Jadestone Energy Regulatory News (JSE)

Jadestone Energy

2022 Half Year Results and Interim Dividend Declaration

20 September 2022-Singapore: Jadestone Energy plc (AIM:JSE) ("Jadestone" or the "Company"), an independent oil and gas production company and its subsidiaries (the "Group"), focused on the Asia Pacific region, reports today its unaudited condensed consolidated interim financial statements, as at and for the six-month period ended 30 June 2022 (the "financial statements").

Management will host a conference call today at 9:00 a.m. UK time, details of which can be found in the release below.

Paul Blakeley, President and CEO commented:

"Jadestone delivered record financial results in the first half of 2022, with production increasing by c.50% compared to the first half of 2021, driven by a full period contribution from the Malaysian assets acquired in August 2021 and the impact of the Montara drilling programme in the second half of 2021, albeit offset by an unplanned shutdown at Montara early in 2022 due to a compressor engine failure. Revenues and adjusted EBITDAX increased by 63% and 113% respectively, due to the increase in production volumes and higher realised oil prices. As a result, we ended the period with a net cash balance of US$161.6 million, an increase of almost 40% compared to year-end 2021. Jadestone remains debt free. 

Despite all this, recent operational performance at Montara has been disappointing, especially given the substantial upgrade and repair work done to date. As previously announced, the field is currently shut-in as we progress a remediation plan for the Montara Venture FPSO following defects identified earlier this year. The plan involves emptying, cleaning, inspecting and, where necessary, resolving any defects in the tanks and hull of the FPSO. In particular, we are moving ahead with the permanent repair of 2C crude oil cargo tank and 4S ballast tank whilst prioritising entry and activity in other tanks in preparation for operational readiness. As we focus on safety and integrity, this activity will continue until we can ensure a safe and reliable restart of the FPSO. In parallel, we are making good progress in the appointment of, and work scope for, the independent reviewer, who will work with us to provide final assurance to Jadestone and the regulator on our remediation plans and operational readiness prior to the restart of production operations. While we understand that the lack of a firm restart date is frustrating for many of our stakeholders, our focus is on the remediation plan and its successful execution which, in turn, will restore confidence in the significant remaining value we see at Montara.

We have also initiated a fundamental review of our hull and tank inspection and repair regime, which will include our maintenance approach, operating systems and organisational structure. As a near-term action to assist management, Jadestone's Board of Directors has established a special subcommittee, which will work closely with Company's executive and senior operations leadership, providing both additional support and challenge, while the Montara FPSO hull and tank remediation work is in progress. This will include weekly progress updates and reports.

The balance sheet strength we have built in recent years, and the confidence in our existing asset portfolio and its planned growth, means we are well-positioned to weather the Montara shut-in without any anticipated impact on our investment programmes, inorganic growth, or near-term shareholder returns. We expect capital expenditures for the year to be in line with guidance of US$90.0 - 105.0 million. We have also taken the decision to increase the interim dividend by 10% to US$3.0 million and, subject to market conditions, we intend to complete the US$25.0 million share buyback programme launched in August and which has so far returned an incremental US$4.9 million to shareholders. The next phase of the shareholder returns strategy announced in June will be determined by the timing of production restart at Montara, our portfolio's operational performance, realised oil prices, and the timing and scale of incremental inorganic growth opportunities.

The Company continues to deliver on its growth strategy. In June, we took a final investment decision on the Akatara gas development on the Lemang PSC in Indonesia, with activity at the site now well underway. Separately, the acquisition of the outstanding 10% stake in the Lemang PSC is expected to complete soon. In July, we announced the acquisition of a non-operated interest in the producing Northwest Shelf ("NWS") oil project offshore Australia, and are making good progress towards closing this transaction in Q4 2022.

Our strong balance sheet underlines the success of our business model, supporting our planned investments for growth, and while the recent Montara asset incident is unfortunate, we are determined to fix it and deliver the original value proposition vindicating our strategy in the Asia Pacific region." 

Paul Blakeley

EXECUTIVE DIRECTOR,

PRESIDENT AND CHIEF EXECUTIVE OFFICER

2022 FIRST HALF RESULTS SUMMARY

Operational and financial summary

l  Production increased 51% during H1 2022 to 15,008 bbls/d (H1 2021: 9,934 bbl/d). Production benefitted from a full period of the PenMal Assets acquired in August 2021 and the Montara activity programme in H2 2021, offset by unscheduled downtime at Montara early in 2022, a planned maintenance shutdown at Stag in May, and the shut-in of the non-operated PenMal Assets in February 2022 due to FPSO class suspension;

l  Average realised oil price1 in H1 2022 was US$109.52/bbl, 62% higher than H1 2021. The realised price includes a weighted average premium across the assets of US$6.99/bbl (H1 2021: US$3.12/bbl); 

l  Revenue of US$225.6 million in H1 2022, up 63% from H1 2021 at US$138.2 million, due to higher production and higher average realised prices;

l  Closing crude stocks as at 30 June 2022 totalled 417,216 bbls, which were subsequently sold in the second half of 2022, generating provisional receipts of US$45.3 million, from a provisional weighted average realised price of US$108.97/bbl; 

l  As at 30 June 2022, there was an underlift production entitlement carried forward of 130,359 bbls at the PenMal Assets, resulting in a receivable of US$16.8 million, calculated based on the average June 2022 Dated Brent price plus latest realised premium;

l  Unit operating costs4 of US$25.71/boe, down 9% from US$28.16/bbl in H1 2021 due to inclusion of the PenMal Assets, which have a lower opex/boe compared to the Australian producing assets;

l  Adjusted EBITDAX improved 113% to US$138.6 million compared to US$65.2 million in H1 2021, predominately due to increased production, higher oil prices and lower one-off project expenditures in Other Expenses;

l  Net profit after tax in H1 2022 of US$49.5 million compared to US$2.5 million in H1 2021;

l  Operating cash flows before movements in working capital in H1 2022 of US$126.5 million, up 133% compared to H1 2021;

l  Capital expenditure in H1 2022 of US$13.6 million, down 16% compared to H1 2021 due to the phasing of expenditure in H2 2022;

l  Cash balances of US$161.6 million as at 30 June 2022 (H1 2021: US$48.3 million), with no debt outstanding; and

l  Recommended interim dividend for FY2022 of US¢0.65/share3 (H1 2021: US¢0.59/share), equivalent to a total distribution of US$3.0 million (H1 2021: US$2.8 million). On 2 August 2022, the Company announced the launch of a share buyback programme with a maximum amount of US$25.0 million. As at 16 September 2022, 4.7 million of shares had been acquired at an accumulated cost of US$4.9 million.

Business development

l  On 16 November 2019, the Group executed a sale and purchase agreement with OMV New Zealand Limited ("OMV"), to acquire an operated 69% interest in the Maari project, subject to customary conditions, including government approvals. Following legislative changes to New Zealand's upstream regulatory framework at the end of 2021, Jadestone has continually engaged with OMV and the New Zealand Government to seek clarity on the processes, terms and associated timeline required to complete the Maari transaction. Despite these efforts, it remains unclear under what circumstances and in what timeframe completion of the transaction and transfer of operatorship can occur;

l  On 6 June 2022, the Group announced that a final investment decision had been taken on the Akatara gas field development onshore Indonesia, following the receipt of necessary consent from the Indonesian upstream regulator. The project is now in the development phase with first gas anticipated in the first half of 2024;

l  On 24 November 2021, the Group executed a settlement and transfer agreement with PT Hexindo Gemilang Jaya to acquire the remaining 10% interest in the Lemang PSC for US$0.5 million and a waiver of unpaid amounts related to the PSC. Indonesian government approval is anticipated in Q4 2022; and

l  On 28 July 2022, the Group announced the execution of a sale and purchase agreement with BP Developments Australia Pty Ltd ("BP") to acquire BP's non-operated 16.67% working interest in the Cossack, Wanaea, Lambert and Hermes oil fields development offshore Western Australia, for a total initial headline cash consideration of US$20.0 million, and certain subsequent contingent and decommissioning security payments.

Significant events

l  On 7 February 2022, the Bunga Kertas FPSO, deployed at the non-operated PenMal Assets, had its class suspended, resulting in the non-operated PenMal Assets being shut-in and production suspended. Production is expected to remain shut-in for the remainder of 2022. The estimated adjustment to the production guidance provided in August 2022 to arrive at the current production guidance for full year 2022 is a reduction of c.720 boe/d;

l  As previously announced, on 17 June 2022, between three to five cubic metres of crude oil was released to sea during a routine oil transfer between tanks on the Montara Venture FPSO. The facility was immediately shut-in as a precaution and the relevant authorities notified. Following a temporary repair and isolation of the 2C cargo tank where the leak originated, production was restarted on 4 July 2022 while a permanent repair was being developed;

l  On 12 August 2022, an additional defect was identified in a ballast water tank on the Montara Venture FPSO during preparation work for a permanent repair to the 2C cargo tank. The Group took the decision to temporarily shut-in production at Montara to prioritise the permanent repairs, removing a number of production operations personnel in order to provide accommodation for additional inspection and repair crews due to an inability to simultaneously accommodate both; and

l  On 15 September 2022, Jadestone's Board of Directors established a temporary special sub-committee to assist management during the ongoing Montara FPSO hull and tank workstreams. It will receive weekly progress reports on the Montara FPSO remediation activities, and interact directly with the Group's senior operations leadership to review actions and progress towards the remediation plan's objectives, including the restart of production.

2022 Guidance

l  Production: 11,000 - 13,000 boe/d (as announced on 12 September 2022, the production forecast was decreased due to the shut-in of production from the Montara fields);

l  Unit opex: US$31.00 - 37.00/boe (increased from previous guidance at US$23.00 - US$28.00 primarily due to incorporating the lower production forecast above) ; and

l  Capex: US$90.0 - 105.0 million (unchanged).

1  Realised oil price represents the actual selling price inclusive of premiums.

2  Operating costs per boe, adjusted EBITDAX and net cash are non-IFRS measures and are explained in further detail below.

3  Dividend per ordinary share calculated based on outstanding number of shares at period/year end. The actual dividend per share will reflect any changes in the shares outstanding between the period/year end and the associated record date including the shares buyback.

4 Unit operating costs per boe before workovers and movement in inventories but including net lease payments and certain other adjustments (see non-IFRS measures below).

Enquiries

Conference call and webcast

The management team will host an investor and analyst conference call at 9:00 a.m. (London)/4:00 p.m. (Singapore) today, Tuesday, 20 September 2022, including a question-and-answer session.

The live webcast of the presentation will be available at the below webcast link. Dial-in details are provided below. Please register approximately 15 minutes prior to the start of the call. 

The results for the financial period ended 30 June 2022 will be available on the Company's website at: www.jadestone-energy.com/investor-relations/

Webcast link: https://app.webinar.net/VXGleQG4RWA

Event title: Jadestone Energy plc first-half 2022 resultsTime: 9:00 a.m. (UK time) / 4:00 p.m. (Singapore time)Date: Tuesday, 20 September 2022Conference ID: 65496332

Dial-in number details:

DIVIDEND DECLARATION AND PROGRESS SHARE BUYBACK PROGRAMME

On 20 September 2022, the Directors declared a 2022 interim dividend of 0.65 US cents/share, equivalent to a total distribution of US$3.0 million. The timetable for the dividend payment is as follows:

l  Ex-dividend date: 29 September 2022

l  Record date: 30 September 2022

l  Payment date: 14 October 2022

The Group's growth-orientated strategy remains unchanged, with the objective of establishing a leading Asia-Pacific upstream company through acquiring and maximising the value of producing fields and development assets. The Group prioritises organic reinvestment, and maintains a conservative capital structure in order to capitalise on inorganic growth opportunities as they arise. Notwithstanding this, the Group believes that its production and development led business model is fundamentally pre-disposed to provide meaningful shareholder returns, particularly during times of higher oil prices. The Company targets a sustainable base dividend, with a targeted split one-third to an interim dividend and two-thirds to a final dividend, growing over time in line with underlying cash flow generation. The base dividend may be augmented over time by additional shareholder returns (in the form of share buybacks, special dividends and/or tender offers) if deemed appropriate by the Company.

The Company does not offer a dividend reinvestment plan and does not offer dividends in the form of ordinary shares.

On 2 August 2022, the Company announced the launch of a share buyback programme (the "Programme") in accordance with the authority granted by the shareholders at the Company's annual general meeting on 30 June 2022. The maximum amount of the Programme is US$25.0 million, and the Programme will not exceed 46,574,528 ordinary shares. There is no certainty on the volume of shares that may be acquired, nor any certainty on the pace and quantum of acquisitions.

As at 16 September 2022, the Company had acquired 4.7 million shares at a weighted average cost of £0.89 per share, resulting in an accumulated total of US$4.9 million.

ENVIRONMENT, SOCIAL AND GOVERNANCE ("ESG")

As a responsible upstream operator, Jadestone contributes to an orderly energy transition by helping to meet regional Asia-Pacific energy demand whilst minimising the environmental footprint of its operations. In doing so, Jadestone aims to bring positive social and economic benefits for its stakeholders, local communities and people associated with its operations.

Jadestone published its third Sustainability Report in June 2022, which covered the Group's ESG performance in 2021, as well as commitments to further improvements in 2022 across key focus areas. This section provides an overview of period-to-date performance of the Group, representing the Stag and Montara fields, the PenMal operated assets and, where relevant, the Akatara gas development.

Net Zero and GHG emissions

The Group committed in June 2022 to achieve Net Zero Scope 1 and 2 GHG emissions from its operated assets by no later than 2040. The detail of this commitment as well as Jadestone's strategy through the energy transition can be viewed on Jadestone's website1.

A key element of the Net Zero commitment is the development of an emissions reduction roadmap for Jadestone's operated assets, which will inform the interim GHG reduction targets for the Group. Jadestone has engaged a reputable international consultant to support its Net Zero workstreams, which will be progressed throughout H2 2022 and into 2023. The Group is on track to publish its Net Zero roadmap in 2023 and is committed to being transparent in the implementation of the roadmap on at least an annual basis.

Illustrative of its efforts to minimise GHG emissions, a solar photovoltaic installation was piloted at the Akatara gas field development in Indonesia in April 2022, replacing diesel generators at four well pads. Solar power now fully meets well pad lighting and electricity needs, with potentially broader application within the Akatara development, such as use in the accommodation camp. In collaboration with other operators in the area, Jadestone is participating in the planting of over 27,000 mangrove trees to positively impact the health and wellness of local communities and environment.

HSE performance

The Group's priority remains the health and safety of its staff and contractors, along with ensuring that any negative environmental impacts from operations are minimised. 

At the operated PenMal Assets, there have been no recordable incidents since Jadestone assumed operatorship in August 2021. Similarly, since construction started at the Akatara gas development in Indonesia earlier this year, no recordable incidents have occurred. In Australia, there were three recordable incidents with one at Stag classified as a Lost Time Injury ("LTI"). The crew member concerned suffered a minor injury, recovered quickly and is back to work. The LTI was managed in accordance with Jadestone's Injury & Illness Management Procedure, with a detailed investigation completed and ensuing actions and engineering modifications fully implemented.

1 https://www.jadestone-energy.com/jadestone-announces-2040-net-zero-target/

As referenced previously, in June 2022, between three to five cubic metres of crude oil was released to sea during a routine oil transfer between tanks on the Montara Venture FPSO. Production operations resumed on 4 July 2022 but were then shut-in again in August 2022 after an additional internal defect was identified in a ballast water tank on the FPSO. The Group took the decision to temporarily shut-in production at Montara to prioritise permanent repairs, removing a number of production operations personnel in order to provide accommodation for additional inspection and repair crews due to an inability to simultaneously accommodate both.

Governance

On 7 April 2022, the Group announced the immediate appointment of Jenifer Thien as an independent non-executive director. Jenifer brings knowledge and experience in environmental, social and governance ("ESG") strategy. Jenifer joined the Remuneration, Governance and Nomination, and Health, Safety, Environment and Climate (HSEC) committees.

On 29 April 2022, Daniel Young stepped down from his role as the Chief Financial Officer ("CFO") and Executive Director and left the Group. Michael Horn took the role of interim CFO until 22 August 2022, when Bert-Jaap Dijkstra was appointed by the Board as CFO and Executive Director.

Jadestone's Board of Directors (the "Board") supports management's decision to shut-in operations at Montara to focus on the inspection, maintenance and repair activities associated with the Montara FPSO hull and tanks, recognising the elevated requirements to restart operations as outlined within the General Direction issued by NOPSEMA on 12 September 2022. The Board has every confidence in the Group's abilities to execute the remediation plan efficiently and effectively and to the satisfaction of the regulatory authorities.

During this period, a technical subcommittee of the Board will work more closely with senior management, providing both support and challenge, while the Montara FPSO hull and tank remediation plan is in progress. This will include weekly progress updates and reports.

OPERATIONAL REVIEW

Producing assets

Australia

Montara project

The Montara project, in production licences AC/L7 and AC/L8, is located 254 km offshore Western Australia, in a water depth of approximately 77 metres. The Montara project comprises three separate fields being Montara, Skua and Swift/Swallow, which are produced through an owned FPSO, the Montara Venture. 

As at 31 December 2021, the Montara assets had proven plus probable reserves of 20.9mm barrels of oil, 100% net to Jadestone. 

The fields produce light sweet crude (42o API, 0.067% mass sulphur), which typically sells for average Dated Brent plus the average Tapis differential of the prior two months before the lifting date. This premium ranged from US$3.53/bbl to US$6.19/bbl during H1 2022. 

Montara production averaged 7,509 bbls/d in H1 2022 (H1 2021: 7,269 bbls/d). The higher production was a result of the drilling of H6 and the subsea workovers of Skua 10 and 11 in the second half of 2021. The additional production was partially offset by an unplanned gas turbine replacement and a temporary loss of subsea communication impacting uptime from the Swallow-11 well during H1 2022.

As previously announced, on 17 June 2022, between three to five cubic metres of crude oil was released to sea during a routine oil transfer between tanks on the Montara Venture FPSO. The facility was immediately shut-in as a precaution and the relevant authorities notified. Following a temporary repair and isolation of the 2C cargo tank where the leak originated, production was restarted on 4 July 2022 while a permanent repair was being developed.

On 12 August 2022, an additional internal defect was identified in a ballast water tank on the Montara Venture FPSO during preparation work for a permanent repair to the 2C cargo tank. The Group took the decision to temporarily shut-in production at Montara to prioritise permanent repairs, removing a number of production operations personnel in order to provide accommodation for additional inspection and repair crews due to an inability to simultaneously accommodate both.

There were three liftings during H1 2022, resulting in total sales of 1.3 mmbbls, compared to 1.5 mmbbls during H1 2021 from the same number of liftings.

Stag oilfield

The Stag oilfield, in production licence WA-15-L, is located 60 km offshore Western Australia in a water depth of approximately 47 metres. 

As at 31 December 2021, the field contained total proved plus probable reserves of 12.6mm barrels of oil, 100% net to Jadestone. 

The Stag oilfield produces heavier sweet crude (18o API, 0.14% mass sulphur), which historically sells at a premium to Dated Brent. The premium of the H1 2022 lifting was US$23.72/bbl compared to a weighted average of US$11.09/bbl in H1 2021, reflecting the increase in refinery demand for heavy oil with low sulphur content.

Production during H1 2022 was 2,057 bbls/d, compared to 2,665 bbls/d during H1 2021, due to a scheduled maintenance shutdown in May 2022. The shutdown was to perform pressure vessel inspections and occurs once in every three years. 

Due to the lifting schedules, there was one lifting in H1 2022 for 0.3 mmbls compared to two in H1 2021 for 0.5mmbls. 

Malaysia

Operated: PM 323 and PM 329 PSCs & Non-operated: PM 318 and AAKBNLP PSCs

The PenMal Assets consist of four licences, two of which are operated by the Group. The two operated licences comprise a 70% interest in the PM329 PSC, containing the East Piatu field, and a 60% interest in the PM323 PSC, which contains the East Belumut, West Belumut and Chermingat fields. Both PSCs are located approximately 230km northeast of Terengganu in shallow water.

The two non-operated ("OBO") licences consist of 50% working interests in each of the PM318 PSC and in the Abu, Abu Kecil, Bubu, North Lukut, and Penara oilfields (the "AAKBNLP") PSC. The two non-operated PSCs are located in the same region as PM329 and PM323.

As at 31 December 2021, the PenMal Assets contained total proved plus probable reserves of 11.2mmboe, net to Jadestone. 

The PenMal Assets produce light sweet crude that is blended to Tapis grade (43o API, 0.04% mass sulphur). This premium ranged between US$0.96/bbl to US$6.76/bbl in H1 2022.

During H1 2022, the average production from the PenMal Assets was 4,578 bbls/d of oil and 5,191 mscf/d of gas, creating a combined production of 5,443 boe/d, net to Jadestone's working interest. There was no comparable production in H1 2021 as the acquisition of the PenMal Assets was completed in August 2021.

On 7 February 2022, the Bunga Kertas FPSO, deployed at the non-operated assets, had its class suspended, resulting in the fields having to shut-in and cease production. Since the class suspension, there has been no production and it is expected that production will remain shut-in for the remainder of 2022. Currently, following a subsequent safety incident, the operator has paused its FPSO repair plan and is assessing the full range of alternatives, which include a comprehensive programme of repairs, an asset divestment or, given that the OBO licenses expire in 2024, a move towards decommissioning the asset 12 months earlier than originally planned.

There were seven oil liftings during H1 2022, for total sales of 0.5 mmbbls in addition to the sale of 939.7 mmscf of gas.

Pre-production assets

Indonesia

Lemang PSC

The Lemang PSC (Jadestone 90% working interest) is located onshore Sumatra, Indonesia. The PSC contains the Akatara field, which has been substantially de-risked with 11 wells drilled into the structure, plus three years of oil production history, up until the field ceased oil production in December 2019. Jadestone is redeveloping Akatara to supply gas, condensate and LPGs for local and regional use.

The Akatara gas field has been independently estimated to contain a 2C gross resource (pre local government back-in rights) of 63.7 bcf of sales gas, 2.5 mmbbls of condensate and 5.6 mmboe of LPG, equating to a combined 18.7 mmboe of resource, or 16.8 mmboe net to Jadestone's existing 90% working interest. 

On 30 June 2021, the Minister of Mines and Energy of Indonesia issued a Ministerial decree that facilitates the development and commercialisation of the Akatara gas field, allocating gas sales from the gas field in the Lemang PSC to a subsidiary of PT Perusahaan Listrik Negara, the national electricity utility, and the associated production and sales of LPG to the local domestic market in Jambi province, together with condensate sales to a local buyer. On 1 December 2021, a gas sale agreement was signed between Jadestone and PT Pelayanan Listrik Nasional Batam, as buyer. 

On 24 November 2021, the Group announced the acquisition of the remaining 10% interest in the PSC from PT Hexindo Gemilang Jaya ("Hexindo"), subject to customary approvals. The transaction was approved by the shareholders of Hexindo's ultimate parent company, Eneco Energy Limited, on 20 June 2022 and the government approval, representing the last required approval for closing, is anticipated in Q4 2022. 

On 6 June 2022, the Group announced that a final investment decision had been taken on the Akatara field development following the necessary approvals by the Indonesian upstream regulator. The Group awarded the engineering, procurement, construction and installation contract on 3 June 2022 and development activities have commenced. Jadestone is pursuing a low-cost development for the field including efficient use of existing wells and infrastructure thereby minimising the incremental impact on the local environment. The Akatara gas project remains on track for first gas in the first half of 2024.

Vietnam

Block 51 and Block 46/07 PSCs

Jadestone holds a 100% operated working interest in the Block 46/07 and Block 51 PSCs, both in shallow water in the Malay Basin, offshore southwest Vietnam. 

The two contiguous blocks hold three discoveries: the Nam Du gas field in Block 46/07 and the U Minh and Tho Chu gas/condensate fields in Block 51, with aggregate 2C resources of 93.9 mmboe.

The Tho Chu discovery in Block 51 is currently under a suspended development area status, with the exploration period expiring in June 2023.

Jadestone has, in recent months, been negotiating with the end-user of gas from its offshore discoveries. These discussions are still at an early stage, but support the prospect of meaningful progress towards commercialising the significant and strategic resource in Jadestone's licences. Development of this resource would lessen Vietnam's future dependence on expensive imports of natural gas and contribute towards the country's stated goal of net zero greenhouse gas emission by 2050.

Pending acquisition

Australia

North West Shelf Project

On 28 July 2022, the Group executed a sale and purchase agreement with BP Developments Australia Pty Ltd to acquire BP's non-operated 16.67% working interest in the Cossack, Wanaea, Lambert and Hermes oil field development (the "North West Shelf Project"), offshore Australia for a total initial headline cash consideration of US$20.0 million, and certain subsequent contingent and decommissioning payments.

The economic effective date of the acquisition is 1 January 2020, meaning that the Group will receive all economic benefits since that date. The Group estimates that the final closing adjustment will be higher than the initial cash consideration of US$20.0 million, in effect representing a net cash income to Jadestone. Upon closing, the Group will pay US$41 million in cash, representing the first of three instalments to be made relating to the decommissioning trust fund payment.

The two final instalments of the decommissioning trust fund payment will be completed through two equal cash contributions of US$20.5 million which are payable around or before 31 December 2022 and 2023, respectively.

The completion of the acquisition is subject to customary closing conditions, including various regulatory approvals. The Group anticipates completion of the transaction in Q4 2022.

New Zealand

Maari project

On 16 November 2019, the Group executed a sale and purchase agreement with OMV New Zealand Limited ("OMV"), to acquire an operated 69% interest in the Maari project, located 120 km offshore New Zealand, subject to customary closing adjustments. The transaction has achieved several key milestones with regard to regulatory approvals. 

Following legislative changes to New Zealand's upstream regulatory framework at the end of 2021, Jadestone has continually engaged with OMV and the New Zealand Government to seek clarity on the processes, terms and associated timeline required to complete the Maari transaction. Despite these efforts, it remains unclear under what circumstances and in what timeframe completion of the transaction and transfer of operatorship can occur.

FINANCIAL REVIEW

The following table provides selected financial information of the Group, which was derived from, and should be read in conjunction with, the unaudited condensed consolidated interim financial statements for the period ended 30 June 2022.

Benchmark commodity price and realised price

The actual average realised oil price in H1 2022 increased by 62% to US$109.52/bbl, compared to US$67.70/bbl during H1 2021. 

The average benchmark oil price incorporated into the Group's liftings was US$102.53/bbl during H1 2022, an increase of 59% compared to H1 2021 at US$64.58/bbl. 

The average premium for the period was US$6.99/bbl, compared to H1 2021 of US$3.12/bbl. The increase reflected the demand for Stag crude which obtained a premium of US$23.72/bbl (H1 2021: US$11.09/bbl) and increases in Tapis linked crude with Montara and the PenMal Assets at US$4.52/bbl (H1 2021: US$1.14/bbl) and US$3.86/bbl (H1 2021: nil), respectively.

1 Realised oil price represents the actual selling price inclusive of premiums.

2 Operating cost per boe, adjusted EBITDAX and net cash are non-IFRS measures and are explained below.

3 Dividend per ordinary share calculated based on outstanding number of shares at period/year end. The actual dividend per share will reflect any changes in the shares outstanding between the period/year end and the associated record date including the shares buyback.

Production and liftings

The Group generated average production of 15,008 boe/d in H1 2022, compared to 9,934 bbls/d in H1 2021. Production increased due to the acquisition of the PenMal Assets in August 2021, which generated additional production of 5,443 boe/d during H1 2022. Montara increased to 7,509 bbl/d from 7,269 bbl/d in H1 2022 due to the completion of the drilling of H6 and the subsea workovers of Skua 10 and 11 at the end 2021 offset by operational issues in H1 2022, in particular downtime associated with changing out the gas compressor engine on the FPSO. Stag production decreased in H1 2022 to 2,057 bbl/d (H1 2021: 2,665 bbl/d) due to a planned shutdown for vessel inspections and natural field decline.

The Group had 11 liftings during the period (H1 2021: five), resulting in sales of 2.0 mmbbls (H1 2021: 2.0 mmbbls).  The PenMal Assets contributed seven oil liftings in H1 2022, representing 0.5 mmbbls. In addition, the PenMal Assets produced and sold 939.7 mmscf (approximately 0.2 mmboe) of natural gas. Lifted volumes were lower than the comparable period last year at Montara and Stag due to the phasing of liftings (four in H1 2022 compared to five in H1 2021).

The Australian closing crude inventories of 417,216 bbls were valued at cost of US$25.9 million, which were subsequently sold in the second half of 2022, generating provisional receipts of US$45.3 million, from a provisional weighted average realised price of US$108.97/bbl.

PenMal Assets were in an underlift carried forward position of 130,359 bbls, reflecting a market value of US$16.8 million, calculated based on the average June 2022 Dated Brent price plus latest realised premium.

Revenue

The Group generated US$225.6 million of revenue in H1 2022, compared to US$138.2 million for the same period in 2021, an increase of 63%. The increase of US$87.4 million is due to:

· The PenMal Assets generating US$48.3 million of crude oil revenue (H1 2021: nil) and US$1.9 million of gas revenue (H1 2021: nil) in H1 2022, following completion of the acquisition in August 2021;

· Higher average realised oil prices at Montara of US$106.76 bbl (H1 2021: US$66.66 bbl) and Stag at US$128.13 bbl (H1 2021: US$70.87 bbl) in H1 2022, contributing an additional US$68.0 million; partly offset by

· A lower lifted volume by 452,795 bbls at Montara and Stag, representing an estimated decrease of US$30.6 million between the comparable periods.

Production costs

Production costs in H1 2022 were US$83.4 million (H1 2021: US$62.5 million), an increase of US$20.9 million, predominately due to the acquisition of the PenMal Assets which contributed US$24.7 million, and a reduction of US$3.8 million at Montara and Stag. Production costs included:

· The PenMal Assets incurred US$16.7 million (H1 2021: nil) of Malaysian supplementary payments, due to the realised price exceeding the escalated base price incorporated into the PSC terms;

· Repair and maintenance ("R&M") costs of US$25.3 million, compared to US$12.1 million in H1 2021. The PenMal Assets incurred routine maintenance of US$2.7 million (H1 2021: nil), Stag an additional US$4.6 million on structural marine maintenance and import hose replacement and Montara an additional US$5.9 million predominately on Skua 11 well subsurface repairs;

· Operational costs at US$32.6 million, an increase of US$8.3 million compared to H1 2021, predominately associated with the PenMal Assets;

· Logistics costs increased by US$5.1 million, with the PenMal Assets incurring US$2.6 million (H1 2021: nil). Australia increased by US$2.5 million due to higher fuel costs for operating vessels and helicopters;

· Transportation costs of US$2.9 million (H1 2021: US$0.5 million), predominately associated with the PenMal Assets and Stag offtake arrangements;

· Workover costs reduced by US$1.6 million due to differences in the phasing of workovers;

· The PenMal Assets were in an underlift carried forward position of 130,359 bbls (H1 2021: nil) resulting in a production credit of US$9.9 million at the end of H1 2022; and

· Montara and Stag generated a credit net inventory movement of US$8.5 million, reflecting the increase in closing crude balances compared to the beginning of the period.

Unit operating costs per boe were US$25.71 bbl (H1 2021: US$28.16/bbl) before workovers and movement in inventories but including lease payments and taking into account various other adjustments (see IFRS measures below).

Depletion, depreciation and amortisation ("DD&A")

The depletion charges of oil and gas properties were US$35.1 million in H1 2022, compared to US$39.7 million in H1 2021. 

The depletion cost on a unit basis was US$12.06/boe in H1 2022 (H1 2021: US$15.70/bbl), predominately due to the inclusion of the PenMal Assets at US$1.61/boe which benefitted from the low cost base following the acquisition, thus lowering the weighted average DD&A unit charge. Stag and Montara increased over the comparable period by US$2.63/bbl and US$1.71/bbl, respectively, reflecting the completion of development projects and natural decline of the production profile.

Other expenses

Other expenses represent the Group's general and administrative ("G&A") costs, one-off project costs and other miscellaneous expenditures. Total other expenses decreased by US$7.0 million in H1 2022 to US$5.5 million (H1 2021: US$12.5 million) due to lower G&A, one-off project costs and hedging losses incurred in H1 2021.

Other income

Other income was US$5.6 million in H1 2022, an increase of US$1.9 million (H1 2021: US$3.7 million). The increase was mainly due to a refund of interest paid to the Australian Taxation Office as part of an early repayment of outstanding 2019 tax amounts previously deferred under a COVID-19 arrangement.

Taxation

The tax charge of US$37.8 million in H1 2022 (H1 2021: US$8.7 million) was split between a current tax charge of US$34.9 million (H1 2021: US$8.9 million) and a deferred tax charge of US$2.8 million (H1 2021: credit of US$0.2 million). 

The current tax charge included US$29.2 million (H1 2021: US$11.4 million) of Australian corporate tax plus Malaysian Petroleum Income Tax ("PITA") tax of US$5.9 million (H1 2021: nil), offset by a net Australian Petroleum Resource Rent tax ("PRRT") credit of US$0.2 million (H1 2021: US$2.5 million).

Australian PRRT

Australian PRRT is a cash-based tax charged to petroleum operations at the rate of 40% and deductible from income tax. The current tax credit of US$0.2 million is associated with Stag operations, due to the utilisation of carried forward PRRT losses.

Montara is not anticipated to incur PRRT expense in the future, as it has unutilised PRRT carried forward credits of US$3.4 billion (H1 2021: US$3.3 billion).  Based on management's latest forecasts, the historical accumulated PRRT net losses will more than offset PRRT that would arise on future PRRT taxable profits.

Malaysian PITA

Malaysia PITA is imposed at the rate of 38% on income from petroleum operations in Malaysia, no other taxes are imposed on income from petroleum operations.

Deferred tax

The deferred tax movement during the period reflects timing differences for corporate tax, PITA and PRRT.  The Group incurred a deferred tax charge of US$2.8 million in H1 2022 (H1 2021: credit of US$0.3 million), because of timing differences between the PITA tax and accounting treatment of the Malaysian crude under-lift position of US$3.6 million (H1 2021: nil) and a deferred tax credit in Australia of US$0.8 million from the timing differences of the accounting and tax bases of the oil and gas properties.  

H1 2022 RECONCILIATION OF CASH

NON-IFRS MEASURES

The Group uses certain performance measures that are not specifically defined under IFRS, or other generally accepted accounting principles. These non-IFRS measures comprise operating cost per barrel of oil equivalent (opex/boe), adjusted EBITDAX and net cash.

The following notes describe why the Group has selected these non-IFRS measures.

1 Total capital expenditure was US$13.6 million, comprising total capital expenditure paid of US$13.4 million, plus accrued capital expenditure of US$0.2 million.

Operating costs per barrel of oil equivalent (Opex/boe)

Opex/boe is a non-IFRS measure used to monitor the Group's operating cost efficiency, as it measures operating costs to extract hydrocarbons from the Group's producing reservoirs on a unit basis.

Opex/boe is defined as total production costs excluding crude inventories movement, underlift/overlift, workovers (to facilitate better comparability period to period), non-recurring R&M, supplementary payments, DD&A, transportation, and short term COVID-19 incentives. It includes lease payments related to operational activities, net of any income earned from right-of-use assets involved in production. 

The adjusted production cost is divided by total produced barrels of oil equivalent for the prevailing period to determine the unit operating cost per boe.

1 Lease payments related to operating activities are payments considered to be operating costs in nature, including leased helicopters for transporting offshore crews. 

2 Underlift, overlift and crude inventories movement are added back to the calculation to match the full cost of production with the associated production volumes (i.e., numerator to match denominator).

3 Workover costs are excluded to enhance comparability. The frequency of workovers can vary significantly, across periods.

4 Other income represents the rental income from a helicopter rental contract (a right-of-use asset) to a third party.

5 Non-recurring repair and maintenance costs in H1 2022 related to the Montara Skua 11 well subsurface repairs and Stag structural marine maintenance and import hose replacement. The costs from the year ended 2021 related to the Montara Swift North SCM change out and facility integrity baseline survey.

6 The supplementary payments are required under the terms of PSCs based on Jadestone's profit oil after entitlements between the government and joint venture partners.

7 PenMal non-operated assets FPSO rectification costs refer to the costs incurred to repair the FPSO BUK CLASS at PM318 and AAKBNLP PSCs following its suspension in February 2022.

Adjusted EBITDAX

Adjusted EBITDAX is a non-IFRS measure which does not have a standardised meaning prescribed by IFRS. This non-IFRS measure is included because management uses the information to analyse cash generation and financial performance of the Group.

Adjusted EBITDAX is defined as profit from continuing activities before income tax, finance costs, interest income, DD&A, other financial gains, non-recurring expenses and exploration assets write-offs.

The calculation of adjusted EBITDAX is as follows:

1 Non-recurring opex represents one-off major maintenance/well intervention activities, in particular the Montara Skua 11 well subsurface repairs and Stag structural marine maintenance and import hose replacement.  The H1 2021 non-recurring costs mainly consisted of workover campaigns at Skua 10 & 11, while Swift North SCM change out and facility integrity baseline survey were included in the 2021 full year costs.

Net cash

Net cash is a non-IFRS measure which does not have a standardised meaning prescribed by IFRS. Management uses this measure to analyse the financial strength of the Group. The measure is used to ensure capital is managed effectively in order to support its ongoing operations, and to raise additional funds, if required.

The cash and cash equivalents for the period ended 30 June 2021 includes restricted cash of US$1.0 million associated with an Indonesian performance bond that was returned in Q3 2021.

2022 PRINCIPAL FINANCIAL RISKS AND UNCERTAINTIES

The Group manages principal risks and uncertainties via its risk management framework. The Group is exposed to a variety of political, technological, environmental, operational and financial risks which are monitored and/or mitigated to acceptable levels.

The Group's risk management framework provides a systematic process for the identification of the principal risks which have the possibility of impacting the Group's strategic objectives. The Board regularly reviews the principal risks and defines corporate targets based on acceptable levels of risk. The Board assesses material risks quarterly with a full review of the risk matrix at least twice per year.

Details of the principal risks and uncertainties faced by the Group as at 30 June 2022 remain unchanged from the risks disclosed in the 2021 Annual Report pages 57 to 63. The Group's risk mitigation activities also remain unchanged.

GOING CONCERN

The Directors have adopted the going concern basis in preparing these unaudited condensed consolidated interim financial statements, having considered the principal financial risks and uncertainties of the Group.

The Directors believe that the Group is well placed to manage its financing and other business risks satisfactorily. The Directors have a reasonable expectation that the Group will have adequate resources to continue in operation for at least 18 months from the date of these unaudited condensed consolidated interim financial statements. They therefore consider it appropriate to adopt the going concern basis of accounting in preparing these financial statements.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The Directors confirm that to the best of their knowledge:

a. the condensed consolidated interim set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting;

b. the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and

c. the interim management report includes a true and fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein).

By order of the Board,

Paul Blakeley

Executive Director

President & Chief Executive Officer

20 September 2022

Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income

for the six months ended 30 June 2022

Condensed Consolidated Statement of Financial Position as at 30 June 2022

Condensed Consolidated Statement of Changes in Equity

for the six months ended 30 June 2022

Condensed Consolidated Statement of Cash Flows for the six months ended 30 June 2022