Jadestone Energy has executed a sale and purchase agreement (the “Agreement”) with Salamander Energy (S.E. Asia) Limited (the “Seller”), an affiliate of PT Medco Energi Internasional Tbk, to acquire the Seller’s interest in three legal entities, which collectively own a 9.52% non-operated interest in the producing Sinphuhorm gas field and a 27.2% interest in the Dong Mun gas discovery onshore northeast Thailand. The headline cash consideration is US$32.5 million, to be funded from the Company’s cash resources.

Highlights

• Jadestone is acquiring 4.6 mmboe of 2P Reserves as at an effective date of 1 January 2022. Based on the headline consideration of US$32.5 million, this represents an acquisition cost of ~ US$7.1/boe.
  • It is anticipated that, due to the effective date of 1 January 2022, the cash consideration on completion will be approximately US$26.4 million plus working capital.
  • Positive cash flow generation from a well-understood reservoir; stable and predictable gas production of approximately 1,600 boe/d net to Jadestone, based on current rates.
• Gas is contracted under a long-term high take-or-pay gas sales agreement with PTT as the buyer at a price linked to high sulphur fuel oil. Recent gas nominations have consistently exceeded the daily contract quantity.
• A first direct step to create significant natural gas production within Jadestone’s portfolio over the medium-term.
• Scope 1 and 2 GHG intensity of Sinphuhorm operations is estimated at 7.5kg/boe of CO2e, significantly lower than the upstream average, with the operator exploring plans to develop a carbon, capture and storage project at the field.
• Establishes a low-cost platform for growth in Thailand, while re-engaging directly with PTTEP, Thailand’s National Oil Company, at the same time providing further diversification of the Company’s production base.
• Sinphuhorm operating costs are approximately US$3/boe and will decrease the Company’s overall unit operating costs.
• The acquired assets will be managed from Jadestone’s existing Southeast Asia offices, with no incremental G&A expense and there are very limited abandonment obligations (currently estimated at c.US$2 million net) associated with the assets.
• The 9.52% interest in Sinphuhorm generated approximately US$20 million (unaudited) of EBITDA in 2022.
• Jadestone estimates payback on the acquisition in circa three and a half years, with returns significantly in excess of the Company’s hurdle rates.
• Jadestone sees potential to enhance value through further infill drilling on the Sinphuhorm field and the potential development of the Dong Mun discovery.
• Management believes further equity in the Sinphuhorm gas field could become available in the near-term.

Paul Blakeley, President and CEO, commented:
“While modest in scale, this opportunistic tuck-in acquisition is low cost, low emissions intensity and very low decline production from the onshore Sinphuhorm gas field. The asset is an excellent addition to our portfolio, diversifying our existing production base, and is a first important step towards building a significant natural gas position within our portfolio as part of our energy transition strategy. Furthermore, these assets carry minimal abandonment liabilities and are administered under very attractive Thai I PSC terms with recent extensions to both the licence and the GSA. 

The asset is highly predictable and reliable, running at close to 100% uptime in 2022 and with a high take-or-pay to a regional power station for electricity generation. We see upside from further infill drilling within Sinphuhorm, with wells planned in 2023 and 2024, and the potential development of the Dong Mun gas discovery, which is 100% owned by APICO, and which represents upside beyond the consideration paid. Establishing a presence in Thailand, as well as re-engaging directly with PTTEP, will also leave us well-positioned to capitalise on further potential asset divestments that we see coming to market in the near-term.”

Sinphuhorm gas field

The Sinphuhorm gas field was discovered in 1983 and commenced production in 2006.  The reservoir is the Permian age fractured carbonate Pha Nok Khao formation, which contains dry gas with a low gas condensate ratio of c.4 bbls/mmcf.

The field has been developed with eleven wells, of which ten are currently producing, drilled from three surface pads in the central and southern part of the field. Further development well locations have also been identified. Pressure depletion trends confirm lower connectivity between the northern and southern parts of the field, with further development potential existing to the north as a result. The field produced an average of 97 mmcfd in 2022. A total of 506 bcf of gas and 2.1 mmbbls of condensate had been produced by 31 December 2021, equating to a 46% recovery factor.

The Sinphuhorm well pads are tied back to a central gas plant with 140 mmcfd capacity and the ability to stabilise small amounts of condensate.  The plant, with its simple design, enjoys high reliability, uptime and performance, with a 16-year track record of safe operations.  Operating costs are very low at c.US$3/boe and decommissioning costs net to the acquired 9.52% interest are estimated at approximately US$2 million.

Gas from Sinphuhorm is exported via a 64 kilometre pipeline to the Nam Phong power plant, the largest in northeast Thailand. Sinphuhorm gas is contracted under a long-term take-or-pay GSA with PTT, as the gas buyer. The current GSA extends over the remaining term of the concession, which expires in March 2031. Gas demand has consistently exceeded 90 mmcfd over the last four years and is expected to remain strong in the foreseeable future amid declining regional supplies and high import prices. The Sinphuhorm gas price is linked to high sulphur fuel oil.  Sinphuhorm condensate is sold to PTT under a long-term condensate sales agreement.

A project to boost compression at the field is already underway with a gross cost estimate of US$62 million and is expected to be onstream in Q3 2024. In addition, further infill wells are planned in 2023 and 2024. Management estimates that at 31 December 2021, the field contained gross 2P reserves of 288 bcf of gas and 0.82 mmbbls of condensate (27 bcf and 0.08 mmbbls net to Jadestone).

KeyFacts Energy: Acquisitions & Mergers news