Jadestone Energy Inc. reported today its consolidated audited financial statements, as at and for the twelve-month period ended December 31, 2018.

From January 1, 2018, the Company has moved to reporting its financial information from a March year end, to a calendar year end.  For that reason, comparative financial information is provided for the nine-month period ended December 31, 2017.

The acquisition of the Montara Assets was completed on September 28, 2018, at which time Jadestone obtained control and 100% legal ownership, apart from interest in the associated licenses which remains subject to regulatory approval. For accounting purposes, Montara’s results are reported in Jadestone’s Financial Statements from September 28, 2018.

Financial highlights

• Net revenue during the fourth quarter was US$45.0 million, a record for the Company, an increase of 38% over the prior quarter, and more than double the revenue in the same quarter a year ago;
• Full year revenue was US$113.4 million, also a record for the Company, an increase of 64% over the annualised result for the nine-month period to December 31, 2017;
• Positive net cash generated from operations of US$32.5 million in the fourth quarter, a record for the Company and an increase from a US$12.2 million net use of funds in the prior quarter, and US$0.6 million for the same quarter a year ago;
• Full year positive net cash generated from operations of US$17.8 million, also a record for the Company, and compares to a US$6.6 million use of funds in the nine-month period to December 31, 2017;
• Total comprehensive income for the fourth quarter was US$28.9 million, a record for the Company, an increase of US$30.4 million on the prior quarter, and compares to US$0.8 million for the same quarter a year ago;
• Total comprehensive income for the full year was US$4.4 million, compared to a loss of US$14.9 million in the nine-month period to December 31, 2017;
• Gross debt reduced to US$101.8 million by year-end, following the first quarterly repayment on the US$120.0 million reserve based loan. After the March 2019 scheduled repayment of US$14.9 million, the principal balance outstanding is US$88.2 million;
• Gross cash and bank balances of US$71.6[1]million at year-end, result in a net debt position of US$30.2 million; and
• Montara voluntary maintenance and inspection shutdown in Q4 2018—the seller agreed to fund cash calls to the tune of US$22.0 million.

Operational highlights

• The Stag production facility has achieved a safety performance of 2,438 days without an LTI;
• Production during the fourth quarter averaged 5,215 bbls/d, including production from Montara in October only. This was prior to the voluntary maintenance and inspection shutdown commencing November 1, 2018, but averaged over the full quarter.  Stag production was below plan at 2,644bbls/d due to two of the largest production wells suffering downhole pump failure, but despite all of this, overall production saw an increase of 69% over the prior quarter;
• Adjusting for the impact of the maintenance and inspection shutdown at Montara, the Company would have had average production for the quarter of 10,272 bbls/d, a multiple of the prior quarter or the same quarter a year ago;
• Shutdown at Montara completed January 11, 2019, clearing an extensive backlog of overdue maintenance and inspection tasks; and
• 2P reserves at December 31, 2018 of 42.8mm bbls comprising both Stag and Montara, an increase of 25.7mm bbls over the total at December 31, 2017.

Outlook highlights

• Stag infill well 49H commenced mid March 2019, and after a period of weather downtime, is now expected to be completed in early May, with first production targeted shortly thereafter;
• Montara development programme commencing Q2/Q3 with the replacement of the subsea umbilical and riserless light well intervention restoring gas lift to Skua-11 and Swift-2, unlocking new oil in the heel of Skua-11 and perforating additional sands in the Swallow-1 well;
• First infill well at Montara expected in Q4 2019 subject to rig availability, targeting 1.8mm bbls of 2P reserves and initial production of approximately 3,000 bbls/d;
• Plans to acquire a new 3D seismic survey in H2 2019, to improve reservoir imaging and assess further step-out potential beyond the existing H6 and Skua 12 target infills;
• Robust downside protection of oil price, and continued exposure to upside via capped swap, executed at the time of the Montara acquisition;
• Average swap price for 2019 is US$71.72/bbl (Dated Brent), while Montara crude is currently selling at a premium of circa US$3.50/bbl; and
• Substantial progress on the Nam Du/U Minh development in Vietnam, including a draft heads-of-agreement for the gas sales and purchase agreement expected to be signed shortly.

Paul Blakeley, President and CEO commented: 
“Reporting our Q4 2018 and full year 2018 results caps what has been a transformational year for Jadestone. With the first production from Montara’s ongoing operations benefiting the quarter, we have demonstrated a step-change in the cash generative capacity of our business. Even with decreasing commodity prices over the quarter and the extended maintenance and inspection shutdown, we managed to strengthen our balance sheet by putting cash in the bank and starting to pay down debt.  Our financial position is strong, and we are poised to show growth and material cash flow going forward.”

“At Montara, we remedied a significant backlog of overdue and inherited maintenance and inspection tasks. This was completely cleared, and gives us far greater confidence in the asset condition and its anticipated performance in the future, while the extensive early work undertaken has also helped to instill the Jadestone operating culture there. Since restarting the facility in January, production from Montara has exceeded our expectations and should be around 11,000bbls/d for the first quarter. We are more convinced than ever in the value proposition at Montara, and see a number of investment opportunities and efficiencies to add further value.”  

Meanwhile, performance at the Stag oilfield has been below plan in the quarter due to downhole pump failures in two key production wells, one of which will require a workover in 2019, after the infill well.  This should restore volumes, along with the benefits of the 49H infill well, the first well to be drilled on Stag in 6 years.”

“Our plans for our Southwest Vietnam assets continue to take shape too. We have built an experienced project management organisation and have made great progress on the project, in anticipation of field development sanction late this year. In addition, I am delighted to see the progress the team is making with Petrovietnam on commercial matters, including negotiating definitive terms for the gas sales and purchase agreement.”  

Operations update

Acquisition of the Montara assets closed just three days before the start of the fourth quarter, with average production during October of 7,628 bbls/d, and one crude oil lifting of 451,291 bbls. Thereafter, the Company voluntarily shut down the facility to address an extensive backlog of overdue maintenance and inspection tasks. Montara’s production resumed on January 11, 2019.

Upcoming activity at Montara in Q2 and early Q3, 2019 includes the replacement of the subsea umbilical from the Skua and Swift/Swallow subsea wells to the Company’s owned FPSO, together with a riserless light well intervention (“RLWI”) programme that will restore gas lift to the Skua-11 and Swift-2 wells, perforate additional sands in the Swallow-1 well, and unlock new heel volumes in the Skua-11 well. The RLWI is expected to deliver approximately 3,200 bbls/d in H2 2019, ensuring continued production from Swift-2 and Skua-11, in addition to the new volumes.

The Company is also developing a plan for drilling its first infill well at Montara later in the year, subject to rig availability. The H6 well will use an existing slot on the Montara wellhead platform and develop 1.8 mm bbls of 2P reserves, targeting an initial rate of approximately 3,000 bbls/d in 2020. The Company is also planning to acquire a new 3D seismic survey in H2 2019, to improve reservoir imaging, to more accurately target future infill wells beyond the planned H6 and Skua-12 infill targets, and assess further step-out potential.

Production at the Stag oilfield was below plan averaging 2,644 bbls/d for the quarter, due to the loss of production from two key production wells, 36H and 37H, following failure of their electric submersible pumps. A workover on 36H returned production later in the quarter, while 37H will be the subject of a future workover campaign, following the drilling of the 49H infill well.

Work on the new Stag 49H infill well commenced in mid March 2019, the first infill at Stag in six years.  Following a delay due to severe weather conditions, drilling activity recommenced on April 10, 2019 and the infill well is expected to be completed in early May with first oil expected shortly thereafter. The well is targeting 1.2 mm bbls of 2P reserves and initial production rates of over 1,000 bbls/d.

In Vietnam, the Company made good progress towards delivery of the Nam Du and U Minh gas developments. During the fourth quarter, the Vietnam team was expanded to fill critical project management positions, and made substantial progress on all work fronts, including facilities front end engineering and design work, conducting technical and environmental studies, tendering for major contracts, and negotiating key commercial terms with Petrovietnam.