Jadestone Energy Results for the Period Ending December 31, 2018 Record Quarterly Revenue and Cash from Operations
April 18, 2019—Singapore:Jadestone Energy Inc. (AIM:JSE, TSXV:JSE) (“Jadestone” or the “Company”), an independent oil and gas production company focused on the Asia Pacific region, reported today its consolidated audited financial statements (the “Financial Statements”), as at and for the twelve-month period ended December 31, 2018.
From January 1, 2018, the Company has moved to reporting its financial information from a March year end, to a calendar year end. For that reason, comparative financial information is provided for the nine-month period ended December 31, 2017.
The acquisition of the Montara Assets was completed on September 28, 2018, at which time Jadestone obtained control and 100% legal ownership, apart from interest in the associated licenses which remains subject to regulatory approval. For accounting purposes, Montara’s results are reported in Jadestone’s Financial Statements from September 28, 2018.
Financial highlights
• Net revenue during the fourth quarter was US$45.0 million, a record for the Company, an increase of 38% over the prior quarter, and more than double the revenue in the same quarter a year ago;
• Full year revenue was US$113.4 million, also a record for the Company, an increase of 64% over the annualised result for the nine-month period to December 31, 2017;
• Positive net cash generated from operations of US$32.5 million in the fourth quarter, a record for the Company and an increase from a US$12.2 million net use of funds in the prior quarter, and US$0.6 million for the same quarter a year ago;
• Full year positive net cash generated from operations of US$17.8 million, also a record for the Company, and compares to a US$6.6 million use of funds in the nine-month period to December 31, 2017;
• Total comprehensive income for the fourth quarter was US$28.9 million, a record for the Company, an increase of US$30.4 million on the prior quarter, and compares to US$0.8 million for the same quarter a year ago;
• Total comprehensive income for the full year was US$4.4 million, compared to a loss of US$14.9 million in the nine-month period to December 31, 2017;
• Gross debt reduced to US$101.8 million by year-end, following the first quarterly repayment on the US$120.0 million reserve based loan. After the March 2019 scheduled repayment of US$14.9 million, the principal balance outstanding is US$88.2 million;
• Gross cash and bank balances of US$71.6[1]million at year-end, result in a net debt position of US$30.2 million; and
• Montara voluntary maintenance and inspection shutdown in Q4 2018—the seller agreed to fund cash calls to the tune of US$22.0 million.
Operational highlights
• The Stag production facility has achieved a safety performance of 2,438 days without an LTI[2];
• Production during the fourth quarter averaged 5,215 bbls/d, including production from Montara in October only. This was prior to the voluntary maintenance and inspection shutdown commencing November 1, 2018, but averaged over the full quarter. Stag production was below plan at 2,644bbls/d due to two of the largest production wells suffering downhole pump failure, but despite all of this, overall production saw an increase of 69% over the prior quarter;
• Adjusting for the impact of the maintenance and inspection shutdown at Montara, the Company would have had average production for the quarter of 10,272 bbls/d, a multiple of the prior quarter or the same quarter a year ago;
• Shutdown at Montara completed January 11, 2019, clearing an extensive backlog of overdue maintenance and inspection tasks; and
• 2P reserves at December 31, 2018 of 42.8mm bbls comprising both Stag and Montara, an increase of 25.7mm bbls over the total at December 31, 2017.
Outlook highlights
• Stag infill well 49H commenced mid March 2019, and after a period of weather downtime, is now expected to be completed in early May, with first production targeted shortly thereafter;
• Montara development programme commencing Q2/Q3 with the replacement of the subsea umbilical and riserless light well intervention restoring gas lift to Skua-11 and Swift-2, unlocking new oil in the heel of Skua-11 and perforating additional sands in the Swallow-1 well;
• First infill well at Montara expected in Q4 2019 subject to rig availability, targeting 1.8mm bbls of 2P reserves and initial production of approximately 3,000 bbls/d;
• Plans to acquire a new 3D seismic survey in H2 2019, to improve reservoir imaging and assess further step-out potential beyond the existing H6 and Skua 12 target infills;
• Robust downside protection of oil price, and continued exposure to upside via capped swap, executed at the time of the Montara acquisition;
• Average swap price for 2019 is US$71.72/bbl (Dated Brent), while Montara crude is currently selling at a premium of circa US$3.50/bbl; and
• Substantial progress on the Nam Du/U Minh development in Vietnam, including a draft heads-of-agreement for the gas sales and purchase agreement expected to be signed shortly.
Paul Blakeley, President and CEO commented:
“Reporting our Q4 2018 and full year 2018 results caps what has been a transformational year for Jadestone. With the first production from Montara’s ongoing operations benefiting the quarter, we have demonstrated a step-change in the cash generative capacity of our business. Even with decreasing commodity prices over the quarter and the extended maintenance and inspection shutdown, we managed to strengthen our balance sheet by putting cash in the bank and starting to pay down debt. Our financial position is strong, and we are poised to show growth and material cash flow going forward.”
“At Montara, we remedied a significant backlog of overdue and inherited maintenance and inspection tasks. This was completely cleared, and gives us far greater confidence in the asset condition and its anticipated performance in the future, while the extensive early work undertaken has also helped to instill the Jadestone operating culture there. Since restarting the facility in January, production from Montara has exceeded our expectations and should be around 11,000bbls/d for the first quarter. We are more convinced than ever in the value proposition at Montara, and see a number of investment opportunities and efficiencies to add further value.”
“Meanwhile, performance at the Stag oilfield has been below plan in the quarter due to downhole pump failures in two key production wells, one of which will require a workover in 2019, after the infill well. This should restore volumes, along with the benefits of the 49H infill well, the first well to be drilled on Stag in 6 years.”
“Our plans for our Southwest Vietnam assets continue to take shape too. We have built an experienced project management organisation and have made great progress on the project, in anticipation of field development sanction late this year. In addition, I am delighted to see the progress the team is making with Petrovietnam on commercial matters, including negotiating definitive terms for the gas sales and purchase agreement.”
Operations update
Acquisition of the Montara assets closed just three days before the start of the fourth quarter, with average production during October of 7,628 bbls/d, and one crude oil lifting of 451,291 bbls. Thereafter, the Company voluntarily shut down the facility to address an extensive backlog of overdue maintenance and inspection tasks. Montara’s production resumed on January 11, 2019.
Upcoming activity at Montara in Q2 and early Q3, 2019 includes the replacement of the subsea umbilical from the Skua and Swift/Swallow subsea wells to the Company’s owned FPSO, together with a riserless light well intervention (“RLWI”) programme that will restore gas lift to the Skua-11 and Swift-2 wells, perforate additional sands in the Swallow-1 well, and unlock new heel volumes in the Skua-11 well. The RLWI is expected to deliver approximately 3,200 bbls/d in H2 2019, ensuring continued production from Swift-2 and Skua-11, in addition to the new volumes.
The Company is also developing a plan for drilling its first infill well at Montara later in the year, subject to rig availability. The H6 well will use an existing slot on the Montara wellhead platform and develop 1.8 mm bbls of 2P reserves, targeting an initial rate of approximately 3,000 bbls/d in 2020. The Company is also planning to acquire a new 3D seismic survey in H2 2019, to improve reservoir imaging, to more accurately target future infill wells beyond the planned H6 and Skua-12 infill targets, and assess further step-out potential.
Production at the Stag oilfield was below plan averaging 2,644 bbls/d for the quarter, due to the loss of production from two key production wells, 36H and 37H, following failure of their electric submersible pumps. A workover on 36H returned production later in the quarter, while 37H will be the subject of a future workover campaign, following the drilling of the 49H infill well.
Work on the new Stag 49H infill well commenced in mid March 2019, the first infill at Stag in six years. Following a delay due to severe weather conditions, drilling activity recommenced on April 10, 2019 and the infill well is expected to be completed in early May with first oil expected shortly thereafter. The well is targeting 1.2 mm bbls of 2P reserves and initial production rates of over 1,000 bbls/d.
In Vietnam, the Company made good progress towards delivery of the Nam Du and U Minh gas developments. During the fourth quarter, the Vietnam team was expanded to fill critical project management positions, and made substantial progress on all work fronts, including facilities front end engineering and design work, conducting technical and environmental studies, tendering for major contracts, and negotiating key commercial terms with Petrovietnam.
Financial overview
Results for the quarter were impacted by a voluntary shutdown of Montara to address the maintenance and inspection backlog. This resulted in only one month of production at Montara for the quarter, but costs continuing throughout the quarter, including an additional US$4.0 million of costs directly attributable to the maintenance and inspection shutdown.
The US$22.0 million adjustment agreed with the seller in connection with the Montara shutdown, has been accounted for as an adjustment to the fair value of assets acquired in the balance sheet, rather than via an immediate credit to the income statement, and was effected via the seller funding cash calls.
The Company reported quarterly revenue of US$45.0 million versus US$17.8 million in the same quarter a year ago, in part due to price realisations increasing from US$57.55/boe in Q4 2017 to US$67.51/bbl in Q4 2018. Total oil lifted in the quarter was 657,160 bbls, compared to 363,615 boe in the same quarter a year ago.
Full year revenue for 2018 was US$113.4 million compared to US$52.0 million for the comparable nine-month period. This was in large part due to total oil lifted in 2018 being 1.7 mm boe, compared to 1.1 mm boe in the comparable nine-month period to December 31, 2017, as well as price realisations increasing from US$53.40/boe in 2017 to US$69.39/boe in 2018.
Production costs for the quarter were US$42.6 million, clean of changes in the prices of inventory and the US$4.0 million of directly attributable costs for the maintenance and inspection shutdown, and versus US$9.0 million for the same quarter a year ago. This equates to US$28.94/bbl[3]assuming October production at Montara had prevailed for the full quarter, i.e. adjusting for the impact of the two month shutdown, and includes 217,077 bbls of Montara crude acquired on September 28, 2019 and recorded at the realised price of US$68.13/bbl, as well as elevated costs at Montara during the transition period, versus US$22.29/boe1in Q4 2017.
Full year production costs for 2018 were US$82.9 million, clean of changes in the prices of inventory and the US$4.0 million of directly attributable costs for the maintenance and inspection shutdown, and versus US$43.5 million for the nine-months to December 31, 2017. This equates to US$28.72/boe[4]and again includes 217,077 bbls of Montara crude acquired on September 28, 2019 and recorded at the realised price of US$68.13/bbl and versus US$28.13/boe2for the nine-months to December 31, 2017.
Jadestone generated an adjusted EBITDAX loss of US$1.7 million for the quarter ended December 31, 2018, compared to a positive EBITDAX of US$11.9 million in the prior quarter, and positive EBITDAX of US$4.6 million for the same quarter a year ago.
For the full year, the Company reports adjusted positive EBITDAX of US$9.2 million, compared to an EBITDAX loss of US$9.7 million for the nine-months to December 31, 2017.
On an unadjusted basis, the Company reported a net loss before tax of US$4.9 million, compared to a net profit of US$3.2 million in the third quarter and a net loss before tax of US$2.8 million for Q4 2017.
Results were impacted by the Montara voluntary shutdown and lower production volumes from the Stag oilfield, due to two key producer wells being down for a part of the quarter.
The Company generated positive cash from operations of US$32.5 million for the quarter, compared to US$0.6 million for the same quarter a year ago, despite the maintenance and inspection shutdown. This is partly driven by the seller agreeing to pay cash calls during the latter portion of the quarter as well as changes in working capital, and an ongoing focus on costs throughout the business, including at Stag.
For the full year, the Company generated positive cash from operations of US$17.8 million, compared to cash used in operations of US$6.6 million for the comparative nine-month period. This US$24.4 million turnaround in positive cash from operations, with only one month of production at Montara in the current year, demonstrates the ongoing transformation of the business.
Cash used in investing activities for Q4 2018 was US$7.5 million, excluding the investment into the debt service reserve (“DSRA”) under the RBL, and compares to US$0.6 million for Q4 2017. This includes preliminary work on the Montara umbilical replacement and on the Stag 49H infill well, as well as increased activities in Vietnam toward the commercialisation of the Nam Du and U Minh gas fields.
For the full year, the Company invested US$161.4 million, inclusive of US$133.1 million paid to the Montara seller and the US$18.6 million deposited to the DSRA, and compared to US$2.1 million invested in the comparable nine-month period to December 31, 2017.
Cash used in financing activities in Q4 2018 was US$18.9 million, the majority of which comprised RBL repayment of US$16.9 million, and compares to cash used of US$0.6 million for Q4 2017.
For the full year, the Company raised a net US$184.9 million from financing activities, net of the repayment of the convertible bond of US$17.4 million, and the first RBL repayment at year end. This compares to US$4.7 million for the nine-month period to December 31, 2017.
At year end, the Company had $53.0 million cash, plus $18.6 million of debt service reserve cash and a further US$10.0 million of cash in support of a bank guarantee. Net debt was US$30.2 million, excluding the US$10.0 million of cash in support of the bank guarantee, and a further US$14.9 million of RBL principal was repaid on March 29, 2019.
Additionally, the Company’s existing capped swap provides very robust support for 2019 cash generation establishing, as it does, a floor benchmark crude oil price of US$71.72/bbl for 50% of planned 2PD production at Stag, before allowing for the circa US$3.50/bbl premium that Montara currently enjoys.
Selected financial information
The following table provides selected financial information of the Company, which was derived from, and should be read in conjunction with, the consolidated audited financial statements for the period ended December 31, 2017.
| Quarterly comparison | Dec 2018 quarter | Dec 2017 quarter | Change (%) |
| Production, mboe1 | 479.8 | 402.0 | 19.4% |
| Sales, mboe1 | 657.2 | 363.8 | 80.7% |
| Avg realised liquids price2, US$/boe1 | 67.51 | 57.55 | 17.3% |
| Sales revenue1, US$ million | 45.0 | 17.8 | 52.8% |
| Capital expenditure2, US$ million | 7.5 | 0.6 | N/M |
| Quarterly comparison | Dec 2018 quarter | Sep 2018 quarter | Change (%) |
| Production, mbbls | 479.8 | 306.1 | 56.8% |
| Sales, mbbls | 657.2 | 422.3 | 55.6% |
| Avg realised liquids price2, US$/bbl | 67.51 | 77.07 | -12.4% |
| Sales revenue2, US$ million | 45.0 | 32.7 | 37.6% |
| Capital expenditure3, US$ million | 7.5 | 1.7 | N/M |
| Yearly comparison | Year to Dec 2018 | 9M to Dec 20174 | Change (%) |
| Production, mboe1 | 1,480.0 | 1,165.7 | 27.0% |
| Sales, mboe1 | 1,683.1 | 1,133.5 | 48.5% |
| Avg realised liquids price2, US$/boe1 | 69.39 | 53.40 | 29.9% |
| Sales revenue2, US$ million | 113.4 | 52.0 | 18.1% |
| Capital expenditure3, US$ million | 10.0 | 2.6 | N/M |
1Production, sales and average realised prices are expressed on a barrels of oil equivalent basis as the underlying data includes gas production from Ogan Komering for the prevailing period based on Jadestone’s 50% participating interest up until May 19, 2018
2Revenue has been restated from gross to net after deducting royalties, but including the effective gain on hedging contracts
3Payment for oil and gas property, plant and equipment and intangible exploration assets. Excludes acquisition related capital expenditure
4Comparable reporting period for the current period is the nine months ended December 31, 2017
Conference call and webcast
The management team will host an investor and analyst conference call at 9:00 p.m. (Singapore), 2:00 p.m. (London), and 9:00 a.m. (Toronto) today, Thursday, April 18, 2019, including a question and answer session.
The live webcast of the presentation will be available at the below webcast link. Dial-in details are provided below. Please register approximately 15 minutes prior to the start of the call. The results for the period ended December 31, 2018 will be available on the Company’s website at: www.jadestone-energy.com/investor-relations/.
Webcast link: https://event.on24.com/wcc/r/1964214/68A3F57926E8403B758AC386B99793F5
Event conference title: Jadestone Energy Inc. – Fourth Quarter Results
Start time: 9:00 p.m. (Singapore), 2:00 p.m. (London), 9:00 a.m. (Toronto)
Date: Thursday, April 18, 2019
Confirmation ID: 54105682
| Country | Dial-in numbers1 |
| Australia | 1800076068 |
| Canada (Toronto) | 416 764 8609 |
| Canada (Toll free) | 888 390 0605 |
| France | 0800916834 |
| Germany | 08007240293 |
| Germany (Mobile) | 08007240293 |
| Hong Kong | 800962712 |
| Indonesia | 0078030208221 |
| Ireland | 1800939111 |
| Ireland (Mobile) | 1800939111 |
| Japan | 006633812569 |
| Malaysia | 1800817426 |
| Singapore | 18001013217 |
| Switzerland | 0800312635 |
| Switzerland (Mobile) | 0800312635 |
| United Kingdom | 08006522435 |
| United States (Toll free) | 888 390 0605 |
1Area access numbers are subject to carrier capacity and call volumes.
— Ends —
Enquiries
| Jadestone Energy Inc. | +65 6324 0359 (Singapore) |
| Paul Blakeley, President and CEO | +1 403 975 6752 (Canada) |
| Dan Young, CFO | ir@jadestone-energy.com |
| Robin Martin, Investor Relations Manager | |
| Stifel Nicolaus Europe Limited (Nomad, Joint Broker) | +44 (0) 20 7710 7600 (UK) |
| Callum Stewart | |
| Nicholas Rhodes | |
| Ashton Clanfield | |
| BMO Capital Markets Limited (Joint Broker) | +44 (0) 20 7236 1010 (UK) |
| Thomas Rider | |
| Jeremy Low | |
| Thomas Hughes | |
| Camarco (Public Relations Advisor) | + 44 (0) 203 757 4980 (UK) |
| Billy Clegg | jadestone@camarco.co.uk |
| James Crothers |
About Jadestone Energy Inc.
Jadestone Energy Inc. 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, Vietnam and the Philippines.
The Company has a 100% operated working interest in Stag, offshore Australia, and a 100% legal and beneficial interest in the Montara assets, and a 99% legal, subject to regulatory approval, beneficial right, title, and interest in the associated production licences AC/L7 and AC/L8 (the “Montara Titles”). The remaining 1% legal interest in the Montara Titles is being held on trust by the seller, in favour of the Company, until Australian regulatory approvals relating to the transfer of operatorship of the Montara assets are obtained. Both the Stag and Montara assets include oil producing fields, with further development and exploration potential. The Company has a 100% operated working interest (subject to registration of PVEP’s withdrawal) in two gas development blocks in Southwest Vietnam and is partnered with Total in the Philippines where it holds a 25% working interest in the SC56 exploration block.
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 throughout the Asia- Pacific region.
Jadestone Energy Inc. is currently listed on the TSXV and AIM. The Company is headquartered in Singapore. For further information on Jadestone please visit www.jadestone-energy.com.
Cautionary statements
Certain statements in this press release are forward-looking statements and information (collectively “forward-looking statements”), within the meaning of the applicable Canadian securities legislation, as well as other applicable international securities laws. The forward-looking statements contained in this press release are forward-looking and not historical facts.
Some of the forward-looking statements may be identified by statements that express, or involve discussions as to expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of phrases such as “will likely result”, “are expected to”, “will continue”, “is anticipated”, “is targeting”, “estimated”, “intend”, “plan”, “guidance”, “objective”, “projection”, “aim”, “goals”, “target”, “schedules”, and “outlook”). In particular, forward-looking statements in this press release include, but are not limited to statements regarding target reserves volumes, production forecasts, cost projections, timing and results of exploration activities on both Stag and Montara, timing and results of the Montara light well intervention programme and replacement of subsea umbilical, expected costs, commodity prices and timing of the gas sales agreement for Nam Du and U Minh.
Because actual results or outcomes could differ materially from those expressed in any forward-looking statements, investors should not place undue reliance on any such forward-looking statements. By their nature, forward-looking statements involve numerous assumptions, inherent risks and uncertainties, both general and specific, which contribute to the possibility that the predicted outcomes will not occur. Some of these risks, uncertainties and other factors are similar to those faced by other oil and gas companies and some are unique to Jadestone. The forward-looking information contained in this news release speaks only as of the date hereof. The Company does not assume any obligation to publicly update the information, except as may be required pursuant to applicable laws. This announcement contains inside information as defined in Article 7 of the Market Abuse Regulation No. 596/2014 and is disclosed in accordance with the Company’s obligations under Article 17 of that Regulation.
The technical information contained in this announcement has been prepared in accordance with the March 2007 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 Inc., a Subsurface Manager with a Masters degree in Petroleum Engineering who has been involved in the energy industry for more than 17 years, has read and approved the exploration and appraisal 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, and is disclosed in accordance with the Company’s obligations under Article 17 of those Regulations.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Glossary
2PD proved and probable developed reserves
2P reserves the sum of proved and probable reserves, denotes the best estimate scenario of reserves
bbls barrels of oil
bbls/d barrels of oil per day
boe barrels of oil equivalent
boe/d barrels of oil equivalent per day
EBITDAX earnings before interest, tax, depreciation, amortisation and exploration expenses
FPSO floating production, storage and offloading vessel
mbbl thousands of barrels of oil
mboe thousands of barrels of oil equivalent
mm bbls millions of barrels of oil
mm boe millions of barrels of oil equivalent
PVEP Petrovietnam Exploration Production Corporation
[1]Excludes a US$10.0 million deposit in support of a bank guarantee
[2]Reporting for Montara will commence post transfer of operatorship
[3]This excludes the impact of workovers and repairs and maintenance at Stag given their unpredictable timing, and costs associated with Montara umbilical and RLWI which are opex related and will be tracked separately as per 2019 guidance
[4]This excludes the impact of workovers and repairs and maintenance at Stag given their unpredictable timing, and costs associated with Montara umbilical and RLWI which are opex related and will be tracked separately as per 2019 guidance
