Jadestone establishes new Malaysia presence through acquisition

Asia-Pacific focussed oil and gas company Jadestone Energy has executed a sale and purchase agreement with SapuraOMV Upstream, to acquire its interest in peninsular Malaysia for initial headline cash consideration of $9m (£6.47m).

The AIM-traded firm said the acquisition would be funded from its cash resources, and certain subsequent contingent payments.

It said the interest would establish a new operating presence for Jadestone in Malaysia, and would add immediate cash flow from around 6,000 barrels oil equivalent per day of low operating cost production, on a net working interest basis, of which over 90% was oil.

The acquisition would also increase the company's 2P reserves by 34%, adding 12.5 million barrels of oil equivalent of net working interest 2P reserves, based on the company's best estimate 2P reserves production profile.

It would provide upside potential through reservoir optimisation opportunities, additional infill wells and cost efficiencies, and was thus described by the board as an “excellent fit” with Jadestone's capabilities and field operating philosophy.

The directors said the interest would support the company’s sustainability principles by creating extended employment for local nationals and providing locally-sourced energy without expanding the infrastructure footprint.

As per the production sharing contracts, the firm said it would undertake the abandonment of facilities and wells at the end of the contract period or production, whichever came earlier.

The abandonment of facilities would be funded through a cess fund arrangement, accumulated during the production phase, while the abandonment of the wells would be cost recovered via petroleum operations.

“I am delighted to add these peninsular Malaysia assets to the Jadestone portfolio,” said president and chief executive officer Paul Blakeley.

“We have always viewed Malaysia as a highly prospective jurisdiction for upstream investment, and have been looking for the right entry opportunity.

“We see this acquisition as a high margin tuck-in, which meets our investment criteria, and sets the stage for us to establish operating credentials in-country while we continue pursuing more materiality and growth through our acquisition and development led strategy.”

Blakeley said both Jadestone and SapuraOMV were focussing their portfolios on “core strengths”, with SapuraOMV on discovered gas resources, and Jadestone on near-term cash generating producing assets, such as the East Piatu, West Belumut and East Belumut fields.

“They are a perfect fit with our strategy, and further bolster our ability to generate quick cycle returns for shareholders.

“By our estimate, the acquisition will add 12.5 million barrels oil equivalent of 2P reserves, increasing total group reserves by over 30%.

“Production will increase by 50% over the midpoint of our 2021 guidance, and with the immediate add of cash flow from a high-value stream of 6,000 barrels oil equivalent per day, we are forecasting rapid payback, and therefore believe the acquisition will be value accretive to the business within the year.”

Blakeley said the company was “excited” by the potential for follow-on investment as well, seeing “significant” running room, particularly in the East Belumut field, adding that the firm would explore the option to conduct further infill drilling in the near term.

“As always, the potential to add value through follow-on investment is a key part of our acquisition criteria, and features alongside our usual priorities to drive cost efficiency wherever possible, and strive for continuous improvement in how we operate.”

At 0905 BST, shares in Jadestone Energy were up 9.92% at 64.85p.