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Oilman Jim's Private Blog


Jadestone Energy - Response to Oil Price Volatility

March 10, 2020-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, notes the recent fall in global oil prices, with the front end (May 2020) of the Brent oil price forward curve trading yesterday at around US$36/bbl, mid-morning UK time.


· Significant downside protection in place. Half of Montara's production is hedged at an average price of US$68.45/bbl through to September 30, 2020, resulting in a blended realised price of c.US$60/bbl based on current oil prices (including latest realised premium);

· Realised pricing at a substantial premium to Brent. Stag most recently achieving a premium of US$21/bbl and Montara realising US$7.60/bbl;

· Cash flow resilience at low oil prices. The Company expects to remain operating cash flow positive in 2020, even at oil prices below US$30/bbl;

· Strong balance sheet. Cash balance of US$116.0mm at January 31, 2020, with outstanding debt of US$50.1 mm; and

· Entirely discretionary forward capital programme provides the Company with maximum flexibility to adjust spending, in line with the macro environment.

Against the current backdrop, the Company's existing hedging programme provides very strong downside oil price protection. Half of Montara's production is hedged through to September 30, 2020 at an average Brent swap price of US$68.45/bbl, or around US$76/bbl inclusive of the premium most recently achieved of US$7.60/bbl. On a blended basis, and based on the current front end of the forward curve, this implies a Montara average crude realisation of around US$60/bbl through to the end of September.

Stag, as a heavy sweet crude, is enjoying an even stronger premium to Brent, with the current month's lifting secured at a US$21/bbl premium to Brent.

As per our statement on February 25, 2020, the Company's guidance for cash opex/bbl in 2020 is US$20.50-23.50/bbl. After allowing for workovers and other non-allocated G&A, the business is resilient and expected to generate positive operating cashflow in 2020, even at oil prices below US$30/bbl.

Jadestone entered 2020 in an extremely strong position from both an operational and balance sheet point of view. In calendar 2019, the Company generated unaudited operating cashflow before changes in working capital, interest and taxes of over US$175.0mm, ending the year with a total cash balance of US$99.4mm after capital expenditure, and debt principal and interest payments.

At December 31, 2019 the total principal outstanding on the drawn reserve based loan, the Company's sole source of financial indebtedness, was US$50.1mm, resulting in a net cash position of nearly US$50.0mm, including restricted cash of US$10.0mm. Since December 31, 2019, Jadestone's cash balance further increased to US$116.0mm at the end of January.

Additionally, it should be noted that Jadestone's capital programme is entirely flexible and can be adjusted should we enter a lower-for-longer oil price environment. The two 2020 planned infill wells in Australia, H6 at Montara and 50H at Stag, can be postponed, with minimal regret costs relative to the capital programme.

No final investment decision has yet been reached on Nam Du/U Minh, a project which delivers fixed price gas to a local high growth energy short market. Any capital spending on Nam Du/U Minh in 2020 will take into account the current macro environment, the Company's financial strength and the Vietnam project's fixed price contracting mix, among other factors.

Paul Blakeley, President and CEO commented:

"As a specialist second phase operator, with a meticulous focus on costs, and entering the year with a robust Balance Sheet and strong downside oil price protection, I'm extremely confident of Jadestone's ability to withstand medium or longer-term oil price pressures. We have the added benefit of Asia Pacific oil production selling at a significant premium to Brent and, in Stag's case, a premium of over US$20/bbl, and from a production base that generates positive cashflow even at low oil prices. Finally, with our strong net cash position and positive ongoing cashflow generation, we are well positioned to take advantage of inorganic growth opportunities, should the right asset(s) emerge for Jadestone".

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