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Jadestone Engy Share Chat (JSE)

Share Price: 58.50Bid: 58.00Ask: 59.00Change: 0.00 (0.00%)No Movement on Jadestone Engy
Spread: 1.00Spread as %: 1.72%Open: 58.50High: 58.50Low: 58.50Yesterday’s Close: 58.50

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Posts: 159
Opinion:No Opinion
Gross Revenue/Cash Flow Generation
6 May '19
Some thoughts on the impact to future gross revenue and cash flow generation of Jadestone's prescient October 2018 Oil Price Hedge and acquisition of the Montara Oil Field.

As CEO Paul Blakeley made reference to in a recent company presentation to investors, the timing and exceptional quality of the Montara deal and its associated 2 year oil price hedge arrangement written into the contract to part finance the acquisition, is proving to be hugely "fortuitous" to the company and its shareholders.

Today, with Brent at circa $70.5/bbl - Jadestone will be getting around $76/bbl with the regional premium to Brent for its hedged volume(5,500 bpd), and circa $74.00 for the remainder of the Montara production - giving an average of circa $75.00/bbl for all Montara's production.

Stag will be generating around $74.50/bbl inclusive of the regional premium to Brent.

Giving an overall sales price average of around $74.80/bbl - suggesting current cash flow generation is likely to be circa $50/bbl.

At the mid 14,500 bopd 2019 production guidance level and an average of today's $70.5 Brent price, Jadestone would see additional gross sales revenue of circa $25 million and $75 million annually, compared to North Sea and Trinidad and Tobago producers respectively.

At an average of $60 Brent the additional annual gross sales revenue would be $47 million and $88 million respectively.

At an average of $50 Brent the additional annual gross sale revenue against North Sea and T&T producers would be $78 million and $114 million respectively.

At 14,500 bopd 2019 guidance, together with the regional oil price premium and oil price hedge i would estimate Jadestone's annual cash flow generation at an estimated top end of the range $24/bbl operating expenses as:

At an average of:

$70.5 Brent - $270 million

$60.0 Brent - $239 million

$50.0 Brent - $217 million

The Montara oil price hedge deal over the next 18 months will clearly provide huge downside protection to cash flow generation should oil prices fall significantly during the remaining 17 months of the 2 year deal.

Any material increase in production above the 14,500 bopd mid guidance case would especially if the double whammy effect of an increase in the average price of Brent occurred - have the potential to deliver an exponential increase in cash flow generation above today's current estimate, since it would be going through a largely fixed price production operation, thereby lowering the opex and increasing the cash flow /bbl.

Against this backdrop, from an investment risk persecutive, it makes extremely good reading to know that Jadestone's 2019-2023 organic, self funding production development plan to 30,000 boepd is based on $50 Brent.

For us, the net $82 million price for the Montara oil field acquisition was an incredible deal when measured against virtually any asset value metric but, to find it included a young $108 million converted cost FPSO with up to 900,000 b

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