Jadestone Energy tallies up Montara closure hit

Jadestone Energy (JSE) made it through 2022 with a healthy balance sheet and sales only slightly behind the year before. This is a low bar for an energy company given the price environment, but the Asia-Pacific-focused producer had to shut down its key oilfield, Montara, in August, and only brought it back into production last month. This was due to a leak in a ballast tank, just two months after a storage tank leak. The authorities are on high alert as Montara, under previous ownership, was the site of one of Australia’s worst oil spills, in 2009. 

Chief executive Paul Blakeley told Investors’ Chronicle it was a “long and painful process” to get Montara back in action. He added that the rigorous repairs and checks completed after the leaks meant the operation was now in better shape. Nonetheless, the company is working hard to broaden its portfolio. This will happen quite quickly, through the construction of a new gas operation in Indonesia, Akatara, and a handful of smaller acquisitions last year. 

The balance sheet did get hit by the shutdown, and by the end of the March quarter Jadestone had $64mn in cash available – half of the cash figure from 31 December. A new $50mn debt facility was drawn down, which is expected to be replaced by a reserves-based loan next month. 

This year will see capital spending of $110mn-$140mn, largely on the Akatara project, while the company will keep looking for new acquisitions. With the current portfolio, analysts see a marginal increase in cash profits this year, from $188mn to $206mn, before a jump to $291mn in 2024. 

Adding significant debt would be a risk given the industry’s history of running into trouble once prices dip, but management has forecast a return to net cash by the end of 2024. 

We remain bullish on Jadestone, but will re-evaluate if the interims later in the year reveal an ominous debt pile. Buy. 

Last IC View: Buy, 71p, 20 Sep 2022