SINGAPORE: Jadestone Energy, an independent oil and gas production company focused on the Asia-Pacific region, has executed a sale and purchase agreement with BP Developments Australia to acquire the Seller’s non-operated 16.67% working interest in the Cossack, Wanaea, Lambert, and Hermes oil fields development (the “North West Shelf Oil Project”), offshore Western Australia, for a total initial headline cash consideration of US$20 million.

Paul Blakeley, President and CEO commented: “This acquisition is another example of our strategy in action, acquiring low-cost barrels at less than US$3/bbl, while establishing an entry position into a very high-quality long-life asset with very low decline rates.  We believe that over time we can exercise increasing influence and deploy our skills in mid-life oil field management.  

In particular we see material upside potential through infill drilling into reservoirs with very significant oil-in-place and, together with optimisation of operating costs, the life of the producing fields can be extended for several years.  In the near to mid-term, further interests in the asset may become available, over which we would have pre-emption rights.  We will initially participate in the joint venture without any incremental headcount or cost and will fund the acquisition through existing cash resources.

“The acquisition also fits well with our sustainability principles and climate strategy with flaring minimised due to available gas export infrastructure, and we look forward to working with the joint venture partners to further minimise the greenhouse gas footprint of the acquired assets. 

We also believe recovery from existing upstream assets should be maximised to provide the resources required to support near-term transition towards a low-carbon future.  In addition, we will fund our share of the forecast decommissioning costs for the assets through early payments, demonstrating our commitment to providing clarity on this important issue for all our stakeholders.”

Highlights

A tuck-in acquisition, within Jadestone’s Asia-Pacific core area;

Jadestone is acquiring 10.4 mmbbls^[1] as at an effective date of 1 January 2020, comprising 1.5 mmbbls of production since the effective date, 5.1 mmbbls of 2P reserves and a further 3.9 mmbbls of 2C resource. Based on a consideration of US$24 million^[2], this represents an acquisition cost of ~ US$2.30/bbl. The transaction includes the Seller’s entire 16.67% working interest in the CWLH fields, subsea infrastructure, FPSO, and full abandonment liabilities estimated at US$82 million;

In addition to the consideration, Jadestone will also pay US$41 million upfront into the decommissioning trust fund for the assets.

It is anticipated that, due to an effective date of 1 January 2020, any closing adjustment will significantly offset the initial headline cash consideration and US$41 million decommissioning payment.

Jadestone will make further payments to the decommissioning trust fund via two equal instalments of US$20.5 million payable on or about 31 December 2022 and 31 December 2023.

A recent independent expert report¹ prepared for the operator of the North West Shelf Oil Project valued a 16.67% stake at approximately US$80 million, based on an effective date of 1 January 2022;

Cash flow positive oil production of approximately 2,100 bbls/d net to Jadestone, based on average production from the North West Shelf Oil Project in 2021; 

Oil production from the North West Shelf Oil Project is low-sulphur, low-density and commands a premium to Brent;

Unit operating costs for the Seller’s interest are estimated at US$22-23/bbl, and would be accretive to the Company’s current unit operating cost guidance for 2022 of US$23-28/bbl;

The acquired assets are expected to generate EBITDA of approximately US$40 million in 2023 at a realised oil price of US$100/bbl;

Potential to add incremental reserves through infill drilling, targeting unswept oil across all four fields; and

Opportunity to extend asset life beyond 2031 (the initial design life of the Okha FPSO).

Overview of the North West Shelf Oil Project

Jadestone will acquire the Seller’s entire 16.67% working interest in the Cossack, Wanaea, Lambert and Hermes (“CWLH”) oil fields which are located within four production licences (WA-3-L, WA-11-L, WA-13-L and WA-16-L) in the North Carnarvon basin offshore north-west Australia, known as the North West Shelf Oil Project and operated by Woodside Energy Group Ltd^[3]. 

The project comprises 13 subsea wells producing through the Ohka floating production, storage and offloading vessel (“FPSO”).  The Okha FPSO was installed at the fields in 2011 and has 60,000 bbls/d of oil processing capacity, along with water handling and gas processing/reinjection facilities.

The Cossack, Wanaea and Hermes fields are currently in production and are estimated to contain aggregate gross 2P reserves of 30.3 mmbbls (5.1 mmbbls net) at 31 December 2021.  Gross average production from the fields in 2021 was 12,461 bbls/d (2,077 bbls/d net) with Q1 2022 production averaging 14,178 bbls/d gross (2,363 bbls/d net). 

The CWLH fields also produce associated gas, with the partners in the North West Shelf Oil Project having the rights to the gas required to fuel the Okha FPSO, with the remainder being used as feedstock in the North West Shelf liquefied natural gas project.  The CWLH fields are considered to be mid-life producing assets with significant original oil in place, which Jadestone estimates at approximately 890 mmbbls, and which provides the opportunity for further investment to increase recovery factors.