigation equipment centuries before Columbus discovered America is remarkable.

[fardels bear] 15/3/2019 21:48

Well done the Vikings then.

[mount teide] 15/3/2019 21:45

Good photo someuwin - you could count on the fingers of one hand the number of days a year you would see the sea state like that 150 miles out into the Northern North Sea!

When i managed a ro-ro freight ferry service between Finland and the UK, it often took between 3 and 7 days to do the North Sea crossing from south of Oslo, Norway to Dundee such were the atrocious sea and weather conditions commonly encountered between September and May - its a sea passage that in relatively calm weather should have been achievable in 24hrs.

[homebrewruss] 15/3/2019 21:27

Thanks MT,
RRE is well worth a look and is supposedly designed to prosper in a low oil price environment. I'd be interested to hear what you think about it.

I agree with all the points you have made on JSE. It is very well positioned and I really like what the management have done to date.
I have a decent sized position now but will look to add on any dips.

I'm also involved with HUR and know how much they have spent on their FPSO in the last year which makes the JSE Montara deal seem all the more remarkable.

[fardels bear] 15/3/2019 20:59

That is a quite remarkable deal if the floater is included at that price.

[someuwin] 15/3/2019 20:45

FPSO Montara Venture...

[mount teide] 15/3/2019 20:19

hbr - after watching the North Sea prove a graveyard for so many small cap O&G companies while invested in Ithaca Energy, i elected to end my investment relationship with North Sea oilers on Ithaca's take over.

A number of factors including extremely challenging year round sea and weather conditions saw Ithaca's production development plans delayed by years - a problem that seems to affect most, if not all North Sea operators. Most projects seem to come in late and over budget.

Having said that i did take a brief look at RRE this afternoon and it does at first glance look an interesting prospect worthy of selection for further research.

In the shipping, O&G and Industrial metal sectors, I look for companies with exceptional assets, a management with a long track record of success in the sector, and focus mainly on the average 6-9 year recovery stage of these long, highly cyclical markets. The last commodity market cycle bottomed after a near 8 year decline/recession stage in H1/2016.

The investment attraction of JSE for me is the quality of the management and long regional experience; re-investment potential of the assets; that they operate in a region where the competition for high quality mature assets is very thin, the number of very experienced second phase operators very low; demand for O&G is growing rapidly and attracts a premium price; operating costs are relatively low; and the mostly benign sea and weather conditions enable field production development and maintenance work to be carried out year round - combined this offers significant investment downside protection rarely found in the North Sea and especially West of Shetland.

That the FPSO 'Montara Venture' was included in the $82m net Montara purchase price is nothing short of astonishing considering the previous owners paid $50m for the hull and another $58m to complete the two year conversion in a Singaporean shipyard. Such is the extremely low cost compared to a similar chartered in vessel(Premier Oil are paying an annual charter fee of $210m a year for the FPSO BW Catcher on their Catcher field) ; if the management were able to increase production from Montara and its satellite fields above 20,000 bopd, they may well see Montara's operating expenses per barrel drop into single $figures.



AIMHO/DYOR

[homebrewruss] 15/3/2019 19:12

Ok Fardels, perhaps better on the RRE board but this should give you the flavour:

[fardels bear] 15/3/2019 18:49

Don't you think you ought at least to express your concern with Andrew Austin since you're slandering his reputation?I was in igas for some years and I rather thought that it was debt and the last oil recession that kiboshed them. I'm not in igas now but that's Nimby related and I am in RRE where I think you and I will do very well by AA..

[homebrewruss] 15/3/2019 18:24

Thanks Spangle, I appreciate this is the JSE board but they have a slightly similar approach in assets bought/developed. I own both having only bought RRE in September at around £5.

With the latest RRE acquisition they will have over 20,000 boepd with another approx 10,000 coming on stream in 20/21 and probably more acquisitions along the way.

Their current market cap is approx £100m but no doubt there will be a sharp rise post current suspension.

Arguably RRE is much cheaper so I'm interested in possible valuation methodologies.

On the other hand I think I prefer the JSE management and there is a slight red flag over the RRE ceo's history at iGas.

[spangle93] 15/3/2019 18:01

o/t Russ - ref your question, TBH it listed when, for personal reasons, I wasn't following small O&G companies, and I've never looked at it since. So I don't know enough about it to have any views at all, let alone either way.

[homebrewruss] 15/3/2019 15:32

Zengas, Spangle and MT a quick question if I may - I'm trying to improve my knowledge in this space.

Did any of you look at RRE at all?
I can't see any of you posting on that board so just wondering if you looked but then looked away and if so why?

Reserves? Decom costs? Management? - All 3?

Thanks