Acquisition of interest in North West Shelf

RNS Number : 0549U

Jadestone Energy PLC

28 July 2022

 

Acquisition of interest in North West Shelf oil producing fields 

28 July 2022-Singapore: Jadestone Energy plc ("Jadestone", or the "Company") an independent oil and gas production company focused on the Asia-Pacific region, is pleased to announce that it has executed a sale and purchase agreement (the "Agreement") with BP Developments Australia Pty Ltd ("BP", or the "Seller"), to acquire the Seller's non-operated 16.67% working interest in the Cossack, Wanaea, Lambert, and Hermes oil fields development (the "North West Shelf Oil Project"), offshore Western Australia, for a total initial headline cash consideration of US$20 million, to be funded from the Company's cash resources, and certain subsequent contingent and decommissioning payments (the "Acquisition").

Paul Blakeley, President and CEO commented:

"This acquisition is another example of our strategy in action, acquiring low-cost barrels at less than US$3/bbl, while establishing an entry position into a very high-quality long-life asset with very low decline rates.  We believe that over time we can exercise increasing influence and deploy our skills in mid-life oil field management.  In particular we see material upside potential through infill drilling into reservoirs with very significant oil-in-place and, together with optimisation of operating costs, the life of the producing fields can be extended for several years.  In the near to mid-term, further interests in the asset may become available, over which we would have pre-emption rights.  We will initially participate in the joint venture without any incremental headcount or cost and will fund the acquisition through existing cash resources.

"The acquisition also fits well with our sustainability principles and climate strategy with flaring minimised due to available gas export infrastructure, and we look forward to working with the joint venture partners to further minimise the greenhouse gas footprint of the acquired assets.  We also believe recovery from existing upstream assets should be maximised to provide the resources required to support near-term transition towards a low-carbon future.  In addition, we will fund our share of the forecast decommissioning costs for the assets through early payments, demonstrating our commitment to providing clarity on this important issue for all our stakeholders."

Highlights

· A tuck-in acquisition, within Jadestone's Asia-Pacific core area;

· Jadestone is acquiring 10.4 mmbbls[1] as at an effective date of 1 January 2020, comprising 1.5 mmbbls of production since the effective date, 5.1 mmbbls of 2P reserves and a further 3.9 mmbbls of 2C resource. Based on a consideration of US$24 million[2], this represents an acquisition cost of ~ US$2.30/bbl. The transaction includes the Seller's entire 16.67% working interest in the CWLH fields, subsea infrastructure, FPSO, and full abandonment liabilities estimated at US$82 million;

¡ In addition to the consideration, Jadestone will also pay US$41 million upfront into the decommissioning trust fund for the assets.

¡ It is anticipated that, due to an effective date of 1 January 2020, any closing adjustment will significantly offset the initial headline cash consideration and US$41 million decommissioning payment.

¡ Jadestone will make further payments to the decommissioning trust fund via two equal instalments of US$20.5 million payable on or about 31 December 2022 and 31 December 2023.

· A recent independent expert report1 prepared for the operator of the North West Shelf Oil Project valued a 16.67% stake at approximately US$80 million, based on an effective date of 1 January 2022;

· Cash flow positive oil production of approximately 2,100 bbls/d net to Jadestone, based on average production from the North West Shelf Oil Project in 2021; 

· Oil production from the North West Shelf Oil Project is low-sulphur, low-density and commands a premium to Brent;

· Unit operating costs for the Seller's interest are estimated at US$22-23/bbl, and would be accretive to the Company's current unit operating cost guidance for 2022 of US$23-28/bbl;

· The acquired assets are expected to generate EBITDA of approximately US$40 million in 2023 at a realised oil price of US$100/bbl;

· Potential to add incremental reserves through infill drilling, targeting unswept oil across all four fields; and

· Opportunity to extend asset life beyond 2031 (the initial design life of the Okha FPSO).

Overview of the North West Shelf Oil Project

Jadestone will acquire the Seller's entire 16.67% working interest in the Cossack, Wanaea, Lambert and Hermes ("CWLH") oil fields which are located within four production licences (WA-3-L, WA-11-L, WA-13-L and WA-16-L) in the North Carnarvon basin offshore north-west Australia, known as the North West Shelf Oil Project and operated by Woodside Energy Group Ltd[3]. 

The project comprises 13 subsea wells producing through the Ohka floating production, storage and offloading vessel ("FPSO").  The Okha FPSO was installed at the fields in 2011 and has 60,000 bbls/d of oil processing capacity, along with water handling and gas processing/reinjection facilities.

The Cossack, Wanaea and Hermes fields are currently in production and are estimated to contain aggregate gross 2P reserves of 30.3 mmbbls (5.1 mmbbls net) at 31 December 2021.  Gross average production from the fields in 2021 was 12,461 bbls/d (2,077 bbls/d net) with Q1 2022 production averaging 14,178 bbls/d gross (2,363 bbls/d net). 

The CWLH fields also produce associated gas, with the partners in the North West Shelf Oil Project having the rights to the gas required to fuel the Okha FPSO, with the remainder being used as feedstock in the North West Shelf liquefied natural gas project.  The CWLH fields are considered to be mid-life producing assets with significant original oil in place, which Jadestone estimates at approximately 890 mmbbls, and which provides the opportunity for further investment to increase recovery factors.

CWLH fields 2P reserves at 31 December 2021

Licences	Fields	2P Gross Reserves (mmbbls)	Working interest in the CWLH fields[4]	Net 2P reserves attributable to Jadestone (mmbbls)	Operator
WA-3-L WA-9-L WA-11-L WA-16-L	Cossack Wanaea Lambert Hermes	30.3	16.67%	5.1	Woodside Energy Group Ltd.

CWLH fields 2C resources at 31 December 2021

Licences	Fields	2C Gross Resources (mmbbls)	Working interest	Net 2C Resources attributable to Jadestone (mmbbls)	Operator
WA-3-L WA-9-L WA-11-L WA-16-L	Cossack Wanaea Lambert Hermes	23.2	16.67%	3.9	Woodside Energy Group Ltd.

Overview of the Acquisition

The transaction is structured as an asset purchase, which includes the Seller's 16.67% working interest in the CWLH fields, subsea infrastructure, FPSO, and abandonment liabilities. 

Jadestone will pay the Seller an initial headline cash consideration of US$20 million, based on an economic effective date of 1 January 2020. This will result in the Company receiving all economic benefits from the production since that date, which will be structured as an adjustment on closing of the transaction.  Further consideration of up to US$4 million in aggregate is payable to the Seller upon certain upside scenarios, which are tied to potential full year oil price outcomes in 2022 and 2023.[5] 

On completion of the transaction, Jadestone will make a payment of US$41 million to the North West Shelf Oil Project's decommissioning trust fund.  It is anticipated that, due to the cash flow generation of the acquired interests from the effective date of 1 January 2020, that the closing adjustment will significantly offset the sum of the initial headline cash consideration and initial decommissioning payment.

Jadestone will make further payments to the decommissioning trust fund via two equal instalments of US$20.5 million payable on or about 31 December 2022 and 31 December 2023.

Oil is sold from the North West Shelf Oil Project on an equity basis with a typical parcel size of 650,000 bbls.  The most recent cargo of oil sold attributable to the Seller's interest was in January 2022.

The acquired assets generated EBITDA of approximately US$20 million in the year ended 31 December 2021, based on a realised oil price of US$56.28/bbl.  The acquired assets are expected to generate EBITDA of approximately US$40 million in 2023, based on a realised oil price of US$100/bbl.

The Acquisition will be funded from the Company's on-hand cash resources, and will not impact the Company's ability to fund planned capital spending or shareholder returns. 

The Seller's interest includes Petroleum Resource Rent Tax ("PRRT") credits.  Jadestone anticipates that these credits will offset any PRRT payable on the acquired interest through to the end of the asset's life.  Jadestone has, and will continue to pay, Australian PRRT and corporate income tax on its Australian operations where applicable.

The North West Shelf Oil Project joint venture partners have waived their pre-emption rights and given their in principle consent to the Acquisition, thus reducing the conditionality of the transaction.

Completion of the Acquisition is subject to customary closing conditions, including regulatory approvals from the National Offshore Petroleum Titles Administrator ("NOPTA") and the Foreign Investment Review Board ("FIRB").  The Company anticipates completion of the transaction during the fourth quarter of 2022.

Conference call

Jadestone's management team will host an investor and analyst conference call at 09:00 (UK) / 16:00 (Singapore) today, including a question and answer session.

Dial-in details are provided below, in addition to a link to a live webcast of the call.  The Company has posted a new presentation to its website, at www.jadestone-energy.com/investor-relations/presentations-communication/ .

Webcast link: https://app.webinar.net/KAlyaPmjEB9

Event title: Jadestone Energy Management Briefing

Start time: 09:00 (UK) / 16:00 (Singapore)

Date: 28 July 2022

Conference ID: 13076170

Dial-in number details:

Country	Dial-In Numbers
United Kingdom	08006522435
Australia	1800076068
Canada (Toll free)	888-390-0546
France	0800916834
Germany	08007240293
Hong Kong	800962712
Indonesia	0078030208221
Japan	006633812569
Malaysia	1800817426
Netherlands	08000227908
New Zealand	0800453421
Singapore	8001013217
Spain	900834776
Sweden	0200899189
Switzerland	0800312635
United States (Toll free)	888-390-0546

For further information, please contact:

Jadestone Energy plc
Paul Blakeley, President and CEO	[phone] (Singapore)
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)
Tony White
Will Soutar
Camarco (Public Relations Advisor)	[phone] (UK)
Billy Clegg Georgia Edmonds	[e-mail]
James Crothers

About Jadestone Energy

Jadestone Energy plc is an independent oil and gas company focused on the Asia-Pacific region.  It has a balanced, low risk, full cycle portfolio of development, production and exploration assets in Australia, Malaysia, Indonesia and Vietnam.

The Company has a 100% operated working interest in the Stag oilfield and in the Montara project, both offshore Australia. Both the Stag and Montara assets include oil producing fields, with further development and exploration potential.  The Company also has interests in four oil producing licences offshore Peninsular Malaysia; two operated and two non-operated positions.  Further, the Company has a 100% operated working interest in two gas development blocks in Southwest Vietnam, and an operated 100% interest (assuming completion of the Hexindo stake acquisition, as announced in November 2021) in the Lemang PSC, onshore Sumatra, Indonesia, which includes the Akatara gas field development.

In addition, the Company has executed a sale and purchase agreement ("SPA") to acquire a 16.67% working interest in the North West Shelf Oil Project, offshore Western Australia, which is expected to complete in the fourth quarter of 2022. The Company has also signed an SPA to acquire a 69% operated working interest in the Maari Project, shallow water offshore New Zealand, and is working with the seller to obtain final New Zealand government approvals. 

Led by an experienced management team with a track record of delivery, who were core to the successful growth of Talisman's business in Asia, the Company is pursuing an acquisition strategy focused on growth and creating value through identifying, acquiring, developing and operating assets in the Asia-Pacific region.

Jadestone Energy plc is listed on the AIM market of the London Stock Exchange.  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.

Henning Hoeyland of Jadestone Energy plc, Australia Country 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 20 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.

Glossary

2C Resources	best estimate contingent resource, being quantities of hydrocarbons which are estimated, on a given date, to be potentially recoverable from known accumulations but which are not currently considered to be commercially recoverable
2P Reserves	the sum of proved and probable reserves.  Denotes the best estimate scenario of reserves
bbl	barrel of oil
bbls/d	barrels per day
CWLH	Cossack, Wanaea, Lambert and Hermes oil fields
EBITDA	earnings before interest, tax depreciation and amortisation
FPSO	floating production storage and offloading vessel
FIRB	Foreign Investment Review Board
GHG	greenhouse gas
mmbbl	million barrels of oil
NOPTA	National Offshore Petroleum Titles Administrator
PRMS	Society of Petroleum Evaluation Engineers Petroleum Resource Management System
PRRT	Petroleum Resource Rent Tax
STOIIP	stock tank oil initially in place

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[1] Based on the Independent Expert Report dated 8 April 2022 prepared for Woodside Energy Group Ltd, the operator of the North West Shelf Oil project, and the operator's year-end 2021 2P reserves estimates.  Totals may not add due to rounding.

[2] Based on the headline cash consideration of US$20 million and contingent payments of US$4 million

[3] Woodside Energy Group  operates the North West Shelf Oil Project with an indirect 50% interest. The other joint venture partners are Chevron, and Japan Australia (MIMI), each with a 16.67% stake.

[4] The production licences cover both the North West Shelf Oil Project and the North West Shelf Gas Project. Jadestone will be acquiring an interest in the production licences to the extent of the North West Shelf Oil Project only.

[5] US$2 million payable in 2023 if the weighted average realised price achieved by Jadestone for North West Shelf Oil Project cargoes sold by Jadestone during 2022 is equal to, or greater than, US$55/bbl.

US$2 million payable in 2024 if the weighted average realised price achieved by Jadestone for North West Shelf Oil Project cargoes sold by Jadestone during 2023 is equal to, or greater than, US$60/bbl.

 

END

 

 

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