2024 Guidance and Corporate Update

Jadestone Energy PLC

15 January 2024

 

2024 Guidance and Corporate Update

15 January 2024 - Singapore: Jadestone Energy plc ("Jadestone", the "Group" or the "Company"), an independent upstream company focused on the Asia-Pacific region, announces its 2024 operational and financial guidance and a corporate update. The financial and operational information in this update has not been audited and may be subject to further review and change.

The Company will host a webcast at 9:00 a.m. UK time today, details of which can be found in the announcement below.

Key Points:

·    2024 production expected to average 20,000-23,000 boe/d, a c.55% increase on 2023 at the midpoint.

-      2023 production is estimated to have averaged c.13,800 boe/d, just above the top end of the implied annual 2023 guidance range of 12,600-13,700 boe/d, driven by strong performance from PM323 (Malaysia) and Montara into year-end.  

·    2024 Group operating costs expected to total US$240-290 million (excluding forecast royalties and carbon taxes totalling c.US$30 million), essentially flat year-on-year on a comparable basis and which would represent a c.30% year-on-year[1] reduction on a unit cost basis due to increased production of lower cost barrels.

·    2024 capital expenditure expected to total US$80-110 million, with other cash expenditure expected to total c.US$77 million on a net basis, primarily reflecting the previously announced CWLH 2 acquisition abandonment funding payments.

·    Net debt at 31 December 2023 estimated at c.US$5 million, based on estimated year-end cash balances of c.US$152 million and debt drawn of US$157 million. The end-2023 net debt position benefitted from timing of liftings and optimisation of working capital into the year-end.

·    Akatara development project on track, with the gas processing plant c.92% complete and construction of the sales gas pipeline c.91% complete.

·    The excellent results of the 2023 PM323 infill drilling campaign in Malaysia are expected to deliver strong production growth and reserve additions, with the four new wells currently producing at a combined gross rate of c.7,000 bbls/d.

·    Acquisition of a further 16.67% stake in the CWLH fields is on track to close during Q1 2024, with field production continuing to perform strongly.

·    Recent work has indicated that life-of-field costs at Montara and Stag will be higher than previously expected, primarily due to increases in repair and maintenance costs to maintain both facilities in an appropriate condition. As a result, the Company anticipates the potential for a non-cash impairment of Montara and Stag at year-end 2023. The updated end-2023 production and cost profiles for all of Jadestone's assets will be incorporated into a revised borrowing base resulting from the March 2024 redetermination of the Company's reserve-based lending ("RBL") facility.

2024 Operational and Financial Guidance

Production and operating cost guidance for 2024 underscores the Company's growth and diversification efforts over recent years, particularly the success of the 2023 Malaysia infill drilling campaign, additional low-cost, low-decline production at CWLH and operational start-up of the Akatara gas project onshore Indonesia, which is on track to commence gas sales during the second quarter of 2024.

·    Production:  Expected to average 20,000-23,000 boe/d, a c.55% increase on 2023 at the midpoint, and primarily assumes:

-      Commissioning activity at Akatara continues through the first quarter of 2024, ahead of planned deliveries under the gas sales agreement commencing during the second quarter of 2024.  

-      Montara production averages approximately 5,000-6,000 bbls/d during 2024. The Skua-11 well at Montara has been offline since October 2023 and requires drilling of a side-track well to restore production, which will also target additional volumes in the vicinity of the existing location. This well is currently scheduled to commence drilling in late Q4 2024.

-      The acquisition of the additional interest in the CWLH fields ("CWLH 2") announced in November 2023 closes in Q1 2024 (as previously guided).

-      Production growth in Malaysia associated with the successful drilling campaign in late 2023.

·    Operating Costs: Expected to total US$240-290 million (excluding forecast royalties and carbon taxes totalling c.US$30 million), essentially flat year-on-year on a comparable basis, with the increase year-on-year largely due to the addition of Akatara operating costs post start-up, and the CWLH 2 acquisition.

-      The midpoints of the total operating cost and production guidance ranges imply a group opex/bbl of c.US$33.5/boe for 2024, which is a c.30% reduction on expected 2023 levels due to higher production and also lower unit cost assets which have been added to the portfolio, such as Akatara, Malaysia and CWLH, all having a positive impact on Group metrics.

·    Capital expenditure: Expected to total US$80-110 million, with the main components being:

-      c.US$40 million at Montara (primarily FPSO mooring chain replacement and planning/long-lead items for the Skua well referenced above);

-      c.US$20 million for completion of the Akatara development;

-      The balance of the capex includes preparation and long-lead items for infill drilling on the operated Malaysia assets and the Stag field in 2025.

·    Other cash expenditure: Expected to total c.US$77 million on a net basis, primarily reflecting the previously announced CWLH 2 acquisition abandonment funding payments. These are expected to be largely funded through revenues from the next two liftings attributable to the CWLH 2 interest, and are now expected to be a lesser amount than the US$102 million announced in November 2023.

Akatara Update

The Akatara development project continues to make good progress and is currently 92% complete. Approximately 1,700 workers are currently on site, with c.3.6 million safe manhours for the Akatara project worked to date.

The Elang-1 rig mobilised to the Akatara well site B in December 2023 and the workover of the Akatara-B2 well commenced on 5 January 2024. The workover programme on the five existing wells, which will provide the raw gas feed into the Akatara Gas Processing Facility, is expected to complete by end-March 2024.

Construction of the sales gas pipeline is approximately 91% complete.

Commissioning activities at the Akatara Gas Processing Facility have already commenced and will continue through the first quarter of 2024, with first gas and final acceptance scheduled for the second quarter of 2024.

Malaysia Operated Assets (PM 323 & 329)

The excellent results of the PM323 infill drilling campaign in Malaysia during 2023 are expected to deliver production growth and reserve additions significantly ahead of expectations.

The four wells drilled in 2023 are currently producing at a combined gross rate of c.7,000 bbls/d. The drilling results, particularly the strong evidence that the EBA-15ST2 well in the southwest of the East Belumut field has intersected a previously undrained area, have highlighted the potential for several further drilling programmes in the near-term.

Ongoing studies currently indicate that maximising recovery and value from the PM323 PSC will likely support a licence extension beyond the current term of June 2028, which, if successful, could unlock up to 8 mmbbls of gross 2P reserves through further drilling. The next infill campaign on the Malaysia operated assets is expected to commence in 2025, with drilling planned on both the East Belumut field in the PM323 PSC and East Piatu field in the PM329 PSC. Subsurface, drilling and technical studies are currently ongoing to firm up the infill well target locations.

CWLH 2 Acquisition

The acquisition of a further 16.67% stake in the Cossack, Wanaea, Lambert, and Hermes ("CWLH") oil fields development offshore Australia, previously announced on 14 November 2023, is on track to close during the first quarter of 2024. Performance from the CWLH fields remains strong, averaging c.2,200 bbls/d during Q4 2023, net to the interest being acquired.

As referenced above, the preliminary year-end 2023 CWLH operator decommissioning cost estimate indicates that the CWLH Abandonment Trust Fund payments associated with the CWLH 2 acquisition will be lower than the US$102 million announced in November 2023.  Jadestone also believes that the CWLH field life can be extended for a further four years without any additional infill drilling, due to high uptime and low decline rates, in turn adding value and reserves.

Montara and Stag Life-of-Field Costs

The Company's understanding of future repair and maintenance (R&M) activity at Montara and Stag has continued to evolve over recent months. In addition to general industry inflation, it has become increasingly clear that, relative to previous expectations, higher levels of long-term R&M activity and costs are required in order to maintain the assets in an appropriate condition throughout their remaining life. This may result in a non-cash impairment in the Company's 2023 financial statements.

At Montara, alternative options of replacing or dry-docking the FPSO have been assessed through a screening exercise, with the most viable option being the continuation of the existing mode of operations with heightened long-term maintenance activity.

This, together with the unplanned redrill of the Skua-11 well and a requirement to replace the FPSO's anchor chains in 2024, will impact Montara's future cash flows and remaining value.

Montara operating costs in 2024 are currently estimated at c.US$120 million and are included in the overall 2024 corporate operating cost guidance above. Going forward, operating costs at Montara are expected to average c.US$95 million per annum for several years with production now expected to cease in 2030.

Stag operating costs in 2024 are currently estimated at c.US$70 million. Going forward, longer-term operating costs at Stag are expected to be c.US$60 million per annum with no significant change to end of field life, which is now expected in 2035.

Whilst disappointing, the impact of these longer-term cost profiles is mitigated by the ongoing delivery of the Company's strategic aim of broadening its portfolio to include newer, higher-quality and higher-margin assets, with strong growth and diversification coming from the Peninsular Malaysia assets, Akatara, CWLH and Sinphuhorm - all longer life assets with a combined average unit cost in 2024 of c.US$11/boe[2].

RBL Facility

Further work is ongoing to assess the impact of the updated production and cost profiles on the borrowing base under the Company's RBL facility. The next RBL facility redetermination, due by end-March 2024, will result in a revised borrowing base and borrowing capacity for Q2-Q3 2024.

The Company has commenced the March 2024 redetermination process with its RBL banks. To address the impact of revised Montara and Stag costs on the borrowing base, the Company has several options, subject to lender consent, including integrating the CWLH 2 acquisition, removing Stag as a borrowing base asset and integrating Akatara once it has passed its completion test.

Net Debt and Liquidity

Net debt at 31 December 2023 is estimated at c.US$5 million, consisting of c.US$152 million of cash[3] and US$157 million of debt drawn under the Company's reserve-based lending ("RBL") facility.

The Company had total available liquidity of c.US$220 million as at 31 December 2023, consisting of c.US$145 million of unrestricted total cash balances, c.US$43 million available debt in the RBL (based on the current borrowing base of US$200 million, valid up to 31 March 2024) and c.US$32 million available under the (undrawn) working capital facility. The cash flow generation of the business is expected to increase significantly once the Akatara project is onstream. Further, the 2024 capital expenditure programme is weighted towards the second half of the year and includes several discretionary elements. The Company will continue to proactively manage its liquidity.   

Chief Operating Officer Recruitment and Board Composition Update

The Company is making good progress towards the appointment of a Chief Operating Officer and expects to update further on this in the near-term. The process to appoint two replacement non-executive directors, originally announced on 30 June 2023, is also well advanced.

In line with its established reporting framework, the Company expects to publish a trading statement summarising the main operational and financial metrics for 2023 within the coming weeks.

Paul Blakeley, President and CEO commented:

"We have had a strong start to 2024, with average production over the last four weeks close to 20,000 boe/d. With the upcoming start of production at Akatara, combined with strong growth from the successful Malaysia infill drilling campaign late last year, stabilised production at Montara and the additional CWLH acquisition, we anticipate significant production growth during 2024, adding further scale, diversification and resilience to our business.

Montara and Stag have been important in building Jadestone's operating capability and a foundation for further growth. However, the reliability of the Montara Venture FPSO in recent years has continued to disappoint, which has been recognised by the market, and we have now reflected what it will take to deliver greater reliability into the future. As we said we would, we have worked hard to successfully grow the business away from Montara and to diversify into higher quality assets, and this is reflected in this year's guidance. However, Montara and Stag are still important to us, with safety, integrity and uptime performance being uppermost in our minds, and with higher maintenance activity than previously projected. We will continue to find ways to maximise asset value, which includes exploring how to crystallise the significant value that we see in the Montara fields' associated gas resource.

We will  focus on balance sheet strength, managing short-term liquidity as we conclude the Akatara project and then move into heightened levels of production and cash generation in the second quarter of 2024 onwards. At the end of 2023 we also benefited from a strong unrestricted cash position of US$145 million and our working capital facility which remained undrawn, a solid foundation for the future.

While we will continue to manage the older producing assets in the portfolio, our drive to acquire newer, higher margin and higher reliability assets is paying off, improving key business metrics and creating value. This is the template for Jadestone's future, with more emphasis on longer-term value and investment, creating room for further growth and improved shareholder returns."

Webcast

The Company will host an investor and analyst presentation at 9:00 a.m. (GMT) on Monday 15 January 2024, including a question-and-answer session, accessible through the link below:

Webcast link: https://www.investis-live.com/jadestone-energy/65a01dbd7f77220c0069d4cf/hert

Event title: Jadestone Energy Conference Call

Time: 9:00 a.m. (GMT) 

Date: 15 January 2024

To join the presentation by phone, please use the below dial-in details for the United Kingdom or the link for global dial-in details:

United Kingdom (Local): [phone]

United Kingdom (Toll-Free): [phone]

Global Dial-In Details: https://www.netroadshow.com/events/global-numbers?confId=57933 

Access Code: 348001

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For further information, please contact:

Jadestone Energy plc
Paul Blakeley, President and CEO	[phone] (Singapore)
Bert-Jaap Dijkstra, CFO Phil Corbett, Investor Relations Manager	[phone] (UK)
	[e-mail]
Stifel Nicolaus Europe Limited (Nomad, Joint Broker)	[phone] (UK)
Callum Stewart
Jason Grossman
Ashton Clanfield
Jefferies International Limited (Joint Broker)	[phone] (UK)
Will Soutar Cameron Jones
Camarco (Public Relations Advisor)	[phone] (UK)
Billy Clegg	[e-mail]
Andrew Turner Elfie Kent

About Jadestone Energy

Jadestone Energy plc is an independent oil and gas company focused on the Asia-Pacific region.  It has a balanced and increasingly diversified portfolio of production and development assets in Australia, Malaysia, Indonesia, Thailand and Vietnam, all stable jurisdictions with a positive upstream investment climate.

Led by an experienced management team with a track record of delivery, who were core to the successful growth of Talisman Energy's business in Asia-Pacific, the Company is pursuing a strategy to grow and diversify the Company's production base both organically, through developments such at Akatara in Indonesia and Nam Du/U Minh in Vietnam, as well as through acquisitions that fit within Jadestone's financial framework and play to the Company's strengths in managing maturing oil assets.  Jadestone delivers value in its acquisition strategy by enhancing returns through operating efficiencies, cost reductions and increased production through further investment.

Jadestone is a responsible operator and well positioned for the energy transition through its increasing gas production, by maximising recovery from existing brownfield developments and through its Net Zero pledge on Scope 1 & 2 GHG emissions from operated assets by 2040.  This strategy is aligned with the IEA Net Zero by 2050 scenario, which stresses the necessity of continued investment in existing upstream assets to avoid an energy crisis and meet demand for oil and gas through the energy transition.

Jadestone Energy plc (LEI: 21380076GWJ8XDYKVQ37) is listed on the AIM market of the London Stock Exchange (AIM: JSE).  The Company is headquartered in Singapore.  For further information on the Company please visit www.jadestone-energy.com.

Cautionary Statements

This announcement may contain certain forward-looking statements with respect to the Company's expectations and plans, strategy, management's objectives, future performance, production, reserves, costs, revenues and other trend information. These statements are made by the Company in good faith based on the information available at the time of this announcement, but such statements should be treated with caution due to inherent risks and uncertainties. These statements and forecasts involve risk and uncertainty because they relate to events and depend upon circumstances that may occur in the future. There are a number of factors which could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements and forecasts. The statements have been made with reference to forecast price changes, economic conditions and the current regulatory environment. Nothing in this announcement should be construed as a profit forecast. Past share performance cannot be relied upon as a guide to future performance. The Company does not assume any obligation to publicly update the information, except as may be required pursuant to applicable laws.

The technical information contained in this announcement has been prepared in accordance with the June 2018 guidelines endorsed by the Society of Petroleum Engineers, World Petroleum Congress, American Association of Petroleum Geologists and Society of Petroleum Evaluation Engineers Petroleum Resource Management System.

A. Shahbaz Sikandar of Jadestone Energy plc, Group Subsurface Manager with a Masters degree in Petroleum Engineering, and who is a member of the Society of Petroleum Engineers and has worked in the energy industry for more than 25 years, has read and approved the technical disclosure in this regulatory announcement.

The information contained within this announcement is considered to be inside information prior to its release, as defined in Article 7 of the Market Abuse Regulation No. 596/2014 which is part of UK law by virtue of the European Union (Withdrawal) Act 2018.

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[1] Based on 2023 operating cost guidance adjusted for forecast royalties and carbon taxes

[2] Excludes royalties and carbon taxes

[3] Includes US$8.2 million of restricted cash balances under the RBL facility

 

END