Jadestone Energy relinquishes Philippines service contract

Asia-Pacific-focussed oil and gas production company Jadestone Energy announced the voluntary relinquishment and termination of service contract 56 (SC56), offshore Philippines on Wednesday.

The AIM-traded firm said its wholly-owned subsidiary Mitra Energy Philippines, together with the operator Total E&P Philippines, had notified the Philippines Department of Energy of their voluntary surrender of their entire interest in, and termination of, SC56.

“We remain focussed on our strategy of delivering value from producing fields and near-term developments in the Asia-Pacific region, while avoiding early-phase greenfield exploration plays such as SC56, requiring multi-year capital programmes prior to production and cashflow,” said president and chief executive officer Paul Blakeley.

“Nor would the major investments in new pipelines and facilities fit our sustainability objectives which include a focus on maximising use of existing infrastructure.

“SC56 was a legacy asset inherited from the previous management and only had option value through a carried well.”

Blakeley said the decision not to drill the well removed any interest for Jadestone to continue further, requiring as it would, new deep-water frontier exploration commitments.

He said it would also not compete with existing portfolio investment options, nor potentially some of the “more interesting” inorganic opportunities moving into the market in the coming 12-to-18 months.

“While we have appreciated great support and cooperation, and long association with the government and regulator in the Philippines, it is now time to relinquish our interest in SC56, as we continue to deploy our production optimisation and field-life extension skills across the region.”

Jadestone said that, as a condition of the surrender and termination of SC56, the partners would be subject to a payment in respect of unfulfilled work commitments.

The company’s share would be met from a portion of the proceeds of the arbitration ruling announced on 9 January.

It said it also expected that it would record a one-time impairment charge of about $50.5m, relating to historical capitalised exploration expenditures on SC56, primarily associated with previous management, with no associated cash impact or tax benefit.

At 1426 GMT, shares in Jadestone Energy were down 5.17% at 55p.