Jadestone Energy has executed a sale and purchase agreement ('SPA') with OMV to acquire an operated 69% interest in the Maari Project, shallow water offshore New Zealand, for a total headline cash consideration of US$50 million (subject to customary closing adjustments), to be funded from the Company’s cash resources.
Overview of the Maari Project
The Maari Project is a mid-life producing asset located in permit PMP 38160, in the offshore Taranaki basin, in 100 metres water depth, approx. 80 kms southwest of New Zealand’s North Island. The project includes the Maari and Manaia oil fields, produced via a self-elevated jack-up wellhead platform, an FPSO, owned by the joint venture partners (being Horizon Oil (26%) and Cue Taranaki (5%)) and the associated decommissioning liability with respect to all facilities, which is shared by the partners in accordance with their respective working interests.
The fields hold 2P reserves of 13.9 mm bbls of oil, and current production is approx. 4,000 – 4,500 bbls/d, both on a net 69% basis.
The project has been producing since 2009, achieving peak production of 16,400 bbls/d in 2010. With original oil in place of close to 300 mm bbls in the producing reservoirs and cumulative production of 38.3 mm bbls, the fields have achieved only a modest recovery factor of 13% to date.
The fields, based on their current 2P reserves, are scheduled to produce until 2031, however the Jadestone management team believe there is substantial potential for reserves upside not yet captured in the 2P reserves.
Overview of the Acquisition
The Acquisition has a total headline cash consideration of US$50 million based on an economic effective date of January 1, 2019, and is structured as a purchase of an interest in the assets.
Upon completion, the purchase price will be adjusted to reflect after tax free cashflow from the economic effective date, and other customary adjustments. The Maari Project generated after tax free cashflow for the calendar year to December 31, 2018 of US$40.1 million (on a net 69% basis).
Additional contingent consideration of US$2.6 million is payable in the event that Dated Brent averages above US$75/bbl in 2020, and a further US$1.3 million if Dated Brent averages above US$75/bbl in 2021.
The Company believes this transaction represents exceptional value to Jadestone shareholders. Highlights of the transaction include:
- An increase in the Company’s net production by approximately 30%, and 2P reserves by 33%;
- 2x the Maari Project’s 2018 after tax free cashflow2, 0.8x the Maari Project’s 2018 EBITDAX2;
- $3.61/bbl of 2P reserves;
- 28x of 2P NAV1,4 and 0.66x of 1P NAV;
- Unlevered IRR of approximately 100%, based on the base case 2P profile, and approximately an adjusted unlevered IRR close to 50% when burdened upfront with all future estimated 2P asset decommissioning costs;
- Expected payback in less than 12 months from anticipated transaction closing;
- 20% accretion on an NAV/share basis; and
- Immediately accretive on an operating cashflow per share and free cashflow per share basis.
The purchase consideration will be funded from available cash when accounting for existing cash on hand, ongoing cashflow generation from the Company’s producing assets and the expected cash flows from the Maari Project between the effective date and completion. The rest of Jadestone’s portfolio remains self-funding, including the Nam Du/U Minh gas development due for sanctioning shortly, and for which a portion of the capital expenditure is expected to be funded from a planned enlargement of the Company’s reserve based loan facility. The acquisition further enhances the Company’s ability to meet the funding requirements associated with its stated dividend policy, including the maiden dividend in 2020.
Completion of the Acquisition will occur upon satisfaction of conditions, including acceptance of Jadestone as operator by the Maari joint venture partners, New Zealand Government approvals relating to title transfer and change of operatorship and other customary conditions on or before November 15, 2020. The Company anticipates completing the transaction in H2 2020, and until then OMV New Zealand will continue as operator of the assets.
New Zealand is highly regarded as a dynamic business landscape and offers the best fiscal regime in the Asia Pacific region for upstream oil and gas activity, comprising a relatively uncomplicated system of royalties and taxes. The New Zealand Government’s support for the development of existing resources, coupled with a constructive regulatory environment, makes it an excellent fit for Jadestone.
The Company intends to establish New Zealand as an extension to its Australia core area. As another maturing hydrocarbon basin in the region, additional opportunities are likely to become available which fit the Company’s strategy to acquire and reinvest into mid-life producing assets. Through a mix of capturing synergies with its existing business, optimising reserves recovery, and additional inorganic growth, the Company is targeting building a portfolio of assets with an ultimate production base of 15 to 20 mboe/d in New Zealand.
Paul Blakeley, President and CEO commented:
'I’m delighted to establish a new operating presence in New Zealand and to begin building relationships with local regulators, communities, staff and other stakeholders. Adding the Maari Project to our growing portfolio of high-value assets in the Asia Pacific region demonstrates our ability to bolt on new assets and provides more than a decade of additional free cashflow, even in the 2P reserves only scenario, as supported by our external reserves audit. The Maari project adds both significant additional opportunity as well as diversity to our operations. New Zealand is a natural strategic fit for Jadestone, where we see many shared values with regards to sustainable energy investment, through maximising recovery of existing resources and world-class expectations for health, safety and environmental stewardship.
'We are excited by the opportunity to deploy our expertise to managing this mid-life producing asset, particularly as we see significant reserves upside. The Maari Project has achieved very modest recovery factors to date, relative to the substantial estimated original oil in place, making this an ideal platform to showcase our differentiated technical capabilities. With ongoing reinvestment into the fields, we foresee many opportunities to add value without relying on further exploration or appraisal success. At the same time, our focus is on extending the life of existing infrastructure that may otherwise not realise its full potential, thereby continuing to generate income, growth, and ongoing employment for local communities and the New Zealand economy.
'The Acquisition is immediately accretive to shareholder value and will be funded entirely with cash on hand. I look forward to establishing an office in New Plymouth, and to further engaging with regulators and local communities as we build our Jadestone team and establish operating credentials in New Zealand.'
The Company has posted a new presentation to its website, at: www.jadestone-energy.com/investor-relations/presentations-communication/.
Source: Jadestone Energy