Jadestone Energy Regulatory News (JSE)

Jadestone Energy Inc. 

Jadestone Energy Results for the Period Ending June 30, 2019Record second quarter cash from operations and almost US$100 million cash from operations in the first six months of 2019

August 27, 2019-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 consolidated interim unaudited results, as at and for the three-month and six-month period ended June 30, 2019.

Financial highlights

·; Net revenue during the second quarter of US$115.3mm, more than double Q1 2019 and nearly seven times Q2 2018. Net revenue for the six-month period to June 30, 2019 was US$171.7mm compared to US$35.8mm for H1 2018;

·; Positive cash generated from operations of US$59.3mm, before changes in working capital, interest and taxes, in Q2 2019, a more than 60% jump on Q1 2019 cash from operations of US$36.7mm, and compared to US$0.1mm for the same quarter a year ago. Cash generated from operations over the six-month period to June 30, 2019 was US$96.4mm compared to a net outflow of US$0.3mm for H1 2018;

·; Average price realisations of US$71.70/bbl, an increase of 6% over Q1 2019. Differentials at Montara and Stag continue to improve, with the latest liftings achieving total differentials to Dated Brent of US$4.32/bbl and US$10.60/bbl respectively;

·; Operating costs of US$21.74/bbl, excluding non-routine opex, including the Montara riserless light well intervention ("RLWI"), decreased by 9% from the prior quarter of US$23.75/bbl, and down 34% from the same quarter a year ago of US$32.70/boe;

·; Quarterly profit after tax of US$22.6mm, nearly a three-fold increase over Q1 2019 profit of US$8.4mm, and versus a loss of US$4.9mm in Q2 2018. Profit after tax for the six-month period to June 30, 2019 was US$30.9mm, compared to a loss of US$21.5mm for H1 2018;

·; Gross debt of US$73.4mm, reduced from US$86.6mm at end March 2019, as the Company continues to pay down its reserve-based lending facility; and

·; Gross cash and bank balances of US$66.4mm, excluding US$10.0mm cash deposited in support of a bank guarantee, resulting in a net debt position of US$7.0mm. Inclusive of restricted cash, the Company is in a net cash position.

Operational highlights

·; Ongoing safe operations at all assets, with the Stag production facility achieving nearly seven years without a lost time injury1;

·; Montara uptime was 82% in Q22, down slightly from 85% in Q1 due mainly to weather-related downtime in April, but materially ahead of the same period in 2018;

·; Production for the quarter averaged 13,315 bbls/d, decreased 8% from production reported for the March 2019 quarter3, due to planned downtime associated with commencement of the RLWI programme at Montara and weather, but nearly a four-fold increase over the same period a year ago;

·; Achieved three production liftings during the quarter, setting a new record of 1.6mm bbls sold, or a total of 2.3mm bbls for the six-month period to June 30, 2019, which compares to 0.6mm boe for H1 2018;

·; Completed drilling the Stag 49H infill well, which targeted 1.2mm bbls of reserves, and was brought on production in late May at a rate of 1,400 bbls/d. 49H is continuing to produce in line with expectations;

·; Completed the RLWI programme at Montara. This innovative programme, which would otherwise have required a significantly more expensive rig-based intervention, was completed on budget in mid-August, with all three accessed wells now contributing to the complex's production;

·; Signed a heads of agreement ("HoA") for the Nam Du/U Minh project gas sales and purchase agreement between Petrovietnam and the Company's wholly owned Vietnamese subsidiaries in April, 2019;

·; Submitted the environmental impact assessment for the Nam Du/U Minh development project;

·; Completed front end engineering design ("FEED") studies for the Nam Du/U Minh development project's offshore facilities and pipelines; and

·; Finally, the Company's safety case for the Montara assets was accepted by Australia's offshore safety and environmental regulator, and operatorship of the asset was transferred to Jadestone on August 6, 2019.

Outlook

·; Group production in the second half of the year will continue benefitting from the Stag 49H infill well, in addition to the successful RLWI programme at Montara, and continued optimisation of production operations across the business;

·; Full year average group production guidance is reconfirmed at 13,500 - 14,500 bbls/d, within the larger range set out in Q1 2019;

·; Opex guidance for the full year is maintained at US$21- 24/bbl, reflecting an acceleration in opex reduction initiatives at Montara, following the transfer of operatorship;

·; Full year major spend remains on budget with the exception of the first infill well at Montara, where the tightening rig market in Australia will likely push the H6 infill well into H1 2020. This results in a reduction in full year major spend to within a range of US$73-88mm, but does not impact production guidance for this year;

·; Award recommendations for the Nam Du/U Minh offshore facilities engineering, procurement, and construction contract and floating production, storage, and offload vessel contract are expected in Q3 2019;

·; The Nam Du/U Minh field development plan is scheduled to be submitted to Petrovietnam and the Vietnam Government for approval, in late Q3 2019, leading to anticipated approval and final investment decision by end of 2019, as planned;

·; Continuing positive discussions with Pertamina and Indonesian regulators relating to the Company re-establishing an interest in the Ogan Komering asset, with timing driven by Indonesian regulatory processes; and

·; With Montara transition completed we are now starting to consider further inorganic opportunities to broaden the base, provide accretive value and grow the business, and subject to the Company's strict evaluation criteria.

1 Lost time reporting for Montara will commence in Q3, post transfer of operatorship on August 6, 2019

2 After excluding downtime due to well interventions

3 Montara production averaged across the period Jan 11, 2019 to Mar 31, 2019, equivalent to Group production of 13,059 bbls/d if averaged across the full 90 days of Q1 2019

Paul Blakeley, President and CEO commented:

"I'm very pleased to report Jadestone's results to June 30, 2019, with record quarterly revenue, profits and cash generation, and providing almost US$100 million cash from operations for the first half of the year. We are building a material business that is strongly cash flow generative, while providing growth through organic investment, both within our existing producing assets in Australia, as well as the new gas developments in Vietnam.

"In Australia, we successfully completed the Stag 49H infill well, which came on production at 1,400 bbls/d in May and continues to produce in line with expectations. At Montara, we completed an innovative subsea well intervention campaign which has successfully restored gas lift to key subsea wells and accessed additional reservoir sands. Importantly, all work at Montara is now being conducted with Jadestone as operator, following our safety case acceptance earlier this month by Australia's upstream regulator. This is an arduous process in one of the world's most highly regulated regimes and I have absolute confidence in our team's ability to uphold our high standards with regards to health, safety, and environmental stewardship in our operations.

"In addition, we're continuing to make good progress with our gas commercialisation in Vietnam, with acceptance of our environmental impact assessment for the Nam Du/U Minh development, and completion of front end engineering and design work for offshore facilities and pipelines. We're also advancing contracts for major project components and commercial gas sales negotiations, leading towards field development plan submission in late Q3 2019, and continue to work towards formal development sanction later this year.

"Our balance sheet is in excellent shape, with net debt effectively eliminated by mid-year, just nine months since we closed the Montara acquisition with a US$120 million RBL financing arrangement. 2019 is a transformational year for Jadestone and our forecast remains intact for organic cash flow to meet all ongoing re-investment plans, as well as generating distributable earnings for shareholders in the future."

Operations update

Montara

Production at Montara (Jadestone 100%4, and operator) averaged 10,700 bbls/d for Q2 2019. Operations were affected by an unusually late cyclone season, resulting in weather-related downtime in April, and a partial shutdown of some subsea wells in June during the Company's RLWI campaign.

Jadestone completed the RLWI campaign in mid-August, on budget. The Company expects to deliver 100% of the forecast reserves and production from the campaign, which includes protecting ongoing production by restoring gas lift and accessing additional reservoir sands. Completion of this innovative campaign was a critical milestone toward achieving the Company's production volume guidance for the year.

The Company is preparing to replace the subsea umbilical from the Skua and Swift/Swallow subsea wells to the Montara owned FPSO, anticipated to be complete in Q3 2019. In addition, advanced planning continues for the Company's first infill well at Montara, which will be drilled from an existing slot on the Montara wellhead platform, targeting 1.8mm bbls of unswept oil, with a target initial production rate of 3,000 bbls/d. Jadestone will be prepared to drill the H6 infill well in late 2019 and is actively canvassing the drilling rig market for a suitable jack-up rig to drill the well.

The Company is also progressing its plans to acquire new 3D seismic, to improve reservoir imaging, to more accurately target future infill wells beyond H6 and Skua-12, and to assess further exploration step-out potential. Timing and detailed planning will be influenced by vessel availability in the region.

There were two liftings from Montara in Q2 2019 of a total of 1.4mm bbls.

4 99% legal interest in the associated production licenses, subject to regulatory approval and held on trust by the seller.

Stag

Production at Stag (Jadestone 100%, and operator) averaged 2,615 bbls/d in Q2 2019. Production was negatively affected by unplanned downtime due to extreme weather activity in April and several wells requiring workovers over the reporting period, awaiting completion of 49H.

The Stag 49H infill well came on production in May and is contributing in line with expectations. Subsequent to quarter-end, all wells but one have been successfully worked over and production has been restored to approximately 4,000 bbls/d. One crude oil cargo was lifted from Stag in Q2 2019, for total sales of 0.2mm bbls.

Vietnam

The Company continues to make good progress on its Southwest Vietnam gas developments. In April, 2019, two Jadestone subsidiaries signed an HoA with Petrovietnam, relating to gas sales from the Nam Du and U Minh fields (Jadestone 70%5 working interest, and operator). The HoA establishes key terms including the agreed daily contract quantity of 80mmscf/d, and stipulates other key commercial terms and principles, including a take-or-pay commitment by the buyer, and a plateau production period of 55 months.

The Company submitted its environmental impact assessment for the Nam Du/U Minh gas development in June, a milestone in environmental governance for the project, and a critical step toward achieving formal development sanction. In addition, the Company completed FEED for the offshore facilities and pipelines during Q2 2019.

Jadestone continues to progress tendering for major contracts, in addition to negotiating the remaining commercial terms and in accordance with its signed HoA. The project remains on track for a final investment decision and project sanction by end of 2019.

5 Jadestone's working interest will increase to 100%, following registration of Petrovietnam's relinquishment of its 30% working interest in block 46/07 and block 51

Financial overview

Results for the quarter reflect a more than doubling of sales volume from 0.7mm bbls in Q1 2019 to 1.6mm bbls in Q2 2019. Meanwhile, realised prices also increased for the quarter, to US$71.70/bbl, an increase of 6% over Q1 2019. The Company reported record revenue of US$115.3mm, versus US$56.4mm in Q1 2019.

Production costs for the quarter were US$39.3mm, versus US$22.7mm in the prior quarter, reflecting an increase in well workover costs associated with the Montara RLWI and other maintenance costs, as well as increased lifting volumes of 1.6mm bbls compared to 0.7mm bbls in Q1 2019. After adjusting for non-routine opex including the Montara RLWI, this equates to US$21.74/bbl6, versus US$23.75/bbl in Q1 2019, and US$32.70/boe in Q2 2018.

Jadestone generated an adjusted positive EBITDAX of US$75.4mm for the quarter ended June 30, 2019, compared to US$23.7mm for the prior quarter, and US$0.3mm in the same quarter a year ago.

On an unadjusted basis, the Company reported a net profit before tax of US$34.0mm, compared to a net profit before tax of US$10.7mm in the prior quarter and a net loss before tax of US$3.9mm in the same quarter a year ago.

Net cash generated from operations before working capital, interest and tax was US$59.3mm, compared to US$36.7mm cash generated in Q1 2019, and US$0.1mm of cash used in Q2 2018.

Cash used in investing activities in Q2 2019 was US$27.7mm, including work on the Stag 49H infill well and the Montara RLWI campaign. This compares to US$9.8mm used in investing activities in Q1 2019, and US$0.2mm used in investing activities in Q2 2018.

Cash used in financing activities in Q2 2019 was US$11.9mm, which was primarily the result of a scheduled quarterly repayment of the outstanding RBL balance. This compares to cash used in financing of US$15.7mm in Q1 2019, and US$0.3mm used in Q2 2018.

At the end of the quarter, the Company had US$51.9mm cash, plus US$14.5mm of restricted cash, primarily related to its debt service reserve, and a further US$10.0mm of cash in support of a bank guarantee. Net debt was US$7.0mm, excluding the US$10.0mm of cash in support of the bank guarantee.

Additionally, the Company's existing capped swap provides robust support for 2019 cash generation establishing, as it does, a floor benchmark crude oil price of US$71.72/bbl for 50% of planned 2PD production at Montara, before allowing for the realised premium, which in the most recent lifting was US$4.32/bbl above Dated Brent.

6 This excludes the impact of workovers and repairs and maintenance at Stag given their unpredictable timing, and costs associated with the Montara RLWI which are opex related and will be tracked separately as per 2019 guidance

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 interim financial statements for the period ended June 30, 2019, available on SEDAR and the Company's website at www.jadestone-energy.com/financial-results/.

7 Production, sales volume and average realised prices are expressed on a barrels of oil equivalent basis as the underlying data includes gas production from Ogan Komering for the prevailing period based on Jadestone's 50% participating interest up until May 19, 20188 Payment for oil and gas property, plant and equipment and intangible exploration assets. Excludes acquisition related capital expenditure and lease payments that under IFRS16 are included in cash used in investing activities 

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 the same day, Tuesday, August 27, 2019, 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 period ended June 30, 2019 will be available on the Company's website at: www.jadestone-energy.com/investor-relations/.

Webcast link: https://event.on24.com/wcc/r/2052870/9B39318BD0B3417B45159AC8001E593EEvent conference title: Jadestone Energy Inc. - Second Quarter ResultsStart time: 9:00 p.m. (Singapore), 2:00 p.m. (London), 9:00 a.m. (Toronto)Date: Tuesday, August 27, 2019Confirmation ID: 66806740

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

- Ends -

Enquiries

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 a 100% legal and beneficial interest in the Montara assets, and a 99% legal, subject to regulatory approval, beneficial right, title, and interest in the associated production licences AC/L7 and AC/L8 (the "Montara Titles"). The remaining 1% legal interest in the Montara Titles is being held on trust by the seller, in favour of the Company, until Australian regulatory approvals relating to the transfer of operatorship of the Montara assets are obtained. 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 www.jadestone-energy.com.

Cautionary statements

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 target reserves volumes, production forecasts, cost projections, timing and results of exploration and development activities on both Stag and Montara, timing and results of the Montara replacement of subsea umbilical, expected costs, commodity prices and timing of the gas sales agreement for Nam Du and U Minh.

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. This announcement contains inside information 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 that Regulation.

The technical information contained in this announcement has been prepared in accordance with the March 2007 guidelines endorsed by the Society of Petroleum Engineers, World Petroleum Congress, American Association of Petroleum Geologists and Society of Petroleum Evaluation Engineers Petroleum Resource Management System.

Henning Hoeyland of Jadestone Energy Inc., a Subsurface Manager with a Masters degree in Petroleum Engineering who has been involved in the energy industry for more than 17 years, has read and approved the technical disclosure in this regulatory announcement.

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.

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.

Glossary

2PD proved and probable developed reserves

bbls barrels of oilbbls/d barrels of oil per dayboe barrels of oil equivalentEBITDAX earnings before interest, tax, depreciation, amortisation and exploration expensesFPSO floating production, storage and offloading vesselmbbl thousands of barrels of oil

mboe thousands of barrels of oil equivalent

mm bbls millions of barrels of oil

mmscf/d millions of standard cubic feet per day

PVEP Petrovietnam Exploration Production Corporation

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

for the three and six months ended June 30, 2019

All comprehensive income is attributable to the equity holders of the parent.

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

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at June 30, 2019

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

CONDENSED CONSOLIDATED STATEMENT OF EQUITY

for the three and six months ended June 30, 2019

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

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

for the three and six months ended June 30, 2019

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

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

for the three and six months ended June 30, 2019

1. CORPORATE INFORMATION

Jadestone Energy Inc. (the "Company" or "Jadestone") is an oil and gas company incorporated in Canada.

The Company's ordinary shares are listed on the TSX Ventures Exchange ("TSX-V") and the London AIM market. The Company trades on both markets under the symbol "JSE".

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

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

During the comparative periods for the three and six months ended June 30, 2018, the Company had a participating interest in the Ogan Komering PSC in Indonesia. The terms of the PSC expired in May 19, 2018, after which the Company no longer held an interest in the PSC.

The Company's head office is located at 3 Anson Road, #13-01 Springleaf Tower, Singapore 079909. The registered office of the Company is 10th Floor, 595 Howe Street, Vancouver, British Columbia V6C 2T5, Canada.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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 ("IFRS") for annual financial statements, and should be read in conjunction with Jadestone's audited consolidated financial statements for the year ended December 31, 2018.

These Financial Statements were approved for issuance by the Company's Board of Directors on August 27, 2019 on the recommendation of the Audit Committee.

3. BASIS OF PREPARATION

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, and operating leases which are stated at the present value of future cash payments.

In addition, these Financial Statements have been prepared using the accrual basis of accounting.

Adoption of new and revised standards

New and amended IFRS standards that are effective for the current period

The Group has applied the following standards and amendments for the first time with effect from January 1, 2019.

- IFRS 16 Leases.

IFRS 16 Leases

General impact of application of IFRS 16 Leases

The Group, for the first time, has applied IFRS 16 Leases (as issued by the IASB in January 2016) as at January 1, 2019.

IFRS 16 introduces new or amended requirements with respect to lease accounting. It introduces significant changes to lessee accounting, by removing the distinction between operating and finance lease. IFRS 16 requires the recognition of a right of use asset and a lease liability, at commencement for all leases, except for short-term leases and leases of low value assets. Details of the new requirements are described in note 18, right of use assets. The impact of the adoption of IFRS 16 on the Group's consolidated financial statements is described below.

The Group has applied IFRS 16 using the "modified retrospective" approach, and has elected not to restate comparatives.

Impact of the new definition of a lease

The Group has made use of the practical expedient available on transition to IFRS 16 not to reassess whether a contract is or contains a lease. Accordingly, the definition of a lease in accordance with IAS 17 and IFRIC 4 will continue to be applied to those leases entered or modified before January 1, 2019.

The change in definition of a lease mainly relates to the concept of control. IFRS 16 determines whether a contract contains a lease, on the basis of whether the customer has the right to control the use of an identified asset for a period of time, in exchange for consideration.

The Group applies the definition of a lease and related guidance set out in IFRS 16 to all lease contracts entered into or modified on, or after, January 1, 2019 (whether it is a lessor or a lessee in the lease contract). In preparation for the first-time application of IFRS 16, the Group has carried out an implementation project. The project has shown that the new definition in IFRS 16 will not change significantly the scope of contracts that meet the definition of a lease for the Group.

Impact on lessee accounting

On adoption, IFRS 16 changed how the Group accounts for leases previously classified as operating leases. The impact to the Group accounts are:

- Recognises right of use assets and lease liabilities in the consolidated statement of financial position, initially measured at the present value of future lease payments;

- Recognises depreciation of right of use assets and interest on lease liabilities in the consolidated statement of profit or loss; and

- Separates the total amount of cash paid into a principal portion (presented within financing activities) and interest (presented within operating activities) in the consolidated statement of cash flows.

Under IFRS 16, right of use assets are tested for impairment in accordance with IAS 36 Impairment of Assets. This replaces the previous requirement to recognise a provision for onerous lease contracts.

Financial impact of initial application of IFRS 16

The recognition of the present value of the minimum lease payments resulted in an additional US$38.0 million (note 18) of right of use assets and associated lease liabilities. The Company has recognised the lease liabilities in relation to lease arrangements, previously disclosed as operating lease commitments under IAS 17, that meet the criteria of a lease under IFRS 16.

Upon recognition, the Company's weighted average incremental borrowing rate used in measuring lease liabilities was 6% percent.

The nature of the Company's leasing activities includes vessels, helicopters, buildings and the Stag FSO, all of which are used in producing and storage of hydrocarbons where the Company has a right to substantially all of the economic benefits.

The Company's lease contracts may contain termination, renewal, and/or purchase options, residual value guarantees, or a combination thereof, all of which are evaluated by the Company on a quarterly basis. The Company accounts for such contract options when the Company is reasonably certain that it will exercise one of these options.

New and revised IFRS's on issue but not yet effective

The Group has not applied the following new and revised relevant IFRS that have been issued, but not yet effective:

- Amendments to IFRS 3 Business Combinations.

The amendments are effective for annual periods beginning on, or after, January 1, 2020, and generally require prospective application. The Group is currently performing an assessment of the standard, and does not anticipate a material impact on the financial statements of the Group in future periods, with the exception of the item listed below.

Amendments to IFRS 3 Business Combinations

The definition of a business has been amended under IFRS 3, on October 22, 2018, clarifying that to be considered a business, rather than an asset sale or purchase, an acquisition would have to include an input and a substantive process that together significantly contribute to the ability to create outputs. The definition of the term outputs is narrowed to focus on goods and services provided to customers, generating investment income and other returns. The amended definition will be applied to reporting period's beginning on, or after, January 1, 2020 prospectively.

4. REVENUE

The Group derives its revenue from contracts with customers for the sale of oil and gas products. Revenue is presented in the consolidated statement of profit or loss, net of royalties.

All royalties included in the comparative period ended June 30, 2018, relate to production entitlement in Indonesia. The Ogan Komering PSC expired on May 19, 2018, and hence no revenue or royalties arose in the current period.

5. PRODUCTION COSTS

6. ACQUISITION OF MONTARA ASSETS

On September 28, 2018 (the "acquisition date"), Jadestone Energy (Eagle) Ltd, a wholly owned subsidiary of the Company, closed the acquisition of the Montara Assets, obtaining control and 100% of the legal ownership from PTTEP Australasia (Ashmore Cartier) Pty Ltd ("PTTEP Australia"), apart from interest in the associated licenses. The Company received 99% interest in the Montara titles on May 30, 2019, and following transfer of the Montara operatorship to Jadestone on August 6, 2019, the Company has now requested transfer of the final 1%.

6.1 Fair value of consideration transferred

The consideration for the Montara Assets on the acquisition date comprised a cash payment of US$133.1 million, as set out below.

In addition to the upfront cash consideration set out above, there are deferred contingent payments payable, depending on the outcome of a number of trigger events. The trigger events relate to future Dated Brent prices in 2019 and 2020, production from the infill well drilling scheduled for 2019, and any future final investment decision for developments with significant 2P reserves. The Group has reviewed all the contingent payment trigger events and recognised the following two potential payments, based on current and future anticipated potential prices of Dated Brent crude oil.

- Annual average Dated Brent crude price exceeding US$80/bbl in 2019: US$20.0 million; and

- Annual average Dated Brent crude price exceeding US$80/bbl in 2020: US$10.0 million.

Management has assessed the fair value of the above deferred contingent consideration using a Monte Carlo option simulation model, which considered inputs such as spot Dated Brent oil prices at the completion date, the prevailing risk-free rate, volatility of oil prices, and the period of time over which the contingent payment will apply. At the date of acquisition, the Company recognised a fair value of US$15.8 million for the two contingent payments. This amount was reduced to US$3.8 million at December 31, 2018, and at June 30, 2019 the revised fair value is US$1.8 million (Note 26).

The maintenance and inspection shutdown that occurred at Montara between November 1, 2018 to January 11, 2019, resulted in a deferral of production and revenue during that period of time, as well as an increase in costs due to overheads still being incurred and additional maintenance and inspection work required to rectify the safety issues. As a result, on January 7, 2019, PTTEP Australia and the Group agreed that PTTEP Australia would fund cash calls capped at US$22.0 million. Management believes that the shutdown was a result of facts and circumstances that existed as at the acquisition date. As such, the US$22.0 million has been adjusted against the consideration transferred for the Montara Assets.

Since the date of acquisition, the Company has been reviewing the fair value of the assets and liabilities acquired in accordance with IFRS 3 Business Combinations. This assessment has resulted in the restatements below.

6.2 Assets acquired and liabilities assumed at the date of acquisition

The fair value assessment of the Montara identifiable assets and liabilities, acquired as at the date of acquisition, have been reviewed in accordance with IFRS 3 Business Combinations. The provisional fair value of the identifiable assets and liabilities of Montara, as at the acquisition date, were:

The provisional values continue to be assessed and as a result, their final values and associated calculations, which include the tax effects, may be different from the provisional determination. Pursuant to IFRS 3, the review of the fair values as at September 28, 2018 of the assets and liabilities acquired, will be completed within 12 months of the acquisition date.

7. DEPLETION, DEPRECIATION AND AMORTISATION ("DD&A")

The Ogan Komering DD&A charge is based on a units of production basis, during the comparable period. The PSC expired on May 19, 2018, and the Group no longer holds an interest in the PSC.

The right of use assets relate predominately to operating leases previously included in production costs. Since the implementation of IFRS 16 Leases, these expenses are now recognised as right of use assets, and are capitalised and depreciated over the life of the lease.

8. OTHER EXPENSES

9. IMPAIRMENT OF ASSETS

The impairment booked in the comparable period relates to the relinquishment of deepwater Block 127 in Vietnam.

10. OTHER INCOME

Miscellaneous income for the six and three months ended June 30, 2019 of US$1.4 million arises from a reduction in estimated Stag FSO redundancy payments. 

11. FINANCE COSTS

During the current reporting period, the Company paid interest of US$1.3 million (2018: US$0.3 million) related to the reserve based loan ("RBL"), which was drawn down in Q3 2018. The comparable quarter interest paid relates to the convertible bond, which was repaid in August 2018.

The lease accretion reflects the finance charge on operating leases due to the adoption of IFRS 16; previously lease payments were treated as a production cost.

12. OTHER FINANCIAL GAINS/(LOSS)

13. INCOME TAX (EXPENSE)/CREDIT

The Company is a resident in the Province of British Columbia and pays no Canadian tax; the Group has no operating business in Canada. Subsidiary companies are resident for tax purposes in the territories in which they operate.

The Australian corporate income tax rate is applied at 30%. PRRT is calculated at 40% of sales revenue less certain permitted deductions and is tax deductible for Australian corporate income tax purposes. The Indonesian corporate income tax rate is applied at 35%, and branch profits tax is applied at 20%.

The tax (expense)/credit on Group profit/(loss) differs from the amount that would arise using the standard rate of income tax applicable in the countries of operation as explained below.

INCOME TAX RECONCILIATION

PRRT TAX RECONCILIATION