Jadestone buying interest on onshore Thailand operation

Asia-Pacific oil and gas producer Jadestone Energy has executed a sale and purchase agreement with Salamander Energy, an affiliate of PT Medco Energi Internasional, it announced on Thursday.

The AIM-traded firm said it was acquiring an interest in three legal entities which own a 9.52% non-operated interest in the producing Sinphuhorm gas field and a 27.2% interest in the Dong Mun gas discovery, onshore northeast Thailand.

It said the headline cash consideration would be $32.5m, to be funded from the company's cash resources.

Jadestone said it was acquiring 4.6 million barrels of oil equivalent of 2P reserves at an effective date of 1 January.

Based on the headline consideration of $32.5m, that represented an acquisition cost of about $7.10 per barrel.

It said it expected that, due to the effective date of 1 January, the cash consideration on completion would be about $26.4m plus working capital.

Jadestone said the acquisition would provide positive cash flow generation from a well-understood reservoir, with “stable and predictable” gas production of around 1,600 barrels of oil equivalent net to Jadestone, based on current rates.

Gas is contracted under a long-term high take-or-pay gas sales agreement with PTT as the buyer, at a price linked to high sulphur fuel oil.

Recent gas nominations had consistently exceeded the daily contract quantity.

The board described it as a first direct step to create “significant” natural gas production within Jadestone's portfolio over the medium-term.

It would also establish a low-cost platform for growth in Thailand, while re-engaging directly with PTTEP, Thailand's national oil company, at the same time as providing further diversification of the firm’s production base.

Sinphuhorm operating costs stood at about $3 per barrel of oil equivalent, and would decrease the company's overall unit operating costs.

The acquired assets would be managed from Jadestone's existing Southeast Asia offices, with no incremental general and administrative expenses, and “very limited” abandonment obligations, currently estimated at $2m net, associated with the assets.

Jadestone said the 9.52% interest in Sinphuhorm generated around $20m of unaudited EBITDA in 2022.

The company said it estimated payback on the acquisition in around three-and-a-half years, with returns “significantly in excess” of its hurdle rates.

It added that it saw potential to enhance value through further infill drilling on the Sinphuhorm field, and the potential development of the Dong Mun discovery, with further equity in the Sinphuhorm gas field possibly becoming available in the near-term.

“While modest in scale, this opportunistic tuck-in acquisition is low cost, low emissions intensity and very low decline production from the onshore Sinphuhorm gas field,” said chief executive officer Paul Blakeley.

“The asset is an excellent addition to our portfolio, diversifying our existing production base, and is a first important step towards building a significant natural gas position within our portfolio as part of our energy transition strategy.

“Furthermore, these assets carry minimal abandonment liabilities and are administered under very attractive Thai I PSC terms with recent extensions to both the licence and the GSA.”

At 1535 GMT, shares in Jadestone Energy were up 2.08% at 81.05p.

Reporting by Josh White for Sharecast.com.