Problems at the Montara FPSO proved challenging for Jadestone Energy in its first half, pulling down results, but the company has stepped up its inspection insight.
Jadestone shut the Montara FPSO between August 2022 and March 2023, amid oil leak concerns. It was then producing until July 29, when another tank defect triggered an alarm. The FPSO was then offline until September 1 and has now reached 6,250 barrels per day.
Jadestone CEO and president Paul Blakeley said Montara had been a “real problem”. The defect in July occurred in a tank that had already been inspected, he explained to Energy Voice.
“The ultrasonic test was not sensitive to pick up such a small point of corrosion,” he said. Jadestone re-examined the tanks with a finer ultrasonic probe and “lo and behold it solves the problem. It’s hugely important to us that we identify why we could have missed it.”
The follow-up inspection found two areas in the tank thinner than had been previously measured, with the company carrying out repairs on the affected areas. “The sense now, among the team, is that we have much greater confidence in the inspection process.”
Jadestone is exporting oil from the FPSO with an oil tanker, which can store crude to compensate for reduced storage. “We will let it go when we can, in about six months or so,” Blakeley explained, drawing a comparison with the same model used at the company’s Stag field.
Problems at Montara drove the company’s after-tax loss, of $59.9 million. The company also reduced its production guidance for April to December this year, suggesting it would average 13,500-15,000 barrels of oil equivalent per day. It had previously guided the high end could reach 17,000 boepd.
Akatara
While Montara is an ongoing challenge for Jadestone, and one the market will continue to watch closely, other parts of the portfolio are doing well.
The company has pinned its near-term growth hopes on Akatara, a gas development that is due to start around mid-2024. The project is now 61% complete and long-lead equipment is on site.
Jadestone carried out well testing on the field recently, which provided 8.5 million cubic feet per day. The project includes five wells and has only 15 mmcf per day of sales contracted.
The A1 well “confirmed the upside volumes”, Blakeley said. Jadestone is working on a potential contract for more gas sales from Akatara.
Another project that has exceeded expectations has been East Belumut. The company drilled a first well on the field, testing it at 2,800 bpd. The entire project is due to provide 2,500 bpd, Blakeley said, from four wells.
The first well has “settled down lower now, but it demonstrates better rocks and a higher oil column than we had anticipated”. The company is now drilling a second well.
© Supplied by Jadestone EnergyAnother three-well workover plan is starting at Stag, Blakeley said, which could add another 1,000 bpd of production.
The second half of the year will be about growing production, the CEO said.
Opportunistic
Jadestone was able to navigate its problems at Montara largely because of its cash pile. This has been reduced to net cash of $7.78mn.
The company will continue to invest into this year, with the balance sheet at its lowest ebb in the first or second quarter of 2024. Once Akatara comes onstream, though, it will be able to pay off debt and rebuild cash “very fast”, Blakeley said.
That’s not to say there is not a possibility for additional spending projects. “There is definitely capacity for M&A. Shareholders want growth from a stock and the banks want us to grow.”
Blakeley said Jadestone was considering two options in particular that were making progress, although there can be no guarantees.
“We’re looking now and we’re continuing to look. We want to expand the business,” he said. Jadestone would finance such a move from its cash generating assets and debt, with Blakeley ruling out further equity raises.
Recommended for you
