Analysts reckon Jadestone Energy (LON:JSE) has its sights set on acquiring a bigger share of the producing North West Shelf oil fields offshore Western Australia that are currently operated by Woodside Energy (ASX:WDS). Ultimately, Singapore-based Jadestone will be seeking operatorship to maximise profitability, the analysts told Energy Voice.
Last week Jadestone announced a deal to acquire a non-operated 16.67% working interest in the Cossack, Wanaea, Lambert, and Hermes oil fields development, known as the North West Shelf oil project, from BP, for a headline price of US$20 million.
Analysts told Energy Voice that Jadestone likely has its eyes on the mid-term future when other partners in the assets, which includes Chevron (NYSE:CVX) , might decide to divest their equity stakes.
“While the acquisition strengthens Jadestone’s position offshore Western Australia, the future possibilities might have been too enticing to ignore. Consider that the acquired assets produce slightly north of 10,000 barrels per day currently — are these the types of assets that Chevron wants to keep its toe in with 16.67% equity?” Readul Islam, an Asia upstream specialist at Rystad Energy, told Energy Voice.
“Even for the recently enlarged Woodside, operating here with 50% equity, these assets can’t compete with the gas-heavy Australian or oil-heavy Gulf of Mexico portfolios. It isn’t unthinkable that these partners also throw in the towel to free up management resources for their core projects. This could leave Jadestone with three operated projects in Australia, as well as one in New Zealand, assuming the Maari transaction closes,” he added.
“If Jadestone is eventually able to acquire its way to operatorship at the NWS oil assets, then it would be able to go after the same prizes it went after with the Stag and Montara transactions — reducing decline rates, reducing operational expenses, etc. If oil prices remain elevated, that could be quite a prize,” said Islam.
“While the abandonment pre-payments are high, however, with an effective transaction date of January 1, 2020, by the time the sale closes, Jadestone could be entitled to the revenue from over 2 million barrels of oil sold, and mainly exposed to the rising prices of the past 12 months. This closing adjustment is largely expected to balance out the headline sale price, as well as the abandonment pre-payments. Moreover, with Jadestone estimating a 2023 EBITDA of circa US$40 million from the stake acquired from BP, this starts to look attractive,” added Islam.
Still, other industry sources doubt Woodside will ever give up its operatorship as they make plenty of profit from charging the joint venture.