Jadestone maintains production guidance after some speedbumps

The AIM-traded firm said that included 9,000 to 10,500 barrels per day from its Australia assets, reflecting first half performance, and the revised contributions from the Montara H6 infill well and the Skua 10 and 11 subsea well workovers, due to the late arrival of the Valaris 107 drilling rig and longer-than-expected drilling at Montara H6 causing a one-month delay in the work programme.

Slight delays were also reported to the Stag workovers, due to Covid-19 restrictions on people and equipment.

The guidance also included daily production from the peninsular Malaysia assets of just over 6,000 barrels of oil equivalent per day, post-closing on 1 August net to Jadestone, and consistent with production levels at the time it announced the acquisition, with some potential upside, equivalent to 2,500 to 3,000 barrels equivalent per day annualised production.

Average 2021 unit production cost guidance was also unchanged at $25.50 to $29.50 per barrel of oil equivalent, reflecting its updated production guidance.

Spending in 2021 was expected to be $105m to $115m, compared to a previous $85m to $95m, including capital expenditure and major non-recurring operational expenditure.

That, the board said, reflected updated estimates on the expected scope of work necessary to restore production from the Skua subsea wells, and the revised cost of the H6 infill well at Montara, where the well was sidetracked due to mechanical equipment issues.

Finally, while Jadestone and the seller remained “committed” to the acquisition of the 69% operated working interest in the Maari asset, offshore New Zealand, the board said it was “prudent” to exclude it from guidance until there was further clarity on the timing of government approvals.

With the economic date of the transaction unchanged at 1 January 2019, all production and resultant free cash flow generated from the asset since that date was continuing to accrue to the company up to the completion date, subject to completion.

Jadestone reiterated its commitment to pay a 2021 cash dividend, in keeping with its dividend policy, and to maintain and grow dividends in line with underlying cash flow generation.

“2021 marks the return to a phase of active investment across our producing assets, following an extraordinarily challenging 2020, and we welcome the relative stability and more favourable investment climate our industry is seeing this year,” said president and chief executive officer Paul Blakeley.

“Further, we remain well positioned to capitalise on the growing number of acquisition opportunities in our core areas, without sacrificing our rigorous sub-surface screening and clear focus on returns.

“We have removed the impact of the Maari transaction for this year, reflecting ongoing uncertainty in the timing of New Zealand government approval.”

Blakeley said that while the government there seemed “more focussed” on new legislation to provide clarity around decommissioning security, Jadestone had, in the meantime, provided all information requested by the regulator in seeking approval.

“Importantly, removing Maari from guidance is more than offset by the inclusion of the peninsular Malaysia acquisition from 1 August.

“The quality of the opportunity set across our asset portfolio remains unchanged and the incremental cash flow from rising production will benefit the business in the last quarter this year and throughout 2022, rather than during last year's depressed price environment.

“I look forward to the successful completion of the Montara activity programme and the full benefit of the peninsular Malaysia assets increasing Jadestone's production towards 20,000 barrels of oil equivalent per day.”

At 0938 BST, shares in Jadestone Energy were down 4.25% at 73.25p.