Jadestone Energy has warned of some upcoming challenges at Montara and Stag, but production should increase this year and costs fall.
The company expects to average 20,000 to 23,000 barrels of oil equivalent per day this year. In 2023, it produced around 13,800 boepd, at the top end of its guidance.
Jadestone president and CEO Paul Blakeley said the company had started 2024 strongly. The company expects “significant production growth during 2024, adding further scale, diversification and resilience to our business”.
This year, Jadestone sees capital expenditure at around $80-110mn. It will also have to stump up $77mn to fund abandonment costs for its CWLH acquisition in Australia.
Meanwhile, operating costs should be $240-290mn, excluding royalties and carbon taxes, which add another $30mn.
Starting up the Akatara gas project will increase opex. However, on a per barrel basis, the company expects costs to fall, to $33.5 per boe. This is down 30% from 2023. It is able to do more with less as a result of Akatara, in addition to projects in Malaysia and CWLH.
Ashley Kelty, at Panmure Gordon, said the update was “more positive … than it may initially appear, as the material increase in production coupled with lower opex should see an improvement” in free cash flow.
Jadestone, at the end of 2023, had cash of $152mn and debt drawn of $157mn. As such, it has net debt of around $5mn. “With stronger commodity prices and higher volumes, [Jadestone] should be well placed to move into a net cash position over 2024”, Kelty continued.
The Panmure Gordon analyst went on to say the company had “sufficient headroom” to meet its capital expenditure and there was “no risk of another liquidity squeeze”.
Montara and Stag
Jadestone did single out upcoming problems at Montara and Stag, though. Montara has posed a number of challenges for the company, with tanks on the FPSO having leaked in the past.
The company warned the costs on the two projects would be higher than previously thought. This, it said, was a result of “increases in repair and maintenance costs to maintain both facilities in an appropriate condition”. It reported there might be a non-cash impairment at the end of 2023.
Montara will produce 5,000-6,000 bpd of oil in 2024. The Skua-11 well went offline in October 2023 and will need a side track to resume production.
Jadestone has considered options such as replacing the FPSO at Montara. However, it believes the most viable option will be to continue operations as is, but with more long-term maintenance. It estimates costs at Montara will be $120mn this year and then falling to $95mn in subsequent years.
The company now expects Montara to halt production in 2030, two years earlier than planned.
Stag operating costs will be around $70mn this year and then fall to $60mn. The field will stop producing in 2035, according to Jadestone’s new plans.
The company said these developments were disappointing. However, the impact of these is “mitigated by the ongoing delivery of the company’s strategic aim of broadening its portfolio to include newer, higher-quality and higher-margin assets”.
Akatara is a crucial part of the company’s future. It is 92% complete and gas feed into the processing facility will begin by April this year. Commissioning has begun and the company expects final acceptance in the second quarter.
Blakeley said the Montara Venture FPSO had continued to disappoint in its performance. “As we said we would, we have worked hard to successfully grow the business away from Montara and to diversify into higher quality assets, and this is reflected in this year’s guidance.”
The two projects are still important, he said. “We will continue to find ways to maximise asset value, which includes exploring how to crystallise the significant value that we see in the Montara fields’ associated gas resource.”
Updated at 12:42 to clarify Montara’s issues are historic.
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