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Jadestone Energy primed to expand as Asia-Pacific oil province matures

'The Montara acquisition made last July is as good a prospect as he has seen for 25 years.'
oil rig
Lots of ways to get more oil from old fields says Jadestone

Oil and gas companies come in many shapes and sizes. There are deep water explorers, shallow water producers while some target horizontal, shale and onshore plays.

Recent AIM-listee Jadestone Energy Inc’s (LON:JSE) speciality is acquiring producing offshore assets that still have some development potential.

WATCH: Jadestone Energy CEO believes Montara is best asset he has seen in 25 years

Typically, these are fields where a major oil group has been the operator but for them are now mature.

Jadestone will not get involved in wildcat exploration and the risk and rewards that go with it.

“We promised shareholders we would not be drawn into exploration when we joined AIM last year,” chief executive Paul Blakeley told Proactive.

“Exploration wells have a one -in-eight to one-in ten chance of success and then it can be 15 years before the company involved sees any cashflow.”

That‘s not Jadestone’s game, he says, but that does not mean the company’s current portfolio is lacking excitement.

Good as it gets

For example, Blakeley says the Montara acquisition made last July is as good a prospect as he has seen for 25 years.

Located in the Timor Sea off the coast of Australia and discovered in 1988, Jadestone acquired Montara from Thai state oil group PTT for US$195mln.

Jadestone raised US$110mln to fund both the acquisition and planned work programme and joined AIM shortly after.

The amount raised was US$15mln more than planned originally due to the strong demand for the shares.

Blakeley’s enthusiasm for Montara will have helped.

Montara ticks all the boxes for the company, he says, and should really start to pull its weight this year.

Production is forecast to soar to between 13,500-15,500 barrels per day compared to an average 7,615 barrels in 2018, but that is just the start, he says.

Change of ownership needs to be confirmed by the Australian oil authorities, but once that comes through and Jadestone takes over as operator the real work begins.

Crucial to be operator

“It’s crucial to be the operator as that gives us a position of very strong control. That is very important, the differentiator.”

More 3-D seismic, in-fill wells, workovers and interventions of existing holes are all planned.

Mature fields are not just about cutting costs, he says, but extending the lives of fields.

At Stag, another field off the coast of Australia, Jadestone is set to drill the first well for six years.

That will boost its output by about 1,000 barrels, which with Stag producing at between 2,500-3,000 barrels per day is a material boost to cashflow.

Operating costs are largely fixed, so the extra barrels will also have a big impact on profits.

“There is always more oil and managing these types of field is what we do.”

Undoubtedly, Jadestone’s team have plenty of experience in managing this type of asset.

Asia-Pacific the focus

Asia-Pacific is where Jadestone is focused but Blakeley sees similarities with the North Sea, an area he understands well from a 41-year career in the business.

He was working for Talisman Energy when it took over the Beatrice Field near the Moray Firth.

That had an estimated two-year life when Talisman became operator but was finally shut down twenty years later in 2017.

Talisman, which was sold recently to Repsol, also had extensive assets in the Asia-Pacific region, where Blakeley was executive vice-president.

The knowledge he garnered there is the foundation of Jadestone.

Regions such as offshore Australia with mature assets will throw up opportunities to acquire, he says, adding the company is already looking at possibilities in several data rooms.

Even without a deal, the production profile is set to rise sharply.

Just from the existing assets, Blakeley is expecting 30,000 barrels per day by 2023.

That includes two gas fields offshore Vietnam where the go-ahead to develop is expected later this year.

Nam Du and U Minh are in block 46/07 and block 51 and again Blakeley knows the area well as they are close to a Talisman-developed project already supplying gas to Vietnam.

Vietnam gas opportunity

A gas sales agreement is required to get this project up and running, but Vietnam is short of power, a Talisman-built pipeline is handily near, while a gas -fired power station onshore is running below capacity.

But as cash builds up expect acquisitions as well.

“We can’t predict when deals come about but we look at 40-50 prospects per year and I can see them yielding some great things for us.

“As we get larger we become a more credible counterparty,” he adds.

Jadestone was listed on the Toronto stock exchange prior to joining AIM and now has a dual -listing.

The Montara funding was priced at 35p, with the shares now trading at 45.8p valuing the group at £204mln.

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