Jadestone Energy Inc. (AIM:JSE, TSXV:JSE) (“Jadestone” or the “Company”), an independent oil and gas production company focused on the Asia Pacific region, provides an update on its 2020 capital expenditure guidance.
In light of current market conditions, and in order to continue to maintain the Company’s strong balance sheet in these uncertain times, Jadestone is reviewing its 2020 capital programme. In the absence of the receipt of Vietnamese Government approvals of the field development plan (“FDP”) for the Nam Du and U Minh gas field developments, Jadestone has decided to delay this project. Jadestone will remove substantially all capital spending which had been planned for the project in 2020, resulting in a 50%, or circa US$90mm reduction to its 2020 capex guidance for the year, which is now expected to be US$80-95mm.
This decision is not just a recognition of the impact of new measures to conserve the Company’s capital resources, but focuses on the largest and longest element of the Company’s 2020 capital programme, and one which would not have contributed cash flow before Q4 2021. This had assumed receipt of Vietnamese Government approvals in Q1 2020, and as this has not been forthcoming, the expected first gas date for the project will be no earlier than late 2022.
The remaining 2020 capital programme largely comprises infill drilling at Montara and Stag, and remains entirely discretionary. The Company will continue to evaluate all capital investments, including potential inorganic growth opportunities, based on anticipated accretive value add for shareholders, while maintaining balance sheet strength.
As of January 31, 2020, Jadestone had an unaudited cash balance of US$116.0mm, including restricted cash of US$10mm and gross outstanding interest bearing debt of US$50.1mm. The Company expects to remain operating cash flow positive even at oil prices below US$30/bbl, owing largely to downside price protection through hedging and significant pricing premia on oil from its producing assets in Australia. The mark-to-market value of the hedge as at February 28, 2020 was over US$18.0mm in favour of the Company.
Paul Blakeley, President and CEO commented:
“We are committed to maintaining capital discipline through the current uncertain environment. While the level of economic turmoil is unprecedented, I am pleased that we retain substantial flexibility and will remain nimble, and course correct as necessary, to ensure ongoing value add to our shareholders.
“Nam Du and U Minh are an important domestic gas resource for Vietnam, which will ultimately contribute to generating clean power and essential fertiliser for the ongoing development of the Southwest Vietnam economy. But, with ongoing Vietnamese Government delays to the FDP approval process, there is a short-term option for us to defer our spending commitments on the project, which we’ve decided to take. Vietnam currently has the potential to take temporarily cheap competitor piped gas, which is oil price linked and benefitting from the current market dislocation, and the Nam Du and U Minh fields can be developed when investment conditions improve.”
