Southeast Asia-focused Jadestone Energy has signed a deal with Indonesia’s Medco Energi Internasional to acquire stakes in the Sinphuhorm gas field and Dong Mun gas discovery onshore Thailand for $32.5 million.
Jadestone has bought interest in three legal entities – owned by Medco’s subsidiary Salamander Energy – 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.
UK-listed Jadestone will acquire 4.6 million barrels of oil equivalent (boe) of 2P reserves. Based on the headline cash consideration of $32.5 million, this represents an acquisition cost of about $7.1/boe, the company said Thursday.
“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,” Jadestone CEO Paul Blakeley said. “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.”
The deal will generate positive cash flow from a well-understood reservoir; stable and predictable gas production of approximately 1,600 boe/d net to Jadestone, based on current rates, noted the company.
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.
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 (CCS) project at the field.
Jadestone said the acquisition 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.
Jadestone estimates payback on the acquisition in circa three and a half years, with returns significantly more than the company’s hurdle rates.