Berenberg starts Jadestone Energy at 'buy'

Analysts at Berenberg initiated coverage on Jadestone Energy at 'buy' on Thursday, stating that the company's efforts to turn around mature assets that had been neglected by their previous owners during the downturn would lead to the stock's re-rating if successful.

If Jadestone, an Asia-focused exploration and production company chasing organic and inorganic growth opportunities in the region, can successfully turn around the assets, Berenberg said its stock would re-rate from an enterprise-value-to-earnings before income, tax, depreciation amortization and exploration expenses ratio of 0.7x in 2020 to the sector-average of 3.8x.

Berenberg noted that following Jadestone's acquisition of two oilfields located offshore Australia, the group managed to increase combined production by 8,000 barrels of oil per day, but said "strong results" had been partially offset by extensive maintenance undertaken at both fields to rectify some legacy issues.

"We expect further value generation as turnaround initiatives start bearing fruit," said Berenberg, which started the group off with a 110.0p target price.

The German broker estimates the fields could generate an incremental value of $310.0m at $65 per barrel, through it highlighted that additional investments in the fields as well as further cost optimisation would likely be required.

"Success at Stag and Montara would serve as a proof of concept for management, allowing it to pursue further inorganic opportunities in the region," said the analysts.

In addition to incremental value at Stag and Montara, Jadestone was focused on organic development of its Nam Du and U Minh gas assets in Vietnam, expected to be sanctioned in the third quarter.

Berenberg estimates the fields could add $316m or 54p per share of unrisked value.