Shares in Jadestone Energy PLC (AIM:JSE) after a broker initiated coverage with a 'buy' recommendation and a 68p target, more than triple the current 21p share price.
Berenberg's pitch is straightforward: production is growing fast, costs are falling, and cash generation could soon outweigh the company’s market capitalisation.
Jadestone, which operates fields across Australia, Indonesia, Malaysia and Vietnam, expects to produce just over 20,000 barrels of oil equivalent a day next year, 73% more than in 2022, thanks largely to the new Akatara field in Indonesia.
The German bank forecasts another 20% increase by 2027, with output reaching about 24,000 barrels a day. More scale brings lower costs: the analysts reckon unit costs will fall by a fifth to about $29 a barrel over the same period.
The improved economics feed into cash flow. By 2027, Berenberg expects earnings before interest, tax, depreciation and amortisation (EBITDA) of $205 million, compared with $86 million last year, and cumulative free cash flow of $211 million over 2025-27.
That equates to a yield of about 140% against the current market value, even on cautious oil price assumptions.
There are catalysts, too. The Nam Du/U Minh gas development offshore Vietnam could, once sanctioned, double EBITDA by the end of the decade. A gas sales agreement is in the works, with regulatory approvals progressing.
A farm-down is expected to bring in partners and limit spending commitments. De-risking that project is seen as the most obvious driver for the shares.
The balance sheet is tight at present; net debt stood at $108 million at the half-year, but Berenberg sees scope for the company to move into net cash by 2027, giving firepower for acquisitions.
Jadestone has grown through deals before, and the analysts expect more of the same.
For investors, this is not a dividend story. Jadestone has paid one in the past but is likely to prioritise growth for now.
With the stock trading at less than half of Berenberg’s net asset value estimate, the bank sees plenty of room for re-rating if management can keep projects moving and avoid the operational mishaps that have hampered it in recent years.
On Thursday, the shares were up 0.91p to 21.81p.