Jadestone Energy Inc. (JSE) (“Jadestone”), an independent oil and gas production company focused on the Asia Pacific region, is pleased to provide a trading and business update for the year ended December 31, 2020.
Paul Blakeley, President and CEO commented:
“Early in 2020, we responded to the combined impact of a drop in benchmark oil prices and the challenges posed by the COVID-19 pandemic. Our primary focus was to preserve our balance sheet in the face of enormous uncertainty, with an oil price that fell below US$20/bbl, and not to be driven by short term targets. We were quick in rescheduling capital investments with an eye on protecting project returns by deferring spending into a stronger price environment, and we were aggressive in challenging our cost base to ensure maximum efficiency across the portfolio.
“Through our cost-saving programme, Project Clover, we have realised US$33.8 million in cashflow savings versus our original plan, and have locked in over a quarter of those savings as structural changes in the way we work going forward. At the same time, we have engaged in a modest hedging programme covering approximately 30% of our planned production volumes in the first quarter 2021, and are prepared to lock in more barrels in the short term with the sole aim of underpinning cashflow to support delivery of our capital programme this year.
“All in, our 2020 performance has met our revised guidance targets, and we have emerged from the year as a stronger company that will be debt free by the end of Q1 2021, US$89.4 million of cash on hand, and an exciting suite of investment projects ahead. Importantly, we have done so without compromising our commitment to sustainable operations, and have recorded no material deviations from our safe operating parameters.
“We are continuing to progress our growth ambitions too, with integration of the Indonesia Lemang asset now underway, the New Zealand Maari asset acquisition expected to complete in H1 of this year, and several additional opportunities in the Asia Pacific region under evaluation.
“We are also announcing today our intent to continue our pivot toward practices more typical of our UK-based peer group. Following our recent adoption and implementation of the Quoted Companies Alliance Corporate Governance Code, it is our intention to effect a corporate reorganisation whereby our British Columbia incorporated parent company will be substituted for an England and Wales incorporated entity, targeted to be complete in the first half of 2021.”
Jadestone achieved its revised 2020 production guidance target, with full year production averaging 11,438 bbls/d. The Company realised an average oil price of US$44.75/bbl in 2020, excluding hedging, and generated net revenue of US$217.9 million. Unaudited cash operating expenses for the full year were around US$23.24/bbl1, after the customary adjustment for workover activities and for abnormal costs associated with damage from Cyclone Damien in Q1. Cashflow savings relating to Project Clover amounted to a US$33.8 million reduction from plan, and over 25% of the realised savings reflect structural changes in the Company’s operations and hence will be reflected in the Company’s outlook targets for 2021. Unaudited capital spending for the full year was approximately US$26 million.
Jadestone more than doubled its net cash balance in 2020. As of December 31, 2020, the Company had a net cash balance of US$82.0 million, comprising cash and bank balances of US$89.4 million, and gross debt outstanding of US$7.4 million. Jadestone’s remaining gross debt comprises the final repayment of the Company’s reserves-based loan (“RBL”), drawn to part fund the Montara acquisition in September 2018. The final RBL redetermination exercise was undertaken in December 2020 and was assessed at a level above the remaining drawn portion. Indeed, the Company’s drawn portion under the RBL facility has remained comfortably below each half yearly redetermination throughout the life of the loan, despite the 71 day shutdown in Q4 2018, the heavy offshore spending programme in 2019, and the oil price collapse in 2020. The final scheduled repayment will be made at the end of Q1 2021.
Jadestone has entered into an agreement to hedge approximately 30% of its production in Q1 2021. The hedging programme entails crude oil swaps covering approximately 265,000 bbls of crude oil between January 1, 2021 and March 31, 2021, at a Dated Brent price of US$49.00/bbl, and before any sales premiums. Jadestone is continually monitoring the level of crude oil swaps, and may add to this hedging programme in the lead up to its capital programme in 2021.
Governance and reorganisation
Effective December 31, 2020, Jadestone has adopted the Quoted Companies Alliance Corporate Governance Code 2018 (the “QCA Code”). The Company’s Board of Directors recognises that the QCA Code provides the Company with the appropriate framework to sustain a strong level of governance, given its size and quotation on the AIM market of the London Stock Exchange.
Over the past two years, Jadestone has pursued an evolution of its corporate practices toward norms and standards typical of its peer companies, who are predominantly UK-based entities. In addition, the Company has recognised that substantial efficiencies are possible with regards to corporate taxation, investor dividend treatment, and various other matters if the Company were domiciled in the United Kingdom. Jadestone announces today its intention to relocate its corporate residence to the United Kingdom. The group will undertake a reorganisation such that its ultimate parent company is changed from a British Columbia incorporated company to an England and Wales incorporated plc. The Company intends to enter into an arrangement agreement and to seek shareholder approval for the proposed reorganisation at a special meeting of shareholders to be held on or about April 9, 2021. Further details will be announced in due course and, subject to shareholder approval, this transaction is anticipated to be completed during the first half of 2021.
The Company remains committed to its acquisition of a 69% operated working interest in the Maari asset, offshore New Zealand, which is pending final government approval. The acquisition effective date remains January 1, 2019, meaning Jadestone will ultimately receive all economic benefits relating to its 69% interest accruing from that date forward.
Jadestone completed its acquisition of the Lemang asset, onshore Indonesia in December 2020, and work is now underway to integrate the asset into the Jadestone portfolio, including development planning.
Jadestone continues to pursue a number of M&A opportunities in the Asia Pacific region. The Company’s management believes the investment climate remains favourable for Jadestone to add value both through inorganic growth and through follow-on investment, leveraging its unique capabilities and strong financial position.
Jadestone intends to provide its 2021 market guidance outlook in February 2021, and will publish its audited 2020 financial results in April 2021 along with its annual 51-101 reserves reporting. The Company’s Annual Report and Sustainability Report will be published in May 2021.
1 Unaudited cash operating expense is a non-GAAP financial measure which does not have a standardised meaning prescribed by IFRS. This non-GAAP financial measure is included because management uses this information to analyse financial performance and efficiency and it may be useful to investors on the same basis. Unaudited cash operating expense is a non-GAAP measure which should not be considered an alternative to, or more meaningful than, “Production cost” as determined in accordance with IFRS, as an indicator of financial performance. Unaudited cash operating expense equals Production cost plus the net impact of opex related foreign exchange gains and losses and adjusted for certain non-routine maintenance items associated with seasonal cyclones and workover costs. Because non-GAAP financial measures do not have a standardised meaning prescribed by IFRS, they are unlikely to be comparable to similar measures presented by other companies and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. Production Cost will be disclosed along with the Company’s full year financial and operating results, including audited consolidated group financial statements, in April 2021.