Hargreaves Lansdown

Jadestone issues guidance for 2021 production

Fri 26 February 2021 08:26 | A A A

No recommendation

No news or research item is a personal recommendation to deal. Hargreaves Lansdown may not share ShareCast's (powered by Digital Look) views.

(Sharecast News) - Asia-Pacific focussed oil and gas production company Jadestone Energy updated the market on its outlook for 2021 on Friday, guiding for average crude oil production of between 11,500 and 13,500 barrels per day, assuming the successful drilling of H6 at Montara, two Skua well workovers, and completion of its acquisition of a 69% operated interest in the Maari asset, offshore New Zealand, at the end of the first half.

The AIM-traded firm said Maari's contribution to its full-year production guidance range was assumed to be 1,500 barrels per day on an annualised basis, and with the completion of the MR6 workover in early May, it said there was scope for additional production upside.

It said the effective date of the acquisition was 1 January 2019.

Conditional on completion of the acquisition, the entire economic benefit from Maari barrels produced throughout 2021 would accrue to Jadestone.

Average unit production costs were guided to be between $25.50 and $29.50 per barrel - a slight increase on 2020, reflecting around $1.00 per barrel of rephased costs from 2020 resulting from Project Clover, and a stronger Australian dollar.

Spending would be between $85m and $95m, including drilling the H6 infill well and conducting workovers on the Skua SK10 and SK11 wells at Montara.

Jadestone committed to pay a 2021 cash dividend, in keeping with its dividend policy, to maintain and grow dividends in line with underlying cash flow generation.

Looking at its gas developments, Jadestone said it was continuing to collaborate with Petrovietnam on its planned gas development at Nam Du and U Minh, offshore Vietnam.

The firm said its approach was to agree a gas production profile for the development as a precursor to a gas sales contract, and ultimately attain government sanction for the field development.

At the same time, Jadestone said it was preparing to re-issue the related floating production, storage and offloading (FPSO) contract tender.

At Lemang, onshore Indonesia, the company said it had made "good progress" integrating the asset into its portfolio, and had started planning for the Akatara field gas development.

In accordance with Indonesian regulatory requirements, Jadestone said it was finalising a heads of agreement on gas sales, to be followed by a gas sales agreement with buyers before seeking formal field development sanction.

The timeline for the Lemang development was "highly flexible", the board said, and at Jadestone's discretion.

"With renewed optimism on both oil prices and the overall state of the global economy early in 2021, we are resuming the highest return investments in our portfolio," said president and chief executive officer Paul Blakeley.

"The measures we put in place to protect our balance sheet last year have set the stage for us to move forward with key projects, including drilling the H6 infill well at Montara and conducting well workovers to restore production capacity at the Skua field, where we have had two key wells offline due to identified problems within the well bores.

"The wells will be worked over utilising the same drilling rig that will drill H6."

Blakeley said that, with the arrival of the Valaris 107 rig expected in June, the company was expecting a "step change" in production, weighted to the second half of the year.

"At the same time, we are working to complete our acquisition of a 69% operated interest in the Maari asset in the first half, and for planning purposes, have assumed closing and transfer of operatorship at 30 June.

"With the combination of our organic production growth plus Maari, we are forecasting a greater than 50% increase in production in the second half versus the first.

"Other acquisition opportunities remain in focus too, and with our strong starting net cash position of $82m, we are poised to continue adding value through inorganic growth this year."

Paul Blakeley said the company had seen a "marked increase" in both the quality and quantity of potentially suitable inorganic opportunities coming to market, which it was evaluating against its "strict" acquisition criteria.

"On the cost side of the business, we are benefitting from the hard work done in 2020 through Project Clover, a significant portion of which has been rolled into our 2021 plan as structural changes to our cost base.

"At the same time, we are ever mindful of our responsibilities to maintain world class safety and asset integrity, so will increase expenditures on maintenance and facilities upgrades across the business, reflecting in general, a rephasing of spend from the worst part of the cycle in 2020, into this year."

Blakeley said the company's "strong" financial position underscored the "resiliency" of its strategy.

"Our business remains fundamentally predisposed to generating distributable returns for shareholders, and I am pleased to confirm that we will pay the final two-thirds portion of our 2020 dividend payment as planned in May, and we intend to declare a 2021 dividend in line with our stated dividend policy, to grow shareholder returns as we increase cash flow."

At 0906 GMT, shares in Jadestone Energy were down 1.27% at 78p.

    The value of investments can go down in value as well as up, so you could get back less than you invest. It is therefore important that you understand the risks and commitments. This website is not personal advice based on your circumstances. So you can make informed decisions for yourself we aim to provide you with the best information, best service and best prices. If you are unsure about the suitability of an investment please contact us for advice.


    More AIM news from ShareCast

    No results were found