Jadestone Energy Regulatory News (JSE)

Jadestone Energy Results for the Period Ending June 30, 2018

August 28, 2018-Singapore: Jadestone Energy Inc. (AIM:JSE, TSXV:JSE) ("Jadestone" or the "Company"), an independent oil and gas production company focused on the Asia Pacific region, reported today its condensed consolidated unaudited financial results for the three and six months ended June 30, 2018.

Second quarter highlights

· Total liquids production of 299,601 bbls, and natural gas production of 157,799 mmbtu, for a total of 4,239 boe/d* for the quarter, an increase of over 4% from the same quarter a year ago, and over 3% up from the prior March 2018 quarter.

· Production from Stag of 256,077 bbls for the quarter, an increase of more than 9% over the same quarter a year ago and more than 6% up from March 2018 quarter, reflecting improved uptime and notwithstanding planned maintenance activities which caused the deferral of approximately 38,000 bbls (or 417 bbls/d for the quarter);

· Sales revenue of US$18.3 million, increased slightly from US$18.1 million in the same quarter a year ago, as increased benchmark prices more than offset the impact of lower aggregate production volumes given the expiry of the Ogan Komering license on May 19, 2018;

· Production costs of US$10.7 million in the quarter, down 52% from US$22.2 million in the same period a year ago, due to lower operating costs at Stag including workover costs;

· Positive cash from operations (before changes in working capital) of US$0.1 million, despite the lower production, and additional costs arising from the Stag turn-around, compared to cash used in operating activities of US$11.1 million in the same quarter a year ago;

· The Stag Oilfield reached a safety milestone of six years without a lost-time incident, and conducted a major planned maintenance turn-around to ensure ongoing facilities integrity;

· Jadestone obtained approval for the Nam Du and U Minh outline development plan from Vietnam's Ministry of Industry and Trade ("MOIT") on May 21, 2018, and work on front-end engineering design ("FEED"), field development plan studies, and the early phases of gas sales agreement negotiations have begun;

· A new gross split PSC covering the Ogan Komering working area in Indonesia was awarded to Pertamina effective May 20, 2018, and the Company began direct business-to-business negotiations with Pertamina to formalise the Company's participation in the new licence. Concurrently, Indonesia's Minister of State Owned Enterprises has established a principal agreement to govern the mechanism by which Pertamina can confer an interest in the new licence and Pertamina's corporate guidance for asset divestitures is being finalised.

* Net working interest and based on production at Ogan Komering averaged across the 49 days of Jadestone participation in the license during the quarter (April 1, 2018 through to May 19, 2018), plus the full quarter's average share of production at Stag

Material developments

Subsequent to the end of the quarter, the Company also announced several material developments:

· A definitive sale and purchase agreement ("SPA") with certain subsidiaries of PTT Exploration and Production Public Company Limited ("PTTEP"), to acquire a 100% interest in the Montara oil project (the "Montara Oil Project" or the "Montara Assets"), offshore Australia via an asset acquisition;

· Funded by a $110 million (gross) oversubscribed equity placing, upsized from an initial target of US$95 million;

· An underwritten secured reserve-based loan facility of US$120 million from Commonwealth Bank of Australia and Société Générale and;

· Admission and first day of dealings on the AIM Market of the London Stock Exchange on August 8, 2018.

Paul Blakeley, President and CEO, commented:

"Operations during the second quarter were executed safely, and according to plan. I am pleased with the performance of our turn-around team in conducting major maintenance work at Stag in late April, which included planned production vessel repairs and integrity-focussed inspection work. While the downtime resulted in deferring production of 38,000 bbls into Q3, the positive impact of our operating philosophy on facility uptime has more than offset the deferral, meaning we are still able to show quarter-on-quarter growth from Stag and generate positive cash from operations. With the maintenance turnaround behind us, and the next one not expected until 2022, I am increasingly confident that Stag will remain a safe and predictable source of cash flow and value creation.

"Also during the second quarter, we have made significant progress toward executing our Vietnam growth strategy in respect of our proposed Nam Du and U Minh gas field development, with the MOIT approvals, and with FEED, gas sales agreement negotiations, and engineering procurement construction discussions now fully underway.

"In addition, the transactions we announced after the end of the quarter demonstrate our team's capacity to layer transformative inorganic opportunities into our portfolio.

"The Montara acquisition marks a step change in our business by adding 10.3 mbbls/d of production and 28.1 mmbbls of 2P reserves. We are working with PTTEP toward closing the asset acquisition within September/October 2018, at which time, the economic benefits of the asset, dating back to the effective date of January 1, 2018, will be reflected in our financial statements by way of a closing adjustment to the purchase price. Accordingly, we have started working within the Montara organisation to ensure a seamless transfer of operatorship to Jadestone, and ongoing safe production operations.

"In addition, our new financing arrangements will not only fund the acquisition, but have allowed us to repay the convertible debt facility we had with Tyrus Capital Event S.à r.l., which had been drawn to US$15 million. These steps simplify our balance sheet and establish the Company's self-funded growth platform, with the capacity to generate annual free cash flow for many years, whilst simultaneously growing production."

Operations update

Stag Oilfield (offshore Australia)

Crude oil production at Stag totalled 256,077 bbls during the quarter to June 30, 2018, an increase of approximately 9% from the same quarter a year ago, and up 6% from the prior quarter. This primarily reflects increased uptime, which more than offset the impact of approximately 38,000 bbls of deferred production due to a planned 12-day maintenance turnaround in April, concluded 1 day ahead of schedule.

Following the planned maintenance event, which was completed on May 3, 2018, production volumes have returned to approximately 3,300 bbls/d. Average production for the quarter was 2,814 bbls/d.

The Company continues to pursue opportunities to enhance value at Stag, and is in advanced planning stages for its first infill well on the asset, expected to be drilled in the fourth quarter of 2018.

Ogan Komering (onshore Indonesia)

Production at the Ogan Komering PSC, under the terms of a temporary cooperation contract, totalled 68,823 boes, reduced by 47% compared to the prior quarter due to expiry of the cooperation contract on May 19, 2018, or 49 days into the quarter.

On a daily rate basis, average Ogan Komering production over the 49 days was 1,425 boe/d, decreased by just 2% from the prior quarter, as the partners continued their efforts to arrest natural declines of the producing fields.

Jadestone is engaged in direct business-to-business negotiations with Pertamina to formalise the Company's participation in the new licence for the Ogan Komering working area, which was granted to Pertamina on May 20, 2018. The Company expects to reach satisfactory binding terms during the fourth quarter of 2018, with participation to be effective from the commencement of the new licence on May 20, 2018.

Financial overview

Jadestone generated adjusted EBITDAX of US$0.3 million for the quarter ended June 30, 2018, compared to a negative adjusted EBITDAX of US$11.5 million in the same period a year earlier. On an unadjusted basis, the Company reported a net loss before tax of US$3.9 million, compared to a net loss before tax of US$14.0 million for the same period a year earlier.

Both unadjusted earnings and adjusted EBITDAX were increased due to higher average realised prices, generating increased revenue despite lower overall production and sales. In addition, operating costs at Stag have fallen substantially, down 52% as compared to Q2 2017, a period before the Company took over operatorship. The Company continues to realise additional operating cost efficiencies throughout its operations at Stag.

The Company reported total book costs of production of US$10.7 million during the quarter, or just under US$32.70/boe production.

In connection with the Company's commodity hedges, during the three months ended June 30, 2018, total non-cash charges of US$1.1 million were booked to the income statement and US$2.8 million to other comprehensive income to reflect current market values at June 30, 2018. In the same period a year earlier, the Company had no commodity hedges.

Investing activities for the quarter amounted to a cash outflow of US$0.2 million, comprised mainly of payments for oil and gas properties.

At the end of the quarter, the Company had US$6.6 million cash, plus a further US$10.0 million of cash in support of a bank guarantee, and another US$13.0 million undrawn on the Company's convertible bond facility.

Selected financial information

The following table provides selected financial information of the Company, which was derived from, and should be read in conjunction with, the consolidated unaudited financial statements for the period ended June 30, 2018.

1 Payment for oil and gas property, plant and equipment and intangible exploration assets. Excludes acquisition related capital expenditure.

Conference call and webcast

The management team will host an investor and analyst conference call at 9:00 p.m. (Singapore), 2:00 p.m. (London), and 9:00 a.m. (Toronto) on Tuesday, August 28, 2018, 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.

Webcast link: https://event.on24.com/wcc/r/1821936/9FCEC286A9137A20C910628826C70497

Event conference title: Jadestone Energy Management Briefing

Start time: 9:00 p.m. (Singapore), 2:00 p.m. (London), 9:00 a.m. (Toronto)

Date: Tuesday, 28 August 2018

Confirmation ID: 81408196

Area access numbers are subject to carrier capacity and call volumes.

- ends -

For further information, please contact:

About Jadestone Energy Inc.Jadestone Energy Inc. is an independent oil and gas company focused on the Asia Pacific region. It has a balanced, low risk, full cycle portfolio of development, production and exploration assets in Australia, Vietnam and the Philippines.

The Company has a 100% operated working interest in Stag, offshore Australia, and has announced a definitive Sale and Purchase Agreement to acquire a 100% operated working interest in the Montara project, offshore Australia, effective January 1, 2018. Both the Stag and Montara assets include oil producing fields, with further development and exploration potential. The Company has a 100% operated working interest (subject to registration of PVEP's withdrawal) in two gas development blocks in Southwest Vietnam and is partnered with Total in the Philippines where it holds a 25% working interest in the SC56 exploration block.

Led by an experienced management team with a track record of delivery, who were core to the successful growth of Talisman's business in Asia, the Company is pursuing an acquisition strategy focused on growth and creating value through identifying, acquiring, developing and operating assets throughout the Asia-Pacific region.

Jadestone Energy Inc. is currently listed on the TSXV and AIM. The Company is headquartered in Singapore. For further information on Jadestone please visit http://www.jadestone-energy.com.

Cautionary statements

A barrel of oil equivalent ("boe") is determined by converting a volume of natural gas to barrels using the ratios of six thousand cubic feet ("mcf") to one barrel. Boes may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf:1 boe is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of oil as compared to natural gas is significantly different from the energy equivalency of 6:1, utilising a conversion on a 6:1 basis may be misleading as an indication of value.

Certain statements in this press release are forward-looking statements and information (collectively "forward-looking statements"), within the meaning of the applicable Canadian securities legislation, as well as other applicable international securities laws. The forward-looking statements contained in this press release are forward-looking and not historical facts.

Some of the forward-looking statements may be identified by statements that express, or involve discussions as to expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of phrases such as "will likely result", "are expected to", "will continue", "is anticipated", "is targeting", "estimated", "intend", "plan", "guidance", "objective", "projection", "aim", "goals", "target", "schedules", and "outlook").

In particular, forward-looking statements in this press release include, but are not limited to statements regarding the ODP revision for Nam Du/U Minh to reflect a standalone development and the early stages of FEED and related work, and Jadestone's continuing discussions with its partners and the regulators on a new contract for Ogan Komering.

Because actual results or outcomes could differ materially from those expressed in any forward-looking statements, investors should not place undue reliance on any such forward-looking statements. By their nature, forward-looking statements involve numerous assumptions, inherent risks and uncertainties, both general and specific, which contribute to the possibility that the predicted outcomes will not occur. Some of these risks, uncertainties and other factors are similar to those faced by other oil and gas companies and some are unique to Jadestone. The forward-looking information contained in this news release speaks only as of the date hereof. The Company does not assume any obligation to publicly update the information, except as may be required pursuant to applicable laws.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

The information contained within this announcement is considered to be inside information prior to its release, as defined in Article 7 of the Market Abuse Regulation No. 596/2014, and is disclosed in accordance with the Company's obligations under Article 17 of those Regulations.

Glossary

Jadestone Energy Inc.

CONDENSED Consolidated INTERIM STATEMENT OF FINANCIAL POSITION

As at June 30, 2018

The accompanying notes are an integral part of the consolidated financial statements.

CONDENSED Consolidated INTERIM PROFIT AND LOSS

AND OTHER COMPREHENSIVE INCOME

for the six months ended June 30, 2018

The accompanying notes are an integral part of the consolidated financial statements.

The accompanying notes are an integral part of the consolidated financial statements.

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS

for the six months ended June 30, 2018

The accompanying notes are an integral part of the consolidated financial statements.

NOTES TO THE cONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

for the six months ended June 30, 2018

1. CORPORATE INFORMATION

Jadestone Energy Inc. (the "Company" or "Jadestone") is an oil and gas company incorporated in Canada. The Company's common shares are listed on the TSX Ventures Exchange ("TSX-V") under the symbol JSE.

On August 8, 2018, the Company issued 239,711,474 new ordinary common shares raising gross proceeds of approximately £83.9 million, at a price of 35 pence per share and, listed on the London AIM Market.

The financial statements are expressed in United States Dollars ("US$").

The Company and its subsidiaries (the "Group") are engaged in production, development, and exploration and appraisal activities in Australia, Indonesia, Vietnam and the Philippines. The Company's current producing asset is in the Carnarvon Basin, offshore Western Australia.

The Company's head office is located at Keppel Towers, #15-05/06, 10 Hoe Chiang Road, Singapore 089315. The registered office of the Company is 10th Floor, 595 Howe Street, Vancouver, British Columbia V6C 2T5, Canada.

2. Basis of preparation

Statement of compliance

These unaudited condensed interim financial statements (the "Financial Statements") are prepared in accordance with International Accounting Standard IAS 34, Interim Financial Reporting, on a going concern basis under the historical cost convention. They do not contain all disclosures required by International Financial Reporting Standards for annual financial statements and accordingly, should be read in conjunction with Jadestone's audited consolidated financial statements for the period ended December 31, 2017.

These Financial Statements were approved for issuance by the Company's Board of Directors on August 28, 2018 on the recommendation of the Audit Committee.

Basis of measurement

These Financial Statements have been prepared on an historical cost basis, except for financial instruments classified as financial instruments at fair value, which are stated at their fair values. In addition, these financials have been prepared using the accrual basis of accounting.

Hedge accounting

For the purposes of hedge accounting, hedges are classified as either:

· Fair value hedges where they hedge the exposure to changes in the fair value of a recognised asset or liability; or

· Cash flow hedges where they hedge exposure to variability in cash flows that is either attributable to a particular risk associated with a recognised asset or liability, or a highly probable forecasted transaction.

At the inception of a hedge relationship, the Group formally designates and documents the hedge relationship to which it wishes to apply hedge accounting, along with the risk management objective and strategy for undertaking the hedge. The documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged, and how the entity will assess the effectiveness of changes in the hedging instrument's fair value in offsetting the exposure to changes in the hedged item's fair value or cash flows attributable to the hedged risk. To achieve hedge accounting, the relationships must be expected to be highly effective and are assessed on an ongoing basis, to determine that they continue to meet the risk management objective.

Hedge accounting is discontinued when the hedge instrument expires, is sold, terminates, is exercised, or no longer qualifies for hedge accounting. At that point in time, any cumulative gain or loss on the hedging instrument recognised in Other Comprehensive Income (OCI) remains in hedge reserve until the forecasted transaction occurs. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in equity is transferred to profit or loss for the year.

Cash flow hedges

The effective portion of the gain or loss on hedging instruments that are classified as cash flow hedges, is recognised in OCI, while any ineffective portion is recognised immediately in the statement of profit or loss. The ineffective portion relating to commodity contracts is recognised in other operating income or expenses.

Amounts recognised as OCI are transferred to profit or loss when the hedged transaction affects profit or loss, such as when the hedged financial income or financial expense is recognised or when a forecast sale occurs.

3. PRODUCTION COST

The Ogan Komering PSC expired on February 28, 2018 and a temporary co-operation contract was entered into, continuing the PSC terms pending the issue of the new PSC on May 20, 2018, at which time Jadestone ceased to hold an interest in Ogan Komering.

4. DEPLETION, DEPRECIATION AND AMORTISATION

The Ogan Komering PSC was fully depleted as at the end of the PSC on February 28, 2018.

5. OTHER EXPENSES

6. IMPAIRMENT OF ASSETS

During Q1 2018, an impairment of US$11.9 million (six months to June 30, 2017: US$6.0 million) was incurred as the decision was taken not to perform any further exploration activities on MEVPK/127 in Vietnam. The Company has commenced relinquishment, to return the block back to the Vietnamese government. 

7. FINANCE COSTS

8. Taxation EXPENSE

The Australian corporate income tax rate is applied at 30%. Australian PRRT is applied at 40% of sales revenue less certain permitted deductions and is tax deductible for Australian corporate income tax purposes. The above movement in deferred tax balances relates to temporary differences between the tax base of an asset or liability, and its carrying amount in the statement of financial position.

The Indonesian corporate income tax rate is applied at 35%. Branch profit tax is applied at 20%.

The Company is resident in the Province of British Columbia and pays no Canadian tax as it has no operating assets in Canada and is in a tax loss position. The subsidiary companies are resident for tax purposes in the countries in which they operate. No Canadian tax arises in the current period, or in the previous year, from any of the subsidiaries' operations.

9. INTANGIBLE EXPLORATION ASSETS

During the six months ended June 2018, the Company performed a review of its exploration assets and decided no further exploration activities would be performed on Vietnam PSC MEVPK/127, resulting in an impairment of US$11.9 million. The Company has commenced relinquishment, to return the block back to the Vietnamese government.

10. OIL AND GAS PROPERTIES

11. PLANT AND EQUIPMENT

12. CASH AND CASH EQUIVALENTS

Restricted cash at June 30, 2018 comprises Stag's cash deposit of US$10.0 million, placed by the Company in support of a bank guarantee to a key contractor, with respect to the Company's obligations under a long term contract.

The Ogan Komering PSC temporary co-operation contract expired on May 20, 2018, at which time the company ceased to hold an interest in Ogan Komering. The decommissioning fund of US$0.7 million was transferred to Pertamina, as the new operator, to fulfil the decommissioning activities at the end of the new production sharing contract.

13. share capital

Authorised ordinary common shares:

Unlimited number of common voting shares with no par value.

Allotted and outstanding:

The holders of ordinary common shares are entitled to receive dividends as and when declared by the Company. Fully paid ordinary common shares carry one vote per share without restriction, and carry a right to dividends as and when declared by the Company.

On August 8, 2018, the Company issued 239,711,474 new ordinary common shares, raising gross proceeds of approximately £83.9 million, at a price of 35 pence per share and listed on the London AIM Market.

14. SHARE-BASED PAYMENTS

The total expense arising from share-based payments recognized for the six month period ended June 30, 2018 was US$0.3 million (June 30, 2017: US$0.3 million).

On August 19, 2015, the Company adopted, as approved by shareholders, a stock incentive plan (the "Plan") which establishes a rolling number of shares issuable under the Plan in the amount of 10% of the Company's issued shares at the date of grant. Under the terms of the Plan, the exercise price of each option granted, cannot be less than the market price at the date of grant, or such other price as may be required by TSX-V. Options under the Plan can have a term of up to 10 years, with vesting provisions determined by the directors in accordance with TSX-V policies for Tier 2 Issuers.

The Black-Scholes option-pricing model, with the following assumptions, was used to estimate the fair value of the options at the date of grant:

The following table summarizes the share options outstanding and exercisable as at June 30, 2018:

15. PROVISION FOR ASSET RESTORATION OBLIGATIONS

The Group's asset restoration obligations ("ARO") result from the future costs of decommissioning the Stag Oilfield facilities, which are expected to be incurred after 2034. The balance of the provision is the discounted present value of the estimated future costs. The present value of the ARO has been calculated based on the blended estimated Australian and United States risk free rate of 2.73% after allowing for an inflation rate of 2.27%, both as at June 30, 2018 (blended risk free rate of 2.52% and inflation rate of 2.27% as at December 31, 2017). The adjustments to the present value of the ARO arising from changes in discount rate and other economic estimates and assumptions for the period are included in oil and gas properties (Note 10).

16. OTHER FINANCIAL LIABILITIES

As at June 30, 2018, Jadestone has entered into two commodity hedges to hedge 350,000 bbls of crude oil production over the period January 2, 2018 to June 30, 2018 at Brent ICE crude fixed at US$64.60/bbl, and another 350,000 bbls over the period July 1, 2018 to December 31, 2018, at Brent ICE crude fixed at US$65.00/bbl, These have been designated as cash flow hedges and hence the fair value movements are recognised in other comprehensive income while the ineffective portion and the amount related to sales for the period are immediately recognised in the income statement.

17. SECURED CONVERTIBLE BONDS

Pursuant to the establishment of the convertible bond facility (the "Facility") with Tyrus Capital Event S.à r.l. ("Tyrus") on November 8, 2016, Jadestone paid a structuring fee equal to 2% of the total amount of the Facility. Jadestone is also required to pay a standby fee equal to 1% per annum on all undrawn amounts until maturity. The Facility will mature on October 31, 2019, at which time Tyrus will have the option to convert the full amount of any principal owing under the Facility into common shares of the Company at a conversion price of C$0.50.

As at June 30, 2018, the drawn down amount of the convertible bond was US$15 million. The cost related to the convertible bonds is tabled below.

The fair value of the options as at June 30, 2018 amounting to US$4.4 million (December 31, 2017: US$3.0 million), embedded in the bonds as a derivative financial instrument, is included in the consolidated financial statement as a liability.

On July 16, 2018, the company entered into an Extension and Modification of Convertible Note Agreement with Tyrus, to agree the terms for an early redemption of the facility in exchange for US$17.5 million. The company repaid the Facility on August 15, 2018.

18. Financial instruments, FINANCIAL RISKS AND CAPITAL MANAGEMENTS

Categories of financial instruments