Jadestone Energy upbeat on outlook despite Maari delays

Asia-Pacific oil and gas producer Jadestone Energy said on Thursday that 2022 production was expected to average 15,500 to 18,500 barrels of oil equivalent per day - a 36% increase on 2021, with around 95% of that being oil.

The AIM-traded firm said the range reflected planned maintenance shutdowns at Montara, Stag, and the operated Peninsular Malaysia assets during the year.

It also included reduced production from the Montara field over a three-to-four week period in early 2022, due to an engine failure in the gas reinjection compressor and the necessary works to restore production to full capacity.

The Maari field was expected to average 4,500 to 4,700 gross barrels per day in 2022, but was excluded from the guidance pending further clarity on the timing of closing the acquisition.

Jadestone said the strength in crude premiums seen in late 2021 had continued into early 2022, with the most recent liftings from Stag in December and Montara in January achieving premiums of $12.70 and $3.80 per barrel, respectively.

Unit operating costs were expected to average $23.00 to $28.00 per barrel of oil equivalent in 2022, representing a 10% reduction on 2021 levels, primarily due to higher average production expected in the year, partially offset by the planned major three-year maintenance programmes.

Capital expenditure guidance was set at $90m to $105m, which mainly consisted of the Stag infill programme developing two million barrels of reserves, and the first phase of the Akatara gas project, which was expected to be sanctioned during the first half.

The cost of the Stag infill programme was immediately deductible under the current Australian tax incentive for qualifying investment, and was expected to reduce overall Australia corporate income tax paid in 2022.

Jadestone said it was currently unhedged, although hedging would be contemplated in line with any debt funding arranged for the Akatara gas development.

Its board said it was committed to pay a 2022 cash dividend, in keeping with the dividend policy, to maintain and grow dividends in line with underlying cash flow generation.

“Our strong balance sheet and unhedged exposure to rising oil prices will comfortably underpin our activity levels in 2022, which incorporates two infill wells at Stag and initial development activity at the Akatara gas project in Indonesia,” said president and chief executive officer Paul Blakeley.

“We welcome the greater clarity that the revised New Zealand hydrocarbon legislation provides, and with Jadestone and OMV both committed to the Maari transaction, we are ready to work with the government to expedite the completion of this deal.

“However, given that the exact schedule to completion is dependent on the New Zealand upstream regulator's implementation of the recent legislative changes, it feels prudent to exclude Maari from our production guidance at this point.”

In the meantime, Blakeley siad Jadestone would continue to benefit from the project's “strong” cash generation.

“In Indonesia, we have continued to advance the Akatara project with pre-project activity moving ahead on schedule, while in Vietnam, we are continuing to engage with the government on the Nam Du-U Minh project.

“We are also encouraged by the mergers and acquisitions pipeline in the Asia-Pacific region, and are currently assessing several opportunities, all subject to our strict investment criteria.”

Maintaining a conservative balance sheet remained a priority for the company, Paul Blakeley said, so it could “comfortably” meet its capital commitments and retain funding flexibility for growth opportunities.

“However, based on our spending forecasts, we expect to generate material incremental cash in 2022 at current oil prices and premiums, and as a result, an increase in shareholder returns, either through increased dividends or share buy-backs, may be considered later in the year.”

At 1120 GMT, shares in Jadestone Energy were down 5.01% at 94.99p.