2 0 2 1 AN NU AL REPORT
Delivering
essential energy
to Asia-Pacific
Our corporate purpose
l We are an upstream oil and gas company operating in
the Asia-Pacific region. We aim to deliver value for our
stakeholders by acquiring and maximising the life of fields
already in production, as well as developing discovered gas
resources to satisfy domestic energy demand and support
regional economic growth.
l We believe this strategy is fit for the energy transition, as
existing fields and discoveries can fulfill global hydrocarbon
demand without requiring new resource additions through
exploration. This strategy will result in lower overall
upstream GHG emissions, a reduced environmental impact,
and is consistent with our target of Net Zero Scope 1 and 2
GHG emissions from our operations by 2040.
l Our strategy is predicated on our values of Respect,
Integrity, Safety, Results-oriented, Sustainability
and Passion.
Sustainability highlights
Committed to Net Zero
Scope 1 & 2 GHG emissions from
our operated assets by 2040
Enhanced TCFD reporting
Inaugural climate
resilience exercise
2
2021 highlights
Zero
reportable environmental incidents
12,545boe/d
production, a 10% increase on 2020
c.20,000 boe/d
year-end 2021 exit rate achieved
c. 4.6 mmboe
sales volume, +10% on 2020
US$74.34 /bbl
realised oil price, +66% on 2020
US$340.2 million
revenue, +56% on 2020 and a Group record
US$157.9 million
adjusted EBITDAX, +152% on 2020
excluding the Skua well workovers
US$96.6 million
operating cash flows before movement
in working capital, +11% on 2020
US$117.9 million
net cash at end-2021, +44% vs. end-2020
US$6.3 million
recommended 2021 dividend, +24% on
second 2020 dividend
44.7 mmboe
2P reserves at end-2021, +20% on end-2021
04
Strategic Report
06 - 07
Jadestone at 5
08 - 09
Chair's statement
10 - 11
Jadestone's portfolio
12 - 17
Chief Executive Officer’s review
18 - 21
Market overview
22 - 23
Business model and strategy
24 - 49
Sustainability review
50 - 51
Key performance indicators
52 - 55
Section 172 statement
56 - 63
Risk management, principal risks & uncertainties
64 - 67
Operational review
68 - 75
Financial review
76
Corporate governance
78 - 79
Chair's corporate governance statement
80
Principles of corporate governance
81 - 85
Compliance statement to QCA Code principles
86 - 93
Directors’ report
94 - 95
Audit Committee report
96 - 105
Remuneration Committee report
106 - 108 Governance & Nomination Committee report
109 - 112 Health, Safety, Environment and Climate Committee
report
113
Disclosure Committee report
114
Financial statements
116
Directors' responsibility statement
117 - 128
Independent auditor’s report
129
130
131
132
Consolidated statement of profit or loss and other
comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
133 - 188
Significant accounting policies and explanation
notes to the financial statements
189
190
Company's statement of financial position
Company's statement of changes in equity
191 - 195 Notes to the financial statements
196
Additional information
198 - 199 Oil and gas reserves
200 - 201 Report on payments to Governments for the year
ended 31 December 2021
202 - 203 Glossary
204
Shareholder information
3
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JADESTONE ENERGY 2021 ANNUAL REPORT
Strategic
report
06 - 07
Jadestone at 5
08 - 09
Chair's statement
10 - 11
Jadestone's portfolio
12 - 17
Chief Executive Officer’s review
18 - 21
Market overview
22 - 23
Business model and strategy
24 - 49
Sustainability review
50 - 51
Key performance indicators
52 - 55
Section 172 statement
56 - 63
Risk management, principal risks & uncertainties
64 - 67
Operational review
68 - 75
Financial review
4
JADESTONE ENERGY 2021 ANNUAL REPORT
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September 2021
Drills successful infill well on
Montara, testing at an initial rate
approaching 10,000 bbls/d
April 2021
Acquires Peninsular Malaysia Assets,
closes in August 2021 for a net receipt
of US$9 million
April 2021
Internal reorganisation creates new UK
parent company in order to reduce costs and
enhance attractiveness to investors
Jadestone at 5
December 2021
Announces gas sales agreement for
the development of the Akatara
gas field on the Lemang PSC
December 2021
Delivers on target to produce
c.20,000 boe/d by year-end 2021
June 2020
Acquisition of operated
90% Interest in Lemang PSC,
closing in December 2020
March 2020
Initiates Project Clover, a cost reduction
programme to enhance resiliency in the
face of the COVID-19 pandemic
November 2019
Announces acquisition of
operated stake in the Maari oil
field offshore New Zealand
August 2018
Admission to the AIM market
of the London Stock Exchange
and raises US$110 million in an
oversubscribed placing
April 2015
Reverse takeover of
Mitra Energy, a company
with exploration
and pre-development
assets in the Philippines,
Vietnam and Indonesia
July 2016
Announces acquisition
of Stag oil field, closing
in November 2016
December 2016
Changes name’ to
‘‘Jadestone Energy Inc.’’
to emphasise a new strategic focus
on oil and gas development and
production, instead of an
exploration-led strategy
6
June 2017
July 2018
A. Paul Blakeley
assumes the role of
Chief Executive Officer
Announces acquisition
of Montara assets, closing
in September 2018
JADESTONE ENERGY 2021 ANNUAL REPORT
September 2021
Drills successful infill well on
Montara, testing at an initial rate
approaching 10,000 bbls/d
April 2021
Acquires Peninsular Malaysia Assets,
closes in August 2021 for a net receipt
of US$9 million
April 2021
Internal reorganisation creates new UK
parent company in order to reduce costs and
enhance attractiveness to investors
December 2021
Announces gas sales agreement for
the development of the Akatara
gas field on the Lemang PSC
December 2021
Delivers on target to produce
c.20,000 boe/d by year-end 2021
June 2020
Acquisition of operated
90% Interest in Lemang PSC,
closing in December 2020
March 2020
Initiates Project Clover, a cost reduction
programme to enhance resiliency in the
face of the COVID-19 pandemic
November 2019
Announces acquisition of
operated stake in the Maari oil
field offshore New Zealand
August 2018
Admission to the AIM market
of the London Stock Exchange
and raises US$110 million in an
oversubscribed placing
April 2015
July 2016
Reverse takeover of
Mitra Energy, a company
with exploration
and pre-development
assets in the Philippines,
Vietnam and Indonesia
Announces acquisition
of Stag oil field, closing
in November 2016
December 2016
Changes name’ to
‘‘Jadestone Energy Inc.’’
to emphasise a new strategic focus
on oil and gas development and
production, instead of an
exploration-led strategy
June 2017
A. Paul Blakeley
assumes the role of
Chief Executive Officer
July 2018
Announces acquisition
of Montara assets, closing
in September 2018
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7
Chair's statement
Dennis McShane
Non-Executive Chair
Dear shareholders
“I am pleased to report a successful 2021 for Jadestone, which marked the fifth year
of its production and development led strategy by executing the biggest activity
programme in its history. This, and the initial contribution of the acquired Peninsular
Malaysia assets, delivered 10% production growth year-on-year, and significantly higher
rates as we exited 2021. This operational performance, allied to rising oil prices with all
production unhedged from H2 2021, delivered record revenues and a 44% increase
in year-end cash balances. As a result, we were able to generate a total shareholder
return of 39% in 2021, and in June 2022 further reward our shareholders through
a 25% increase in the recommended final dividend.
2021 was characterised by a concerted global economic
recovery from the impact of the COVID-19 pandemic, due to
the roll out of vaccines and improving treatments for those
infected with the virus. The impact of a recovering global
economy manifested itself in an improving oil demand outlook,
which underpinned rising oil prices throughout the year and
enhanced the value of our business.
COVID-19 continued to pose significant logistical challenges
to our business during 2021, particularly in our core Australia
operations. The movement of staff and offshore crew rotations
were affected by periodic hard borders between states that
were permanently lifted only very recently. The business dealt
admirably with these testing circumstances and the Directors
would like to place on record our gratitude for the resilience
and flexibility of all Jadestone’s staff during this period.
Our investment case remains extremely attractive, premised
on further significant growth from organic investment across
our existing portfolio, development of our existing discovered
gas resource, as well as additional growth through further
asset acquisitions in our core areas. Jadestone’s strategy is
well-positioned in the context of the ongoing energy transition,
where we expect there will be willing sellers of mid-life and
maturing upstream assets. We can capitalise on this trend
by extending the economic life of these assets through
further investment while minimising their greenhouse gas
(“GHG”) emissions. In addition, Jadestone will also increase
the weighting of gas in its portfolio, initially through the
development of its Indonesia and Vietnam discoveries, followed
by an anticipated increase in gas-weighted acquisitions.
To demonstrate Jadestone’s continued commitment to be
a responsible operator, and to mitigate our impact on the
environment, we have introduced a target of Net Zero Scope
1 & 2 GHG emissions by 2040 from our operated assets.
Upstream GHG emissions, and the potential to mitigate
them, will play an increasingly important role in our business
development framework.
8
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At the end of the year, we were sorry to announce the
departure of our CFO, Daniel Young, who decided to repatriate
his family back to Australia after a period of over 20 years
abroad. Dan joined the business in early 2017 and was
instrumental in the growth of Jadestone over the past five
years. We wish him well in the next chapter of his life and
career. The search for his successor is at an advanced stage.
In April 2022, we announced the appointment of Jenifer
Thien as a Non-Executive Director. Jenifer’s significant senior
executive and sustainability experience will be an important
and complementary addition to the Board’s skillset.
Five years have elapsed since Jadestone assumed its current
corporate identity and strategy. During that period the Group
has announced seven asset acquisitions, grown production
towards ~20,000 boepd at the end of 2021, and established
itself as a leading independent in the Asia-Pacific oil and gas
sector. I’d like to thank and congratulate everyone who has
played a role in this success story.
Early 2022 has been dominated by the distressing scenes in
Ukraine following Russia’s invasion. The conflict has roiled
energy markets as many countries look to reduce or eliminate
Russian oil and gas imports in response, and brought energy
security back into the spotlight. Ensuing high energy prices
have stoked inflation fears and clouded the economic outlook.
Our financial strength at this time is a key differentiator against
this uncertain backdrop, and Jadestone stands ready to play its
part in contributing to energy security in the Asia-Pacific region.
I remain confident that Jadestone has the platform to deliver
further accretive growth in the years to come. On behalf of
Jadestone’s Directors, I thank you for your continued support.”
Dennis McShane
Non-Executive Chair
The PenMal Assets acquisition from SapuraOMV was the
latest example of how attractive growth opportunities in
Asia-Pacific can be, with significant production and
reserves added in return for a cash inflow of US$9 million.
Unfortunately, progress on the Maari acquisition in New
Zealand has been frustratingly slow, although recent changes
to New Zealand’s hydrocarbon legislation holds out the
prospect of some positive momentum towards closing this
transaction during 2022.
Less than 12 months after closing the asset purchase of the
initial stake in the Lemang Production Sharing Contract (“PSC”),
we were very pleased to see significant progress on the Akatara
gas field development onshore Indonesia, with the gas sales
agreement announced in December 2021. We look forward to
taking a final investment decision on this project in the first half
of 2022 with first gas scheduled for early 2024.
While we have not seen comparable progress in
commercialising our Vietnam gas resources, in part due to
the impact of the COVID-19 pandemic, we remain committed
to unlock the significant value in the Nam Du and U Minh
gas discoveries. We believe that the development of Nam Du
and U Minh would increase Vietnam’s energy independence,
support the country’s growing economy, and assist in the
country’s energy transition following Vietnam’s commitment to
carbon neutrality by 2050. Development of both the Indonesia
and Vietnam gas discoveries represent a key pillar of our
sustainability strategy, as they will introduce significant gas-
weighting into the portfolio, thereby reducing the Group’s GHG
emissions intensity over the medium-term.
Our governance framework continued to evolve during the
year. The internal reorganisation, completed in April 2021,
introduced a UK plc as the ultimate parent company of the
Jadestone Group. The reorganisation will further raise our
profile with investors who were unable to invest in non-UK
domiciled companies. In addition to our annual Quoted
Companies Alliance (“QCA”) Code compliance statement, and
as a result of the reorganisation, this year’s annual report
also includes our first Section 172 disclosure, reporting how
the Directors have carried out their duties to stakeholders
under Section 172 of the Companies Act 2006. We have
also refreshed the structure and terms of reference of our
Board committees, to ensure that their remit and scope are
appropriate in light of Jadestone’s continued growth and the
increasing scrutiny of upstream operators’ GHG footprint.
Finally, we have significantly increased the extent of our
voluntary reporting pursuant to the Task Force on Climate-
Related Financial Disclosures (“TCFD") recommendations,
recognising that the execution of our business strategy through
the energy transition will be an increasingly important element
of disclosure for our stakeholders going forward.
9
JADESTONE ENERGY 2021 ANNUAL REPORT
OVERVIEW / INTRODUCTION
Cambodia
Ho Chi Minh
Vietnam
Gulf of Thailand
Ca Mau
Block 51
Gas Pipeline
Block 46/07
Vietnam
HO CHI MINH CITY
Block 51 PSC
Block 46/07 PSC
PM329 PM318
PM 323 | AAKBNLP
0 25 50 75 100kms
Malaysia
Block 51 PSC, and Block 46/07 PSC, Vietnam
Status: In development
Working Interest: 100%
Gross Acreage: Block 51 – 887km2, Block 46/07 – 2,622km2
Location: Malay-Tho Chu Basin
Water Depth: Block 51 – 64m, Block 46/07 – 48m
KUALA LUMPUR
SINGAPORE
Lemang PSC
JAKARTA
Indonesia
Indonesia
Lemang
Montara
Stag
0
15
30kms
*Jadestone has entered into
an agreement to acquire
the remaining 10% working
interest in the PSC
Lemang PSC, Indonesia
Status: In development
Working Interest: 90%*
Gross Acreage: 743km2
Location: South Sumatra Basin
Montara project, Australia
Status: Producing
Working Interest: 100%
Gross Acreage: 672km2
Location: Offshore Western Australia
Water Depth: 77m
Montara
Timor Sea
PERTH
Stag oilfield, Australia
Status: Producing
Working Interest: 100%
Gross Acreage: 160km2
Location: Offshore Western Australia
Water Depth: 47m
Indian Ocean
Stag
PM329
Malay Basin
PM318 /
AAKBNLP
PM323
Malaysia
0
50
100
400kms
Australia
Maari
NEW PLYMOUTH
New Zealand
Tasman Sea
New Zealand
Maari
Cook Strait
Western Australia
Western Australia
0
25
50
75
100kms
0
25
50
75
100kms
0
25
50
75kms
Star denotes
Jadestone office
1010
Vietnam
HO CHI MINH CITY
Block 51 PSC
Block 46/07 PSC
PM329 PM318
PM 323 | AAKBNLP
0 25 50 75 100kms
Malaysia
KUALA LUMPUR
SINGAPORE
Lemang PSC
Cambodia
Ho Chi Minh
Vietnam
Gulf of Thailand
Ca Mau
Block 51
Gas Pipeline
Block 46/07
Indonesia
Lemang
JAKARTA
Indonesia
Montara
Stag
PERTH
Montara
Timor Sea
Indian Ocean
Stag
PM329
Malay Basin
PM318 /
AAKBNLP
PM323
Malaysia
0
50
100
400kms
Peninsular Malaysia
Status: Producing
Operated assets: PM323 (60% working interest)
and PM329 (70% working interest)
Non-operated assets: PM318 and AAKBNLP
(50% working interest)
Gross acreage: 3,389km2
Location: Malay Basin
Water depth: 63-72 metres
0
15
30kms
Australia
Western Australia
Western Australia
0
25
50
75
100kms
0
25
50
75
100kms
Star denotes
Jadestone office
Jadestone's portfolio
Maari
NEW PLYMOUTH
New Zealand
Tasman Sea
New Zealand
Maari
Maari project, offshore
New Zealand
Status: Pending acquisition
Working interest: 69% and operator
(on completion)
Gross Acreage: 34km2
Location: Offshore Taranaki Basin
Water Depth: 100m
Cook Strait
0
25
50
75kms
11
11
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JADESTONE ENERGY 2021 ANNUAL REPORT
Chief Executive
Officer’s review
A. Paul Blakeley
Executive Director, President and Chief Executive Officer
Building on a successful first five years
In a little over five years, we have transformed Jadestone from an exploration led
vehicle into a leading Asia-Pacific upstream company with a significant production base
and material organic growth potential. We also find ourselves today with potential
for further material inorganic growth in an environment where mid-life and maturing
upstream assets are coming to market. I am proud of what we have achieved so far
and congratulate the Jadestone team on another successful year.
While 2020 was characterised by our resilience in the early
stages of the COVID-19 pandemic, Jadestone’s focus in 2021
was demonstrating our agility in the face of an improving
oil price backdrop by sanctioning and executing the Group's
biggest ever activity programme. This comprised the Montara
H6 infill well and subsea workovers on the Skua-10 and Skua-11
wells, while we also made progress towards sanctioning our
Akatara gas project and acquired our first producing assets
in Malaysia.
12
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Sustainability and Net Zero target
Sustainability remains one of Jadestone’s core values, and we
continue to spend a significant amount of time ensuring that
our strategy and business model are appropriate and resilient
as we play our part in progressing the energy transition.
We added relevant sustainability experience to the Board
through the appointment in April 2022 of Jenifer Thien as a
Non-Executive Director, and we now also have a permanent
ESG Manager to oversee our sustainability performance and
reporting.
As an upstream oil and gas company in Asia-Pacific, we will
continue to help deliver the energy that the region needs to
ensure there is a just and orderly energy transition, while at
the same time address our own GHG footprint to maintain
our licence to operate and enhance relationships with our
stakeholders, particularly our investors who are experiencing
pressure from their own clients to decarbonise their portfolios.
Our absolute GHG emissions and emissions intensity
increased in 2021 compared to 2020 levels, driven by an
increase in flaring at Montara, due to reliability issues with
the field's gas reinjection system in the first half, and the
drilling and workover campaign in the second half of the year.
Consequently, our 2021 target of 5% reduction of flaring versus
2020 levels was not achieved. A root cause analysis of the
reinjection compressor downtime was undertaken, identifying
potential actions to mitigate the impact of similar events in the
future. Our strategy of acquiring assets in the middle of their
producing lives, means that our GHG emissions intensity may
be higher than our peers. However, we will aim to drive down
emissions, through both improved operating practices as well
as with targeted capital investment.
We have introduced a Net Zero commitment for our business,
aiming to achieve Net Zero Scope 1 and 2 GHG emissions from
our operated assets by no later than 2040. We have also issued
a climate policy statement, setting out our position on climate
change and how we expect our corporate strategy to be
successful during the energy transition. Our climate approach
and Net Zero strategy are covered in more detail on pages
24 to 25 of this annual report. Furthermore, we have also
enhanced on our sustainability reporting, including an
expanded set of voluntary disclosures against the TCFD
recommendations, demonstrating our commitment to
transparency and the sustainability of our business.
COVID-19 pandemic impact
During 2021, the impact of the COVID-19 pandemic continued
to be seen across the business. Around a quarter of the savings
identified during Project Clover, the cost saving and efficiency
programme introduced in the early stages of the pandemic,
have been locked in as permanent reductions to our cost base.
At certain points during 2021, we experienced challenges with
the hard borders between states in Australia, impacting crew
changes and the movement of other personnel and equipment
offshore to Montara and Stag. However, we have managed to
navigate these challenges without any significant compromise
to our high standards of safety and operational efficiency.
We have also continued to support our onshore employees,
with the formation of a COVID-19 management committee,
safe management measures implemented for each of our
offices and clear guidance and financial support for any
employees who either contracted COVID-19 or who were
required to be tested. We have an assistance programme in
place for our Australian employees, and provided additional
support, in the form of counselling, for offshore crews whilst
they navigated the difficult conditions brought about by
COVID-19, including quarantine. There has been regular
communication for all employees working from home, with
a focus on employee safety and well-being. We have also
held regular virtual townhalls to update employees on Group
developments, while a formal employee survey was carried
out at the end of 2021 which provided feedback on Jadestone’s
leadership, communication, values, development and culture.
As the impact of the COVID-19 pandemic has diminished,
lockdown restrictions have been gradually lifted and economic
activity has recovered, such that crude oil and refined product
demand have increased significantly. However, with reduced
investment in the upstream industry over several years, and
OPEC unable to manage market supply, the sector is barely
meeting crude oil demand. As a result, crude oil inventories
have declined below the range of the last five years.
The oil forward curve is currently in backwardation, meaning
the near-term oil market is undersupplied. While this is an
obvious near-term positive for our business, the success of
the longer-term energy transition would be best served in a
more stable investment environment. In the midst of this, we
see a clear role for Jadestone to play, minimising emissions
while maximising recovery from already discovered resource,
providing affordable energy to support Asia-Pacific economies.
13
JADESTONE ENERGY 2021 ANNUAL REPORT
CHIEF EXECUTIVE OFFICER’S REVIEW
Asset review
Montara
At Montara, the focus during 2021 was on the planning and
safe execution of the work programme, which comprised the
drilling of the H6 infill well and the workovers of the two Skua
field subsea wells to rectify well bore integrity issues. Although
the programme took longer and was more expensive than
originally expected, it had a successful conclusion, with the
H6 well in particular delivering impressive rates during initial
testing, and it has already achieved payback in approximately
seven months.
During H1 2021, there was an unplanned shutdown at Montara
to replace a significant number of critical valves on the Montara
Venture FPSO. This 16 day valve replacement work programme
resulted in 102,000 bbls of deferred production.
Our health and safety performance at Montara was
satisfactory, with no fines for regulatory non-compliance
and no reportable environmental incidents. However, we
were above target on both regulatory notices and the total
recordable injury frequency ratio, and this will be an area of
renewed focus during 2022.
At Montara, the innovative offshore roster that was introduced
during 2020 to maintain asset efficiency while meeting
COVID-19 protocols reverted to standard offshore operating
practices in late 2021. Across the period up to the end of
2021, production remained uninterrupted by labour and/or
employee restrictions. Several of our employees also decided
to relocate with their families to Western Australia to mitigate
the impact of fluctuating border controls to their commute.
I thank all of our offshore crew for their resilience, flexibility
and understanding as we have navigated the challenges posed
by COVID-19 to our offshore operations.
No drilling is planned at Montara in 2022. As part of Montara's
three-to-four-year regular maintenance shutdown schedule,
a three-week planned shutdown was originally planned for
July 2022. However, the key workstream during this shutdown
was the planned replacement of the gas turbine core, which
was moved forward to February/March due to the compressor
outage earlier in the year. As a result, the workscope for the
shutdown has been significantly reduced and all remaining
critical maintenance activities can be carried out by a shorter
one-week turn-around which has now been scheduled for
later in 2022. Rescheduling has the added advantage of
avoiding competition for labour during the Australian offshore
maintenance season, and a shorter shutdown allows for
maximised oil production while oil price and premiums remain
high. A small amount of carry-over work may result from this
but to be clear, none of this will impact on the integrity or
safety of the Montara assets.
The next major development activity on Montara is expected
to take place in 2024, with the drilling of up to two further
Skua infill wells.
14
Stag
At Stag, production was broadly flat year-on-year, with natural
decline offset by continued work to address the backlog of well
workovers that had built up in 2020 during the early stages
of the COVID-19 pandemic. We expect there will be a modest
increase in operating expenditure during 2022 due to a once-in-
three-years maintenance shutdown that occurred in April.
In the second half of 2022 we plan to drill two infill wells –
a relatively low risk activity with attractive economics and which
is expected to pay for itself in 18 months or less. The Stag
investment is also efficient from a tax perspective, as the cost
of the wells is immediately tax deductible.
Stag’s low sulphur medium-heavy crude oil continues to be in
demand as a blending agent for bunker fuels in the shipping
industry. As a result, Stag cargoes have continued to attract
strong premiums. Cargo premiums during 2021 ranged
between US$8.30/bbl and US$13.88/bbl above Brent, averaging
US$11.30/bbl. The first Stag cargo of 2022, lifted in early April,
achieved a premium of $23.72/bbl and an overall realisation
of US$128.12/bbl.
Peninsular Malaysia
In August 2021, we completed the acquisition of a collection
of shallow water assets offshore Peninsular Malaysia (the
"PenMal Assets") from SapuraOMV. Inclusive of agreed
adjustments, Jadestone received cash of approximately US$9.2
million on completion – a very attractive outcome for a portfolio
of assets which will be an important contributor to Jadestone’s
reserves and financial performance.
From completion, our focus has been on integrating these
assets and their workforce into our organisation and thoroughly
reviewing the cost base and potential upside opportunities.
We believe there is scope to add incremental value to the
PenMal Assets in the near-term through both reservoir
optimisation and production optimisation/enhancement
activities across the PM323 and PM329 operated licences.
Gas reinjection is expected to be a key part of reservoir
optimisation. Production enhancement has been initially
focused on restoring idle wells to production, while ongoing
production optimisation is focused on both gas lift and topsides
processes. Plus, there are infill development well opportunities
at East and West Belumut and East Piatu fields.
While the performance of the operated PenMal Assets has been
encouraging, the non-operated assets have not performed in
line with expectations. The non-operated assets have been
offline since February 2022 due to the Bunga Kertas FPSO failing
its class inspection and also a blockage in an intra-field pipeline.
We anticipate that these issues will be rectified within the third
quarter of 2022.
The PenMal Assets acquisition provides us with a strong
operating platform in Malaysia, a country that senior Jadestone
employees know well from previous industry roles. Over the
past several months we have been reestablishing contacts
across the country’s upstream sector, which leaves us well
positioned to expand our footprint in the country over time.
Maari
Our planned acquisition of a 69% operated interest in New
Zealand’s Maari project did not complete in 2021. This was
a source of frustration for the team, given the significant time
and effort expended to provide the New Zealand government
with comfort on Jadestone’s operatorship of the project, as
well as the delays in implementing the development activity
we believe is required to maximise the remaining potential of
the asset.
In late 2021, the New Zealand parliament passed the Crown
Minerals Amendment Bill, which, amongst other things,
introduced a trailing liability regime for upstream licensees
in the country. During 2022 year-to-date, we have been working
to address additional questions and requests from New
Zealand’s upstream regulator as it applies the new legislation.
While the timetable to completion remains out of our hands,
Jadestone and the seller, OMV, remain committed to this
transaction.
Reserves
As at 31 December 2021, Jadestone had total independently
evaluated 2P reserves of 44.7 mmboe, compared to 37.1
mmbbls at the end of 2020. The year-on-year increase reflects
the booking of 11.2 mmboe for the PenMal Assets at year-end,
partially offset by production during the year.
Lemang PSC
During 2021, we made significant progress in the pre-
development phase of the Akatara gas project within the
Lemang PSC onshore Indonesia. In December 2021, a gas sales
agreement for the Akatara gas field was signed, a key milestone
less than 12 months after closing the acquisition of the original
stake in the Lemang PSC – testament to the hard work, rigour
and focus of our project team in Jakarta. The development of
the Akatara gas field will not only displace coal in Indonesia’s
energy mix, thereby assisting the transition to a lower carbon
economy, but will also deliver LPG for domestic use in the local
market.
On 24 November 2021, we announced the acquisition, subject
to customary approvals, of the remaining 10% interest in the
PSC. Through this transaction, which is expected to complete
in Q3 2022, our interest in the Lemang PSC will increase to
100%, pre local government back-in rights.
Once onstream, Akatara will support our growth strategy,
while at the same time increasing the proportion of gas in our
production mix. Fixed-price, low-opex gas production provides
a balance to our existing oil assets, and will have the added
benefit of reducing the GHG emissions intensity of the Group's
operations.
In the near-term, Jadestone expects to award the EPCI contract
for the Akatara field development. This will pave the way for
a project sanction decision, which would allow for 16.8 mmboe
of net resource associated with the project to be booked
within Group reserves, and for development activity to
accelerate. The Akatara gas project remains on track for first
gas in H1 2024.
Vietnam
Disappointingly, there was little progress on the planned Nam
Du/U Minh gas development offshore Vietnam during the year.
Where possible, we continued to engage with Petrovietnam
(“PVN”) over the terms of a gas sales agreement, although PVN
has had to prioritise short-term issues caused by a combination
of COVID-19-induced subdued energy demand and costly gas
imports indexed to crude oil.
Nonetheless, the compelling logic for the development of
the Nam Du/U Minh gas discoveries is understood by all
key stakeholders in the project, including the Vietnamese
government and PVN. Recently, we have engaged directly with
the government in an attempt to move the project forward.
We believe that development of the Nam Du/U Minh gas fields
will increase Vietnam’s energy independence, reduce energy
import costs, support the country’s growing economy, and
assist in the country’s energy transition following Vietnam’s
recent commitment to carbon neutrality by 2050.
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15
JADESTONE ENERGY 2021 ANNUAL REPORT
CHIEF EXECUTIVE OFFICER’S REVIEW
Financial results review
In 2021, production averaged 12,545 boe/d, in
line with guidance and approximately 10% higher
than 2020, reflecting the initial contribution
of the acquired PenMal Assets and the impact
of the Montara activity campaign towards the end
of the year.
Sales volumes in 2021 totalled 4.6 mmboe, an increase of
10% on 2020. The Group realised an average oil price of
US$74.34/bbl during the year, compared to an average Brent
price of US$70.94/bbl. The average realised oil price in 2021
represented a 66% increase on 2020, as oil prices rose in line
with a recovering global economy. With no hedged barrels in
H2 2021 or beyond, the full benefit of higher oil prices has been
accruing directly to the Company and its shareholders. As a
result of the increase in sales volumes and higher realisations,
the business generated US$340.2 million in net revenue, an
increase of approximately 56% on 2020, and a record for the
Group.
Reported production costs excluding depletion, depreciation
and amortisation, were US$206.5 million in 2021, a significant
increase on 2020 primarily due to the subsea workovers on
the Skua wells, the initial contribution of the production costs
associated with the PenMal Assets acquired during the year,
a rephasing of costs from 2020 due to the Project Clover
initiatives, adverse exchange rate moves and higher repairs
and maintenance spend at Montara and Stag.
On an adjusted basis, which excludes workovers and
non-recurring items, unit cash operating expense1 was
US$26.22/boe for 2021, which was within the guidance
range set at the beginning of the year.
Workover expense will be significantly reduced in 2022, albeit
the impact on reported production costs will be partly offset
by a full-year contribution to from the PenMal Assets.
Adjusted EBITDAX1 was US$157.9 million, excluding the Skua
workovers in 2021 which will not be repeated in 2022. The
Group reported a loss after tax of US$13.7 million, a significant
improvement from the 2020 loss after tax of US$60.2 million,
even before taking into account the Skua workovers.
We generated US$96.6 million of cash flow from operations
before working capital changes. During 2021, our capital
expenditure totalled US$56.0 million, the majority of which
comprised the costs of drilling the H6 infill well on the Montara
field.
In early 2021, the Group made the final scheduled payment
on its reserves based loan, at which point the Group became
entirely debt free. Dividends paid during the year totalled
US$7.7 million, representing the final portion of the Company's
maiden dividend and the interim 2021 dividend.
Overall, net cash increased by US$35.7 million, or 43%,
during the year, resulting in a year-end net cash position
of US$117.9 million.
1 Unit cash operating expense and adjusted EBITDAX are non-IFRS measures and are explained on pages 72 to 73.
16
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Outlook
2021 was a year when we delivered on our growth strategy
through the Montara activity programme, the PenMal
Assets acquisition and significant progress on the Akatara
gas development. Combined with recovering oil prices,
this delivered a significant increase in our cash position,
underpinning 2022’s activity and also strengthening our ability
to execute further inorganic growth in the future.
We remain confident that as the energy transition accelerates,
there will be further opportunities to leverage our skillset
to acquire upstream assets with upside potential through
reinvestment and performance optimisation. We need to show
patience and stick to the rigorous investment principles that
have been the bedrock of our success to date. Going forward,
the GHG profile of upstream assets will become an increasingly
important factor in our business development activities.
When reviewing growth opportunities, we are seeing
increased regulatory scrutiny in Australia and New Zealand
on the funding of decommissioning obligations, which is
already slowing the disposal of assets from major and large
independent upstream companies. We will work creatively
to find common ground with regulatory authorities on our
approach to decommissioning funding, although going forward
this is likely to be a more important consideration in the
regulatory approval process than it was in the early stages
of our growth.
Production in the first five months of 2022 has been impacted
by the previously announced unplanned compressor outage
at Montara, and a temporary shut-in of the non-operated
assets in Malaysia due to class recertification issues with the
leased FPSO. As a result, production in the first part of this year
has averaged c. 15,700 boe/d, although in May we have seen
production rates return closer to 17,000 boe/d. We therefore
still expect 2022 average production to be within the 15,500 -
18,500 boe/d guidance range.
The final outcome for 2022 will be determined by ongoing
activity to handle increased gas volumes at Montara (which
longer-term may result in the installation of additional
compression on the FPSO), the timing for re-start in production
from the non-operated Malaysia assets and the impact of the
Stag infill drilling programme in the second half of the year.
It is worth noting that additional compression at Montara will
not only increase oil production, but also allow for more gas
to be reinjected into the Montara field, thereby reducing the
amount of gas being flared.
The conflict between Ukraine and Russia has led to significant
volatility in oil prices during the first half of 2022. With oil prices
averaging over US$100/bbl year to date and the forward curve
above US$100/bbl to the end of 2022, Jadestone is set for a
second consecutive year of meaningful cash generation.
This cash flow outlook, allied to Jadestone's already robust
financial position, has allowed us to propose a final 2021
dividend of US$6.25 million, which is a 25% increase on the
second interim 2020 dividend paid in June 2021.
During 2022, we intend to redouble our focus on safety, and
strive to deliver an improvement on our outcomes in 2021.
This is a core focus for the leadership team during 2022.
Finally, but perhaps most importantly, the Net Zero target that
we have committed to, as well as the focus on reducing our
GHG footprint, provides clear evidence that we take climate
change seriously and we intend to play a positive role in the
energy transition. We believe these goals and growing our
business are not mutually exclusive aims, given our focus
on maximising recovery from existing fields over time and
increasing the weighting of gas in the portfolio. We believe this
strikes the right balance in delivering secure and affordable
energy in parts of Southeast Asia, where either an energy
shortage exists or where coal may be used as an alternative.
A. Paul Blakeley
Executive Director
President and Chief Executive Officer
17
JADESTONE ENERGY 2021 ANNUAL REPORT
MARKET OVERVIEW
Brent oil price chart
l
b
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$
S
U
140
120
100
80
60
40
Actuals
Forward
Jan 21
Mar 21
May 21
Aug 21
Oct 21
Jan 22
Mar 22
May 22
Aug 22
Oct 22
Dec 22
Source: Bloomberg, 30 May 2022.
Market overview
Our Australian oil production has historically sold at
a premium to Brent. Stag crude cargoes sold in the range
of US$8.30 – 13.88/bbl premium during 2021, with the
crude continuing to be in high demand given its low sulphur
content, which makes it an attractive blend choice for marine
fuels. Montara premiums have also started to recover from
their pandemic lows, with the fields' crude selling for a
premium of US$0.43 – 2.94/bbl to Brent during 2021.
We have also seen our oil production from our recently
acquired PenMal Assets selling at a premium to Brent.
In 2022 year-to-date, premiums have continued to
strengthen: the Tapis premium to Brent (which is the basis
for the pricing of Montara and the PenMal Assets oil sales)
averaged US$6.47/bbl in May, while the Stag April 2022 lifting
was agreed at a premium of US$23.72/bbl.
Oil markets
During 2021, the global economy continued its recovery from
the initial impact of the COVID-19 pandemic, boosted by a
roll out of vaccines and the gradual relaxation of lockdown
restrictions around the world. While this wasn’t geographically
uniform, it resulted in a broad-based increase in global
economic activity during the year, which had a commensurate
positive impact on demand for oil.
The International Energy Agency (“IEA”) currently estimates
that oil demand in 2021 was 97.5 mmbbls/d, compared to
91.9 mmbbls/d in 2020, an increase of 5.6 mmbbls/d, or 6%.
The IEA also estimates that demand will increase further in
the near-term, averaging 99.4 mmbbls/d in 2022. This increase
in demand has not been matched by supply, chiefly due to a
measured pace of increase from the OPEC+ group of countries,
gradually restoring output from the pandemic cuts in 2020,
and a general trend of under-investment globally over the last
several years.
As a result, total oil stocks (crude and products) declined
significantly in 2021 and continued this trend in 2022. At the
end of March 2022, OECD stocks were significantly below their
five-year average, according to the IEA. Oil prices reacted to this
mismatch between demand and supply by averaging US$70.86/
bbl in 2021, compared to US$41.96/bbl in 2020. Prices have
risen further still in 2022 and spiked in early March 2022
following Russia's invasion of Ukraine. For the first four months
of 2022, Brent oil prices averaged US$107.72/bbl. As at 30 May
2022, the oil futures strip was implying that Brent oil prices will
stay above US$65/bbl through the current decade.
18
Asia gas supply and demand outlook
Total Asia gas demand
Asia gas output1
Gap between regional supply
and demand to be filled by new gas
developments and LNG imports.
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2020
2025
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Source: Wood Mackenzie.
Gas prices
Natural gas currently makes up a modest proportion of
Jadestone’s production and revenues, with approximately 1,000
boe/d net of gas production from the PM329 PSC offshore
Malaysia. The price of this gas is linked to fuel oil prices.
Benchmark global gas prices rose significantly in 2021, as
economies and energy demand recovered from the COVID-19
pandemic, while supply lagged behind due to a prolonged
period of underinvestment by producers over the past several
years. Low European gas inventory levels, adverse weather
conditions on the continent for renewable energy output
and a move away from coal-fired plants meant significant
competition for natural gas supplies during 2021. Prices rose
sharply in early 2022, immediately before and after the start
of conflict in the Ukraine, given Russia’s historical importance
as a gas supplier to Europe.
Given the global competition for gas, Asian gas prices have
followed European prices higher. In particular, gas import
prices into Vietnam, which are linked to the price of oil, have
also significantly increased over the past year. This enhances
the attractiveness of the Nam Du / U Minh project, which would
not only supply gas to Vietnam at prices considerably less
than what the country is paying for gas imports now, but also
provide domestic energy security relative to potential import
shortages in the future.
Asia-Pacific Energy Markets
The Asia-Pacific region, led by China, continues to be the main
driver of global energy demand. According to the BP Statistical
Review of World Energy 2021, Asia-Pacific comprised 46% of
global primary energy consumption in 2020, with regional
demand increasing by 3.3% per annum between 2009-19, the
highest rate of all regions. Furthermore, the IEA projects that
Asia-Pacific’s share of energy consumption will stay above
40% by 2050 in several climate scenarios.1
Crude oil is a global commodity, with the characteristics of
the crude and its price being primary drivers of purchasing
strategies amongst oil consumers in Asia-Pacific. However,
security of supply is becoming an increasingly important
factor, with crude oil consumers in the region spreading their
imports out over several countries to avoid dependency on any
particular producer. In this context and to maximise economic
output, Jadestone anticipates that many countries in Asia-
Pacific will continue to promote and support their domestic
upstream industries, which is complementary to Jadestone’s
strategy of maximising the output from existing oil fields.
Despite increasing globalisation of gas flows in recent decades,
a significant proportion of global gas production is consumed
either domestically or regionally. According to Wood Mackenzie
(see chart above), Asia-Pacific’s gas demand is expected to
increase significantly by 2040. At the same time, regional supply
is expected to decline. This gap will be partially filled by LNG
imports, although development of regional gas resources will
be important to meet demand, as well as ensuring that Asia-
Pacific energy security isn’t undermined. Jadestone intends to
capitalise on this trend of maximising regional gas production,
by commercialising the existing gas resources in its portfolio,
as well as more broadly increasing the weighting of gas in its
portfolio over time.
1
International Energy Agency | World Energy Outlook 2021, page 322.
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JADESTONE ENERGY 2021 ANNUAL REPORT
CHIEF EXECUTIVE OFFICER’S REVIEW
Mergers and acquisition ("M&A") activity and the
energy transition
There is now an established trend of large, publicly listed, oil
and gas companies disposing of mid-life/maturing assets as
part of their energy transition strategies, which see upstream
portfolios funding the growth of low-carbon investment.
While these assets may not be material to larger companies,
and therefore may not warrant the time or investment to
maximise reserves recovery, reduce costs and reduce GHG
emissions to extend their lives, they are a natural fit for
Jadestone, providing these assets otherwise meet our rigorous
acquisition criteria. According to Wood Mackenzie, in 2021,
24 separate M&A transactions with aggregate spend exceeding
US$30 billion were announced in Asia-Pacific, indicating a
healthy market for M&A in our core area.
Costs and lead times
Fiscal policies enacted by governments to cushion the impact
of COVID-19, as well as supply chain disruptions and strong
consumer growth, have collectively led to a broad-based
increase in inflation through 2021 and into 2022.
During 2021, there was no meaningful sign of cost inflation
in Jadestone’s supply chain. In 2022, we expect that higher
fuel costs will feed through into the cost of logistics support
(principally helicopters and supply vessels) for our Australia and
PenMal Assets. Diesel, the price of which has also increased
significantly so far in 2022, represents a small portion of
our operational expenditure and is mainly used to satisfy
operational power requirements on our offshore assets during
planned shutdowns.
Elsewhere, there are some early signs of cost inflation in the
drilling services sector across the Asia-Pacific region and a
marked increase in lead times for drilling-related consumables,
although this is not anticipated to have a meaningful impact on
the timing of drilling activity on the Stag field scheduled for the
second half of 2022.
Jadestone’s principal currency exposure is from movements
in the Australian dollar against the US dollar. Around 80% of
Jadestone’s Australia operating expenditure in 2022 is expected
to be incurred in Australian dollars. Over the last decade
and a half, a weakening US dollar has tended to be positively
correlated with a strengthening oil price, providing a degree of
natural FX hedging for Jadestone. However, this relationship
has reversed in recent months, although it is too early to say
whether it is part of a sustained trend.
20
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Decommissioning
During 2020 and 2021, decommissioning, and in particular the
ability of smaller companies to take over the decommissioning
responsibilities of larger companies, has attracted greater
scrutiny from regulators in Australia and New Zealand.
This has arisen, in part, due to high-profile cases where the
decommissioning responsibility for upstream assets has been
assumed by the respective government following the financial
collapse of a licensee.
In April 2022, the Australian government enacted a levy on all
oil production in the country to pay for the decommissioning of
the Laminaria and Corallina oil fields, following the collapse of
the field’s 100% owner and operator in 2019. This incident also
led to a tightening in Australia’s upstream decommissioning
legislation, including trailing liability provisions (where previous
licencees remain liable in the event existing licence holders
cannot meet decommissioning obligations) and strengthened
regulatory oversight to reduce the chances of a similar event
occurring again.
In New Zealand, revised decommissioning legislation came
into force in December 2021, introducing, amongst other
things, trailing liability. These changes occurred in response
to the permit owner of the Tui oil field going into receivership
and liquidation in 2019, resulting in the New Zealand
government assuming responsibility for the decommissioning
of the field. The legislative change in 2021 imposes a statutory
obligation on all current and future petroleum licence
holders to decommission their wells and infrastructure,
while also giving the regulator powers to periodically assess
permit and licence holders’ financial capability to meet their
decommissioning obligations.
Jadestone believes that the New Zealand government’s
overhaul of the decommissioning regime is a central
factor in the delays experienced in closing the Maari
transaction. Furthermore, the Group believes the funding
of decommissioning liabilities is becoming an increasingly
important factor in the sale process for upstream oil and gas
assets in Australasia.
The PenMal Assets acquired in 2021 follow a different
model of decommissioning funding. The estimated cost of
decommissioning facilities is funded over the life of field
through an annual payment, which is cost recoverable, with
the estimated cost of PenMal Assets facilities decommissioning
already funded. The cost of decommissioning wells is incurred
as required and is also cost recoverable.
While Jadestone’s business model is focused on prolonging
the life of the upstream assets it acquires, thereby pushing
out the date of decommissioning, the Group takes its
decommissioning obligations seriously, and fully reflects
forecast decommissioning costs when performing the
commercial assessment for potential acquisitions, as well as
for corporate planning purposes. While Jadestone expects
regulators to assess its financial strength as part of the
approval process for new acquisitions, we do not currently
expect this to significantly impair our ability to grow through
acquisition, given our strong balance sheet and the forecast
cash flows from our asset base at prevailing oil prices.
21
JADESTONE ENERGY 2021 ANNUAL REPORT
Safety
Passion
Integrity
Sustainability
Respect
Results-oriented
Balanced portfolio
Value creation
Minimised
environmental
impact
I O N OF STR
A
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E
G
Y
T
U
EXE C
Production growth
Supplier
partnerships
Shareholder returns
Tax payments
to host countries
Cash flow growth
Employee remuneration
and benefits
Deep experience
of Asia-Pacific
upstream industry
Reducing competition
Rigorous technical
approach
Operating capability
Strong balance
sheet
22
Safety
Passion
Integrity
Sustainability
Respect
Results-oriented
Balanced portfolio
Value creation
Minimised
environmental
impact
I O N OF STR
A
T
E
G
Y
T
U
EXE C
Production growth
Supplier
partnerships
Shareholder returns
Tax payments
to host countries
Cash flow growth
Employee remuneration
and benefits
Deep experience
of Asia-Pacific
upstream industry
Reducing competition
Rigorous technical
approach
Operating capability
Strong balance
sheet
Business model and strategy
Jadestone pursues an acquisition led strategy with a focus on mid-life producing assets
and/or discovered resource capable of being commercialised within a short time frame.
The Group’s strategic focus is on select key upstream basins in the Asia-Pacific region.
Target assets are those where Jadestone believes it can create value through additional
capital investment across oil price cycles to unlock reserves upside and improve
operating performance. This is complemented by organic growth activity, principally
through its two gas developments onshore Indonesia and offshore Vietnam, which
Jadestone is aiming to commercialise in the near-term.
Jadestone recognises that it needs to reduce the GHG footprint
of its operations. Over the course of 2021 and early 2022,
work was undertaken on the Group's GHG footprint and the
potential impact on the business of physical and transition risks
associated with climate change. More detail on this process can
be seen in the Sustainability Review on pages 33 to 38 of this
report and in the separate 2021 Sustainability Report.
The outcome of this work was a formal commitment,
announced in June 2022, to reduce Scope 1 and 2 GHG
emissions from its operated assets, and making GHG emissions
an important consideration in its business development
activities. Jadestone has committed to a target of Net Zero
Scope 1 and 2 emissions from its operated assets by 2040,
with a detailed roadmap and interim milestones to be set out
during 2023.
In conclusion, Jadestone believes that it can continue to
execute its strategy and grow its oil and gas production for the
benefit of all stakeholders, while reducing the impact of this
growth on the environment by reducing GHG emissions as low
as reasonably practicable.
Jadestone believes that with the application of its deep
knowledge of the Asia-Pacific upstream oil and gas industry,
a rigorous technical approach, proven operating capabilities,
a strong balance sheet and reduced competition for target
assets, it can execute this strategy successfully and deliver
benefits to all stakeholders.
Jadestone also recognises that the oil and gas industry is a key
source of GHG emissions, the main cause of climate change,
which in turn is having a negative effect on our planet and its
people. As a result, the world's energy mix needs to transition
towards a lower-carbon future, albeit this transition is likely
to be one where oil and gas will remain important components
of the global energy mix until the low carbon energy system
is sufficiently developed.
In this context, Jadestone has assessed whether its current
corporate strategy is suitable and resilient in the face of the
energy transition.
The Group's strategy for maximising reserves from existing
producing oil and gas fields explicitly precludes frontier
exploration, which Jadestone believes is unnecessary in the
scenario where oil and gas demand is declining as low-carbon
energy takes a greater share of the primary energy mix.
The typical profile of Jadestone’s counterparties in asset
transactions are larger upstream companies for whom mid-life
producing assets are natural divestment candidates to fund
their own energy transition strategies. As a result, the energy
transition is likely to result in more opportunities coming to
market, increasing the probability that the Jadestone's strategy
will be successful.
Jadestone believes that the energy transition should be just
and orderly, with developing and vibrant economies in Asia-
Pacific not being disadvantaged relative to their developed
peers. Through direct employment and contractors, significant
expenditure with suppliers, payments to host governments and
its charitable donations and community outreach programmes,
Jadestone contributes directly to increasing prosperity and
economic growth in its core areas of operations.
23
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Jadestone’s role in
the energy transition
Climate considerations are front and centre of the business strategy
Jadestone recognises the need for action to arrest the impact of
rising temperatures caused by human activities, and specifically
greenhouse gas emissions derived from the production and
use of fossil fuels. We support the view that, as a result, the
world’s energy mix must diversify towards a low-carbon future.
In order to facilitate an orderly and just transition, we recognise
that oil and gas continues to play a role in providing essential
energy until the low-carbon energy system is sufficiently
developed.
In line with the fossil fuel sectoral pathway in the 2021 IEA
report on Net Zero Emissions (NZE) by 2050, Jadestone sees
itself playing an important role in the energy transition,
focused on maximising recovery from existing producing and
discovered resource, rather than engaging in new exploration
and major greenfield development activity.
Jadestone will provide responsible stewardship, deploying
additional capital to maximise reserves recovery, improve
operating performance and reduce GHG emissions and other
environmental impacts, while maintaining a robust financial
framework in order to safely decommission assets in line with
regulatory requirements.
While the upstream GHG emissions intensity of maturing assets
may be relatively high, once under Jadestone’s ownership we
plan to improve the environmental performance of acquired
assets, so they operate with a reduced GHG footprint. We will
work to support these claims with clear quantifiable evidence,
across key areas of impact.
Through the development of domestic gas resource in
South-East Asia, such as our gas projects in Vietnam and
Indonesia, Jadestone will support the energy transition
by displacing coal and/or other high-cost/high-emission
alternatives while supplying the region with local, affordable
energy and contributing to economic growth in the wider
Asia-Pacific region.
Over time, gas will play an ever-increasing role in Jadestone’s
portfolio, underpinned by sound ESG credentials and with
a clear focus on measuring and minimising fugitive emissions.
Mitigating GHG emissions from our upstream operations
will be a key pillar of Jadestone’s strategy and underlines
our approach to managing the climate risk exposure to
the business.
In taking this approach, Jadestone believes that it can continue
to execute on its strategy and expand its production base,
even in scenarios of declining global oil and gas demand,
as maturing upstream assets are released by the majors.
Frontier exploration has always been explicitly excluded from
our corporate strategy – complementing a key finding of the
IEA’s Net Zero Emissions by 2050 report. However, in order
to prolong the life of existing infrastructure and/or existing
producing fields, Jadestone will continue to assess the potential
for near-field tie-back opportunities across its licences.
In summary, Jadestone will play a role in promoting a just and
orderly energy transition, supporting economic growth in the
Asia-Pacific region, while reducing the GHG footprint of its oil
and gas production in support of climate goals and a target of
Net Zero GHG emissions by 2040.
Jadestone will play a role in promoting a just and orderly
energy transition, supporting economic growth in the
Asia-Pacific region, while reducing the GHG footprint of its oil
and gas production in support of climate goals and a target
of Net Zero GHG emissions by 2040.
24
Net Zero
roadmap
l
A key element of Jadestone’s
Net Zero commitment will be the
development of detailed emissions
reduction roadmaps for its
operated assets.
l
Jadestone will publish a Net Zero
roadmap in 2023 outlining the
following:
–
Scope, baseline and methodology of the
Net Zero target
–
Interim time-bound targets over the short
and medium-term
–
Implementation plans and specific strategies
informed by asset-level emission reduction
frameworks over the short and medium-term
–
An estimate of the capital expenditures
needed to deliver short-term goals
Net Zero
by 2040
Jadestone is committed to achieve
Net Zero Scope 1 and 2 GHG emissions for
its operated assets by no later than 2040.
This commitment covers Scope 1 direct emissions from the
Group's existing operated assets as well as Scope 2 emissions
from electricity purchased for its facilities.
The commitment also covers Scope 1 and 2 GHG emissions
from future acquisitions, where Jadestone becomes operator.
Jadestone defines Net Zero as the state reached when its
GHG emissions are reduced in line with the goals of the Paris
agreement, and any remaining emissions that cannot be
reduced further, are fully neutralised by like-for-like permanent
removals.
Jadestone will achieve this target through a combination of the
following:
l A focus on operational efficiencies;
l A reduction of flaring where Jadestone has operational
control;
l An increasing share of gas in the production mix of
Jadestone’s portfolio over time;
l A focus on mitigating GHG emissions in the planning stage
and in the development of new production streams; and
l For those emissions which are economically or technically
difficult to eliminate, Jadestone will employ nature-based
solutions and offsets, and where offsets are used, will
ensure they are properly measured, verified, and represent
permanent removal of carbon from the atmosphere.
Jadestone intends to review its Net Zero commitment over
time to align with best practice methodologies informed
by climate science.
Jadestone will expand its emissions reporting in the future
to include Scope 3 GHGs, seeking opportunities to reduce
Scope 3 emissions where the Group has direct control and/or
influence.
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JADESTONE ENERGY 2021 ANNUAL REPORT
SUSTAINABILITY REVIEW
Sustainability
review
Sustainability is a core value for Jadestone and is central
to its way of doing business. As a leading oil and gas
development and production company in the Asia-Pacific
region, Jadestone strives to deliver sustainable value for
all of its stakeholders in a safe, secure, environmentally
and socially responsible manner.
To emphasise its commitment to mitigate the environmental
impact of its activities, in 2022 Jadestone announced a target
to achieve Net Zero Scope 1 and 2 emissions from its operated
assets by 2040.
The primary focus of this sustainability
review is the operational performance of
Jadestone's operated assets in Australia,
Stag and Montara.
Jadestone will include GHG emissions and
wider health, safety and environmental
operational data for the PenMal operated
assets in its 2022 reporting, when a full-year
of performance data under Jadestone's
operatorship will be available.
For more details relating to Jadestone's
ESG reporting boundaries, please refer
to the 'Reporting boundaries' section of
the 2021 Sustainability Report.
26
This section is a summary of Jadestone's
2021 Sustainability Report, which is available
at www.jadestone-energy.com and which
provides a detailed overview of the Group's
2021 sustainability performance.
2021 ESG highlights
JADESTONE ENERGY 2021 ANNUAL REPORT
Net Zero by 2040
firm commitment
Zero
violations of anti-bribery
and anti-corruption laws
Zero
lost time injuries
Zero
reportable
environmental incidents
Climate
92%
scenario analysis as per TCFD
local nationals employed
Employee
survey
ESG
oversight
measuring engagement levels
strengthened at Board level
Regulatory
approvals
for new operations
and growth projects
US$25 million
paid in taxes and fees
in Asia-Pacific
30% reduction
GHG data
Oil-In-Water concentration
increased analysis and reporting
Five-fold
increase in funding for
community programmes
Fugitive
emissions survey
piloted at Stag
Apprentice
programme participation
27
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28
Jadestone’s ESG framework
As a responsible upstream operator, Jadestone contributes
to an orderly energy transition by helping to meet regional
Asia-Pacific energy demand whilst minimising the environmental
footprint of its operations. In doing so Jadestone aims to bring
positive social and economic benefits for its stakeholders, local
communities and people associated with its operations.
Jadestone supports the UN Sustainable Development Goals ("SDGs"),
which aim to address global challenges such as poverty, inequality
and climate change.
Strategic pillar
Environment
Social & human capital
Leadership & governance
ESG
aspiration
l Targeting Net Zero by 2040
through advancing GHG
reduction initiatives for own
operations in support of the
aims of the Paris Agreement
l Delivering improved
environmental performance
compared to previous
operator of acquired assets
l Delivering operational
excellence through robust
environmental management
practices
l Fostering community
l Robust governance on
prosperity around own
activities, including advancing
sustainable development,
livelihoods, good health and
well-being
l Providing productive
employment, championing
worker health, safety and
well-being
l Supporting governments
in achieving the UN SDGs
by aligning priorities and
accelerating action
ESG issues
l Excellence in business
ethics and commitment to
transparency
l Resilient business model
l Meeting energy demand
in the most efficient and
sustainable way
Material
topics
l Environmental management
l Stakeholder engagement
l Leadership and governance
l GHG emissions
l Occupational health and
l Climate change and business
l Emissions and discharges
safety
model resilience
l Workforce management and
l Business ethics and
diversity
transparency
l Regulatory management
l Asset integrity and critical
incident management
UN SDG
alignment
Informed by IPIECA1 guidance, Jadestone believes it can support several of the
UN SDGs, either through its core business or through community engagement
initiatives. These UN SDGs are outlined below and their associated impact
pathways reflected within Jadestone’s ESG aspiration.
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IPIECA's SDG Roadmap for the oil and gas sector.
29
JADESTONE ENERGY 2021 ANNUAL REPORT
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Material ESG topics
Materiality assessment process
For the third consecutive year, Jadestone conducted an
assessment of its most material ESG topics. This year it has
consulted the latest Global Reporting Initiative ("GRI") 11: Oil
and Gas Sector standard when undertaking the assessment in
an effort to communicate its impacts in a manner that is more
useful and relevant to its key stakeholders.
Jadestone defines material topics in the context of ESG
materiality assessments as those issues, that in the view of
the Group and its external stakeholders, have the potential to
significantly affect the Group's sustainability performance and
therefore, affect stakeholder assessment, views and decisions.
2021 material topics
The 11 material topics, listed on the preceding page, resulted
from the materiality assessment and form the basis of this
report. The topics have been informed wherever possible
by the likely material topics ("LMTs") as per the GRI11 sector
standard, while also using the Sustainability Accounting
Standards Board ("SASB") Oil & Gas – exploration & production
standard where GRI could not be matched against Jadestone’s
ESG impact. In the absence of guidance from either framework,
Jadestone developed its own approach in consultation with
subject matter experts and based on industry practice.
In addition to the 11 material topics areas, such as
decommissioning, waste, biodiversity, community engagement
and modern slavery were discussed in the context of
stakeholder expectations and increasing societal significance.
These topics were not deemed significant for the period of
2021, however, they remain monitored closely as Jadestone's
operational footprint continues to expand.
ESG materiality assessment process
1
Identify key ESG
topics relevant to
the industry as well
as Jadestone's
operating context
2
Review 2020
material topics in
the context of the
new GRI sector
standard
3
Identify ESG
expectations of key
stakeholders
4
Integrate feedback
from subject
matter experts
External and
internal context
review
Mapping
Jadestone’s 2020
material topics
against the
GRI 11 standard
Ongoing
stakeholder
engagement and
targeted ESG
sessions & surveys
Cross-functional
workshops
ensuring country
perspective
5
Prioritise impacts
for reporting in
Executive
Leadership
workshop
Updated 2021
material topics
based on
significance to the
business and key
stakeholders
30
Governance
Strategy
Risk
management
Metrics
and targets
Climate change and
business model resilience
Climate change and energy transition represent a paramount challenge for the
energy sector and society at large. Jadestone continues to assess the associated
risks and opportunities, chartering a resilient path for its business through
the energy transition. This section has been structured in accordance with the
recommendations of the Task Force on Climate-Related Financial Disclosures.
Governance over
ESG and climate
Jadestone considers climate change and the transition to
a low-carbon future as a key material risk to the business.
As such, responsibility for the governance of climate change-
related risks and opportunities within Jadestone rests with the
Board of Directors. Jadestone’s Board closely monitors climate-
related risks and opportunities and engages with management
to ensure that careful consideration is given to relevant climate
change issues affecting the Group. The Board considers
climate change impacts upon material matters such as capital
expenditure, budgeting and overall corporate strategy.
Jadestone is continuously strengthening the Board’s subject-
matter expertise on climate change and wider ESG issues
through engagement with external stakeholders and issue
experts, ongoing research and regular discussions and debate.
Furthermore, monthly ESG briefings and specific ESG materials
that support Board meetings have been broadened to ensure
that Board decisions are further informed by useful ESG data
and analysis.
Board 2021 ESG & climate curriculum
1
ESG fundamentals
u ESG and corporate sustainability topics most material
to oil and gas
u Emerging ESG trends
u Leading ESG frameworks of importance to oil and gas
2
Climate change and energy transition
u Climate fundamentals: the science, influential reports
and developments
u Energy transition and associated risks & opportunities
for oil and gas
u Climate action to fulfil growing expectations and
regulatory demands
3
ESG and climate governance
u Director's duties and legal obligations
u Best practice governance principles
u Governance model for Jadestone
31
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To reflect the increasing importance of climate change-related
risks and opportunities, in tandem with a wide array of ESG
topics, Jadestone’s Board undertook an initiative in 2021 to
update the Board Charter, as well as the terms of reference of
the various committees. This step ensures climate change and
wider ESG considerations are given greater prominence across
all Board activities and committees.
At Jadestone, ultimate responsibility and accountability for
the Group's approach to climate change lies with the CEO. The
CEO is responsible for the identification and assessment of
risks and opportunities, defining the strategy and approving
action plans suitable to control and mitigate the identified risks,
which include climate change-related risks. He is supported
by the Climate Change Working Group and the ESG Lead as
a Climate Risk owner, and engages fully with the Board on all
actions related to climate change and the energy transition.
Climate and ESG performance targets form part of executive
performance plans, which cascade from the CEO through to the
executive leadership team and down further through relevant
functions in the organisation.
Jadestone has allocated internal resources to manage the wide
array of climate change issues (as well as other material ESG
topics), including ESG Lead, Legal and Regulatory team, Investor
Relations Manager, Country Managers, HSE team, Operations,
Commercial and Supply Chain functions. These responsibilities
cover a wide array of matters including emissions reporting
and management, mitigation and adaptation, climate-related
legislation, and GHG-related operational issues. Jadestone's
ESG and climate governance structure is summarised below.
Jadestone's ESG and climate governance structure
Board of Directors
Retains overall accountability for the strategic direction and performance of the Group
and in doing so acts on behalf of its stakeholders
ESG remit: overseeing control and accountability systems designed to ensure appropriate standards are met
in relation to health, safety, environment, and climate-related impacts as well as social responsibility and
governance of the Group.
p
q
Board Committees
Assists the Board to discharge its responsibilities across:
Health, Safety,
Environment and
Climate (“HSEC”)
Committee
Ensures management
has designed and
implemented effective
health, safety, social,
environmental,
and climate risk
programmes, controls
and reporting systems
Governance and
Nomination
Committee
Oversees corporate
governance practices,
reviews membership
and nominations to
the Board and ensures
continued development
programmes are in
place for all Directors
Audit Committee
Remuneration
Committee
Disclosure
Committee
Determines executive
remuneration including
approval of executive
incentive schemes,
which incorporate ESG
performance objectives
Oversees timely and
accurate disclosures
as required to meet
the Group’s legal and
regulatory obligations,
including sustainability
and climate-related
disclosures
Ensures proper and
timely disclosure of
material financial
information and reviews
all material matters
affecting the risks and
financial position of
the Group, including
material climate and
other ESG risks
p
q
Executive Directors: CEO & CFO
Executive Directors hold the ultimate responsibility for the formation, delivery and
execution of the Group's strategy
Ultimate responsibility and accountability for the Group's approach to climate change and
management of ESG risks and opportunities lie with the CEO.
The CEO is supported by the CFO, with particular regard to the growing financial materiality aspects of
climate change and ESG agenda.
p
q
Executive leadership team
The executive leadership team is responsible for the delivery of strategy in accordance
with the requirements of the Board
ESG topics are managed through internal resources, reporting directly to the CEO and providing
updates to the Board on a regular basis. These responsibilities also cover climate risk mitigation and
adaptation, emissions management and other related operational issues.
Climate Change
Working Group
Country HSE
Committees
Country
operational
forum
CSR and HR forum
Enterprise risk
register review
Legal and
governance
forum
32
Strategy
Impacts of climate-related risks and opportunities
Jadestone’s assessment of climate change-related risks and
opportunities are outlined in the following tables, split between
transition and physical risks (and organised according to the
criteria outlined by the TCFD).
Jadestone defined time horizons listed above to help assess
when the risks may initially manifest themselves. Jadestone
continues to investigate and monitor transition risks that in
the short-term and/or further in the future may become of
high relevance to its business, seeking to quantify financial
Time horizons
SHORT-TERM
< 3 years
MEDIUM-TERM
3-10 years
LONG-TERM
> 10 years
impacts wherever feasible to further guide its assessment of
risk materiality.
Each identified risk has been assigned appropriate
management actions, which outline how the Group
manages the potential impacts of climate-related issues
on the business strategy and financial planning. The risk
management methodologies underpinning the analysis
are discussed on page 39.
Transition risk
Timeframe
Potential impact
Management action
Access to finance for
oil and gas projects
becoming more
restricted
Short-term
l Restricted availability of debt and/
or equity financing and resultant
impact on the ability
to fund acquisitions and/or to
fully develop existing assets in
an optimal timeframe
l Higher cost of capital
M&A opportunity
set will increasingly
comprise higher
emission fields
Medium-term l Increased capex required to
manage emissions
l Difficulty in achieving climate
targets
l May exacerbate other transition
climate risks
l Transparent, robust GHG emissions
disclosures
l GHG mitigation incorporated into funding
model
l Prudent financial management (less debt,
more self-funded capital strategy)
l Sustainability-linked financing initiatives,
where cost of funds are linked to ESG
outcomes
l GHG emissions analysis including carbon
pricing impact on economics integral
to inorganic investment strategy
l M&A strategy in line with Jadestone’s
Net Zero commitment
l Focus on improving GHG performance
of fields compared to previous operators
on an absolute/intensity basis
Carbon tax
implemented in host
countries or regionally
Short to
medium-term
l Increased operating cost and/or
l Continue emissions reductions where
tax expense
possible to reduce exposure
l Incentive to reduce GHG emissions
further as economic justification
for investments in emissions
reductions becomes more
compelling
l Monitor policy changes in core region/areas
l Assessment of climate scenario analysis and
impacts built into asset valuations
More stringent
emissions reduction
standards enacted by
governments
Short to
medium-term
l
Increased capex required to
manage emissions
l Curtailed field life if standards
cannot be met
l Emissions reduction initiatives and
overarching framework for each asset to
evaluate options
l Monitor and assess regulatory
developments to anticipate exposure
Short to
medium-term
Increased investment
required to implement
lower emissions
technology on existing
and new assets to
meet climate targets
Shareholder activism
on climate grounds
Short to
medium-term
l Increased capex and/or operating
l Develop emissions reduction framework
costs
l Impact on business case and
investor perception
l Capital allocation diverted away
from growth options and/or
shareholder returns
for each facility to strategically plan capex
investment and operating cost
l Staged approach to mitigations, informed
by a marginal abatement cost curve
("MACC")
l Group climate strategy out of step
with shareholder expectations
might lead to activism and/or
divestment
l Clear climate strategy and Net Zero
commitment, underpinned by well-defined
short and mid-term targets
l Proactive shareholder engagement, clear
l May result in significant downward
messaging and reporting on Net Zero target
pressure on the share price
l Regular climate scenario analysis
Decrease in
hydrocarbon price due
to the impact of the
energy transition on
supply and demand
Medium to
long-term
l Undermines investment case and
strategy
l Negative impact on share price
l Potential to accelerate repayments
on any outstanding debt
l Focus on Southeast Asia market, where
energy demand is projected to increase
according to most forecasts
l Regular climate scenario analysis that
stress-tests the Group's portfolio under
most stringent climate scenarios
33
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Transition opportunity
Timeframe
Potential impact
Management action
Opportunity to serve
major Asia-Pacific growth
markets from existing mid-
life assets
Short to
medium-term
l Asia-Pacific markets receive crude
oil and natural gas from existing
fields that are maximised for
production whilst ensuring that
associated GHG emissions are
minimised
l Jadestone as an operator of choice
in the region
l Clearly defined business strategy that is
centred around mid-life assets, which,
prioritises improved environmental
outcomes
l Focus on improving emissions
performance of fields compared to
previous operators on an absolute/
intensity basis
l Net Zero strategy with interim targets
New business
opportunities presented by
energy transition
Medium to
long-term
l Opportunity to diversify and
expand into technologies that
stand to benefit from the energy
transition
l Monitoring of new technologies and
business ventures in core regions
looking for competitive returns
compared with core business
l Engagement with industry associations
and regulators on energy transition
Physical risk
Impact
Response
Acute risks (driven by climatic events)
Physical risk to offshore facilities
due to an increased frequency of
tropical cyclones associated with
climate change
l Physical risk (damage) to facility
l Increased weather down time
Short-term:
l Site evacuations due to cyclones are governed
by Jadestone’s facility specific cyclone response
plans, regardless of the frequency of events
Medium to long-term:
l Extra downtime factored into financial planning
or mitigating investments.
l Use of up-to-date climate modelling for risk and
design assessments
Physical risk to supply chain and
logistics due to tropical cyclones,
coastal and pluvial flooding,
extreme heat and water stress
associated with climate change
l Delay in receiving supplies,
materials and equipment
Medium to long-term:
l Increased costs and mitigating investments
l Increased cost of logistics services
factored into financial planning
l Contingency planning
Chronic risks (driven by longer-term shifts in climate patterns)
Workforce health affected by
increase in extreme heat days
associated with climate change
l Increase in worker stand down
time
Short-term:
l Working in extreme heat is currently managed
l Possible increase in first aid cases.
under existing HSE plans
Medium to long-term:
l Extra downtime or additional manning can be
factored into financial planning
34
Business resilience: climate scenario analysis
While some impacts of climate change are apparent in the
short-term, its most significant effects are likely to emerge
over the medium to longer-term, and their exact timing and
magnitudes are uncertain. To help explore potential effects of
climate change on Jadestone's business, corporate strategy and
financial performance across those longer timelines, Jadestone
commissioned a specialist advisory firm to develop a credible
methodology for assessing the resilience of its portfolio to risks
related to the transition to a low-carbon future, in line with the
TCFD recommendations.
Jadestone then undertook a quantitative scenario
analysis, testing the Group's portfolio1 against a range
of plausible and robust scenarios, including a 1.5°C scenario.
The underlying assumptions and the results of the modelling
are discussed below.
Methodology
Out of the seven transition risks identified and listed on the
preceding pages, the climate scenario approach covered two
key risks identified as most likely to impact Jadestone’s financial
performance due to the transition to a low-carbon future:
(i) possible changes to the price of hydrocarbons due to the
energy transition’s impact on demand and supply, and (ii) the
impact of tighter carbon-related regulations through additional
carbon taxes.
Demand scenarios described by the International Energy
Agency ("IEA") in its 2021 World Energy Outlook ("WEO") formed
the basis for the analysis, offering the necessary granularity
of underlying data to run a robust quantitative exercise, while
representing a “gold standard” among investors, policymakers
and other key stakeholders.
The use of the IEA scenarios also enables some level of
standardisation of stress-testing and more appropriate
comparisons between companies. The specific scenarios
discussed here comprise the following:
l
Stated Policies Scenario ("STEPS"), which assumes
policies and targets already announced by governments
are enacted, but that there is no further policy
development on climate change beyond this, and
estimates an average temperature rise of 2.7°C by 2050;
l Announced Pledges Scenario ("APS"), which assumes
full implementation of countries’ pledges announced
under the Paris Agreement and updated ahead of COP26
in Glasgow, and estimates an average temperature rise
of 2.1°C by 2050; and
l Net Zero Emissions Scenario ("NZE"), which sets out
a narrow but achievable pathway to reach Net Zero
emissions by 2050, and projects a 50% chance of limiting
global temperature rise to 1.5°C by 2050 without a
temperature overshoot.
STEPS is underpinned by policies and targets already
announced by governments and therefore represents the
current best external estimate of oil supply and demand
trends, and was therefore utilised as Jadestone’s base case for
the purposes of modelling the impact of lower-demand in the
APS and NZE scenarios2.
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The IEA’s scenarios represent a range of possible outcomes
for future demand for oil and gas, globally and in the Asia-
Pacific region, through to 20403, as depicted in the charts
on the following page. The IEA’s NZE, released for the first
time in 2021, reflects a rapid decline in fossil fuel demand,
an accelerated deployment of low-carbon technologies and
significant behavioural changes that reduce energy use.
The methodology went beyond the demand assumptions
inherent in the IEA’s scenarios and included assumptions
on how the upstream industry might respond to the energy
transition and how this could impact supply. This included
a view on industry indiscipline, which may lead to suppliers
aggressively competing for market share, and a view on
the disruptive impact of the COVID-19 crisis on investment
levels and production decline. The model then combined
demand and supply-side assumptions to develop a robust
understanding of how hydrocarbon prices in different markets
might be impacted (see Figure 5 on page 36).
1 Current producing assets as well as future committed assets and developments have been included.
2 STEPS specifies oil price forecasts in real terms for 2030 and 2050. Annual oil price forecasts in the intervening years were estimated by Jadestone’s
climate advisory firm, with oil prices in the years prior to 2030 estimated by Jadestone based on consensus oil price estimates derived in January 2022.
3 The analysis was limited to 2040 due to Jadestone’s production projections currently having a similar cut-off point.
35
JADESTONE ENERGY 2021 ANNUAL REPORT
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Future demand for oil and gas, according to IEA scenarios
Figure 1
World oil demand in alternative
scenarios
Figure 2
World gas demand in alternative
scenarios
d
/
b
m
120
100
80
60
40
20
0
m
c
b
6,000
5,000
4,000
3,000
2,000
1,000
0
2020
2025
2030
2035
2040
2020
2025
2030
2035
2040
STEPS
APS
NZE
STEPS
APS
NZE
Figure 3
Asia-Pacific oil demand in alternative
scenarios
Figure 4
Asia-Pacific gas demand in alternative
scenarios
NZE does not include gas demand forecast for Asia-Pacific
d
/
b
m
45
40
35
30
25
20
15
10
5
0
1,400
1,200
1,000
m
c
b
800
600
400
200
0
2020
2025
2030
2035
2040
2020
2025
2030
2035
2040
STEPS
APS
NZE
STEPS
APS
Figure 5
Oil prices in alternative demand and supply-side scenarios
)
l
a
e
r
0
2
0
2
(
l
b
b
/
$
S
U
90
80
70
60
50
40
30
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
STEPS (central)
APS (central)
APS (APD)
APS (II)
NZE (central)
NZE (APD)
NZE (II)
Source: IEA, Jadestone analysis.
36
Beyond the impact on commodity prices as a result of reduced
demand (in APS and NZE), Jadestone also considered the effect
that potential carbon taxes within the various jurisdictions of its
operations might have on its portfolio.
This allowed an estimation of how carbon taxes could differ in
certain climate-related scenarios from business-as-usual tax
assumptions and thus isolate the effect of the climate scenario
on carbon taxes for different geographies.
Results
Jadestone defines financial resilience as the ability to fund
planned activity across its existing portfolio in periods of lower
oil prices without compromising the Group's financial strength.
In practice, this means generating sufficient cash flow from
its assets to fund, along with existing cash resources, planned
operating and capital investment and delivering acceptable
returns. Jadestone adopts a flexible financial framework,
assessing planned activity over a multi-year period and the
associated funding requirement.
As a result, and in the context of the climate scenario analysis,
Jadestone believes that operating cash flow is the most
appropriate metric on which to judge resilience, as this will
directly impact its ability to fund planned activity.
The impact on operating cash flow of the climate scenarios is
displayed in the table on page 38, split out over the short-term,
medium-term and long-term time periods.
Climate scenario methodology – underlying assumptions
1
Energy transition risks most likely to impact Jadestone’s asset valuation:
l Changes to the price of hydrocarbons due to the impact on demand and supply in the energy transition
l Additional direct carbon costs
2
Scenarios: demand-side assumptions
l
STEPS as demand base case scenario with short-term pricing alignment using third-party estimates
3 Modelling industry response: supply-side assumptions
l Central - industry remains disciplined and new production comes online as required to meet projected
demand under steady change rates
l Accelerated Production Decline ("APD") - pull-back in investment and a subsequent accelerated decline in
productive capacity
l
Industry Indiscipline ("II") - suppliers compete aggressively for market share, leading to a minimised
supply-demand gap and even surplus on some occasions
4
Translating the impact of demand and supply scenarios on hydrocarbon prices
l
The impact on hydrocarbon prices was modelled in the form of price deltas to isolate the effect of
the energy transition on hydrocarbon prices from other assumptions
5
Tax on carbon emissions
l Based on historical GHG emissions and the IEA’s views on carbon tax developments across jurisdictions
and scenarios
l
Included in the model as an additional operating cost and a proxy for carbon-related risk
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Operating cash flow impact (vs. STEPS central)
Scenario
Short-term
Medium-term
Long-term
Announced Pledges Scenario (Central)
Announced Pledges Scenario (AD)
Announced Pledges Scenario (II)
Net Zero Emissions by 2050 Scenario (Central)
Net Zero Emissions by 2050 Scenario (APD)
Net Zero Emissions by 2050 Scenario (II)
Low impact
Moderate impact
High impact
<=10%
10-25%
>=25%
Time horizons
SHORT-TERM
< 3 years
MEDIUM-TERM
3-10 years
LONG-TERM
> 10 years
The scenario analysis suggests that Jadestone would see a
negative impact on operating cash flow in most scenarios,
although in the majority of outcomes the impact is either low
or moderate. Only in the most ambitious NZE climate scenario
where industry indiscipline on supply occurs would operating
cash flows be negatively impacted by more than 25%, and only
in the long-term (i.e. more than 10 years from now).
It should be noted that the carbon tax assumptions in the
scenario analysis were applied to an unmitigated GHG
emissions profile of the Group's current asset portfolio, and
therefore do not take into account any actions which may
be taken to reduce or offset these emissions over the time
horizons analysed. Furthermore, lower oil price scenarios may
result in a deflationary environment for Jadestone's purchased
goods and services, which is not reflected in the scenario
analysis, and which may also offset the negative impact
on cash flows.
Over the time periods assessed in the scenario analysis, natural
gas, both through domestic production and imports, is likely
to play an important role as a transition fuel in several Asia-
Pacific energy markets. This trend would underpin Jadestone’s
strategy to increase the share of gas in its portfolio by acquiring
and/or developing regional gas assets. This would increase
portfolio diversification and may reduce the sensitivity of the
Group's financial performance to oil prices.
Furthermore, Jadestone is taking proactive steps to manage
its exposure to climate-related risks, as outlined in its Net Zero
approach on pages 24 to 25.
It should be noted that Jadestone interprets the climate
scenario analysis results as one element of wider internal
strategic discussions.
Overall, Jadestone believes the potential impact on its cash
flows in the climate scenario analysis is manageable and would
not materially undermine the ability to execute its strategy
of accretive growth in the Asia-Pacific region, nor to continue
to create shareholder value.
38
Risk management
The Group manages its principal risks and uncertainties via its
enterprise risk management framework, which incorporates
Jadestone’s Risk Management Policy and risk register matrix.
The framework provides an enterprise-level view of risk,
establishing a systematic process for the identification,
assessment and management of material risks, including
definition of accountability.
The Risk Management Policy is owned by the CEO, who will
delegate responsibility to the CFO, Country Managers, and
functional heads including the Group Operations Manager.
The Board regularly reviews the principal risks and defines
the KPIs based on acceptable risk levels. The Board assesses
material risks quarterly with a full review of the risk matrix at
least twice per year.
Metrics and targets
Financially material climate-related risks, where feasible,
are assigned metrics to allow for risk exposure monitoring.
These include asset and Group level:
l Scope 1 GHG absolute emissions;
l Scope 1 GHG emissions intensity;
l Scope 1 GHG emissions by source;
l Carbon tax in countries of operation; as per current and/or
announced legislation and projecting future pricing;
l Capex and opex associated with decarbonising assets.
Jadestone also monitors its Scope 2 emissions from
electricity used in its offices and is committed to increasing
its understanding of Scope 3 emissions associated with the
activities in its value chain.
Climate-related risks and opportunities are identified, assessed
and managed under Jadestone’s enterprise risk management
framework, and reviewed by the Board as part of the regular
risk review.
GHG emissions metrics are also assessed during new
opportunities’ screening as part of business development
due diligence.
In 2021 Jadestone conducted a detailed transition climate risk
and opportunity analysis, supported by specialist climate risk
consultants. The analysis was carried out at a country-level first,
ensuring that geographical differences/nuances to the energy
transition context were well understood and appreciated
before informing a corporate view of risk exposure. Regional
analysis was followed by a Leadership CCWG workshop, where
the results of country sub-groups were summarised and
analysed from Group-level perspective.
In order to assess the physical risks Jadestone may face due
to climate change, a specialist environmental consultancy was
commissioned to undertake a high-level portfolio screening
and assess the range of potential physical climate-related risks
and opportunities that may be present across a selection of
Jadestone’s current and future assets. The screening covered
key asset types across Jadestone’s portfolio and assessed their
exposure to a set of hazards such as cyclones, extreme heat
and flooding. The methodology applied is described in the Risk
management section of the 2021 Sustainability Report.
For trend analysis of key GHG metrics, please refer to section
Greenhouse gas emissions on pages 42 to 44.
Jadestone is committed to climate-related targets listed
below, which will set it on course to delivering on its Net Zero
commitment:
l Develop a Net Zero decarbonisation plan based on facility
emissions reduction review;
l Undertake a review of GHG emissions across the value
chain (Scope 3) to further underpin GHG data integrity;
l Conduct a fugitive emissions survey at the Montara asset;
l
Incorporate climate-related risk analysis into Jadestone's
investment strategy; and
l Continued improvements across the four pillars of the TCFD
in line with regulatory requirements and best practice.
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Environmental management
Effective environmental management is central to Jadestone operations and goes
beyond the “license to operate” considerations. The Group is committed to ensuring
it acts as a responsible steward over the assets it acquires and develops. It applies a
precautionary principle to its activities and seeks to minimise any negative impacts
on the environment by carefully managing its operational performance through a
set of targeted KPIs. Jadestone is committed, at a minimum, to complying with all
environmental laws and regulations in all the countries in which it operates.
Jadestone’s HSE management system (Australia)
Corporate level
Corporate HSE plan
HSE policy
Legal obligations
Asset level
Environmental impact
statements
Environmental plans
Oil pollution
emergency plans
Safety cases
Environmental risks in Jadestone’s Australian operations are
managed alongside health and safety considerations, through
the overarching Health, Safety and Environment Management
System (“HSE MS”). The system is aligned to the principles of
the ISO14001 standard, ensuring that there are processes
and practices in place to manage environmental impacts, risks
and performance whilst meeting legislative and corporate
requirements. Key roles and responsibilities of implementing
the HSE MS and associated environmental management
tasks include monitoring, auditing, incident preparedness
and response and continuous improvement, are outlined
in comprehensive environment plans developed for each
operational asset in alignment with regulatory context and
legal requirements. In addition, Jadestone applies a
comprehensive compliance assurance programme to
demonstrate that its environmental performance is as
intended.
Despite continual challenges presented by the global
pandemic, Jadestone maintained operational performance
across the key areas of environmental impacts, with zero
reportable1 environmental incidents at its operating facilities
and no environmental high potential incidents recorded during
the reporting period.
As Jadestone continues to expand its business, these
environmental standards, policies and practices are continually
established in alignment with standards of local jurisdictions,
for all operations. Jadestone will continue integrating new
assets into its overarching HSE management framework,
ensuring that a level of consistency across regions is achieved.
Please refer to Jadestone’s 2021 Sustainability Report,
section Environmental management, for further detail on
environmental management activities in support of the
Group's newly integrated operations in Malaysia and future
development in Indonesia.
Environmental management metrics
Unit
2021
2020
2019
Reportable1 environmental incidents
Environmental high potential incident (“HiPO”)
Regulatory enforcements2
Regulatory fines
# per year
# per year
# per year
# per year
0
0
2
0
0
0
1
0
0
0
0
0
1 Reportable refers to an incident relating to the activity that has caused, or has the potential to cause, moderate to significant environmental damage,
whilst not being in breach of the Environmental Performance Outcomes as defined in the Environment Plan for the asset in alignment with the
Australian offshore regulator’s (NOPSEMA) definition.
2 Discussed in section Occupational health and safety.
40
Discharges
and air
emissions
A range of pollution impacts and risks
to water and air are associated with oil
and gas production activities.
Discharges to water
The treatment and discharge of produced water is a key focus
in managing the impact of Jadestone's offshore operations on
the marine environment.
Jadestone’s approach to managing produced water at the
Australian operations is to reduce the OIW content to threshold
concentrations which are below that considered appropriate
under the National Water Quality Management Framework
(ANZECC/ARMCANZ 2000). Discharges of produced water
are routinely measured and evaluated against performance
criteria, as per site environment plans.
In 2021, Jadestone sought to further improve its discharge
quality streams. The target of combined OIW concentration
to be less than 14mg/L across the Australian assets was
achieved and exceeded, with combined OIW at 10mg/L based
on daily averages.
In spite of this positive trend, there was also a period at the
end of the year when OIW concentrations at the Montara
asset were above the desired specifications. In such events,
off-specification water was redirected to settling slops tanks,
allowing discharge water quality to improve. In addition,
engineering evaluation is underway to devise alternative ways
of handling produced water for further improvements in OIW
concentrations in the discharge stream.
Air quality
The main sources of atmospheric emissions during operational
activities include: production gas and flaring, power generation
and process heating, engine exhaust, venting and fugitive
emissions. Measures to limit energy use and GHG emissions
will typically help improve air quality performance. In addition,
air pollutant emissions are kept as low as possible through
management measures such as scheduled maintenance of
equipment and availability of equipment spares. Atmospheric
emissions from Jadestone’s operations in Australia have been
largely stable year-on-year, with the exception of TVOC levels,
which increased slightly in 2021, mostly driven by an increase
in flaring and to a lesser extent, an update to applied gas
density for Montara based on periodic production gas analysis.
Waste management
Waste streams at Jadestone's offshore facilities typically include
putrescible waste and non-hazardous materials such as paper
and cardboard, mixed plastics, wooden pallets and scrap metal,
which are segregated for ease of recycling. Hazardous waste
streams may include fuel, lubricating oils, produced sand and
chemicals associated with operations. These are segregated at
source and stored in clearly marked containers prior to transfer
onshore to Jadestone’s waste management contractor for
recycling, wherever practicable or disposal at a licensed waste
disposal facility.
Jadestone has waste management plans in place for all of
its offshore activities, which detail the waste management
practices during operation.
Air emissions, 2019 - 2021
2019
2020
2021
r
a
e
y
/
s
e
n
n
o
t
1000
900
800
700
600
500
400
300
200
100
0
Produced water metrics
OIW concentrations1
Produced water2
NOx
SO2
TVOC
Unit
mg/L
ML
2021
10.1
2020
14.4
2019
14.7
2,833
3,209
1,866
1 Combined OIW average discharged, based on daily averages from Stag and Montara.
2 Produced water volumes combined across Stag and Montara; Montara facility data available only from Aug 2019, when operatorship was transferred
to Jadestone.
41
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42
GHG emissions
Mitigating GHG emissions from upstream
operations is a key pillar of Jadestone’s
strategy and of its approach to managing
the climate risk exposure of the business.
Direct emissions – Scope 1
The primary sources of GHG emissions from Jadestone
operated facilities result from flaring of excess associated gas
as well as combustion of fuels to power the sites.
When taking over assets from previous operators, Jadestone
identifies and introduces operational efficiency measures
that reduce unnecessary power consumption whilst seeking
opportunities for process adjustments that limit flaring.
During the acquisition of the Montara asset in 2019, a number
of operational issues were identified and corrected allowing
for increased uptime of the reinjection compressor unit and,
which resulted in increased reinjection of produced gas back
into the reservoir. An outcome of achieving improved operation
of the reinjection compressor was a material reduction in GHG
emissions over the operating life of the asset.
This action is representative of the strong management focus
on operational efficiencies and in this instance, related flaring
volumes, a key metric monitored and reviewed frequently
at Jadestone for both emissions and reservoir management
purposes. A listing of current priorities applied at Jadestone
to flaring management is provided below:
l
Improving process stability – focus on process
optimisation: reducing pressure fluctuations reduces
the necessity to flare operational gas for short repetitive
periods.
l Reinjecting gas – strong focus on increasing gas
reinjection capacity to avoid GHG emissions, enhance oil
recovery and preserve reservoir pressure.
l Gas as fuel source – produced gas is used to fuel gas
turbines, which in turn provide power to the facility, thus
reducing the need to purchase and supply diesel for the
operation of plant and equipment.
It is important to note that while the commercialisation of
produced gas for sale to market has been considered as an
additional mechanism for reducing total gas flared at the
Montara facilities, this option is currently not viable due to the
preference for reinjection, and the remoteness of the field and
local infrastructure not available at this time. There is future
potential for gas cap blowdown1 and commercialisation via
soon-to-be developed nearby gas infrastructure.
1 Gas cap blown down involves a shift to gas production as the field
approaches the end of its economic oil-producing life.
GHG emissions
Scope 1 GHG emissions and GHG intensity1,2,3, 2019 – 2021
e
-
2
O
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t
,
s
n
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s
i
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1
e
p
o
c
S
400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0
69
67
81
90
80
70
60
50
40
30
20
10
0
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i
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I
2019
2020
2021
Combustion
Flaring
Venting
Other fugitive
Upstream intensity
Indirect emissions – Scope 2
Jadestone's indirect, Scope 2 GHG emissions account for less
than 1% of its Scope 1 and 2 GHGs combined and result from
the consumption of purchased electricity across its offices.
2021 performance
Overall in 2021, Scope 1 GHG emissions from the
Australian assets, increased by 6%, when compared to 2020.
This increase was driven by the performance of the Montara
asset. Unplanned events related to the reinjection system's
failure in the first half of 2021 resulted in periods of excessive
flaring. Furthermore, the mobilisation of the drilling rig for the
drilling campaign in the latter half of 2021, led to extended
periods of time where Montara operations had to either be
fully shut in or had partial production, without associated gas
reinjection. Volumes flared at Montara increased by
12% compared to 2020 levels.
Consequently, Jadestone’s 2021 target of 5% reduction of
flaring, vs. 2020 levels were not achieved. Investigation into
the root cause of the reinjection system downtime in H1 2021
was undertaken, identifying preventative measures such as
replacement of valves, holding of spares as well as further
reinjection capacity initiatives to be tested throughout 2022.
Daily routine flare management forms a cornerstone of
Jadestone’s operational discipline, illustrated by opportune
maintenance activities undertaken during the drilling campaign
period to avoid even further flaring.
With respect to power generation at the sites in 2021, the
operated assets used 445 GWh of energy, with 88% comprising
of fuel gas, 8% of crude oil and 4% of diesel. This consumption
is slightly reduced from 2020 consumption, and is responsible
for almost 30% of total GHG emissions from upstream
operations.
Diesel use, however, increased by 15%, linked to the
aforementioned events at Montara as well as workover periods
at Stag, resulting in the 5% reduction target not being met.
Review of the GHG intensity metric suggests an increase at
a Group-level, resulting from the aforementioned factors
(drilling programme as well as reinjection compression
unavailability), which also affected production volumes.
GHG emissions intensity of 81kg CO2-e/bbls represents a high
intensity compared to some peers, driven by lower levels of
production volumes against original capacities of the facilities.
Jadestone is committed to proactively managing the carbon
footprint of its assets, seeking to improve the environmental
performance of acquired assets so they can continue to
operate with a reduced GHG footprint.
Outlook
Jadestone is committed to continuously improving its approach
to GHG emissions management and incorporating lessons
learnt from previous years. Jadestone is currently evaluating
emissions reduction options to actively manage its emissions
profile and upstream intensity. Its climate-related targets are
listed in section Metrics and targets, on page 39.
Scope 1 GHG emissions
by gas, 20211
1%
18%
CO2
CH4
N2O
1 Representing 100% operational control of the Australian assets, Stag and Montara.
2
Jadestone assumed operatorship of the Montara asset in August 2019. Data represents CY emissions
for 2019, including those from the previous operator.
3 GHG emissions intensity is defined as Scope 1 emissions over production.
81%
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Streamlined Energy and Carbon Reporting
(“SECR”)
As detailed within the Directors’ Report, the Group has elected
to voluntarily report Scope 1 and 2 greenhouse gas emissions
from its Australian assets and regional offices under the SECR
framework.
The GHG emissions section of the 2021 Sustainability Report
details Jadestone’s approach to managing energy use and
GHG emissions, and discusses some of the energy efficiency
measures taken at the operated sites in Australia.
The data in the below table represents 100% operational
control of Jadestone’s Australian assets, Stag and Montara.
Jadestone has no operations in the UK1, its emissions and
energy use are therefore nil.
Please refer to the About this Report section of the 2021
Sustainability Report for definitions of the GHG methodologies
applied in deriving the figures included within the SECR
disclosures.
Scope 1 and 2 GHG and energy data, 2019 – 2021
Representing 100% operational control, Stag and Montara
Metrics
Unit
2021
2020
20192
Total Scope 1 and 2 emissions from operated entities and offices
Total Scope 1 emissions3
Total Scope 2 emissions4
Total Scope 1 & 2 emissions
tCO2-e
tCO2-e
tCO2-e
295,913
178
296,091
280,328
181
280,509
342,698
(149,417)
163
342,858
(149,580)
Total Scope 1 and 2 emissions from operated entities
GHG Intensity5
kg CO2-e/bbls
81
67
69
Energy use by operated entities and offices6
Direct energy:
Fuel consumption
Indirect energy:
Electricity consumption offices
Total direct and indirect
energy consumption
MWh
MWh
MWh
444,897
462,934
289,579
(198,884)
303
311
240
445,200
463,245
289,819
(199,124)
1 With an exception of 1 employee who is working in home office mode.
2 2019 performance also includes Montara performance data covering the period under the previous operator (Jadestone share is included in brackets,
representing period from August 2019 onwards).
3 Montara data has been retrospectively updated using gas density data sampled in February 2021. Updated global warming potential factors have been
applied to historical data to allow for meaningful comparisons, affect flaring and total Scope 1 emissions.
4 Scope 2 data is location based, using appropriate grid emissions factors.
5 GHG intensity is given as total Scope 1 emissions (tCO2-e) over production (bbls).
6 Direct energy is defined as energy generated onsite by the facility itself. Indirect energy is defined as energy that is generated offsite and purchased by
the Group.
44
Occupational
health and safety
Jadestone is committed to providing a safe and rewarding work environment and
maintaining exceptional health and safety performance throughout all operations and
activities. Putting safety first at all times is one of the core values that underpins how
Jadestone does business and the behaviours it expects from its employees. Jadestone’s
Board-approved HSE Policy and Corporate HSE Plan lay out its philosophy and approach
to health and safety.
HSE management system
In Australia, Jadestone operations are governed by its Health,
Safety and Environment Management System ("HSE MS").
The system comprises elements that conform with IOGP
Guidelines1 as well as ISO 14001:2015 and describes the
standards, procedures and behaviours necessary to achieve
the desired HSE performance and outcomes for operations
in Australia. Respective countries of operations develop their
own HSE management systems, in adherence with the local
regulatory framework whilst maintaining principles of ISO
14001:2015.
2021 performance
Over the course of 2021, Jadestone Australia recorded three
personal injury incidents in its operated assets: one restricted
work case at the Stag operation, and a restricted work case
and medical treatment case at Montara. These personal injury
events are very significant for Jadestone as protection of its
employees is of paramount importance. The injuries were
managed in accordance with the Injury & Illness Management
Procedure, with detailed investigations following that identified
key learnings. In addition, the Group received two enforcement
notices in the course of the year, both in relation to the
Montara asset, discussed in more detail in the 'Occupational
health and safety' section of the 2021 Sustainability Report.
Jadestone is committed to minimising process safety risks to
as low as reasonably practicable levels and operating effective
and reliable emergency response and preparedness systems.
Section Asset integrity and critical risk management in the 2021
Sustainability Report provides a more detailed overview of
Jadestone’s approach.
HSE metrics
Unit
2021
Manhours worked1
Lost time injury ("LTI")
Recordable cases2
Total recordable incident frequency rate ("TRIFR")3
High potential incident (“HiPO”)
HSE audits
Full emergency exercises
Desktop emergency exercises
million hours
# per year
# per year
rate
# per year
# per year
# per year
# per year
3.8
0
3
7.8
0
8
1
4
2020
3.2
0
0
3.15
2
7
1
4
2019
0.21
0
1
12.32
0
8
1
3
1 Manhours represent Jadestone's permanent and fixed term employees as well as contractors.
2 Recordable includes fatalities, major injuries, lost time injuries (LTIs), alternative duties injuries (ADI), medical treatment injuries (MTIs) reported.
3 TRIFR represents total number of recordable incidents recorded against the total hours worked, standardised to one million hours; calculated as
rolling 12 month average.
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Workforce management
and diversity
Jadestone recognises that its success depends on its employees and the contributions
they make. Jadestone’s HR, compensation and performance management practices are
overseen by the Board’s Remuneration Committee and strive to offer equal opportunities,
safe working conditions, competitive terms of employment and comprehensive learning
and development opportunities. With a growing operating footprint in the Asia-Pacific
region, Jadestone’s approach to managing people is reflective of a workforce that is office
and site-based, spanning across a number of geographies and cultures.
Total employees1
2019
183
2020
211
2021
331
Women in Jadestone2
Onshore
Overall
Senior management
Board
32%
16%
28%
13%
Includes permanent employees, contractors and consultants.
1
2 Permanent employees.
46
Local nationals
across regions2
Vietnam
100%
Australia
98%
Malaysia
97%
Indonesia
75%
Singapore
44%
Group
92%
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Jadestone’s
diversity principles:
l Promote a workforce that reflects the diversity
of the communities we serve
Workforce profile and diversity
Jadestone continued its growth in 2021 with the PenMal Assets
acquisition, which is reflected in the permanent employee
numbers for the year increasing by 60%. Jadestone welcomed
108 new permanent and fixed-term employees in August
2021, with the majority of offshore and supply base personnel
engaged on the assets by the previous operator being retained,
while also adding new hires to the onshore team.
l Maintain a work culture that fosters access
and inclusion, with all internal and external
stakeholders treated fairly and with respect
The Group also regularly seeks support from contractors across
a range of disciplines reflecting ad hoc projects and higher
activity levels, engaging 49 contractors in 2021.
l Recruit, develop and manage employees in line
with individual competencies
l Provide a supportive working environment that
is adapted as required to meet the needs of a
diverse workforce
l Adapt and adopt an organisation and work
methods to include everyone
l Commit to a policy of equal employment
opportunity and pay equality
l Maintain a workplace that is free of any
harassment or unfair discrimination with
appropriate avenues for the investigation of
complaints
Jadestone places emphasis on engaging local talent in countries
of Jadestone operations and strong commitment to develop
a workforce that reflects the diversity of the communities it
serves. In 2021, 92% of Jadestone's employees were locals,
exceeding the target of 90%.
Jadestone understands that diversity has many facets and
fosters behaviors of inclusion as far as national origin, race
and ethnicity, religion, gender, sexual orientation and marital
status. Jadestone has a grievance process in place that ensures
that any incidents of discrimination, victimisation, harassment,
or bullying are dealt with appropriately. Jadestone recorded no
such incidents in 2021.
As of 2021, women represent 32% of the total onshore
workforce, but only 16% of total overall workforce which is
reflective of gender diversity being a common challenge for
offshore oil and gas operators. At year-end, 28% of senior
management positions were filled by women.
47
JADESTONE ENERGY 2021 ANNUAL REPORT
SUSTAINABILITY REVIEW
Governance, business
ethics and transparency
Commitment to the highest standards of governance, ethics and integrity is intrinsic
to how Jadestone conducts its business.
Management systems
Strong governance must be supported by enterprise-wide
management systems that document how the business
assesses and controls risks, impacts and threats while
constantly seeking opportunities for improvement.
Jadestone operates a robust risk management framework
that evaluates principal risks and threats affecting the Group,
described in detail in the Strategic Report section of the 2021
Annual Report.
In Australia, the Business Management System ("BMS")
provides for an integrated system and processes that govern
the activities of Jadestone Energy Australia, with the Australia
executive team assuming primary governance. Designed in
accordance with ISO 55001 Asset Management – Management
Systems Requirements, the BMS is structured into three
streams of Lead, Core and Support, that group business
activities critical to execution of business strategy,
as summarised in the diagram on the opposite page.
Jadestone is committed to extending appropriate systems
to new countries of operation, which set out consistent
expectations for its operations when addressing environment,
security, safety, health or social risks and opportunities.
In addition, HSE management systems are developed in
countries of operations to manage impacts and risks, as
described in sections Environmental management and OHS.
Regulatory management and legal compliance
Jadestone is committed to ensuring it complies with all laws
and regulations, be it at a corporate level or operational
level. Legal compliance is facilitated by respective counsels
in countries of operations as well as such regulator-facing
functions as HSE, that ensure compliance with operational
requirements. Jadestone seeks assistance from specialist
law firms on a case-by-case basis and receives regular legal
obligations briefings relevant to its industry and footprint.
Before integrating a new site, legal due diligence is undertaken
in support of timely regulatory approvals for new operations
and growth projects.
Corporate governance
Jadestone believes that an effective corporate governance
framework adds value to its business and enhances
stakeholder confidence in the Group. In 2020, Jadestone
adopted the Quoted Companies Alliance ("QCA") Corporate
Governance Code and since that time has adhered
to its principles.
Jadestone seeks to constantly improve its corporate
governance practices in alignment with the principles.
Its latest compliance statement in respect of QCA Code
principles can be accessed in the Corporate Governance
section of Jadestone’s 2021 Annual Report.
ESG oversight
Jadestone ensures that it has appropriate structures, policies
and procedures in place that provide governance over all
sustainability-related aspects of its activities. In 2021, the Board
reorganised its committees, in order to ensure appropriate
oversight of its ESG responsibilities. Effective 15 December
2021, the mandate of the Health, Safety and Environment
Committee was expanded to include climate-related and
social responsibilities, the Terms of Reference being amended
and the committee’s name changed to the Health, Safety,
Environment and Climate ("HSEC") Committee. Also, the
Nomination Committee's mandate was expanded to include
governance responsibilities, with the Terms of Reference being
amended accordingly and the committee’s name changed to
the Governance and Nomination Committee.
For a more detailed breakdown of Jadestone’s structured
approach to ESG and climate governance, please refer to the
Climate change & business model resilience chapter as well
as the Corporate Governance section of Jadestone’s 2021
Annual Report.
A copy of Jadestone's key governance documents,
including the Articles of Association, the Code of
Conduct and related policies, are available on
Jadestone's website at https://www.jadestone-energy.
com/sustainability-2020/key-policies/ and https://www.
jadestone-energy.com/wp-content/uploads/2021/04/
Jadestone-Energy-Plc-articles-of-association-revised-
211065177v1-Legal.pdf
48
Business Management System - Jadestone Australia
Lead
Core
Support
Operational excellence
Value discipline
People
Stakeholder relations
Risk assurance
Subsurface evaluation
Drilling
Develop
Produce
Abandonment
Legal & tax
Information
Equipment & supplies
Customers
Technical guidance
Business ethics and transparency
Jadestone takes a strong position on ethical matters, with
zero tolerance for fraud, bribery and corruption. Jadestone’s
commitment to integrity and compliance is filtered throughout
the business from a top down approach, with the Board of
Directors laying the groundwork for an ethical corporate
culture. This standard of behaviour is communicated to all
individuals working at Jadestone through the Code of Conduct,
amongst other key policies such as the Anti-Bribery and Anti-
Corruption Policy, Insider Trading Policy and Whistle blower
Policy, which can all be found on Jadestone's website.
The Code of Conduct reflects Jadestone's commitment to a
culture of honesty, integrity and accountability. It condemns
such practices as corruption, anti-trust or any other practices
that may result in violating anti-bribery and anti-corruption
laws. The Group has a set of core values which uphold ethical
conduct – Respect, Integrity, Safety, Results-Orientated,
Sustainability and Passion. All individuals working at Jadestone,
including contractors, are expected to make a commitment to
these values, and to contribute to protecting and enhancing
the Group's reputation. Jadestone’s core values underpin
every aspect of work done within the business, and form the
foundation of the Code of Conduct.
It is the responsibility of all individuals working at Jadestone
to familiarise themselves and comply with corporate business
ethics and anti-corruption policies and procedures through
the Code of Conduct. All of Jadestone's onshore and offshore
employees undertake a mandatory e-learning course on
the Code of Conduct upon commencing their employment.
Employees are required to complete a refresher on the Code
of Conduct every 12 months including confirmation of their
compliance.
Payment to governments
As part of its commitment to transparency and legal
compliance, Jadestone has disclosed all payments made to
governments in all jurisdictions, in accordance with Canada’s
Extractive Sector Transparency Measures Act since 2018.
Following Jadestone’s delisting from the TSX Venture Exchange
in March 2020, this obligation ceased. With Jadestone now
domiciled in the UK, it is committed to reporting payments
to governments as part of compliance with the Reports on
Payments to Governments Regulations 2014 (UK) as amended
in December 2015. In 2021, Jadestone paid US$25 million in
local taxes, fees and royalties in the Asia-Pacific region (see
table below). A complete list of payments is included on page
201 of this Annual Report.
Human rights and modern slavery
Jadestone recognises that modern slavery is a significant
global human rights issue and can take many forms, including
human trafficking, forced labour, child labour, domestic
servitude, people trafficking, workplace abuse and/or other
unethical behaviour. As a UK domiciled entity, Jadestone
is obliged to issue a statement that sets out the steps that
Jadestone has taken as a Group, to ensure no modern
slavery or human trafficking occurs within its supply chains
or business, in compliance with the UK Modern Slavery Act
2015. Its 2021 calendar year statement can be accessed here
https://www.jadestone-energy.com/sustainability-2020/key-
policies/. Similarly, in line with the Australian Modern Slavery
Act 2018, Jadestone’s Australian subsidiaries have submitted
a statement addressing modern slavery risks and the steps
taken to mitigate and eliminate those risks in the context of the
Australian operations and business.
Business ethics metrics
Unit
2021
2020
2019
Number of legal actions for anti-competitive behaviour, anti-trust,
and monopoly practices and their outcomes
# per year
Significant fines and non-monetary sanctions for non-compliance
with laws and regulations
# per year
Confirmed incidents of corruption
Concerns raised by employees in relation to a breach of the
Group's Code of Conduct
# per year
# per year
0
0
0
0
0
0
0
0
0
0
0
0
Payments to governments total
US$, million
25.0
28.7
7.9
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KEY PERFORMANCE INDICATORS
Key performance indicators
Each year, the Board agrees a performance contract with the CEO, which contains key
objectives aligned to the Group's strategic aims, and performance indicators which
measure the degree of success in achieving these objectives.
These key objectives and performance indicators are
cascaded down through the business, ensuring there is a clear
understanding, accountability and alignment among employees
on the strategic aims, how they are measured and how the
outcome will impact annual compensation.
The outcome of the CEO’s 2021 performance contract is
summarised in the following table, with further detail on the
underlying key performance indicators (“KPIs") included below.
2021 KPIs
2021 commentary
Strategic objective: Achieve 2021 operations targets, result: 12.0% out of 30%
Deliver average annual production
and 2021 exit rate according to plan
l Annual production of 12,524 boe/d was within the annual guidance range,
which was recalibrated, with no change in the guidance range, in August 2021
to incorporate the PenMal Assets and exclude any contribution from the Maari
field, given a prudent assessment that this acquisition was unlikely to close
during 2021.
l 2021 exit production exceeded expectations following positive results from the
Montara activity programme, and the initial contribution of the PenMal Assets.
Deliver average unit Group opex
and capital and major expenditures
to plan.
l Unit opex of US$26.22/bbl was within the guidance range.
l Capital and major expenditure was within the revised guidance set out in
August 2021.
Successfully deliver work programmes
and improved performance
l Positive progress made in delivering improved logistics, supply chain and
onshore support.
l Montara facilities uptime improved but fell short of 95% target in Q4 2021.
l Stag field performance held back by COVID-19 related factors impacting
workover activity and workover unit uptime.
Strategic objective: Deliver Improvement in ESG targets, result: 13% out of 20%.
Maintain health and safety
performance at top quartile
Maintain MSCI ESG Rating at BBB but
striving to progress to level “A”
Deliver environmental targets
consistent with improving
performance
Build a strong, diverse and sustainable
organisation
Maintain top quartile
governance standards
l The total recordable injury frequency ratio performance did not achieve
targeted levels.
l MSCI rating suspended following change of parent company due to internal
reorganisation.
l One loss of primary containment incident. Did not meet GHG emissions
reduction target.
l All recruitment, training, apprentice, offshore competency and retainment
targets reached.
l One enforcement notice and General Direction received from Australian
offshore regulator. Statutory audit for 2021 and board performance in line with
expectations.
50
2021 KPIs
2021 commentary
Strategic objective: Per Share Accretive Growth in Asia-Pacific, result 11.5% out of 30%.
Maintain delivery
on strategic objectives
l Completed PenMal Asset acquisition and actively participated in several other
potential asset acquisition processes.
l Completion of the Maari acquisition still outstanding due to regulatory process.
l Achieved key commercial milestones on the Akatara gas development in
Indonesia.
l Progress in the commercialisation of the Nam Du / U Minh fields offshore
Vietnam was hampered by delays in commercial discussions with the
Vietnamese Government.
Complete one or more
new acquisitions
l Completed highly accretive PenMal Asset acquisition, with value creation
>US $4/boe 2P NPV10.
Strategic objective: Create Sustainable Shareholder Value: 14% out of 20%.
Improve share price and implement
dividend strategy
l Share price increased 37% in 2021, but did not meet both absolute and relative
performance targets.
l Second portion of 2020 dividend paid, interim dividend paid in October 2021,
final 2021 dividend declared in June 2022.
Maintain sustainable funding &
leverage
l Cash balances increased 45% during the year and the Group was debt free at
year-end 2021.
Investor relations
l Trading volumes averaged approximately 1.3 million shares per day in 2021,
a 42% increase on 2020.
l Stakeholders were regularly updated on business developments through public
disclosure.
l Face-to-face interaction with analysts and investors was constrained due to the
ongoing impact of the COVID-19 pandemic.
l Annual performance was in line with guidance recalibrated in August 2021 for
PenMal Assets acquisition, delay in Maari completion and revised cost of the
Montara activity programme.
The table below summarises the CEO’s Board-approved performance contract for 2022.
2022 KPIs
Strategic objective
Weight
Summary detail
Achieve 2022
operations targets
30%
Deliver continuous
improvement in ESG
performance
25%
Deliver accretive growth
in the Asia-Pacific region
25%
l Deliver production guidance of 15,500 – 18,500 boe/d.
l Deliver unit operating cost guidance of US$23.00 – 28.00/boe.
l Deliver capital expenditure guidance of US$90 – 105 million.
l Deliver work programmes and improved operating performance, including
progressing Nam Du/U Minh towards FID.
l Maintain health and safety performance at top quartile.
l Achieve improvement in Jadestone’s external ESG ratings.
l Deliver environmental targets.
l Conduct GHG emission review, identify opportunities to reduce Scope 1 & 2 intensity,
announce a Net Zero emissions target and climate strategy.
l Continue to build a strong, diverse and sustainable organisation through increased
employee engagement, retention and succession planning.
l Deliver top quartile governance standards, including a target of zero enforcement
notices from NOPSEMA and zero fines for non-compliance.
l Acquire both producing and development assets, adding >30 mmboe of 2P reserves
and value creation of >US$4 NPV10 per 2P boe acquired.
l Advance the completion of the Maari operated stake and successfully transfer
operatorship from seller.
l Progress Nam Du/U Minh project with agreement on GSA and explore value
crystallisation through farm-down, with schedule to re-submit FID in 2023.
Create sustainable
shareholder value
l Target increase in share price of 35% from 2021 closing with share price performance
to exceed straight average of peer group1.
l Declare 2022 dividend in line with the Company's policy and consider additional
returns through dividends and/or share buybacks if justified by cash generation/
capital allocation.
20%
l Maintain sustainable funding and leverage.
l Broaden the shareholder base and improve liquidity.
Improve Jadestone’s visibility in the financial markets.
l
1 See Remuneration Committee report for details of peer group.
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Section 172 statement
Under the Companies Act 2006, Jadestone is required
to include, within the Strategic Report, a statement
reporting how the Directors have had regard to
the matters set out in section 172 (1) (a) to (f) when
performing their duties.
Section 172 of the Companies Act 2006
A director of a company must act in the way he or she
considers, in good faith, would be most likely to promote the
success of the company for the benefit of its members as a
whole, and in doing so have regard (amongst other matters) to:
a
b
c
d
e
the likely consequences of any decision in the long term;
the interests of the company’s employees;
the need to foster the company’s business relationships
with suppliers, customers and others;
the impact of the company’s operations on the community
and the environment;
the desirability of the company maintaining a reputation for
high standards of business conduct; and
f
the need to act fairly as between members of the company.
Since the internal reorganisation to set up a new UK parent
company in 2021, Jadestone’s Directors’ legal duties and
responsibilities, including corporate reporting, have been
governed by the Companies Act 2006.
During 2021, and in particular the process of relocating
Jadestone’s parent company to the UK, Jadestone’s Directors
were informed of the Companies Act 2006 requirements
relating to their responsibilities. The Directors were also
advised of the Section 172 responsibilities and the requirement
to include a compliance statement in the Company’s annual
report. The Directors also receive regular briefings from the
Company’s Nominated Adviser on the AIM Rules for Companies
2021 (the "AIM Rules").
Jadestone’s board of Directors has a primary responsibility
to foster the short and long-term success of the Group and
be accountable to its shareholders. In particular, the Board
is responsible for supervising the management of the Group's
business and affairs. The Directors take their duties and
responsibilities to stakeholders seriously and receive regular
written and verbal updates on business performance and
stakeholder engagement. The responsibilities of Jadestone’s
Board are set out in the Board of Directors Charter which can
be viewed on Jadestone's website.
Information on how Jadestone’s Board assesses, monitors
and mitigates the environmental footprint of its business, as
well as community engagement, is included on pages 31 to 32
of this report.
53
JADESTONE ENERGY 2021 ANNUAL REPORT
SECTION 172 STATEMENT
The following sets out several of the key focus areas for Jadestone's Directors in 2021, and the accompanying relevant section 172
disclosures:
Decisions
Section 172 disclosures
Internal
reorganisation
l During 2021, Jadestone changed its parent company country of incorporation from Canada to the UK, one of the
final stages of a multi-year process which has seen the Group progressively adopt the norms and practices of its
UK-based peers.
l The decision was also taken in the belief that the change of corporate residence would reduce the regulatory
administrative actions and annual costs associated with a Canadian domicile.
l
It was also believed that Jadestone’s reorganisation could assist the optimisation of the Group's tax structure,
as well as further raise its profile among UK and European investors, who may have been unable to buy shares
in non-UK domiciled companies.
l As a result of the above, the Directors believed the redomicile was in the long-term interests of the Group,
its shareholders and employees (many of whom are also shareholders).
l The Company made, and continues to make, efforts to ensure that all shareholders in the previous parent
company (Jadestone Energy Inc.) were informed of the reorganisation generally and how they could exchange
their shares in Jadestone Energy Inc. for Jadestone Energy plc shares.
l Given the phased move away from Jadestone’s legacy Canadian presence, including the delisting of the Company’s
shares from the TSXV in March 2020 and the ensuing migration of the majority of trading volumes to London, the
move was not believed to have a negative impact on Canadian based shareholders.
2021 activity
programme
l The 2021 activity programme, including the drilling of the H6 infill well at Montara, marked a return to growth and
investment, following the activity deferrals and focus on cost reductions and maximising cash flow resiliency in
the immediate aftermath of the COVID-19 pandemic during 2020.
l A recovery in economic growth, and with it oil demand and oil prices, underpinned the decision by the Directors
to implement the majority of the investment plan that had been deferred in Q2 2020.
l The Directors believed the activity programme to be in the interests of all stakeholders, in that the activity would
continue the development of the Group's reserve base, increase production, target an attractive return on
investment, and increase profits and cash flow to further support future growth.
l The activity programme was also considered in the best interests of employees, providing them with reassurance
that activity deferrals and cost reductions in 2020 were temporary, and that Jadestone continues to be an
ambitious, growth-oriented and dynamic employer.
l The resumption of activity also allowed the Group to reengage and reinforce relationships with key suppliers,
including with Valaris, the provider of the rig to drill the H6 infill well.
l An environmental plan for the Montara drilling campaign was originally prepared in 2019. Following a decision
to sanction the activity in 2021, the original environmental plan was reassessed, with some minor modifications
made to reflect the revised scope of work.
l
In late April 2021, Jadestone agreed to purchase the PenMal Assets from SapuraOMV. The acquisition was forecast
to have a rapid payback, and to be value accretive to Jadestone across all key metrics.
l The acquisition was assessed not to adversely impact the Group's ability to fund the remainder of its planned
capital spending in 2021, dividends, or the potential closing of the Maari acquisition.
l All offshore and supply base personnel engaged on the SapuraOMV assets were retained as employees of
Jadestone, with the intention to expand the onshore team in Malaysia, and build a workforce of local Malaysian
nationals.
SapuraOMV
acquisition
l The PenMal Assets acquisition provided an operating footprint in Malaysia, an area the senior management of
Jadestone is familiar with from their previous employer. Jadestone believes this footprint positions it to participate
in further business development opportunities in Malaysia, which the Company believes could be similarly value
accretive for shareholders.
l Detailed due diligence was carried out prior to submitting a bid for the assets, including on HSE statistics, GHG
emissions, risk assessments, regulatory audits and incident reports.
l
Jadestone is fully responsible for procurement of all equipment, facilities, supplies and services for the operated
Malaysian PSCs. Furthermore, procurement activities must be sourced through suppliers with an established
Malaysian presence. Jadestone will seek to form positive and sustainable relationships with its domestic supply
chain, supporting direct employment for Malaysian nationals and broader economic growth.
l The Directors remain committed to the acquisition of OMV’s 69% operated interest in the Maari field, despite
the transaction not completing during 2021.
l The Directors continue to believe that the acquisition remains in the best interest of all stakeholders, as it
represents a multi-year opportunity, with a relatively low overall reserves recovery rate to date from the Maari
asset fields, and would further diversify the Group's production base.
l The local supply chain would also benefit from an operator seeking to invest in the asset and prolong the life
of the Maari field, which may also enhance the employment opportunities available in the New Zealand
upstream sector.
l
l
Jadestone has continued to work with OMV to expedite the New Zealand Government’s review of the deal.
In particular, Jadestone has endeavoured to provide comfort to the New Zealand Government over the Group's
financial framework, and its ability to fund its share of the decommissioning costs of the Maari field.
Jadestone supports the recent legislative change to the country’s decommissioning framework, and continues
to offer solutions to the New Zealand government to enable a swift completion of the transaction and a safe
transfer of operations.
Commitment
to the Maari
acquisition
54
Decisions
Section 172 disclosures
Reverting to
pre-pandemic
operating
practices in place
prior to COVID-19
l During 2021, the Directors were kept informed of how employee working practices, both on and offshore, were
evolving against the backdrop of the COVID-19 pandemic.
l At Montara, the innovative offshore roster that was introduced in 2020 to maintain asset efficiency while meeting
COVID-19 protocols reverted to pre-pandemic operating practices in late 2021, when it was judged safe to do so.
l During 2021, workstreams were commenced in order to announce a Net Zero target by the end of H1 2022.
l The Directors have engaged with the Company’s advisers and certain shareholders to understand the implications
of a committed Net Zero target for Jadestone and the broad contours of a possible strategy.
l A series of workshops were held to further understand how a Net Zero target might work in practice and its
Net Zero pledge
potential impact on employees and stakeholders in general.
l A draft climate policy statement and Net Zero commitment were circulated to the Directors for their comment and
approval in advance of announcing both in June 2022.
l See pages 24 to 25 of this annual report and the Group's 2021 Sustainability Report for more detail on the Net Zero
commitment.
l
Jadestone monitors, on a continuous basis, its exposure to volatility in hydrocarbon prices.
l The Group looks to hedge downside oil price risk specifically, during periods of major capital expenditure and/or
when the Group draws down on a significant quantum of financial indebtedness (in both cases, in pursuit of further
growth).
l The Group does not otherwise tend to hedge hydrocarbon prices, but rather focuses on its core business areas
including strict adherence to safe working practices, maximising uptime and production, optimising costs and
capital spend, and advancing organic and inorganic growth projects.
Hedging
l During 2021, as oil prices continued to recover from their pandemic-related lows, several of the Jadestone's
shareholders asked whether the Board had considered implementing hedges as a speculative tool.
l The Board reviewed the Group's hedging policy on several occasions during 2021, assessing the arguments for and
against a limited hedging programme to lock-in improving levels in Dated Brent pricing.
l Given the Group's strong balance sheet at the start of 2021, strong cash flow generation during the year, and an
overall inclination not to limit or curtail its shareholders’ exposure to optionality in hydrocarbon prices, the Board
decided not to engage in speculative hedging.
l Since that point, oil prices have continued to strengthen to over US$100/bbl in H1 2022.
l Prompted by regular dialogue with shareholders on the Group's capital allocation framework and on dividends
specifically, during 2021 the Board assessed whether the Company's dividend policy was appropriate, particularly in
the context of the Group's existing and growing cash position and no debt.
l During 2021, there was still considerable uncertainty around the pace and extent of the global economic recovery
following the significant initial impact of the COVID-19 pandemic, and risks of subsequent infection waves.
Dividend
l
Furthermore, the Board was mindful of the potentially significant levels of expenditure needed for the Group's
organic development projects, as well as maintaining sufficient cash resources to capitalise on business
development opportunities as they arise.
l As a result, the Directors decided during 2021 that the existing dividend policy should remain unchanged.
l The Board continues to constantly monitor financial management generally including shareholder
distributions.
l
In recognition of the Group's significant net cash position at the end of 2021, and the likelihood of further significant
free cash flow generation in 2022, it was announced in February 2022 that the Company would consider an increase
in shareholder returns, either through increased dividends and/or share buy-backs, later in 2022.
Specifically in regard to the Group's employees, during 2021:
l
the Board received monthly updates on organisational
matters and developments;
l
the Board was also updated on succession planning for
critical roles within the Group.
l at each board meeting, the Directors received an update
on the impact of COVID-19 restrictions across the business,
particularly how restrictions in Western Australia were
being managed through changes to rostering in order to
maintain safe and reliable operations at the Montara and
Stag assets;
l
l
the Directors were kept informed of the progress on a new
enterprise bargaining agreement for the Montara asset,
which was concluded and fully ratified in May 2021, and
which provided stability and certainty around employment
entitlements and conditions for the crew on the Montara
Venture FPSO;
the Board requested information on the organisational
structure and employee headcount for both the acquired
PenMal Assets and the proposed Akatara gas development
onshore Indonesia;
l an employee survey was carried out in late 2021 with the
results shared with the Board in early 2022; and
COVID-19 related lockdown restrictions limited the Director's
ability during 2021 to meaningfully interact with the Group's
employees. With the resumption of in-person Board meetings
in 2022, it is anticipated that the Directors will be able to
engage directly with employees during 2022.
Specifically in regard to the Group's customers, the Board
formally delegates crude marketing arrangements to
management, and receives regular updates on sales contracts
when appropriate. Jadestone’s oil production is sold and
refined into products primarily used in the transportation and
industrial sectors. Montara production is sold under a term
agreement with a major oil company, with legal title passing
once the oil is lifted from the Montara FPSO. Stag production is
sold at the highest price in a competitive tender administered
by the Group's marketing agent, with Jadestone responsible
for shipping the oil to the buyer. In Malaysia, oil and gas
production is sold to PETRONAS, the state oil company.
55
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56
Risk management,
principal risks &
uncertainties
The Group is exposed to a range of risks due to the environments in which
it operates, and their effects may have a positive or negative outcome for the
organisation. The Board is ultimately responsible for managing the Group's risk
appetite and exposure and delegates to management the task of identifying,
managing and monitoring the risks faced. The Board undertakes a bi-annual
assessment of the risks and their potential impact on the current business
plan and longer-term operational strategy.
The Group maintains a risk register that includes strategic,
regulatory, operational, commercial, technological and
economic risks. The register provides a clear definition of the
risk, its impact and probability on the business detailing all
mitigating controls in place to reduce the risk to acceptable
levels. The register is regularly reviewed, and emerging risks
assessed and quantified by management.
The principal risks currently recognised in the corporate risk
register are listed below in alphabetical order detailing the risk,
mitigation and how the risk has changed over the year. The risk
movement has been assessed on the basis of whether there
has been a material change in the impact to the business or the
likelihood of occurrence. It should be noted that there may be
additional risks unknown to the Group and/or other risks that
have currently been assessed as less material, but which may
develop into material risks in the future.
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JADESTONE ENERGY 2021 ANNUAL REPORT
RISK MANAGEMENT, PRINCIPAL RISKS & UNCERTAINTIES
«
«
«»
Risk has increased during the year
Risk has decreased over the year
No change in the risk over the year
Risk
Risk description
Risk movement during the year and select mitigations
Business development
opportunities
Risk Owner:
EVP Business Development
Change in year
«»
l The Group seeks to acquire producing (or near production) assets that complement the
current portfolio. If there are limited business development opportunities that fit the
Group’s strict acquisition targets, this may restrict the ability to expand the business.
l The risk remains unchanged compared to prior year as the controls in place ensure only the right opportunities are pursued.
The Group is committed to grow via acquisitions, so the risk remains a principal risk for the Group.
l The Group reviews a significant number of inorganic business development opportunities within its core region on an annual
l A lack of business development success will hinder the Group’s ability to reduce its
basis. If an opportunity complements the portfolio and supports the achievement of business objectives, then it will be progressed
portfolio concentration as a key failure of any single asset will impact the Group’s overall
performance and its ability to achieve business targets.
to a formal due diligence review.
l A persistent lack of business development success may result in negative investor
confidence potentially impacting funding availability.
l Poor due diligence or unfavorable transaction terms may add low quality assets or
l Business development opportunities are assessed against strict criteria through detailed due diligence analysis.
unexpected liabilities to the Group impacting business objectives.
l Acquisition opportunities are only progressed if they create shareholder value and capital is directed at those projects and assets
that are deemed to offer compelling returns.
l The Group’s senior management team has extensive knowledge and experience in the region with the necessary skills and
experience to evaluate potential business opportunities that align with the Group’s strategic focus. Additionally, third-party
expertise is sought for select key disciplines, if required.
Capital funding
l The Group’s business plan requires access to capital to fund future expansion and is
l The Group has strengthened its balance sheet during 2021 by repaying the its reserves based loan in full, and generated
dependent on developing a sustainable capital structure which supports business targets.
significant cash from an expanded portfolio, which has lowered the risk of not being able to obtain finance, but the risk remains
Risk Owner:
CFO
Change in year
«
Climate change – transition
risks
Risk Owner:
ESG & Sustainability Manager
Change in year
«
Development and recovery of
reserves
Risk Owner:
Country Managers
Group Subsurface Manager
Change in year
«»
Funding of decommissioning
risk
Risk Owner:
Regional Operations Manager
Change in year
NEW
58
l A change in sentiment towards funding of upstream oil and gas production and
development could impact access to capital and/or the terms under which capital
is provided.
a principal risk based on investors’ and lenders’ changing sentiment towards oil and gas projects.
l The Group maximises its net cash position while ensuring sufficient liquidity and minimising interest bearing debt.
l Cash forecasts are continually monitored, including multiple scenarios for base case, and low cases with mitigations.
l The Board and management deploy a disciplined approach to the allocation of capital across the portfolio.
l Strong long-term relationships are sought and maintained with both major international financial institutions lending to upstream
oil and gas companies and leading institutions investing in the equity of the same companies.
l Climate change and the transition to a low-carbon future represent material risks to the
l
In the face of the latest climate science, growing societal expectations and emerging policies including carbon taxes, the risk to the
business that may affect the Group’s ability to execute its strategy.
oil and gas industry and Jadestone's business increased compared to the previous year.
l The potential impacts from emerging policy, regulation, investor sentiment and a shift
l The Group recognises the increasing importance of climate change-related risks and it has taken steps to formalise its approach
to low-carbon sources of energy could impact the performance of the business and may
increase costs, affect access to capital, reduce asset value and restrict future growth
opportunities.
to managing exposure, summarised on pages 33 to 38 of this report.
l Energy transition-related policy developments are monitored in core regions and potential implications on the business are
evaluated and reflected in the Group’s financial modelling.
l The Group undertakes climate scenario analysis across its portfolio that assesses the resilience of its assets in different oil and
carbon price environments.
l The Group is committed to becoming Net Zero Scope 1 and 2 GHGs on its operated assets by 2040 and by the end of 2023 will
develop and publish a GHG emission reduction roadmap for its key assets. The roadmap will include interim targets and concrete
interventions to decarbonise its upstream operations in line with the Net Zero commitment.
l The Group is currently dependent on a small number of producing assets. A reserve
l There has been no material change in the likelihood or business impact and potential reserve write-downs continue to be a
write-down may impact business performance and corporate reputation.
principal risk.
l The Group operates mid-to-late-life assets and low oil prices or prolonged field shutdowns
requiring high cost remediation could accelerate the end of field life impacting recoverable
reserves.
l The majority of the Group’s reserves are in production. Reserves are assessed by reference to actual performance data, reducing
the uncertainty range and risk of a write-down. Internal technical reserves reviews ensure a high-quality submission. All assets are
either audited or reviewed on an annual basis.
l The Group places a strong emphasis on subsurface analysis and has centralised its subsurface teams in order to develop a centre
of excellence to manage the asset portfolio and evaluate new opportunities across the region.
l There is increasing regulatory focus on operators to have sufficient financial capability to
l The Group reviews its decommissioning obligations on a regular basis and estimates are annually audited by third-party experts.
fund all their decommissioning commitments as and when they fall due. Future legislative
changes could require capital to be set aside for decommissioning activities, restricting
cashflows and the availability of funds for investment or returns
to shareholders.
l The asset retirement obligations, including future estimated decommissioning costs,
are based on judgements, estimates and assumptions that may differ from the actual
expenditure when it is incurred.
l The asset retirement obligation estimate is based upon current legislation, industry best
practice, timing and prevailing decommissioning technologies. There is a risk that any
element of the judgement may prove to be incorrect, potentially negatively impacting
business performance.
l Relevant legislation is monitored, and proposed changes discussed with relevant stakeholders including regulators and industry
bodies.
l The Group operations in Malaysia, Vietnam and Indonesia operate under PSCs that require regulator approved and monitored
cess funding which ensures decommissioning funds are set aside over the duration of the PSC.
l Decommissioning is included in long-term business plans to ensure sufficient cash is preserved in the business to fund all of the
decommissioning liabilities.
Risk
Risk description
Risk movement during the year and select mitigations
Business development
l The Group seeks to acquire producing (or near production) assets that complement the
l The risk remains unchanged compared to prior year as the controls in place ensure only the right opportunities are pursued.
opportunities
Risk Owner:
EVP Business Development
Change in year
current portfolio. If there are limited business development opportunities that fit the
Group’s strict acquisition targets, this may restrict the ability to expand the business.
l A lack of business development success will hinder the Group’s ability to reduce its
portfolio concentration as a key failure of any single asset will impact the Group’s overall
performance and its ability to achieve business targets.
l A persistent lack of business development success may result in negative investor
confidence potentially impacting funding availability.
The Group is committed to grow via acquisitions, so the risk remains a principal risk for the Group.
l The Group reviews a significant number of inorganic business development opportunities within its core region on an annual
basis. If an opportunity complements the portfolio and supports the achievement of business objectives, then it will be progressed
to a formal due diligence review.
l The Group’s senior management team has extensive knowledge and experience in the region with the necessary skills and
experience to evaluate potential business opportunities that align with the Group’s strategic focus. Additionally, third-party
expertise is sought for select key disciplines, if required.
l Poor due diligence or unfavorable transaction terms may add low quality assets or
l Business development opportunities are assessed against strict criteria through detailed due diligence analysis.
unexpected liabilities to the Group impacting business objectives.
l Acquisition opportunities are only progressed if they create shareholder value and capital is directed at those projects and assets
that are deemed to offer compelling returns.
Capital funding
l The Group’s business plan requires access to capital to fund future expansion and is
l The Group has strengthened its balance sheet during 2021 by repaying the its reserves based loan in full, and generated
Risk Owner:
CFO
Change in year
dependent on developing a sustainable capital structure which supports business targets.
l A change in sentiment towards funding of upstream oil and gas production and
development could impact access to capital and/or the terms under which capital
is provided.
significant cash from an expanded portfolio, which has lowered the risk of not being able to obtain finance, but the risk remains
a principal risk based on investors’ and lenders’ changing sentiment towards oil and gas projects.
l The Group maximises its net cash position while ensuring sufficient liquidity and minimising interest bearing debt.
l Cash forecasts are continually monitored, including multiple scenarios for base case, and low cases with mitigations.
l The Board and management deploy a disciplined approach to the allocation of capital across the portfolio.
l Strong long-term relationships are sought and maintained with both major international financial institutions lending to upstream
oil and gas companies and leading institutions investing in the equity of the same companies.
Climate change – transition
l Climate change and the transition to a low-carbon future represent material risks to the
risks
business that may affect the Group’s ability to execute its strategy.
l
In the face of the latest climate science, growing societal expectations and emerging policies including carbon taxes, the risk to the
oil and gas industry and Jadestone's business increased compared to the previous year.
l The potential impacts from emerging policy, regulation, investor sentiment and a shift
l The Group recognises the increasing importance of climate change-related risks and it has taken steps to formalise its approach
to managing exposure, summarised on pages 33 to 38 of this report.
l Energy transition-related policy developments are monitored in core regions and potential implications on the business are
evaluated and reflected in the Group’s financial modelling.
l The Group undertakes climate scenario analysis across its portfolio that assesses the resilience of its assets in different oil and
carbon price environments.
l The Group is committed to becoming Net Zero Scope 1 and 2 GHGs on its operated assets by 2040 and by the end of 2023 will
develop and publish a GHG emission reduction roadmap for its key assets. The roadmap will include interim targets and concrete
interventions to decarbonise its upstream operations in line with the Net Zero commitment.
Development and recovery of
l The Group is currently dependent on a small number of producing assets. A reserve
l There has been no material change in the likelihood or business impact and potential reserve write-downs continue to be a
reserves
write-down may impact business performance and corporate reputation.
principal risk.
l The Group operates mid-to-late-life assets and low oil prices or prolonged field shutdowns
l The majority of the Group’s reserves are in production. Reserves are assessed by reference to actual performance data, reducing
requiring high cost remediation could accelerate the end of field life impacting recoverable
reserves.
the uncertainty range and risk of a write-down. Internal technical reserves reviews ensure a high-quality submission. All assets are
either audited or reviewed on an annual basis.
l The Group places a strong emphasis on subsurface analysis and has centralised its subsurface teams in order to develop a centre
of excellence to manage the asset portfolio and evaluate new opportunities across the region.
Funding of decommissioning
l There is increasing regulatory focus on operators to have sufficient financial capability to
l The Group reviews its decommissioning obligations on a regular basis and estimates are annually audited by third-party experts.
l Relevant legislation is monitored, and proposed changes discussed with relevant stakeholders including regulators and industry
bodies.
l The Group operations in Malaysia, Vietnam and Indonesia operate under PSCs that require regulator approved and monitored
cess funding which ensures decommissioning funds are set aside over the duration of the PSC.
l Decommissioning is included in long-term business plans to ensure sufficient cash is preserved in the business to fund all of the
decommissioning liabilities.
59
Risk Owner:
ESG & Sustainability Manager
Change in year
opportunities.
to low-carbon sources of energy could impact the performance of the business and may
increase costs, affect access to capital, reduce asset value and restrict future growth
Risk Owner:
Country Managers
Group Subsurface Manager
Change in year
risk
Risk Owner:
Change in year
Regional Operations Manager
to shareholders.
fund all their decommissioning commitments as and when they fall due. Future legislative
changes could require capital to be set aside for decommissioning activities, restricting
cashflows and the availability of funds for investment or returns
l The asset retirement obligations, including future estimated decommissioning costs,
are based on judgements, estimates and assumptions that may differ from the actual
expenditure when it is incurred.
l The asset retirement obligation estimate is based upon current legislation, industry best
practice, timing and prevailing decommissioning technologies. There is a risk that any
element of the judgement may prove to be incorrect, potentially negatively impacting
business performance.
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RISK MANAGEMENT, PRINCIPAL RISKS & UNCERTAINTIES
«
«
«»
Risk has increased during the year
Risk has decreased over the year
No change in the risk over the year
Risk
HSE risks
Risk Owner:
Regional HSE Manager
Change in year
«»
Risk description
Risk movement during the year and select mitigations
l The nature of our operations and location of key producing assets means HSE is a key
l There has been no change in the potential impact or likelihood of the HSE risks due to the nature of our operations and the
priority for the Board and senior management team.
environments in which the Group operates.
l An unsafe working environment and the failure to observe appropriate HSE standards
l The Board’s HSEC committee oversees and sets standards for the Group, to drive accountability and commitment throughout the
could result in personal injury, fatality and/or reputational damage. The consequence of
a failure to manage HSE risk could result in penalties, increased costs and the potential
loss of the Group’s license to operate.
Human Resources
l The Group is dependent on its ability to recruit, develop and retain key personnel
l The Board via the Governance and Nomination Committee together with the leadership team continually monitor succession
Risk Owner:
Regional HR Manager
Change in year
NEW
in order to achieve its long-term strategic objectives. There is a risk that personnel may
be lost via natural attrition or to competitors resulting in a delay finding replacements,
this may generate an inability to meet strategic objectives with increased constraints
on the capacity and morale of remaining staff.
l The Group is committed to maintaining a diverse and inclusive workforce across
the organisation to help protect against skill shortages.
l
l
In response to COVID-19 and the evolving markets in which the Group operates,
the Group is reliant on a mobile workforce to deliver operational performance in line
with expectations.
Industrial action across key sectors or assets could impact operational targets, costs
and resultant cash flows for the Group.
IT resiliency & continuity
l The reliance on IT systems, networks and processes continues to evolve and as the Group
grows and develops, the connectivity of networks and systems becomes more complex.
l The likelihood and impact hasn’t changed during the year as the Group continues to enhance its security systems to minimise
l A cyber security breach could impact operations resulting in a financial loss and/or the
disclosure of confidential information resulting in financial loss, corporate reputational
damage and/or legal exposure for the Group.
l The Group’s earnings are dependent on oil prices which are influenced by supply and
demand trends and geopolitical events. A prolonged decline in oil prices would have
a negative impact on revenues, margins, profitability and cash flows of the Group.
l A sustained period of low oil prices would adversely impact the Group’s liquidity,
investment and expansion plans. In addition, it could also adversely impact commercial
reserves, asset values and the Company's ability to make shareholder returns.
Risk Owner:
Regional IT Manager
Change in year
«»
Oil price risk
Risk Owner:
CFO
Change in year
«
60
organisation.
operational incidents.
office.
and competitors.
continuity.
l The Group targets zero lost time incidents. Any lost time or near-miss incidents are investigated and any and all lessons learnt
implemented promptly throughout the Group, alongside active monitoring of HSE leading and lagging indicators.
l The Group is committed to maintaining robust health and safety policies, including procedures in place to respond to unexpected
l The Group’s HSE management system includes environmental impact statements, environmental plans, oil spill response and
other emergency plans and operational safety cases.
l Regular training and exercises are used to test the Group’s preparedness for any major incidents.
plans for key management personnel and other critical positions. Succession plans have been established for each Jadestone
l The Remuneration Committee and leadership team assess the Employee Value Proposition to ensure alignment with market place
l The Group functions are focused on employee career development to build a depth of knowledge and experience to ensure
l During 2021, the Group conducted a comprehensive staff survey of all onshore and offshore staff. The results have been assessed
and areas of concern addressed.
l The Group continues to support diversity across the organisation considering national origin, race, ethnicity, gender, religion
and marital status to maintain an inclusive workplace. All appointments are made based on merit, experience and performance,
whilst actively seeking diversity of skills, gender, social and ethnic backgrounds. The Board's oversight role includes ensuring that
diversity and inclusion are integrated into HR standards and recruitment processes.
l The Group has implemented Standard Operating Procedures for onshore and offshore personnel. The Group continues to
monitor the evolving situation and aligns with industry and medical specialists to ensure appropriate actions are implemented
in conjunction with expert advice and prevailing level of risk.
l The Group is working with industry experts to review and mitigate potential industrial relations risk; related to its Australia assets,
following guidance provided by Fair Work Commission and Fair Work Act.
potential business disruptions.
l Extensive data and server backups are performed regularly.
l The Group’s IT redundancy strategy is applied to its critical systems and network. The most up to date security software is
maintained, and support and training is provided to all staff to minimise the exposure of security threats.
l Network and critical system penetration tests are also performed to measure and ensure an appropriate level of protection.
l Multi-Factor Authentication has been enabled with several other initiatives such as Mobile Device Management and Data Loss
Protection solutions scheduled to be rolled out in the near-term.
l The commodity price risk has reduced over the year as short-term commodity prices have increased but the risk remains high due
to the uncertain economic outlook with COVID-19, high inflation and the Russia/Ukraine conflict.
l The Group maintains a continual focus on its cost structure and cost efficiency initiatives, to embed cash flow resiliency.
The Group uses commodity price hedging to mitigate the exposure to fluctuations in oil prices during periods of elevated capital
expenditure and/or debt incurrence.
l During the formulation of the annual work plan and budget and three-year plan, different scenarios are considered which include
a range of oil price outcomes and cost profiles to establish the potential impact on Group revenues, profitability and cash flows.
l The Group seeks to diversify its asset portfolio and reduce exposure to commodity price fluctuation through fixed price gas
contracts, including the Akatara gas and liquids project in Indonesia and the Nam Du/U Minh gas development offshore Vietnam.
Risk
HSE risks
Risk Owner:
Regional HSE Manager
Change in year
Risk Owner:
Regional HR Manager
Change in year
Risk Owner:
Regional IT Manager
Change in year
Oil price risk
Risk Owner:
CFO
Change in year
Risk description
Risk movement during the year and select mitigations
l The nature of our operations and location of key producing assets means HSE is a key
l There has been no change in the potential impact or likelihood of the HSE risks due to the nature of our operations and the
priority for the Board and senior management team.
environments in which the Group operates.
l An unsafe working environment and the failure to observe appropriate HSE standards
l The Board’s HSEC committee oversees and sets standards for the Group, to drive accountability and commitment throughout the
could result in personal injury, fatality and/or reputational damage. The consequence of
a failure to manage HSE risk could result in penalties, increased costs and the potential
loss of the Group’s license to operate.
Human Resources
l The Group is dependent on its ability to recruit, develop and retain key personnel
in order to achieve its long-term strategic objectives. There is a risk that personnel may
be lost via natural attrition or to competitors resulting in a delay finding replacements,
this may generate an inability to meet strategic objectives with increased constraints
on the capacity and morale of remaining staff.
l The Group is committed to maintaining a diverse and inclusive workforce across
the organisation to help protect against skill shortages.
l
In response to COVID-19 and the evolving markets in which the Group operates,
the Group is reliant on a mobile workforce to deliver operational performance in line
with expectations.
l
Industrial action across key sectors or assets could impact operational targets, costs
and resultant cash flows for the Group.
organisation.
l The Group targets zero lost time incidents. Any lost time or near-miss incidents are investigated and any and all lessons learnt
implemented promptly throughout the Group, alongside active monitoring of HSE leading and lagging indicators.
l The Group is committed to maintaining robust health and safety policies, including procedures in place to respond to unexpected
operational incidents.
l The Group’s HSE management system includes environmental impact statements, environmental plans, oil spill response and
other emergency plans and operational safety cases.
l Regular training and exercises are used to test the Group’s preparedness for any major incidents.
l The Board via the Governance and Nomination Committee together with the leadership team continually monitor succession
plans for key management personnel and other critical positions. Succession plans have been established for each Jadestone
office.
l The Remuneration Committee and leadership team assess the Employee Value Proposition to ensure alignment with market place
and competitors.
l The Group functions are focused on employee career development to build a depth of knowledge and experience to ensure
continuity.
l During 2021, the Group conducted a comprehensive staff survey of all onshore and offshore staff. The results have been assessed
and areas of concern addressed.
l The Group continues to support diversity across the organisation considering national origin, race, ethnicity, gender, religion
and marital status to maintain an inclusive workplace. All appointments are made based on merit, experience and performance,
whilst actively seeking diversity of skills, gender, social and ethnic backgrounds. The Board's oversight role includes ensuring that
diversity and inclusion are integrated into HR standards and recruitment processes.
l The Group has implemented Standard Operating Procedures for onshore and offshore personnel. The Group continues to
monitor the evolving situation and aligns with industry and medical specialists to ensure appropriate actions are implemented
in conjunction with expert advice and prevailing level of risk.
l The Group is working with industry experts to review and mitigate potential industrial relations risk; related to its Australia assets,
following guidance provided by Fair Work Commission and Fair Work Act.
IT resiliency & continuity
l The reliance on IT systems, networks and processes continues to evolve and as the Group
l The likelihood and impact hasn’t changed during the year as the Group continues to enhance its security systems to minimise
grows and develops, the connectivity of networks and systems becomes more complex.
potential business disruptions.
l A cyber security breach could impact operations resulting in a financial loss and/or the
disclosure of confidential information resulting in financial loss, corporate reputational
damage and/or legal exposure for the Group.
l Extensive data and server backups are performed regularly.
l The Group’s IT redundancy strategy is applied to its critical systems and network. The most up to date security software is
maintained, and support and training is provided to all staff to minimise the exposure of security threats.
l Network and critical system penetration tests are also performed to measure and ensure an appropriate level of protection.
l Multi-Factor Authentication has been enabled with several other initiatives such as Mobile Device Management and Data Loss
Protection solutions scheduled to be rolled out in the near-term.
l The Group’s earnings are dependent on oil prices which are influenced by supply and
l The commodity price risk has reduced over the year as short-term commodity prices have increased but the risk remains high due
demand trends and geopolitical events. A prolonged decline in oil prices would have
a negative impact on revenues, margins, profitability and cash flows of the Group.
l A sustained period of low oil prices would adversely impact the Group’s liquidity,
investment and expansion plans. In addition, it could also adversely impact commercial
reserves, asset values and the Company's ability to make shareholder returns.
to the uncertain economic outlook with COVID-19, high inflation and the Russia/Ukraine conflict.
l The Group maintains a continual focus on its cost structure and cost efficiency initiatives, to embed cash flow resiliency.
The Group uses commodity price hedging to mitigate the exposure to fluctuations in oil prices during periods of elevated capital
expenditure and/or debt incurrence.
l During the formulation of the annual work plan and budget and three-year plan, different scenarios are considered which include
a range of oil price outcomes and cost profiles to establish the potential impact on Group revenues, profitability and cash flows.
l The Group seeks to diversify its asset portfolio and reduce exposure to commodity price fluctuation through fixed price gas
contracts, including the Akatara gas and liquids project in Indonesia and the Nam Du/U Minh gas development offshore Vietnam.
61
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JADESTONE ENERGY 2021 ANNUAL REPORT
RISK MANAGEMENT, PRINCIPAL RISKS & UNCERTAINTIES
«
«
«»
Risk has increased during the year
Risk has decreased over the year
No change in the risk over the year
Risk
Risk description
Risk movement during the year and select mitigations
Operating performance
l The Group is focused on producing assets and aims to bring discovered hydrocarbons into
l The risk likelihood and impact hasn’t changed during the year as the business continues to operate mid/late-life assets.
Risk Owner:
Regional Operations Manager
Change in year
«»
Pandemic impacts
Risk Owner:
Country Managers
Change in year
«
production rapidly.
l
In the case of mid-life and/or maturing producing assets there is a risk that operational
performance will decline through lower production, increased costs and/or deteriorating
infrastructure reliability/uptime.
l The Group deploys a mid-life field operating philosophy, which closely monitors reservoir, well and plant performance while
continuously seeking operating efficiencies and reinvestment opportunities to increase recovery rates and the production life
of each field.
across Group operations and offices.
of individual assets.
l The Group operates a continuous improvement mindset, designed to identify cost saving opportunities that lower the cost base
l The Group is focused on building a diverse and resilient portfolio, to minimise the risk of over exposure to the performance
l The COVID-19 pandemic generated business disruption risk due to the disruption arising
from infection of key personnel and the possibility of having to temporarily reduce or
cease operations, in turn impacting on cash flows and profitability.
l The Group monitors the evolving situation and guidance surrounding COVID-19, as more information becomes known about the
disease new procedures and controls are developed, which has lowered the risk over the year.
l While the disruptions have been managed in the short term, any prolonged pandemic related restrictions could impact business
l The prolonged pandemic impacts and its effects on the global economy remain uncertain
performance through a decline in commodity prices and additional expenditure to meet new working arrangements.
with the continual risk of new strains having the potential to severely impact commodity
prices and staff mobility, among other factors.
Project execution & economics
l The Group’s near-term growth is primarily dependent on the successful execution
l There has been no material change in the likelihood or impact of the risk and project economics and execution are a key feature
Risk Owner:
Country Managers
Change in year
«»
Regulatory infringement
Risk Owner:
Country Managers
Change in year
«»
Sovereign / political risk
Risk Owner:
Country Managers
General Counsel/CEO
Change in year
«»
62
of strategic projects in Indonesia and Vietnam and the completion of the Maari acquisition
in New Zealand.
l Project delays and/or a failure to complete the Maari acquisition could negatively
impact operational performance and economic outcomes resulting in a misalignment
of shareholder expectations and a decline in shareholder value.
l Regulations across the Asia-Pacific region are diverse and complex and include, among
others, operational efficiency, legal, tax and environmental controls. A breach of any
aspect may result in the loss of production, lower revenues, increased costs, lower profits
and cash flow, and/or reputational damage.
l The Group’s key assets are located in politically stable countries, but there is always
the possibility of governmental or regulatory changes which could negatively impact
the business.
l The Russia/Ukraine conflict has created geopolitical, social and economic uncertainty.
The conflict has impacted commodity prices at a time of rising cost of living resulting
in political pressure for windfall taxes on the oil and gas sector.
l Other potential consequences of political, social or economic instability could be adverse
changes to cost recovery, taxation and additional import and export controls.
l The Group has assessed the financial and operational risks to the business and implemented multiple policies in response to the
COVID-19 pandemic. The Group implemented new procedures covering IT, travel, supply chain and operations. The Group also
implemented recommended safe practices across its operations and offices including remote working guidelines and established
pandemic response committees at each location to manage local best practice.
l The Group has encouraged all staff to get vaccinated against the COVID-19 virus, and follow recommended hygiene and social
distancing guidelines.
of the long-term strategy for the Group.
l The Board and management seek out regular dialogue with national oil companies, regulators, and other government bodies
to ensure acceptance and approvals are obtained as soon as possible.
l Projects are tailored to local market conditions, including with regard to supply and price.
l Project economics are assessed with multiple sensitivities to identify critical challenges, including contingency planning for
potential project failures.
l Management regularly provides strategic updates and project status to shareholders and other stakeholders.
l The has been no material change in the likelihood or impact of the risk but due to the nature the risk it remains a principal risk
for the Group.
l The Group maintains positive relationships with governments and key stakeholders, and actively monitors the political and
regulatory environment within each of the countries and regions in which it operates. There are regular communications with
government and trade bodies to understand potential and actual changes in the regulatory environment. Government relations
officers are employed in-country, where it is deemed appropriate, to liaise with government bodies to understand the potential
impacts of likely regulatory changes on the business.
l
Jadestone operates as a good corporate citizen, including in accordance with PSC and tax regulations.
l New assets are assessed for political risk, and the potential negative impacts that could arise on the Group.
l Policies and procedures are regularly updated to reflect changes in each of the jurisdictions in which the Group operates.
l There has been no change in the potential likelihood or impact but the risk is continually monitored and evaluated.
l The Group maintains positive relationships with governments and key stakeholders, and actively monitors the political and
regulatory environment within each of the countries and regions in which it operates.
l New assets are assessed for political risk, and the potential negative impacts that could arise on the Group.
Risk
Risk description
Risk movement during the year and select mitigations
Operating performance
l The Group is focused on producing assets and aims to bring discovered hydrocarbons into
l The risk likelihood and impact hasn’t changed during the year as the business continues to operate mid/late-life assets.
Risk Owner:
Regional Operations Manager
Change in year
l
In the case of mid-life and/or maturing producing assets there is a risk that operational
performance will decline through lower production, increased costs and/or deteriorating
infrastructure reliability/uptime.
production rapidly.
l The Group deploys a mid-life field operating philosophy, which closely monitors reservoir, well and plant performance while
continuously seeking operating efficiencies and reinvestment opportunities to increase recovery rates and the production life
of each field.
l The Group operates a continuous improvement mindset, designed to identify cost saving opportunities that lower the cost base
across Group operations and offices.
l The Group is focused on building a diverse and resilient portfolio, to minimise the risk of over exposure to the performance
of individual assets.
Pandemic impacts
l The COVID-19 pandemic generated business disruption risk due to the disruption arising
l The Group monitors the evolving situation and guidance surrounding COVID-19, as more information becomes known about the
from infection of key personnel and the possibility of having to temporarily reduce or
disease new procedures and controls are developed, which has lowered the risk over the year.
Risk Owner:
Country Managers
Change in year
cease operations, in turn impacting on cash flows and profitability.
l The prolonged pandemic impacts and its effects on the global economy remain uncertain
with the continual risk of new strains having the potential to severely impact commodity
prices and staff mobility, among other factors.
l While the disruptions have been managed in the short term, any prolonged pandemic related restrictions could impact business
performance through a decline in commodity prices and additional expenditure to meet new working arrangements.
l The Group has assessed the financial and operational risks to the business and implemented multiple policies in response to the
COVID-19 pandemic. The Group implemented new procedures covering IT, travel, supply chain and operations. The Group also
implemented recommended safe practices across its operations and offices including remote working guidelines and established
pandemic response committees at each location to manage local best practice.
l The Group has encouraged all staff to get vaccinated against the COVID-19 virus, and follow recommended hygiene and social
distancing guidelines.
Project execution & economics
l The Group’s near-term growth is primarily dependent on the successful execution
l There has been no material change in the likelihood or impact of the risk and project economics and execution are a key feature
of strategic projects in Indonesia and Vietnam and the completion of the Maari acquisition
of the long-term strategy for the Group.
Risk Owner:
Country Managers
Change in year
in New Zealand.
l Project delays and/or a failure to complete the Maari acquisition could negatively
impact operational performance and economic outcomes resulting in a misalignment
of shareholder expectations and a decline in shareholder value.
l The Board and management seek out regular dialogue with national oil companies, regulators, and other government bodies
to ensure acceptance and approvals are obtained as soon as possible.
l Projects are tailored to local market conditions, including with regard to supply and price.
l Project economics are assessed with multiple sensitivities to identify critical challenges, including contingency planning for
potential project failures.
l Management regularly provides strategic updates and project status to shareholders and other stakeholders.
Regulatory infringement
l Regulations across the Asia-Pacific region are diverse and complex and include, among
l The has been no material change in the likelihood or impact of the risk but due to the nature the risk it remains a principal risk
Risk Owner:
Country Managers
Change in year
others, operational efficiency, legal, tax and environmental controls. A breach of any
aspect may result in the loss of production, lower revenues, increased costs, lower profits
and cash flow, and/or reputational damage.
for the Group.
l The Group maintains positive relationships with governments and key stakeholders, and actively monitors the political and
regulatory environment within each of the countries and regions in which it operates. There are regular communications with
government and trade bodies to understand potential and actual changes in the regulatory environment. Government relations
officers are employed in-country, where it is deemed appropriate, to liaise with government bodies to understand the potential
impacts of likely regulatory changes on the business.
l
Jadestone operates as a good corporate citizen, including in accordance with PSC and tax regulations.
l New assets are assessed for political risk, and the potential negative impacts that could arise on the Group.
l Policies and procedures are regularly updated to reflect changes in each of the jurisdictions in which the Group operates.
Sovereign / political risk
l The Group’s key assets are located in politically stable countries, but there is always
l There has been no change in the potential likelihood or impact but the risk is continually monitored and evaluated.
Risk Owner:
Country Managers
General Counsel/CEO
Change in year
the possibility of governmental or regulatory changes which could negatively impact
the business.
l The Russia/Ukraine conflict has created geopolitical, social and economic uncertainty.
The conflict has impacted commodity prices at a time of rising cost of living resulting
in political pressure for windfall taxes on the oil and gas sector.
l Other potential consequences of political, social or economic instability could be adverse
changes to cost recovery, taxation and additional import and export controls.
l The Group maintains positive relationships with governments and key stakeholders, and actively monitors the political and
regulatory environment within each of the countries and regions in which it operates.
l New assets are assessed for political risk, and the potential negative impacts that could arise on the Group.
63
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JADESTONE ENERGY 2021 ANNUAL REPORT
OPERATIONAL REVIEW
Operational review
Producing assets
Australia
Montara project
The Montara project, in production licences AC/L7 and AC/L8, is
located 254 km offshore Western Australia, in a water depth of
approximately 77 metres. The Montara project comprises three
separate fields being Montara, Skua and Swift/Swallow, which
are produced through an owned FPSO, the Montara Venture.
shutdown allows for maximised oil production while oil price
and premiums remain high. A small amount of carry-over work
may result from this but to be clear, none of this will impact on
the integrity or safety of the Montara assets.
Stag oilfield
The Stag oilfield, in production licence WA-15-L, is located
60 km offshore Western Australia in a water depth of
approximately 47 metres.
As at 31 December 2021, the field contained total proved
plus probable reserves of 12.6mm barrels of oil, 100% net
to Jadestone.
The Stag oilfield produces heavier sweet crude (18° API, 0.14%
mass sulphur), which historically sells at a premium to Dated
Brent. The premium in 2021 ranged between US$8.30/bbl to
US$13.88/bbl. The most recent lifting was agreed at a premium
of US$23.72/bbl.
During 2021, the under-buoy hose, which is used for crude oil
off-loading was replaced, an undertaking which is scheduled
to occur only once every five years. In addition, two extra
well workovers were performed during the year compared
to average, which partially reflects the clearing of a backlog
of workovers which had built up in the early stages of the
COVID-19 pandemic.
Production was maintained at 2,359 bbls/d in 2021, compared
to 2,394 bbls/d in 2020, through ongoing production
optimisation despite the constraints of COVID-19 on workover
execution.
There were four liftings in 2021, for total sales of 1.0 mmbbls,
compared to 0.9 mmbbls in 2020 from the same number of
liftings. Asset operational and maintenance complexity was
reduced through successful operation of an innovative storage
tanker offloading arrangement.
A once-in-every-three-years routine shut down was conducted
in Q2 2022 to perform pressure vessel inspections. In Q3 2022,
the 50H and 51H infill development wells are scheduled to be
drilled. These development wells are anticipated to complete
and come onstream in Q4 2022, and are expected to add
around 1,000 bbls/d to current production levels.
As at 31 December 2021, the Montara assets had proven
plus probable reserves of 20.9mm barrels of oil, 100% net
to Jadestone.
The fields produce light sweet crude (42° API, 0.067% mass
sulphur), which typically sells for average Dated Brent plus the
average Tapis differential in the month of lifting. The premium
in 2021 ranged between US$0.43/bbl to US$2.94/bbl. Premiums
have increased in the first half of 2022, with the latest Tapis
Brent differential at around US$6.47/bbl.
By late September 2021, the H6 infill development well had
been successfully drilled and tied into the Montara field
facilities and production commenced. The well includes a circa
1,200 metre horizontal section of the reservoir in good quality
oil-bearing sands. The well delivered an initial rate, after clean-
up, approaching 10,000 bbls/d.
Following the completion of the H6 well, two subsea workovers
on Skua-10 and 11 were performed with Skua-10 returning to
stabilised production of 1,500 bbls/d. The return of production
for Skua 11 was delayed to March 2022 due to required repairs
on the subsea hydraulic connection, which were successfully
achieved, and the well was brought back on-stream with
stabilised production of 1,500 bbls/d.
Montara production averaged 7,647 bbls/d in 2021 (2020: 9,045
bbls/d). Lower production was the result of natural field decline
and additional downtime associated with the drilling of H6 and
the subsea workovers of Skua 10 and 11, plus an unscheduled
shutdown in early 2021 to replace defective valves on the FPSO.
There were six liftings in 2021, resulting in total sales of 3.0
mmbbls, compared to 3.2 mmbbls in 2020 from the same
number of liftings.
As part of Montara's three-to-four-year regular maintenance
shutdown schedule, a three-week planned shutdown was
originally planned for July 2022. The key workstream during
this planned shutdown was the replacement of the gas turbine
core, which was moved forward to February/March due to
the compressor outage earlier in the year. As a result, the
work scope of the planned shutdown has been significantly
reduced, and all remaining critical maintenance activities can
be carried out by a shorter one-week turn-around which has
now been scheduled for later in 2022. Rescheduling has the
added advantage of avoiding competition for labour during
the Australian offshore maintenance season, and a shorter
64
The Group believes there is scope to add incremental value
to the PenMal Assets in the near-term through both reservoir
optimisation and production optimisation/enhancement
activities across the PM323 and PM329 operated licences.
Gas reinjection is expected to be a key part of reservoir
optimisation. Production enhancement has been initially
focused on restoring idle wells to production, while ongoing
production optimisation is focused on both gas lift and
topsides processes. In addition, there are infill development
well opportunities at the West Belumut and East Piatu fields,
which will be evaluated in parallel with the East Belumut infill
potential.
In 2021, average production from the PenMal Assets since
the completion date was 5,377/bbls/d of oil and 4,084 mscf/d
of gas (for a total of 6,057 boe/d), net to Jadestone’s working
interest. Averaged over the full year this is equivalent to
2,539 boe/d, net to Jadestone. The average realised crude
oil price was US$78.29/bbl, while gas sold for US$2.19/mcf.
The average premium in 2021 ranged between US$0.27/bbl
to US$3.46/bbl. The most recent lifting was agreed at a
premium of US$4.33/bbl.
Between the date of acquisition and the year end there were
seven liftings resulting in total sales of 582,181 boe and gas
sales of 624.8 mcf.
On 7 February 2022, the Bunga Kertas FPSO, deployed at the
non-operated assets, had its class suspended, resulting in the
fields having to shut in and temporarily cease production.
The operator anticipates the FPSO will have its class reinstated
by July/August 2022. Since the class suspension there has been
no production from the non-operated assets.
Malaysia
Operated: PM 323 and PM 329 PSCs &
Non-operated: PM 318 and AAKBNLP PSCs
On 1 August 2021, Jadestone completed the acquisition of the
entire share capital of SapuraOMV Upstream (PM) Inc., for a
cash consideration of US$20.0 million, comprising the headline
price of US$9.0 million plus adjustments of US$11.0 million.
The economic effective date of the acquisition was 1 January
2021, meaning the Group was entitled to the net cash
generated since 1 January 2021 up to the completion date. As a
result, on 1 August 2021 the Group obtained gross cash held by
SapuraOMV of US$29.2 million, resulting in a net cash receipt
of US$9.2 million.
There are two separate potential contingent payments of
US$3.0 million each related to the annual average Dated Brent
price exceeding US$65/bbl in 2021 and US$70/bbl in 2022.
Dated Brent averaged US$70.91/bbl in 2021 and as a result the
first US$3.0 million contingent payment was paid in January
2022. Management believes the second contingent payment is
probable and thus recognised a discounted provision of US$1.4
million in the annual financial statements for the year ended 31
December 2021.
Post completion, the name of the acquired entity was changed
to Jadestone Energy (PM) Inc. (the “PenMal Assets”).
The PenMal Assets consist of four licences, two of which are
operated by the Group. The two operated licences comprise
a 70% interest in the PM329 PSC, containing the East Piatu
field, and a 60% interest in the PM323 PSC, which contains the
East Belumut, West Belumut and Chermingat fields. Both PSCs
are located approximately 230km northeast of Terengganu
in shallow water. All fields are in production, and have been
developed by way of fixed wellhead and central processing
platforms. The two non-operated licences consist of 50%
working interests in each of the PM318 PSC and in the Abu, Abu
Kecil, Bubu, North Lukut, and Penara oilfields (“AAKBNLP”) PSC.
The two non-operated PSCs are located in the same region as
PM329 and PM323.
The PenMal Assets added immediate cash flow from 6,057
boe/d, on a net working interest basis, of which over 89% is oil.
The PenMal Assets produce light sweet crude that is blended to
Tapis grade (43° API, 0.04% mass sulphur).
The PenMal Assets added 11.2 mmboe net working interest 2P
reserves to the Group's 2P reserves as at 31 December 2021.
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JADESTONE ENERGY 2021 ANNUAL REPORT
OPERATIONAL REVIEW
Pending acquisition
Pre-production assets
New Zealand
Maari project
Indonesia
Lemang PSC
On 16 November 2019, the Group executed a sale and
purchase agreement with OMV New Zealand Limited (“OMV
New Zealand”), to acquire an operated 69% interest in the
Maari project, located 120 km offshore New Zealand, in a water
depth of 100 metres, for a total headline cash consideration of
US$50.0 million and subject to customary closing adjustments.
The transaction has achieved several key milestones with
regard to regulatory approvals, and the Group continues to
focus on securing the remaining ministerial consents from the
New Zealand Government, including the approval for transfer
of operatorship.
Jadestone and OMV New Zealand continue to work towards
completion of the transaction. The Group would assume the
operatorship of the Maari project upon completion of the
transaction. The economic benefits from 1 January 2019 until
the closing date will be adjusted in the final consideration price.
This is anticipated to be a net receipt to the Group.
The Lemang PSC is located onshore Sumatra, Indonesia.
The PSC contains the Akatara field, which has been
substantially de-risked with 11 wells drilled into the structure,
plus three years of oil production history, up until the field
ceased oil production in December 2019.
On 30 June 2021, the Minister of Mines and Energy of Indonesia
issued a Ministerial decree that facilitates the development
and commercialisation of the gas field, allocating gas sales
from the Akatara gas field in the Lemang PSC to a subsidiary
of PT Perusahaan Listrik Negara, the national electricity utility,
and the associated production and sales of LPG to the local
domestic market in Jambi province, together with condensate
sales to a local buyer. On 1 December 2021, a gas sale
agreement was signed between Jadestone and PT Pelayanan
Listrik Nasional Batam, as buyer.
In early 2022, Jadestone launched a tender for the engineering,
procurement, construction and installation contractor (“EPCI”)
for the Akatara development. After a rigorous process, a
recommendation on the EPCI contractor was made to the
Indonesian upstream regulator, SKKMigas, in May 2022.
Regulatory approval was received in late May 2022 and the EPCI
contract signed in early June 2022, allowing Jadestone to take
a final investment decision (“FID") and accelerate development
activity on the Akatara field.
The Akatara gas field has been independently estimated to
contain a 2C gross resource (pre local government back-in
rights) of 63.7 bcf of sales gas, 2.5 mmbbls of condensate
and 5.6 mmboe of LPG, equating to a combined 18.7 mmboe
of resource, or 16.8 mmboe net to Jadestone's existing 90%
working interest. Following FID, Jadestone will book it's share of
economic Akatara gas resources at the end of 2022.
Jadestone is pursuing a low-cost development of the field,
including efficient re-use of existing wells and infrastructure,
thereby minimising incremental impact on the local
environment. The Akatara gas project remains on track for first
gas in H1 2024.
On 24 November 2021, the Group announced the acquisition,
subject to customary approvals, of the remaining 10% interest
in the PSC from PT Hexindo Gemilang Jaya (“Hexindo”). Through
this transaction, the Group's interest in the Lemang PSC will
increase to 100%, pre local government back-in rights. In return
for the transfer of Hexindo's 10% stake, the Group will waive
unpaid amounts related to Hexindo's interest in the Lemang
PSC and will pay a consideration of US$0.5 million (inclusive
of transfer taxes) subject to the approval of government,
shareholders of Hexindo and the shareholders of Eneco Energy
Limited, Hexindo's parent company. Jadestone anticipates
receiving the remaining approvals in Q3 2022.
66
Vietnam
Philippines
Block 51 and Block 46/07 PSCs
Service Contract 56 (“SC56”)
Exploration assets
Jadestone holds a 100% operated working interest in the Block
46/07 and Block 51 PSCs, both in shallow waters in the Malay
Basin, offshore southwest Vietnam.
The two contiguous blocks hold three discoveries: the Nam
Du gas field in Block 46/07 and the U Minh and Tho Chu gas/
condensate fields in Block 51, with 2C resources of 93.9
mmboe.
The Tho Chu discovery in Block 51 is currently under
suspended development area status, with the exploration
period expiring in June 2023.
The formal field development plan (“FDP”) in respect of the
Nam Du/U Minh development was submitted to the Vietnam
regulatory authorities in late 2019. The Group deferred
the project in mid-March 2020, amid delays in Vietnamese
Government approvals and the drop in global oil prices due to
COVID-19.
Discussions are continuing with the Vietnamese Government
and Petrovietnam to reinstate the project, agree a gas
production profile for the development, as a precursor to a gas
sales contract, and ultimately attaining government sanction
for the field development.
In 2020, Total E&P Philippines B.V. (“Total”) and Jadestone
informed the Philippines Department of Energy of their
intention to voluntarily surrender the entire interest in
SC56 (Jadestone 25% working interest) and accordingly,
to terminate the contract. The effective date of termination
was 21 December 2020.
Following the termination, in Q3 2021, the Group paid US$1.5
million to the Philippines Department of Energy, related to
the unfulfilled minimum work programme, net to Jadestone’s
25% participating interest.
Service Contract 57 (“SC57”)
In 2006, the Group executed an agreement with the Philippines
National Oil Company (“PNOC”) to acquire a 21% working
interest in SC57. The acquisition required the approval of the
Office of the President of the Philippines and in December 2021
the Philippines Department of Energy advised such approval
will not be granted. The Group is now seeking reimbursement
from PNOC for costs of approximately US$0.9 million which it
incurred in relation to a 2008 seismic acquisition campaign.
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JADESTONE ENERGY 2021 ANNUAL REPORT
FINANCIAL REVIEW
Financial review
The following table provides select financial information of the Group, which was
derived from, and should be read in conjunction with, the audited consolidated financial
statements for the year ended 31 December 2021.
USD’000 except where indicated
Sales volume, barrels of oil equivalent (boe)
Production, boe/d
Realised oil price, US$/boe1
Revenue2
Production costs
Operating costs per barrel of oil equivalent (US$/boe)3
Adjusted EBITDAX3
Unit depletion, depreciation & amortisation (US$/boe)
Impairment
Profit/(loss) before tax
Loss after tax
Loss per ordinary share: basic & diluted (US$)
Dividend per ordinary share (US¢)
Operating cash flows before movement in working capital
Capital expenditure
Outstanding debt3
Net cash3
2021
2020
4,562,279
4,165,612
12,545
74.34
11,438
44.79
340,194
217,938
(206,523)
(105,338)
26.22
157,948
13.67
-
1,080
(13,742)
(0.03)
1.93
96,622
55,996
-
117,865
23.10
62,582
16.24
50,455
(57,238)
(60,178)
(0.13)
1.62
86,883
24,065
7,386
82,055
1 Realised oil price represents the actual selling price and before any impact from hedging.
2 Revenue in 2020 included hedging income of US$31.4 million, pursuant to the characterisation of the two-year capped swap programme as a cash flow
hedge under IFRS 9. Losses realised from the 2021 swaps of US$4.6 million were recognised in other expenses, pursuant to the characterisation of the
ad hoc 2021 six-month swap programme as derivative instruments measured at fair value through profit or loss. The 2021 swap programme covered
a short time span (not exceeding a half yearly reporting period), whereas the capped swap programme crossed three annual reporting periods.
3 Operating cost per boe, adjusted EBITDAX, outstanding debt and net cash are non-IFRS measures and are explained on pages 72 to 74.
68
Benchmark commodity price and realised price
The average benchmark price incorporated into the Group’s
liftings was US$70.94/bbl in 2021, an increase of 75% compared
to 2020 at US$40.61/bbl.
The actual average realised price in 2021 increased broadly
in line with the benchmark price, by 66% to US$74.34/bbl,
compared to US$44.79/bbl in 2020. The average premium
for the year was US$3.39/bbl, compared to 2020 of US$4.17/
bbl. The decline in premiums was predominately due to the
inclusion of PenMal Assets barrels with an average premium
of $1.14bbl. Stag averaged US$11.20/bbl (2020:11.45/bbl) and
Montara US$1.14/bbl (2020: US$2.04/bbl).
Since the December 2021 year end, premiums have continued
to increase with the most recent liftings achieving a premium
of US$6.47/bbl, US$23.72/bbl and US$4.33/bbl, at Montara,
Stag and PenMal Assets respectively.
Production and liftings
The Group generated average production of 12,545 boe/d
in 2021, compared to 11,438 bbls/d in 2020. Production
increased due to the acquisition of PenMal Assets which
generated average production of 6,057 boe/d since the date of
acquisition, or 2,539 boe/d averaged over the full year. Montara
production declined in 2021 to 7,647 bbls/d from 9,045 bbls/d
in 2020 due to natural field decline and downtime associated
with the drilling of H6 and workovers on Skua 10 & 11, plus
an unscheduled shutdown to replace defective valves on the
FPSO. Stag production in 2021 was 2,359 bbls/d, broadly in line
with the 2,394 bbls/d achieved in 2020.
The Group had 17 liftings during the year (2020: 10), resulting
in sales of 4.6 mmbbls (2020: 4.2 mmbbls), reflecting the
higher production compared to 2020. The PenMal Assets
contributed seven oil liftings since August, representing 0.6
mmbbls. In addition, PenMal Assets produced and sold 624.8
mcf (approximately 0.1 mmboe) of natural gas, which is sold via
pipeline directly to PETRONAS.
Revenue
The Group generated revenue of US$340.2 million in 2021, an
increase of 56% compared to 2020 of US$217.9 million, and the
highest revenue ever recorded by the Group. The increase of
US$122.3 million was predominately due to:
l Higher average realised prices in 2021, compared to
2020 for Stag and Montara, contributing an additional
US$115.3 million;
l PenMal Assets generating oil revenues of US$45.6 million
and gas sales of US$1.0 million (2020: nil);
l A decrease of 0.2 mmbbls in lifted volumes at Montara
and Stag in 2021 compared to 2020, resulting in a decline
in revenues of US$8.3 million; and
l Hedging income was nil1 in 2021, a decline of US$31.4
million compared to 2020. The Group’s 24 month
capped swap cash flow hedge programme ended on
30 September 2020.
Production costs
Production costs increased by 96% in 2021 to US$206.5 million,
from US$105.3 million in 2020, predominately due to:
l Workover costs of US$67.0 million (2020: US$21.7 million),
mostly related to the subsea workovers at Skua 10 & 11
of US$47.2 million. The Montara subsea workovers were a
one-off event and differ from the pump replacements at
Stag as they require a dedicated drilling rig, whereas the
Stag workovers are undertaken by the hydraulic workover
unit in place on the Stag platform. There were nine
workovers at Stag in 2021, compared to eight in 2020;
l Repairs and maintenance costs of $45.2 million, compared
to US$22.5 million in 2020, with the PenMal Assets
contributing US$5.1 million and Australia an additional of
US$17.6 million compared to 2020. Montara incurred an
additional US$11.6 million due to a once-in-every-three-
year subsea flowline inspection, a subsea control module
(“SCM”) change-out on the Swift North well and higher fabric
maintenance costs. Stag incurred an additional US$6.0
million due to a once-in-every-five-years under-buoy hose
replacement and also higher fabric maintenance costs;
l Operating costs increased to US$61.6 million (2020:
US$45.2 million), with the PenMal Assets contributing
US$11.2 million, plus higher contractor charges at Stag and
Montara from changing rosters in response to COVID-19
restrictions;
l Logistics costs increased to US$20.2 million (2020: US$18.9
million), with the PenMal Assets contributing US$2.3 million;
l Transportation costs of US$2.8 million in 2021 (2020: nil),
reflecting the change in offtake arrangements at Stag
following the cancellation of the Dampier Spirit FSO lease
in September 2020. The revised offtake arrangements in
Q4 2020 and through 2021 resulted in a change to the
point of sale, with end buyers predominately located in
Singapore and Malaysia, which resulted in the Group paying
transportation expenses; and
l A net inventory movement of US$12.5 million (2021: US$9.7
million; 2020: credit of US$2.8 million), reflecting the year-
on-year differential of the Group’s crude inventories on
hand and the change in net underlift/overlift position of
the Group at year end due to production imbalances with
the joint operating partner in the PenMal Assets. There
were 274,103 bbls on hand at 2021 year end, compared
to 601,999 bbls at 2020 year end, contributing to US$9.0
million. Additionally, the Group has a net underlift of 88,398
bbls from PenMal Assets at year end, compared to 135,115
bbls on the acquisition date, contributing to US$3.5 million.
Unit operating costs per barrel of oil equivalent were US$26.22/
boe (2020: US$23.10/bbl), before workovers and movement
in inventories, but including net lease payments and certain
other adjustments (see non-IFRS measures below). Unit costs
increased due to the lower production at Montara and higher
operating costs including repairs & maintenance.
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1 The hedging loss in 2021 of US$4.6 million was recognised within other expenses, as opposed to offsetting against revenue, due to the adoption of
a different accounting treatment for the 2021 commodity swap contracts. The two-year capped swap programme was characterised as a cash flow
hedge under IFRS 9 and realised gains were recognised as part of revenue. Losses realised from the 2021 swaps were recognised in other expenses,
pursuant to the characterisation of the ad hoc 2021 six-month swap programme as derivative instruments measured at fair value through profit or
loss. The 2021 programme covered a short time span (not exceeding a half yearly reporting period), whereas the capped swap programme crossed
three annual reporting periods.
69
JADESTONE ENERGY 2021 ANNUAL REPORT
FINANCIAL REVIEW
Depletion, depreciation and amortisation
(“DD&A”)
DD&A charges were US$80.2 million in 2021, compared to
US$84.6 million in 2020, reflecting lower production at Montara
during the year, resulting in a decrease in depletion charges in
Australia of US$9.0 million compared to 2020. The reduction
was partly offset by depletion charges at the PenMal Assets of
US$3.6 million since the date of acquisition of 1 August 2021.
Depreciation of the Group’s right-of-use assets declined by
US$5.0 million mostly due to the termination of the Dampier
Spirit leased FSO at Stag in 2020.
The depletion cost on a unit basis was US$13.67/boe in 2021
(2020: US$16.24/bbl), predominately due to the inclusion of
PenMal Assets which lowered the average DD&A unit charge.
The combined depletion cost on a unit basis at both Stag
and Montara remained largely comparable to 2020 (2021:
US$16.16/bbl; 2020: US$16.24/bbl). The PenMal Assets, by
comparison, recorded unit depletion charges of US$3.87/boe.
Staff Costs
Total staff costs were US$51.8 million in 2021, comprising
US$26.8 million (2020: US$20.7 million) in relation to offshore
employees, which are recorded under production costs,
and US$25.1 million (2020: US$21.9 million) associated with
administrative employees. The average number of employees
employed by the Group during the year was 278 (2020: 210),
reflecting the additional employees associated with the
acquisition of the PenMal Assets.
Other expenses
Other expenses decreased in 2021 to US$26.2 million
(2020: US$26.9 million). The variance of US$0.7 million was
predominately due to:
l Reduction of non-recurring costs by US$9.2 million
compared to 2020. In 2021, the Group incurred total non-
recurring costs of US$5.2 million, these included internal
reorganisation costs of US$1.1 million, acquisition costs of
US$0.8 million in relation to the PenMal Assets, and several
other business development related expenses of US$3.3
million. In comparison, the Group had a total of US$14.4
million of one-off costs in 2020, including US$9.1 million
associated with the litigation fees in respect of SC56 and
the exit from the Block 05-1 PSC offshore Vietnam (see
‘Other income’ section for the litigation income generated),
Australian rig contract deferral costs of US$3.0 million,
Australian exploration expense of US$1.0 million and
several business development projects totalling US$1.3
million, including the acquisition of the Lemang PSC;
l Net foreign exchange loss of US$1.0 million (2020: US$2.6
million);
l A fair value loss on commodity swaps of US$4.6 million
(2020: US$0.5 million) pursuant to the characterisation of
the ad-hoc 2021 six-month swap programme as derivative
instruments measured at fair value through the profit
and loss;
l Written off of intangible exploration assets of US$5.3 million
(2020: nil) following the termination of a contract with
a third-party contractor; and
l Higher provision made for slow-moving materials and
spares on hand of US$2.6 million (2020: US$0.1 million),
mainly associated with the Australian drilling components
and facility spare parts.
70
Other income
Other income of US$7.7 million was generated during
2021 compared to 2020 of US$26.4 million. The income is
predominately the result of non-recurring transactions as
detailed below:
l During 2021, the Group incurred US$2.5 million of net
foreign exchange gains (2020: US$0.1million) associated
with the weakening of the Australian dollar;
l Rebate income of US$4.5 million (2020: US$3.6 million)
arising from the sublease of right-of-use assets under the
Group’s helicopter lease contract;
l
In comparison, during 2020, the Group generated US$11.1
million of litigation income from Total regarding the carried
exploration well at SC56 for US11.1 million and received
a settlement sum of US$1.0 million from Inpex regarding
the litigation resolution of Block 05-1 (see ‘Other expenses’
section for the litigation fees incurred); and
l Also, 2020 saw the reversal of provisions associated with
the Dampier Spirit of US$6.4 million and a fair value gain on
derivatives of US$3.8 million.
Impairment
In 2020, the Group recorded an impairment of US$50.5 million
associated with the capitalised intangible exploration costs
at SC56, as the costs were no longer deemed recoverable,
following the decision to voluntarily relinquish the Group’s
interest in the block. The impairment provision was formally
written off during 2021 following the finalisation of the
settlement for unfulfilled minimum work commitments under
the PSC for US$1.5 million, payable to the Department of
Energy in the Philippines. The penalty was offset against a prior
provision of US$1.8 million resulting in a credit to other income
of US$0.3 million.
Taxation
The tax charge of US$14.8 million in 2021 (2020: US$2.9 million)
is split between a current tax charge of US$7.3 million (2020:
US$11.7 million) and a deferred tax charge of US$7.5 million
(2020: credit US$8.7 million). The current tax charge includes
US$9.5 million (2020: nil) of PITA tax incurred by the Malaysian
operations, offset by an Australian PRRT refund of US$1.4
million (2020: US$1.7 million paid) and corporate tax credit of
US$0.8 million (2020: US$10.0 million expense).
Australian PRRT
Australian petroleum resource rent tax (“PRRT”) is a cash based
tax charged at the rate of 40% and is deductible from income
tax. The current tax credit of US$1.4 million is associated with
Stag operations, due to the utilisation of PRRT carried forward
losses during the year. Montara is not anticipated to incur PRRT
expense in the future, as it has unutilised PRRT carried forward
credits of US$3.4 billion (2020: US$3.3 billion). Based on
management's latest forecasts, the augmentation on historical
accumulated PRRT net losses will more than offset PRRT that
would otherwise arise on future PRRT taxable profits.
Malaysian PITA
Malaysian petroleum income tax (“PITA") is charged for each
year of assessment derived from petroleum operations at the
rate of 38%. The current tax charge represents the tax liability
generated from the date of acquisition until the year end.
Deferred tax
The deferred tax movement during the year reflects timing differences for income tax, PITA and PRRT. The Group incurred a
deferred tax charge of US$7.5 million in 2021, which consists of US$5.2 million for the recognition of net deferred tax liabilities
on the Australian operations, US$3.4 million of deferred PRRT expense and US$1.1 million of deferred PITA credit. In 2020, the
Group had a deferred tax credit of US$8.7 million, which consisted of US$4.0 million for the unwinding of deferred tax liabilities
and US$4.7 million of deferred PRRT credit. The increase in deferred tax charge in 2021, compared to 2020, is explained by:
l Additional deferred tax liabilities recognised at the Australian operations, predominately arising from the additional capital
expenditure spent at Montara in 2021, which created temporary taxable timing differences arising from the difference
between the accounting base and the tax base of oil and gas properties, due to the immediate deductibility of the cost
associated with the H6 drilling programme. The Group further recognised deferred tax liabilities arising from the insurance
claim receivable of US$10.3 million on the well control claim for the Skua 11 well workovers. The insurance claim will be taxable
in future following cash receipt;
l Deferred PRRT expense of US$3.4 million in 2021, arising from the reduction of deferred tax assets associated with Stag PRRT,
following the utilisation of unutilised PRRT losses carried forward from 2020; and
l The Group incurred US$1.1 million of deferred PITA credit predominately arising from the recognition of deferred tax assets
associated with the oil and gas properties based on the difference between the accounting depletion charge and the tax
charge in 2021.
2021 Reconciliation of net cash
Cash and cash equivalents, 31 December 2020
Restricted cash, 31 December 2020
Total cash and cash equivalent, 31 December 2020
Revenue
Other operating income
Production costs
Staff costs
General and administrative expenses
Operating cash flows before movements in working capital
Movement in working capital
Net tax paid
Interest paid
Purchases of intangible exploration assets, oil and gas properties, and plant and equipment1
Net cash inflows from acquisition of PenMal Assets
Other investing activities
Financing activities
Total cash and cash equivalent, 31 December 2021
USD’000
USD’000
80,996
8,445
340,194
6,030
(206,523)
(24,117)
(18,962)
89,441
96,622
18,808
(11,834)
(1,505)
(55,920)
9,219
80
(27,046)
117,865
Net cash increased over the year due to the combination of higher realised prices and increased production due to the acquisition
of the PenMal Assets, partially offset by the drilling of the H6 infill development well, spending on the Skua subsea workovers and
non-routine repairs and maintenance.
The Group has been debt free following the final repayment of its reserves based loan in March 2021.
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1 Total capital expenditure was US$56.0 million (2020: US$24.1 million), comprising total capital expenditure paid of US$55.9 million (2020: US$17.9
million), plus accrued capital expenditure of US$0.1 million (2020: US$6.1 million).
71
JADESTONE ENERGY 2021 ANNUAL REPORT
FINANCIAL REVIEW
Non-IFRS measures
The Group uses certain performance measures that are not specifically defined under IFRS, or other generally accepted accounting
principles. These non-IFRS measures comprise operating cost per barrel of oil equivalent (opex/boe), adjusted EBITDAX, outstanding
debt, and net cash.
The following notes describe why the Group has selected these non-IFRS measures.
Operating costs per barrel of oil equivalent (Opex/boe)
Opex/boe is a non-IFRS measure used to monitor the Group’s operating cost efficiency, as it measures operating costs to extract
hydrocarbons from the Group’s producing reservoirs on a unit basis.
Opex/boe is defined as total production costs excluding oil inventories movement and underlift/overlift, write down of inventories,
workovers (to facilitate better comparability period to period) and non-recurring repair and maintenance. It includes lease
payments related to operational activities, net of any income earned from right-of-use assets involved in production, foreign
exchange gains arising from foreign exchange forwards in respect of local currency operating expenditure, and excludes
transportation costs, PenMal Asset supplementary payments, DD&A and short-term COVID-19 subsidies.
The adjusted production cost then divided by total produced barrels of oil equivalent for the prevailing period to determine the unit
operating cost per barrel of oil equivalent.
USD’000 except where indicated
Production costs (reported)
Adjustments
Lease payments related to operating activity1
Underlift, overlift and crude inventories movement2
Workover costs3
Impact from FX derivatives apportioned to production costs4
Other income5
Non-recurring repair and maintenance6
Australian transportation costs
PenMal Assets supplementary payments7
Australian Government JobKeeper scheme
Adjusted production costs
Total production, (barrels of oil equivalent)
Operating costs per barrel of oil equivalent
2021
2020
206,523
105,338
10,619
(9,680)
(67,006)
-
(4,512)
(6,593)
(1,231)
(8,255)
196
120,061
4,578,962
26.22
17,548
2,806
(21,686)
(2,649)
(3,634)
(1,619)
-
-
600
96,704
4,186,478
23.10
1 Lease payments related to operating activities are lease payments considered to be operating costs in nature, including leased helicopters for
transporting offshore crews, and the Dampier Spirit FSO rental fees prior to its lease termination in September 2020. These lease payments are added
back to reflect the true cost of production.
2 Underlift, overlift and crude inventories movement are added back to the calculation to match the full cost of production with the associated
production volumes (i.e., numerator to match denominator).
3 Workover costs are excluded to enhance comparability. The frequency of workovers can vary significantly, across periods.
4 A portion of the net impact from foreign exchange hedging instruments was apportioned to production costs, based on the Group’s actual local
currency expenditure during the hedging period.
5 Other income represents the rental income from a helicopter rental contract (a right-of-use asset) to a third party.
6 Non-recurring repair and maintenance costs in 2021 related to the Montara Swift North SCM change out and facility integrity baseline survey.
The costs in 2020 related to costs associated with Cyclone Damien.
7 The supplementary payments are required under the terms of PSCs based on Jadestone’s entitlement to profit from oil and gas. The payments are
made to PETRONAS.
72
Adjusted EBITDAX
Adjusted EBITDAX is a non-IFRS measure which does not have a standardised meaning prescribed by IFRS. This non-IFRS measure
is included because management uses the information to analyse cash generation and financial performance of the Group.
Adjusted EBITDAX is defined as profit from continuing activities before income tax, finance costs, interest income, DD&A, other
financial gains, non-recurring expenses and exploration assets write-offs.
The calculation of adjusted EBITDAX is as follow:
USD’000
Revenue
Production cost
Staff cost
Impairment of assets
Other expenses
Other income, excluding interest income
Other financial gains
Unadjusted EBITDAX
Non-recurring
Net loss/(gain) from oil price derivatives
Impairment of assets
Non-recurring opex1
Intangible exploration assets written off
Net litigation income
Rig contract deferred costs
Net loss/(gain) on contingent considerations
Gain from termination of FSO lease
Others2
Adjusted EBITDAX
2021
340,194
(206,523)
(25,068)
-
(26,181)
7,602
266
90,290
4,633
-
53,096
5,260
-
-
438
-
4,231
67,658
157,948
2020
217,938
(105,338)
(21,903)
(50,455)
(26,918)
26,119
359
39,802
(30,889)
50,455
8,270
-
(3,005)
3,000
(359)
(6,429)
1,737
22,780
62,582
The Group EBITDAX reflects the strong cash operational performance of the assets with the creation of an additional US$158.0
million generated during 2021 before investing activities and non-recurring operating costs.
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1
Includes one-off major maintenance/well intervention activities, in particular the workover campaigns at Montara Skua 10 & 11, Swift North SCM
change out and facility integrity baseline survey in 2021. The 2020 one-off major maintenance/well intervention activities were comprised of Skua 10
and H3 workover campaigns, and other non-recurring production expenditures such as the repair and maintenance costs associated with weather
downtime in 2020.
2
Includes Maari transition team costs, Australian Government JobKeeper scheme, business development and internal reorganisation costs, as well as
Montara seismic acquisition costs associated with the non-licence area and gain on contingent consideration in 2020.
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JADESTONE ENERGY 2021 ANNUAL REPORT
FINANCIAL REVIEW
Outstanding debt
Total borrowings, as recorded in the Group’s consolidated statement of financial position, represents the carrying amount of the
Group’s interest bearing financial indebtedness, measured at amortised cost pursuant to IFRS 9 Financial Instruments.
Outstanding debt is a non-IFRS measure which does not have a standardised meaning prescribed by IFRS. Management uses this
measure to manage the capital structure, and make adjustments to it, based on the funds available to the Group. Outstanding debt
is defined as long and short-term interest bearing debt, with effective interest method financing costs added back (i.e., excluded),
and excluding derivatives.
As at 31 December 2021, the Group has no outstanding interest bearing financial indebtedness of any kind, following the final
scheduled repayment of the RBL at the end of Q1 2021.
USD’000
Long-term borrowing
Short-term borrowing
Add back: effective interest method financing costs
Outstanding debt
2021
-
-
-
-
2020
-
7,296
1,021
7,386
Net cash
Net cash is a non-IFRS measure which does not have a standardised meaning prescribed by IFRS. Management uses this measure
to analyse the financial strength of the Group. This measure is used to ensure capital is managed effectively in order to support
ongoing operations, and to raise additional funds, if required.
USD’000
Outstanding debt
Cash and cash equivalents
Restricted cash
Net cash
2021
-
117,865
-
117,865
2020
(7,386)
81,996
7,445
82,055
Net cash is defined as the sum of cash and cash equivalents and restricted cash, less outstanding debt. Cash and cash equivalents
in 2021 contain a restricted cash balance of US$0.4 million and US$0.5 million in relation to a deposit placed for bank guarantee
with respect to the PenMal Assets and an Australian office building, respectively. In 2020, restricted cash included the RBL debt
service reserve account balance of US$7.4 million but excluded US$1.0 million in respect of a cash collateralised bank guarantee
with the Indonesian regulator with respect to a joint study agreement as the guarantee was removable and can then be used to
fund the business. The Indonesian bank guarantee was released in Q3 2021 upon completion of the study.
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JADESTONE ENERGY 2021 ANNUAL REPORT
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Corporate
governance
report
78 - 79
Chair's corporate governance statement
80
Principles of corporate governance
81 - 85
Compliance statement to QCA Code principles
86 - 93
Directors’ report
94 - 95
Audit Committee report
96 - 105
Remuneration Committee report
106 - 108 Governance and Nomination Committee report
109 - 112 Health, Safety, Environment and Climate Committee report
113
Disclosure Committee report
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JADESTONE ENERGY 2021 ANNUAL REPORT
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Chair's
corporate
governance
statement
A key component of my role is to oversee the development of the Group’s corporate
governance model and ensure there is a clear focus on this important area of our
business. It is my responsibility to work with my fellow Directors to ensure that the
Group embraces good corporate governance and delivers the highest standards.
Jadestone is committed to upholding high standards of
governance and responsible, social and ethical behaviour.
Jadestone has implemented a Code of Conduct Policy that
applies to all employees and contractors and which provides
a framework of principles for conducting business, dealing
with other employees, clients and suppliers, and reflects the
Group's commitment to a culture of honesty, integrity and
accountability. Jadestone has a set of core values: Respect,
Integrity, Safety, Results-Orientated, Sustainability and Passion.
Each employee is expected to make a commitment to these
values, and to contribute to protecting and enhancing the
Group's reputation. Jadestone’s core values underpin the work
the business does, and they form the foundation of its Code
of Conduct.
A copy of the Group's key governance documents, including
the Articles of Association, the Code of Conduct and related
policies, are available on Jadestone's website at
www.jadestone-energy.com/sustainability-2020/key-policies/.
As part of its staged transition from North American to UK
norms, polices and procedures, and in line with the AIM Rules,
Jadestone adopted the Quoted Companies Alliance Corporate
Governance Code 2018 (the "QCA Code") in 2020. Following
the completion of the Group's internal reorganisation in
April 2021, Jadestone Energy plc became the new ultimate
holding company of the Group and as a UK company is fully in
compliance with the QCA Code. The Board recognises the value
and importance of high standards of corporate governance,
and believes that the QCA Code provides an appropriate
framework for a company of Jadestone's size and stage of
development.
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In addition, Jadestone publishes on its website a Modern
Slavery Statement pursuant to Section 54 of the UK Modern
Slavery Act 2015, which sets out the steps that Jadestone has
taken, and continues to take, to ensure no modern slavery or
human trafficking occurs within its supply chains or business.
The report below provides a high-level overview of how the
Group has applied the principles of the QCA Code throughout
2021. I am pleased to report that the Board considers that the
Group complies with the requirements of the QCA Code.
Jadestone’s corporate governance culture will continue to
be regularly benchmarked against the QCA Code, with any
developments and changes communicated to shareholders.
As the Chair, I will work with the Directors to build upon
the existing values in place and ensure that good corporate
governance is applied throughout Jadestone’s business.
As a result, Jadestone’s future growth will be built on strong
foundations of respect and integrity, to the benefit of all our
stakeholders.
Dennis McShane
Chair
The Group constantly seeks to improve its corporate
governance practices to reflect the QCA Code, as illustrated
in the Board’s continued focus during 2021 on a range of
ESG issues. The Board of Directors Charter (the "Board
Charter") was updated to specifically recognise the Board's
responsibility over ESG related matters. The Board reorganised
its committees, in order to ensure appropriate oversight of its
ESG responsibilities. Effective 15 December 2021, the mandate
of the Health, Safety and Environment (“HSE”) Committee was
expanded to include climate-related and social responsibilities,
the terms of reference amended and the committee’s name
changed to the Health, Safety, Environment and Climate
(“HSEC”) Committee. In addition, the Nomination Committee's
mandate was expanded to include governance responsibilities,
with the terms of reference being amended accordingly
and the committee’s name changed to the Governance and
Nomination Committee.
The Board is responsible to Jadestone's shareholders for the
leadership, control and management of the Group. The Board
is responsible for the long-term success of the Group and for
ensuring its appropriate management and operation in pursuit
of its objectives. The Board is in constant communication
and meets regularly. The Directors are all identified on pages
91 to 93, together with a summary of their current and past
experience and skills. Whilst there is a formal schedule of
matters specifically reserved for consideration by the Board,
as identified on page 85, the Executive Directors have the
responsibility for specific functional aspects of the Group's
affairs. The Board currently comprises eight Directors, of
whom one is an executive and seven are non-executive. Daniel
Young stepped down as a Director and CFO effective 29 April
2022 and the Group expects to announce a new CFO in the
near-term. The Board has established an Audit Committee, a
HSEC Committee, a Governance and Nominations Committee,
a Remuneration Committee and a Disclosure Committee as
further described on page 85. Each committee's terms of
reference can be found on Jadestone's website.
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JADESTONE ENERGY 2021 ANNUAL REPORT
CORPORATE GOVERNANCE REPORT
Principles of
corporate governance
The Board fully endorses the importance of good corporate governance and applies
the corporate governance code in the form issued by the QCA in April 2018. The Board
views the QCA Code as an appropriate, recognised governance code for a company
of Jadestone’s size, structure and AIM listing.
The Board believes that the QCA Code provides the Group
with the framework to add value to its business, enhances
stakeholder confidence in Jadestone and sustains a strong level
of governance. There are also instances where Jadestone's
governance structures exceed levels set out in the QCA Code.
The QCA Code identifies ten principles of corporate governance
for companies to apply and against which companies must
publish certain specified disclosures. The Group has committed
to apply these ten principles within its business. These
principles are:
1. Establish a strategy and business model which promote
long-term value for shareholders.
2. Seek to understand and meet shareholder needs and
expectations.
3. Take into account wider stakeholder and social
responsibilities and their implications for long term success.
4. Embed effective risk management, considering both
opportunities and threats, throughout the organisation.
5. Maintain the Board as a well-functioning, balanced team led
by the Chair.
6. Ensure that between them the Directors have the necessary
up to date experience, skills and capabilities.
7. Evaluate Board performance based on clear and relevant
objectives, seeking continuous improvement.
8. Promote a corporate culture that is based on ethical values
and behaviours.
9. Maintain governance structures and processes that are
fit for purpose and support good decision-making by the
Board.
10. Communicate how the company is governed and is
performing by maintaining a dialogue with shareholders
and other relevant stakeholders.
80
Compliance statement
to QCA Code principles
PRINCIPLE ONE
Establish a strategy and business model which
promote long-term value for shareholders
Jadestone is a leading independent upstream oil and gas
production and development company in the Asia-Pacific
region. The Group aims to grow primarily through acquisitions
and is focused on creating value through identifying,
acquiring, developing and operating assets within select parts
of the Asia-Pacific region. The Group aims to leverage the
significant experience and track-record of its management
team to maximise value from Jadestone’s existing asset base
through production and cost optimisation, and on identifying
acquisitions that offer significant value both at the time of
purchase and through potential organic development and
reinvestment. The Board’s objective is to create and maintain
a leading independent Asia-Pacific focused upstream oil and
gas company that generates significant shareholder returns
primarily through capital growth. The Group's strategy and
business model are further detailed in the Strategic Report
on pages 22 to 23.
PRINCIPLE TWO
Seek to understand and meet shareholder needs
and expectations
Jadestone is committed to effective communication and
constructive dialogue with its shareholders and the investment
community at large. Jadestone actively strives to understand
and meet shareholder needs and expectations. Jadestone
works hard to ensure members of the Board and the executive
team are highly accessible to shareholders. Jadestone offers
direct lines of access to the Chief Executive Officer (“CEO”) and
Chief Financial Officer (“CFO”), as applicable, and members of
the Board.
Further, Jadestone has dedicated spokespersons for investors,
including an Investor Relations Manager and has two retained
corporate brokers, with mandates that include coordinating
corporate access for shareholders, and eliciting feedback from
the investment community on corporate developments and
news flow.
In 2021, Jadestone webcast presentations to accompany
financial results disclosures and the announcement of major
acquisitions. As part of the webcast presentations, live question
and answer sessions allowed participants to engage directly
with the CEO and CFO. Furthermore, in late 2021, Jadestone’s
Board engaged directly with several of the Company’s
shareholders to understand how institutional investors were
integrating ESG and sustainability factors into their investment
decisions.
The contact details of Jadestone's Investor Relations Manager
and public relations adviser can be found on the Group's
website at the following link:
https://www.jadestone-energy.com/contact/.
Shareholder feedback
Jadestone regularly meets with shareholders and prospective
investors through investor conferences and roadshows, as
well as ad hoc individual meetings. Through these interactions,
which take the form of both one-on-one and group meetings,
the Board and executive team form and maintain relationships
with investors and obtain feedback from shareholders on
the Group's strategy, execution and performance. During
2021, these interactions were primarily conducted via video
conferencing due to pandemic-related travel restrictions.
Information
Jadestone provides regular updates to shareholders in the
form of guidance announcements, operations updates, and
the release of half-yearly and annual financial and operating
results. These disclosures are designed to set expectations and
to provide reviews of performance against those expectations.
In accordance with its continuous disclosure obligations,
Jadestone will provide updates when internal forecasts differ
materially from publicly disclosed expectations, and announce
price-sensitive business developments without delay.
Shareholder advisory bodies
Jadestone maintains ongoing relationships with multiple
shareholder advisory bodies, including during the off-season
cycle in the second half of each calendar year, to enable
feedback regarding proposals either put to, or to be put to,
shareholders for voting at annual meetings.
Annual general meeting
The annual general meeting (“AGM”) is the main forum for
dialogue between the Board and the Company’s shareholders,
and all shareholders are encouraged to attend and participate.
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JADESTONE ENERGY 2021 ANNUAL REPORT
CORPORATE GOVERNANCE REPORT
PRINCIPLE THREE
Take into account wider stakeholder and social
responsibilities and their implications for long-
term success
The Board recognises that the long-term success of the Group
is reliant upon the efforts of its employees, its shareholders,
contractors, suppliers, regulators and other stakeholders. With
an expanding operating footprint in the Asia-Pacific region,
Jadestone recognises the importance of a comprehensive
stakeholder management strategy to successfully and
considerately operate in this diverse range of countries.
In addition, the Group engages with its key stakeholders
through various channels, dependent on the nature of
the relationship, and values the feedback it receives from
those stakeholders. The Group takes every opportunity to
ensure that, where possible, the views of its stakeholders are
considered and acted upon when these are believed likely
to bring material benefit to the success and integrity of the
Group's business activities. Jadestone has published on its
website a Modern Slavery Statement pursuant to Section 54
of the UK Modern Slavery Act 2015. This statement sets out the
steps that Jadestone has taken, and is continuing to take, to
ensure no modern slavery or human trafficking occurs within
its supply chains or business.
For the latest update on Jadestone’s key stakeholder
consultation and engagement activities in 2021, please refer to
the Stakeholder Management section in the 2021 Sustainability
Report. The Section 172 statement contained within the
Strategic Report sets out how Jadestone’s Directors have taken
into account the interests of stakeholders when performing
their statutory duty to promote the success of the Group
during 2021, while the Sustainability Review within the Strategic
Report sets out the Group's governance approach to climate
risks and opportunities.
PRINCIPLE FOUR
Embed effective risk management, considering
both opportunities and threats, throughout the
organisation
The Board is ultimately responsible for managing Jadestone’s
risk appetite and exposure, and delegates to management the
task of identifying, managing and monitoring the risks faced
by the business. Jadestone has in place a risk management
framework which assists the Board in identifying, assessing,
and mitigating the risks faced by the Group to an acceptable
level. This is reviewed on an ongoing basis and actions are
taken as needed to reduce the risks to an acceptable level, as
required. The Board undertakes a bi-annual assessment of the
risks and their potential impact on the current business plan
and longer-term operational strategy.
Jadestone's risk management process is aligned with the
requirements of ISO 31000 and addresses risk management
at three levels: business, facility and task. The Group's risk
management framework is also discussed in the Audit
Committee report and the Principal Risks and Uncertainties
section of the Strategic Report on pages 57 to 63.
The Board holds at least one formal strategy review annually.
In addition, the Board regularly identifies opportunities for
growth, both organic and inorganic, in the form of possible
acquisitions.
82
PRINCIPLE FIVE
Maintain the Board as a well-functioning,
balanced team led by the Chair
Board composition and independence
During calendar year 2021, the Board was comprised of eight
Directors. These included the Non-Executive Chair, the Group’s
President and CEO, the Group’s CFO and five Non-Executive
Directors. More than half of the Board is independent when
accounting for the independent Non-Executive Chair and four
independent Non-Executive Directors. During 2021, both A.
Paul Blakeley and Daniel Young were Executive Directors and
considered to be full time employees. A. Paul Blakeley was not
considered to be independent due to his role as President and
CEO, and Daniel Young was not considered to be independent
due to his role as CFO.
On 7 April 2022, Jenifer Thien was appointed as an independent
Non-Executive Director of the Company. A summary of Jenifer
Thien's experience and skills can be found on page 93. On
29 April 2022, Daniel Young stepped down from the Board as
a result of his resignation as CFO, as originally announced on
23 December 2021.
In the Board’s judgement, six of the seven Non-Executive
Directors, namely Dennis McShane (Chair), Robert Lambert,
Jenifer Thien, Iain McLaren, Cedric Fontenit and Lisa Stewart are
considered independent. David Neuhauser, a Non-Executive
Director, is not considered to be independent as a result of his
managerial responsibilities with a material shareholder of the
Company, Livermore Partners LLC.
The skills and experience of the Non-Executive Directors vary
across disciplines, each enhancing the Board’s independent
oversight of the Group’s business. The Directors biographies on
pages 91 to 93 speak to their relevant skills and experience.
The Group has effective procedures in place to monitor and
deal with conflicts of interest. The Board is aware of the
external commitments and interests of its Directors, and
changes to those commitments and interests are reported
to and, where appropriate, agreed with the rest of the Board.
All the Directors have access to independent legal advice in
addition to the Company’s secretary (“Company Secretary”).
Any Director may take independent professional advice at the
Group’s expense in the furtherance of their duties.
The Board is supported by its committees being the Audit, the
Governance and Nomination, the Remuneration, the HSEC
and the Disclosure Committees. The composition of each of
the Audit Committee and the Remuneration Committee is fully
independent. Directors are all individuals of high calibre and
most have many years’ experiences in the oil and gas industry.
The details of Board and committee meetings during 2021, as
well as director attendance, is disclosed in the Directors' Report
and the committee reports later in this section.
The Group, when considering the recruitment of a new CFO
and Executive Director, is of the view that the current Board
is appropriately resourced to meet its statutory duties and
comply with the QCA Code. The composition of the Board is
reviewed regularly to ensure it has the appropriate level of
skills and experience as the Group continues to grow.
Non-Executive Directors are advised on appointment that they
are expected to devote such time, individual circumstances
permitting, as is necessary for the proper performance of their
duties, which is expected to be not less than three days per
month, based on preparation for and attendance at:
l Scheduled Board meetings;
l The Annual General Meeting;
l Site visits;
l Meetings of Non-Executive Directors;
l Meetings with shareholders;
l Director education/training; and
l Meetings as part of the Board evaluation process.
Non-Executive Directors are also advised that this time
commitment may increase if they become a committee
member or chair, or if they are given additional responsibilities.
PRINCIPLE SIX
Ensure that between them the directors have
the necessary up-to-date experience, skills and
capabilities
The Board covers a wide range of experience and skills. To
meet the requirements of an independent upstream oil and
gas production and development company, these experiences
and skills must cover knowledge of financial, legal, operational,
technical and sustainability matters, plus experience of risk
management and growth in both the independent E&P sector
and public capital markets. In particular, in April 2022, the
Board strengthened its skills, capability and knowledge in the
area of ESG and sustainability through the appointment of
Jenifer Thien as Non-Executive Director.
The Board believes that the current balance of skills across
the Board reflects a very broad range of commercial and
professional skills across geographies and industries and each
of the Directors has experience in public markets. Details of the
Directors’ experience and areas of expertise are outlined on
pages 91 to 93.
The Board considers and reviews the requirement for
continued professional development. The Board undertakes
to ensure that their awareness of developments in corporate
governance and the regulatory framework is current, as well
as remaining knowledgeable of any industry-specific updates.
The Company’s Nominated Adviser and other external advisers,
including legal advisers, also support this development by
providing guidance and updates as required.
Each of the Directors, both executive and non-executive, has
considerable experience and all have demonstrated skills which
are complementary, independent and sufficient to cover all of
the requirements of the Board. As the Group continues to grow
its asset base, the Governance and Nomination Committee will
continue to monitor Board composition to ensure that it has
the appropriate mix of experience, skills, personal qualities
and capabilities. This includes a commitment to diversity
where possible. With Lisa Stewart’s appointment as a Director
at the end of 2019, female representation on the Board
improved from 0 to 13%, with this ratio increasing further
to 22% following the appointment of Jenifer Thien in April
2022. The Governance and Nomination Committee is charged
with increasing diversity at the Board level and within senior
management.
The Company Secretary is responsible for ensuring that Board
procedures are complied with and that governance matters
are addressed by the Group. All Directors have direct access
to the Company Secretary and are able to take independent
legal advice. The Board has considered the guidelines under
the QCA Code with regard to the key responsibilities of a
Senior Independent Director (“SID”), taking into account
additional facts, including the role of the Board Chair, the size
of the Board, the existence of a Deputy Chair of the Board,
the number of independent Non-Executive Directors, and the
channels of communication amongst the Company's Executive,
Non-Executive Directors and shareholders. In light of the
foregoing, the Board has determined that the appointment
of a SID is not required, though the matter will be considered
at regularly and as circumstances change.
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JADESTONE ENERGY 2021 ANNUAL REPORT
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PRINCIPLE SEVEN
Evaluate Board performance based on clear
and relevant objectives, seeking continuous
improvement
A Board matrix helps guide the assessment of the skills and
diversity of the Directors and highlights any potential skill gaps
to address. The Board considers that its effectiveness and
the individual performance of Directors is vital to the success
of the Company. The Company currently conducts an internal
process which involves each Board member completing a self-
assessment and delivering it to the Chair who is also the Chair
of the Governance and Nomination Committee. However, in
parallel with the expansion of the Company's activities, and
the need to meet the requirements of the QCA Code, a formal
evaluation process was adopted during the course of 2021.
Further details on the Board and Committee performance
evaluation are outlined in the Governance and Nomination
Committee Report on pages 106 to 108.
Directors are re-appointed by shareholders pursuant
to Jadestone's Articles of Association, while taking into
consideration the provisions of the QCA Code, having due
regard to their performance and ability to continue to
contribute to the Board in the light of the knowledge, skills and
experience required and the need for progressive refreshing
of the Board (particularly in relation to Directors serving for a
term beyond nine years).
PRINCIPLE EIGHT
Promote a corporate culture that is based on
ethical values and behaviours
The Board is responsible for the management, or for
supervising the management, of the Group's business and
affairs. In supervising the conduct of the business, the Board
through the CEO sets the standards of conduct for the Group.
The application of details of the Group's corporate governance,
including business ethics and integrity, are set out on pages
48 to 49.
The Group’s values of Respect, Integrity, Safety, Results-
oriented, Sustainability and Passion foster a culture of
accountability, efficiency and innovation which support the
Group’s mission and promote a corporate culture based on
ethical behaviours and conduct. These values are enshrined
in written policies and working practices, including the Code
of Conduct, adopted by all Group employees. An open culture
is encouraged across the Group, with regular communications
to staff regarding progress. The senior management team
regularly monitors the Group’s cultural environment and seeks
to address any concerns that may arise, escalating these to
Board level as necessary.
84
PRINCIPLE NINE
Maintain governance structures and processes
that are fit for purpose and support good decision
making by the Board
PRINCIPLE TEN
Communicate how the company is governed and
is performing by maintaining a dialogue with
shareholders and other relevant stakeholders
The Board has a primary responsibility to foster the short
and long-term success of the Group and is accountable to the
shareholders.
Reserved matters for the Board
The Board is responsible for the direction and overall
performance of the Group with an emphasis on strategy, policy,
financial results, compliance matters and good governance.
The matters reserved for the Board include, amongst others:
l setting the Group’s purpose, values and standards;
l
reviewing and approving the Group’s strategy and annual
plans for achievement;
l monitoring corporate governance compliance with
significant policies and procedures, including health and
safety;
l oversight of communications and timely disclosure;
l ensuring the integrity of internal controls and management
of risks, including regular risk reviews;
l approving the Group’s annual and interim reports and
accounts; and
l overseeing control and accountability systems designed
to ensure appropriate standards are met in relation to
health, safety, environmental (including climate), social
responsibility and governance of the Group.
In addition to the above, the Board has approved a set of
financial delegations of authority to ensure clarity throughout
the business concerning the distinction between financial
matters which require Board approval and those that can be
delegated to senior management.
Board committees
The Board delegates specific responsibilities to the Board
committees. Each committee has Board approved terms of
reference which describe the committee’s responsibilities and
the framework by which those responsibilities are fulfilled.
The terms of reference for each committee were last reviewed
and updated in 2021 to align with the QCA Code. During the
calendar year 2021, the Board operated five committees: an
Audit Committee, a Nomination Committee, a Remuneration
Committee, an HSE Committee and a Disclosure Committee.
A summary of the roles, responsibilities, composition and
2021 activities of each of these committees can be found at
pages 94 to 113.
Effective 15 December 2021, the HSE Committee's mandate
was expanded to include climate-related and social
responsibilities, and therefore the terms of reference were
amended and the committee’s name changed to the HSEC
Committee. Also, the mandate of the Nomination Committee
was expanded to include the responsibilities related to
governance, the terms of reference were amended accordingly
and the committee’s name changed to the Governance and
Nomination Committee.
The Board is committed to ensuring that it communicates with
shareholders and other stakeholders in a transparent and
timely manner, and believes that by doing so it demonstrates
the importance it places upon the views of all stakeholders.
The Company’s methods for maintaining a dialogue with
shareholders and other relevant stakeholders is set out in
Principles Two and Three above. The Group's financial and
operational performance, in addition to reports from each of
the Board committees, is summarised in this Annual Report.
Shareholders are encouraged to attend the AGM and to
ask questions. Outcomes of votes cast by shareholders will
be disclosed in a clear, transparent and timely manner.
Shareholders vote to fix the number of directors and elect
the directors to hold office until the next AGM or until their
successors are elected or appointed. In addition, shareholders
vote to appoint the Company’s auditor, and to authorise the
Board to determine the auditor’s remuneration. The Company
receives reports from shareholder advisory bodies, reviews
their findings and meets with them to discuss shareholder
matters. The Board takes the view that, if there is a resolution
passed at a general meeting of shareholders with 20% votes
against, the Company will seek to understand the reason for
the result and, where appropriate, take suitable action.
In addition, the Company has set out its Section 172 disclosures
in the Strategic Report on pages 53 to 55. The Section 172
statement describes how the directors have considered the
interests and likely consequences of any decisions on the
Group's employees, suppliers, customers, community
and the environment, in accordance with the Directors’
statutory duties.
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85
JADESTONE ENERGY 2021 ANNUAL REPORT
Directors’ report
The Directors present their Annual Report on the affairs of the Group and the audited
Group and consolidated financial statements of Jadestone Energy plc for the year ended
31 December 2021.
Internal reorganisation
During calendar year 2021, Jadestone Energy Inc. (“JEI”) was the
parent company of the Group for the period from 1 January
to 23 April. In March 2021, the Group commenced an internal
corporate reorganisation by way of a plan of arrangement
under the Business Corporations Act (British Columbia) (the
“Reorganisation”). Under the Reorganisation, Jadestone Energy
plc, a newly incorporated UK public limited company, became
the ultimate parent company of the Group, including all
subsidiaries. The Reorganisation did not result in a change in
control in the ultimate holding company of the Group, or in
a change of ultimate shareholding in any of the assets of the
Group, or in a change in the management of any the Group’s
assets. Following completion of the Reorganisation on 23 April
2021, JEI’s shares were delisted from trading on AIM. On 26
April 2021, the shares of Jadestone Energy plc were admitted to
trading on AIM.
The Directors of JEI as at 26 April 2021 were appointed as
Directors of Jadestone Energy plc effective from admission to
AIM. This Annual Report, including the Financial Statements,
are prepared and presented with Jadestone Energy plc as the
parent company of the Group from 26 April 2021. For example,
reference to the Board means (i) the Board of JEI up to 26 April
2021, and (ii) the Board of Jadestone Energy plc on and from
26 April 2021.
Incorporation and listing
Jadestone Energy plc was incorporated on 22 January 2021
under the Companies Act 2006, with its head office located in
Singapore. As part of the Reorganisation, the Company’s shares
were admitted to trading on AIM on 26 April 2021.
Adoption of QCA code
JEI adopted the QCA Code effective 31 December 2020. At
the time of the Reorganisation, Jadestone Energy plc adopted
and currently applies corporate governance practices to
reflect the QCA Code and which are similar to the practices
adopted by the Group. There are also instances where the
Group's governance structures exceed the levels set out in the
QCA Code. The Group will prepare a corporate governance
statement at least annually to explain the way in which it has
applied the QCA Code and to identify any areas in which the
Group's governance structures and practices differ from the
expectations set by the QCA Code.
BCSC order
Over the last several years, the Company had experienced
a significant shift away from Canada in both the composition
of its share register and the trading volume of its shares.
Approximately 97% of the Company’s shares were held by non-
Canadian residents as at 31 December 2019, while more than
98% of all Jadestone shares that traded in 2019, were traded
on AIM. Effective at the close of business on 24 March 2020,
the Company’s shares were delisted from the TSX Venture
Exchange. The Company’s shares continued to trade on AIM.
Following the TSX Venture Exchange de-listing, in June 2020
the Company’s principal regulator in Canada, the British
Columbia Securities Commission (“BCSC”) issued an order (the
“Order”), granting the Company relief from certain Canadian
disclosure requirements, generally consistent with the relief
granted to a designated foreign issuer (“DFI”), as defined in
National Instrument 71-102 Continuous Disclosure and Other
Exemptions Relating to Foreign Issuers.
While the Company remained as a British Columbia
incorporated company, and it continued as a reporting issuer
in the Provinces of British Columbia and Alberta, following
issuance of the Order, the Company provided disclosure in
Canada generally consistent with the disclosures required
of a DFI. In the Company’s case, satisfaction of its disclosure
obligations under the AIM Rules and applicable UK legislation,
resulted in satisfaction of the requirements under the Order.
In March 2022, the Company applied to the BCSC, as its
principal regulator in Canada, to cease to be a reporting issuer
in British Columbia and Alberta, the Company’s two Canadian
reporting jurisdictions. The BCSC, by way of an Order, granted
the relief which was then disclosed by the Company on 6 April
2022. As a result, the Company is no longer classified as a
designated foreign issuer under Canadian securities regulations
and is no longer required to file financial statements and other
continuous disclosure documents with the Canadian securities
regulatory authorities. The application was justified by the very
low and decreasing level of Canadian based shareholding in the
Company (estimated at 0.09% at the time of the application),
and is expected to result in efficiency improvements and cost
reductions.
Jadestone will continue to comply with all UK regulatory and
disclosure requirements.
86
Principal activities
Jadestone is an independent oil and gas production and
development company focused on the Asia-Pacific region.
The Group has an acquisitive strategy and is focused on growth
and creating value through identifying, acquiring, developing
and operating assets throughout the Asia-Pacific region.
Jadestone currently has a portfolio of oil and gas production,
development and exploration assets in Australia, Malaysia,
Indonesia and Vietnam and has signed a sales and purchase
agreement to acquire assets in New Zealand. The Group is
focused on creating value through leveraging the significant
experience and track-record of its management team
to maximise value from Jadestone’s existing asset base
through production and cost optimisation, and on identifying
acquisitions that offer significant value both at the time of
purchase and through potential organic development and/
or reinvestment. The Directors’ objective is to create a leading
independent Asia-Pacific-focused upstream oil and gas
company that generates significant value through share price
appreciation and returns to shareholders.
Business review and future developments
A review of the business and the future developments of
the Group is included in the Strategic Report (including the
Chief Executive Officer’s Statement, Business Model and
Strategy, Financial Review and Operational Review) and
Chair’s Statement (all of which, together with the Corporate
Governance Statement, are incorporated by reference into this
Directors’ Report).
Dividend
The Board’s primary method of providing direct returns
to shareholders is by way of a dividend, on a biannual basis.
The Board intends to maintain and grow the dividend over
time, in line with underlying cash flow generation.
In light of the Group’s strong financial position at the mid-
point of 2021, the Company paid out an interim dividend on
1 October 2021 of US$2.75 million (0.59 US cents/share), an
increase of 10% over the Group’s maiden interim dividend of
October 2020.
As a result of a further strengthening of the Group's cash
position over the second half of 2021, resulting in a record
high net cash position at the end of the year, the Board intends
to recommend a final 2021 dividend of US$6.25 million, or
1.34 US cents per share, representing a 25% increase over
the second 2020 dividend.
The dividend policy reflects the Group's current and expected
future cash flow generation potential. The Board may further
revise the Group’s dividend policy from time to time in line
with the actual results and financial position of the Group.
The Board has considered, and will continue to consider,
share buybacks and tender offers as a way of enhancing
shareholder returns.
Share capital
Details of shares issued by the Company during the period are
set out in note 30 to the Consolidated Financial Statements.
The Directors continue to review and evaluate strategic
acquisition opportunities recommended by senior
management, which align with the strategy and requirements
of the Group.
Financial instruments
The Group's financial risk management objectives and
policies are discussed in note 41 to the Consolidated Financial
Statements.
Streamlined Energy and Carbon Reporting
Legislation introduced in 2018 requires UK companies to
report on GHG emissions and energy use from 2019 onwards
(Streamlined Energy and Carbon Reporting, or “SECR”).
As Jadestone is listed on the AIM, the Group is only required to
disclose its GHG emissions and energy use within the UK and
its offshore areas. The Group has no operations within the UK
or its offshore areas, and has only one employee located within
the UK, hence its emissions and energy footprint within the
country are immaterial.
However, given the strategic importance of the Group's GHG
emissions and energy use to its stakeholders, Jadestone has
elected to report in line with the SECR requirements for main
market UK listed companies, which covers, inter alia, annual
global GHG emissions and underlying global energy use. These
SECR disclosures for 2021 have been included within the
Sustainability Review of the Strategic Report, which provides
greater detail and context around the Group's GHG emissions
in 2021.
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87
JADESTONE ENERGY 2021 ANNUAL REPORT
DIRECTORS’ REPORT
2021 Board and committee attendance
The table below shows a summary of Directors’ attendance at Board and committee meetings for the period from 1 January 2021
to 31 December 2021.
Audit Committee
Remuneration
Committee
Board of Directors
q
Governance and
Nomination
Committee
Health, Safety,
Environment and
Climate (“HSEC”)
Committee
Disclosure
Committee
CHAIR
CHAIR
CHAIR
CHAIR
CHAIR
Iain McLaren
Cedric Fontenit
Dennis McShane
Robert Lambert
Dan Young
MEMBERS
MEMBERS
MEMBERS
MEMBERS
MEMBERS
Robert Lambert
Lisa Stewart
Dennis McShane
Iain McLaren
Cedric Fontenit
Iain McLaren
A. Paul Blakeley
A. Paul Blakeley
Lisa Stewart
A. Paul Blakeley
Neil Prendergast
3 MEETINGS IN 2021
2 MEETINGS IN 2021
2 MEETINGS IN 2021
3 MEETINGS IN 2021
1 MEETINGS IN 2021
Name and positions
held in the Company
Board
Audit
Committee
Governance
& Nomination
Committee
Remuneration
Committee
HSEC
Committee
Disclosure
Committee
5 of 5
N/A
2 of 2
N/A
3 of 3
1 of 1
5 of 5
5 of 5
N/A
N/A
N/A
N/A
2 of 2
2 of 2
N/A
N/A
5 of 5
3 of 3
N/A
N/A
3 of 3
5 of 5
3 of 3
2 of 2
2 of 2
5 of 5
5 of 5
N/A
N/A
N/A
N/A
2 of 2
2 of 2
N/A
N/A
N/A
5 of 5
3 of 3
N/A
N/A
3 of 3
1 of 1
N/A
N/A
N/A
N/A
N/A
N/A
A. Paul Blakeley
Director, President
and CEO
Daniel Young
Director and CFO
Dennis McShane
Director and Chair
Robert Lambert
Director and Deputy
Chair
Iain McLaren
Director
David Neuhauser
Director
Cedric Fontenit
Director
Lisa A. Stewart
Director
88
Directors and their interests
The Directors, who served throughout the year and up to the
date of this report, except as noted, were as follows:
l Dennis McShane (Independent Non-Executive Chair)
l A. Paul Blakeley (Executive Director, President and CEO)
l Daniel Young (Executive Director and CFO)1
l Robert Lambert (Independent Non-Executive Deputy Chair)
Directors’ indemnities
As permitted by the Articles of Association, the Directors
have the benefit of an indemnity, which is a qualifying third-
party indemnity provision as defined by Section 234 of the
Companies Act 2006. The indemnity is currently in force.
The Group also purchased and maintained throughout the
financial period directors’ and officers’ liability insurance in
respect of itself and its Directors.
l Cedric Fontenit (Independent Non-Executive Director)
l
Iain McLaren (Independent Non-Executive Director)
l David Neuhauser (Non-Executive Director)
l Lisa A. Stewart (Independent Non-Executive Director)
l
Jenifer Thien (Independent Non-Executive Director)2
1 Stepped down as CFO and Executive Director on 29 April 2022.
2 Appointed 7 April 2022.
The Directors who held office at the end of the financial year
had the following interests in the ordinary shares of the
Company:
Director
A. Paul Blakeley
Daniel Young
Dennis McShane
Robert Lambert
Iain McLaren
David Neuhauser
Cedric Fontenit
Lisa A. Stewart
Interest as at
1 January 2021
Interest as at
31 December 2021
2,732,798
217,919
453,651
553,919
163,778
32,319,1671
200,0002
Nil
4,232,798
1,179,579
453,651
153,919
166,208
32,319,1671
200,0002
Nil
1 Mr. Neuhauser does not own any ordinary shares of the Company
directly but, as managing director of Livermore Partners LLC, exercises
control or direction over the ordinary shares beneficially owned by
Livermore Partners LLC.
2 Mr. Fontenit owns 200,000 ordinary shares of the Company directly.
He also holds indirect beneficial interest in the Company through
443.5565 units of a fund managed by Tyrus Capital S.A.M. (the “Fund”)
holding an interest in the ordinary shares of the Company. However,
Mr. Fontenit does not exercise control or direction over the Fund’s
holding in the Company.
No rights to subscribe for shares in or debentures of Group
companies were granted to any of the Non-Executive Directors
or their immediate families, or exercised by them, during the
financial year.
On 17 December 2021, Daniel Young, Executive Director,
exercised options over a total of 1,700,000 shares. The option
exercise was net settled, resulting in the issue of 961,660
ordinary shares.
Details of share awards that have been granted to the
Executive Directors in calendar year 2021 under the Company’s
Stock Option Plan in addition to details of awards to Executive
Directors in calendar year 2021 under the Performance
Share Plan and the Restricted Share Plan are included in the
Remuneration Committee report on pages 100 to 105. During
calendar year 2021, no Non-Executive Directors received any
awards under the Company’s long-term incentive plans.
Political donations
The Group did not make any political donations nor incur any
political expenditures to candidates or political campaigns
during the period.
Conflicts of interest
There are no potential conflicts of interest between any duties
owed by the Directors to the Company and their private
interests and/or other duties, nor any arrangements or
understandings with any of the shareholders of the Company,
customers, suppliers or others pursuant to which any Director
was selected to be a Director. The Company tests regularly to
ensure awareness of any future potential conflicts of interest
and related party transactions. Directors are required to
declare any additional or changed interests as they arise.
In the event a conflict should arise, the pertinent Director
does not take part in decision making related to the conflict.
In December 2021, Daniel Young recused himself when
the Board considered and decided on the stock option net
settlement agreement related to Daniel Young’s options.
In March 2022, A. Paul Blakeley recused himself when the
Board approved the LTIP grants of which he was a recipient.
Related party transactions
There were no related party transactions to which the
Company was a party during the period, save as disclosed in
note 46 of the Consolidated Financial Statements.
Substantial shareholders
The following table sets out, to the best of the Company’s
knowledge, its significant shareholders as at 30 April 2022.
Shareholder
Tyrus Capital
Baillie Gifford
Livermore Partners
Number of
ordinary
shares as at
30 April 2022
118,205,247
39,195,875
32,319,167
Odey Asset Management
31,237,627
Fidelity
Polar Capital
Premier Miton Investors
Invesco
Blackrock
25,645,912
22,440,273
18,702,808
15,854,697
14,192,500
% Interest
as at
30 April 2022
25.39
8.42
6.94
6.71
5.51
4.82
4.02
3.41
3.05
89
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JADESTONE ENERGY 2021 ANNUAL REPORT
Going concern
The Consolidated Financial Statements have been prepared
under the going concern assumption, which presumes the
Group and the Company will be able to meet their obligations
as they fall due for the foreseeable future.
Director confirmations
Each of the Directors, whose name and functions are listed
in the Directors’ Report, confirms that, to the best of their
knowledge:
l The financial statements have been prepared in accordance
with UK-adopted International Accounting Standards and
International Financial Reporting Standards as issued
by the International Accounting Standards Board and in
conformity with the requirements of the Companies Act
2006; and
l The Strategic Report includes a fair review of the
development and performance of the business and the
position of the Group and the Company, together with
a description of the principal risks and uncertainties that
it faces.
Corporate governance statement
The Group currently complies with the QCA Code and a more
detailed compliance statement is provided at pages 81 to 85.
Disclosure of information to auditors
Each of the persons who is a Director at the date of approval
of this annual report confirms that:
l so far as the Director is aware, there is no relevant audit
information of which the Company's auditors are unaware;
and
l the Director has taken all the steps that he/she ought to
have taken as a director in order to make himself/herself
aware of any relevant audit information and to establish
that the Company's auditors are aware of that information.
This confirmation is given and should be interpreted in
accordance with the provisions of s418 of the Companies
Act 2006.
This Annual Report was approved by the Board of Directors
and authorised for issue on 3 June 2022.
On behalf of the Board
A. Paul Blakeley
DIRECTORS’ REPORT
Share dealing code
The Company adopted a code for share dealings (the "Dealing
Code") appropriate for an AIM company, in compliance with
Rule 21 of the AIM Rules and with the Market Abuse Regulation.
The Dealing Code applies to the Directors, members of the
senior management team and other relevant employees of the
Group.
Corporate governance policies
The Board reviewed and reaffirmed several key governance
policies in 2021, including the Code of Conduct, the Anti-
Bribery and Anti-Corruption Policy, the Whistleblower Policy,
the Diversity Policy, the Environmental, Social and Governance
Policy and the Risk Management Policy. The Group's key
governance policies are available on the Group's website.
The Board, assisted by senior management, reviews and
refines Group policies on a regular schedule.
Risk management
Risk management is integral to all of the Group’s activities. Each
member of senior management is responsible for continuously
monitoring and managing risk within the relevant business
areas. Every material decision is preceded by an evaluation of
applicable business risks. Reports on the Group’s risk exposure
and reviews of its risk management are regularly undertaken
and presented to the Board. The Directors conduct a review
of the Group’s risk register bi-annually. Additional details
regarding the Group’s risk management can be found on
pages 57 to 63.
Annual general meeting
The Company's AGM will be held in London, England on 30
June 2022. Full details of the proposals to be addressed at the
AGM are set out in a separate Notice of the AGM. Shareholders
are invited to complete the proxy form received either by post
or vote electronically in accordance with the notes contained
within the Notice of the AGM. The Notice of the AGM and
the Proxy Form are available on the Group’s website at
https://www.jadestone-energy.com/aim/notices/.
Registrar
Jadestone Energy plc’s share registrar in respect of its ordinary
shares traded on AIM is Computershare Investor Services plc.
Contact details can be found on the Group's website.
Independent auditor
Having reviewed the independence and effectiveness of
the auditor, the Audit Committee has recommended to the
Board that Deloitte Ireland LLP (“Deloitte”) be appointed.
Deloitte has expressed its willingness to be appointed
as auditor. A resolution to appoint Deloitte, as auditor
of Jadestone Energy plc, will be put to the shareholders
at the AGM.
Additional disclosures
Supporting information that is relevant to the Directors’
Report, which is incorporated by reference into this Directors’
Report, can be found throughout this Annual Report. For
considerations of post balance sheet events, please refer to
note 45 in the Consolidated Financial Statements within this
Annual Report.
90
Board of Directors
A. Paul Blakeley OBE
Executive Director, President
and Chief Executive Officer
Appointed:
Executive Chairman June 7, 2016 /
President and CEO June 15, 2017
Committee Memberships:
HSEC Committee; Disclosure Committee; and
Governance & Nomination Committee
Paul commenced at Jadestone in June
2016. Paul holds a BSc. from Bedford
College, University of London. Paul
has over 40 years’ energy experience,
including over 20 years at Talisman
Energy Inc (‘Talisman’). As Executive
Vice President Asia Pacific & Middle
East at Talisman, Paul led the building
of Talisman’s portfolio in Asia Pacific
to become the largest upstream
independent in the region.
Paul has a long track record of acquiring
production and managing commercial
and operational risks, while overseeing
investment to further enhancing value
through follow-on development activity.
Dennis McShane
Independent Non-Executive Director,
Chair
Robert Lambert
Independent Non-Executive Director,
Deputy Chair
Appointed:
December 10, 2017
Appointed:
May 5, 2011
Committee Memberships:
Governance & Nomination Committee (Chair);
and Remuneration Committee
Committee Memberships:
HSEC Committee (Chair); and Audit
Committee
Dennis has over 40 years’ experience in
finance, oil and gas, and mining sectors
in the US, Europe, Africa, and Australia.
Dennis has been involved in numerous
transformational corporate transactions
both as director and advisor.
He currently serves as an Executive
Director of The Advertising Checking
Bureau, Inc., and previously he was the
Executive Director of Strategy for Ophir
Energy plc having previously served as a
Senior Independent Director during its
Initial Public Offering (IPO), and Director
of Finance and Strategy leading the
IPO of Ferrexpo plc. Dennis was also
previously a Managing Director with
JP Morgan Chase and Co.
Robert has over 50 years’ experience
in the international petroleum
exploration and production business.
Robert is MBA-qualified and previously
held numerous operational and
management positions during his
career with Conoco Inc. from 1978
to 2004. Robert contributes his
extensive experience in commercial
and operational risk management
in upstream oil & gas to Jadestone's
Board. Robert is currently also a Director
of Vancouver-based Hillcrest Energy
Technologies Ltd.
Directorships of Other Reporting Issuers:
Hillcrest Energy Technologies Ltd.
Directorships of Other Reporting Issuers:
None
Directorships of Other Reporting Issuers:
None
91
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JADESTONE ENERGY 2021 ANNUAL REPORT
Board of Directors
Cedric Fontenit
Independent Non-Executive Director
Iain McLaren
Independent Non-Executive Director
David Neuhauser
Non-Executive Director
Appointed:
June 7, 2016
Appointed:
April 21, 2015
Committee Memberships:
Remuneration Committee (Chair); and
Governance & Nomination Committee
Cedric has extensive experience
in advising on M&A, financing and
structuring investments gained from his
20-year career in investment banking
and hedge fund industries. Cedric is
currently co-founder and managing
partner of Amavia Capital, a private
investment firm and the President of
Tall Mount SAS. He was previously a
senior member of the investment team
at Tyrus Capital S.A.M. where he had
significant investment experience in
the oil and gas and mining industries,
among others.
Directorships of Other Reporting Issuers:
None
Committee Memberships:
Audit Committee (Chair); Governance &
Nomination Committee; and Remuneration
Committee
Iain has significant experience in the
oil and gas sector and is currently
Director, Chair of the Audit Committee
and a member of the Remuneration
and Nominations committees for
Wentworth Resources plc, as well as
a Director of Ecofin Global Utilities
and Infrastructure Trust plc. Iain is a
past Senior Independent Director for
Capricorn Energy plc (formerly Cairn)
and a number of other companies. Iain
was the President of the Institute of
Chartered Accountants of Scotland, and
was a partner in KPMG for 28 years until
2008, bringing extensive experience in
public company audit, internal control
and risk management.
Directorships of Other Reporting Issuers:
Ecofin Global Utilities and Infrastructure Trust
plc; and Wentworth Resources plc.
Appointed:
June 7, 2016
Committee Memberships:
None
David has extensive capital markets
and M&A experience and is currently
founder and CIO of event-driven hedge
fund Livermore Partners in Chicago.
He is a Non-Executive Director of AEX
Gold and the Chairman of the board
of Kolibri Global Energy Inc. He has
invested in and advised global public
companies for the past 21 years and
has a strong track record of enhancing
intrinsic value through restructuring
and strategic initiatives.
Directorships of Other Reporting Issuers:
Kolibri Global Energy Inc.; and
AEX Gold Inc
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Lisa Stewart
Independent Non-Executive Director
Jenifer Thien
Independent Non-Executive Director
Appointed:
December 1, 2019
Appointed:
April 7, 2022
Committee Memberships:
HSEC Committee; and Audit Committee
Lisa has over 40 years of experience
in the upstream oil and gas industry in
engineering and senior management
positions. Currently Lisa is a Director of
Cottera Energy Inc., Director of Western
Midstream Partners LP, and Executive
Chairman of Sheridan Production
Partners LLC, previously Lisa has served
as President and Chief Executive Officer
of Sheridan Production Company LLC.
Lisa was an Executive Vice President
of El Paso Corporation, President of
El Paso E&P, and Director of Talisman
Energy Inc. Prior to her time at El Paso,
Lisa spent 20 years at Apache, including
extensive experience in Asia-Pacific,
leaving in January 2004 as Executive
Vice President with responsibility
for reservoir engineering, business
development, land, environmental,
health & safety, and corporate
purchasing.
Directorships of Other Reporting Issuers:
Cottera Energy Inc.; and Western Midstream
Partners LP
Committee Memberships:
Remuneration Committee; Governance &
Nomination Committee; and HSEC Committee
Jenifer is the Founder and Principal of
Grit and Pace, through which she advises
corporations on Environmental, Social
and Governance (ESG) strategy and
what it takes to drive change in supply
chain, procurement and operational
excellence. Currently Jenifer is an
Independent Non-executive Director of
UEM Edgenta Berhad. She has over 30
years of international senior executive
experience in the consumer-packaged
goods industry and had the opportunity
to live and work in several countries
across Asia and the US throughout
her career. This includes 25 years with
Mars, Incorporated, where she last
served as the Global Chief Procurement
Officer. Jenifer has successfully led
complex business transformation and
sustainability programs through her
deep understanding of the business
enterprise, the ability to mobilise
required capabilities, as well as intensive
stakeholder engagement.
Directorships of Other Reporting Issuers:
UEM Edgenta Berhad
JADESTONE ENERGY 2021 ANNUAL REPORT
CORPORATE GOVERNANCE REPORT
Audit Committee report
Committee members and meeting attendance
In 2021 the Audit Committee comprised:
Iain McLaren (Committee Chair)
l
l Robert Lambert
l Lisa Stewart
All of whom are independent.
Meeting Attendance:
Iain McLaren
Robert Lambert
Lisa Stewart
Meetings:
3 out of 3
3 out of 3
3 out of 3
14 April 2021 | 31 August 2021 | 16 November 2021
Role of the Committee
The Audit Committee has oversight of the Group’s financial reporting including
any accompanying narrative, internal controls and risk management systems,
compliance, whistle-blowing and fraud, as well as external statutory financial audits
and reserves audits.
Letter from the Committee Chair
Dear shareholder,
It is my pleasure to present the Audit Committee
Report for the year ended 31 December 2021.
Relief from Canadian reporting obligations
As a further step in the Group’s ongoing pivot away from its
legacy Canadian securities market presence and Canadian
corporate governance practices to those aligned with its UK
peers, the Company applied in March 2022 to the British
Columbia Securities Commission, and was shortly thereafter
granted relief to cease to be a reporting issuer in Canada.
This application was justified by the very low and decreasing
level of Canadian based shareholding in the Company
(estimated at around 0.09% of issued capital at that time), as
well as expected efficiency improvements and cost reductions
for the Group. The UK pivot has, among other steps, already
seen the Company’s shares admitted to AIM in August 2018,
the Group’s compensation structures realigned from North
American to UK norms starting from May 2019, the Company’s
shares delisted from the TSX Venture exchange in March 2020,
the adoption of the QCA Code in place of Canadian governance
norms and practices in December 2020, and the redomicile of
the Group’s parent company to the UK in April 2021.
The effect of the BCSC Order is that Jadestone is no longer
classified as a designated foreign issuer under Canadian
securities regulations and is no longer required to file financial
statements and other continuous disclosure documents with
the Canadian securities regulatory authorities. Jadestone
will continue to comply with all UK regulatory and disclosure
requirements.
94
Selection of UK registered auditor following the
internal reorganisation
Following the internal reorganisation under which, among
other things, Jadestone Energy plc became the new ultimate
holding company of the Group (see further page 86), the Audit
Committee oversaw the identification of a new UK registered
auditor within Deloitte to become the new signing partner for
the annual audited statutory Group accounts.
Financial reporting
Over the last twelve months the Audit Committee has
monitored and reviewed the preparation and issuance of
the Group's consolidated audited financial statements and
Company audited financial statements for the year/period
ended 31 December 2021, along with the Group’s unaudited
condensed interim financial statements for the six-month
period ended 30 June 2021.
The Audit Committee has remained focussed on reviewing
material matters affecting the risks and financial position of
the Group. During 2021 this focus continued to include an
assessment of the risks and financial impacts on the Group
from the combined impact of the COVID-19 pandemic and
continued volatility in oil prices.
The Audit Committee also reviewed the auditor's planning
report for the 2021 full year audit, including consideration of
the planned scope and audit approach, the materiality level
and the auditor’s identified items of significant risk and areas
of audit focus, and independence, among other factors. The
Committee then oversaw the completion of the preparation
and finalisation of the issuance of the Group’s consolidated
audited financial statements for the year ended 31 December
2021. This has included a thorough review and challenge of the
financial statements as well as the significant financial reporting
issues and judgements contained within them, and a detailed
discussion with the auditor of their May 2022 final report to
those charged with governance.
Audit fees and non-audit services by the auditor
Under clause 8.6.1(l) of the Audit Committee Terms of
Reference (“TOR”), the Group is precluded from engaging
Deloitte for any non-audit services across the business.
Exceptions to this principle, on a one-off basis, may be
considered, but in all cases subject to the Audit Committee’s
prior approval. This policy is applied on a global basis to all
member firms of the Group’s auditors. This restriction has
been complied with in 2021, as it was in 2020 and 2019, with no
non-audit services and no non-audit fees paid to the auditors.
Total fees paid to the auditors were as follows:
US$'000
Total audit fees
Non audit fees paid
to auditors
Total fees paid to auditors
Twelve
months ended
31 December
2020
Twelve
months ended
31 December
2021
382
-
382
795
-
795
Auditor rotation
Under cl. 8.6.2(b) of the Audit Committee TOR, the Company
is required to put the Group’s audit services contract out to
tender at least once every ten years. This helps to ensure
the Group can compare the quality and effectiveness of the
services provided by the external auditors. Additionally, the
external audit lead partner must be rotated after a maximum
of five years, cl. 8.6.2(a).
Deloitte was first engaged as auditor for the Group’s
consolidated statutory audited financial statements for the year
ended 31 March 2014 for Jadestone Energy plc’s predecessor
entity Mitra Energy Inc. (which at that time had a March year
end). The Company will ensure compliance with cl. 8.6.2(b),
namely putting the Group consolidated annual statutory audit
out to tender, by no later than the year ended 31 December 2023.
The year ended 31 December 2021 is the first year that Mr
Cathal Treacy has been the Group’s audit lead partner. Should
Deloitte continue as auditor for the Group’s consolidated
annual statutory financial statements beyond 2025, the
Company will ensure appropriate rotation of the audit lead
partner within Deloitte at that time.
ESG
Consistent with the changes around reporting in response to
climate transition risk, the Audit Committee has monitored
the Group’s responses to climate risk and ESG disclosures
generally and reviewed the Group’s TCFD scenarios, analysis
and disclosure specifically.
Reserves reporting
The Board has continued to delegate to the Audit Committee
the oversight, monitoring and review of the Group’s oil and gas
reserves and resources disclosures.
The Audit Committee has duly overseen the work conducted by
management and by the Group’s qualified third-party reserves
evaluator culminating in the Group’s disclosure of year end
2021 reserves on page 198.
Yours sincerely,
Iain McLaren
Non-Executive Director and Chair of the Audit Committee
Responsibilities of the Audit Committee
a Monitor the integrity of the Group’s financial statements
including its annual and interim financial statements
and reviewing significant financial reporting issues and
judgments contained within them;
b Overseeing the Group’s accounting and financial
reporting processes, the Group's internal controls and risk
management systems and the resolution of any issues
identified by the Group’s external auditor;
c Meeting with the Group's external auditor, along with the
Chief Financial Officer and select senior finance managers
of the Group, to plan for and to subsequently review the
annual audited and interim unaudited financial statements
of the Group; and
d Supervise the Group’s reporting of its oil and gas reserves
including overseeing the work undertaken by the Group’s
independent third party reserves evaluator.
Review of the financial statements
The Audit Committee monitors the integrity of the annual
and interim financial statements and reviews the significant
financial reporting matters and accounting policies and
disclosures in the financial reports. The external auditor
attended all Audit Committee meetings during the year.
At the conclusion of the annual audit process the auditor
provides a detailed final report to those charged with
governance, including the results of their audit and other
audit matters. The Audit Committee evaluates the overall
performance of the auditor and recommends their continued
appointment to the Board.
Internal controls and risk management
The Audit Committee is responsible for the oversight of
the Group’s system of internal controls including the risk
management framework. The Group’s principal risks and
uncertainties, which provide a framework for the Committee’s
focus, are discussed on pages 57 to 63.
Management identifies the key operational and financial
processes that exist within the business and has developed an
internal control framework. This is structured around a number
of Group policies and procedures and includes a delegated
authority framework.
Compliance, whistleblowing and fraud
The Audit Committee reviews the Group’s procedures, systems
and controls, including for detecting fraud, for the prevention
of bribery, money-laundering, and corporate criminal offence.
The Committee receives reports on any non-compliance, of
which there were none in 2021.
The Group has a whistleblowing policy in place and the
Committee is responsible for overseeing the arrangements and
the effectiveness of the processes for this. The policy exists to
enable employees to raise any concerns in confidence about
wrongdoing or impropriety within the Group.
Internal audit
The Group currently does not have an internal audit function.
The Committee continues to monitor the appropriateness of
this as the Group evolves and grows.
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JADESTONE ENERGY 2021 ANNUAL REPORT
CORPORATE GOVERNANCE REPORT
Remuneration
Committee report
Committee members and meeting attendance
In 2021 the Remuneration Committee comprised:
l Cedric Fontenit (Committee Chair)
l Dennis McShane
Iain McLaren
l
All of whom are independent.
Meeting Attendance:
Cedric Fontenit
Dennis McShane
Iain McLaren
Meetings:
2 out of 2
2 out of 2
2 out of 2
4 March 2021 | 18 November 2021
Role of the committee
The Remuneration Committee ensures that the remuneration of directors, employees
and officers is set appropriately based on industry data, with the goal of attracting,
retaining, and motivating key management personnel to ensure the long-term success
of the Group.
Key roles and responsibilities
Responsibilities of the Remuneration Committee include:
l Annually reviewing and making recommendations with
Responsibilities of all members of the Remuneration
Committee include:
respect to executive remuneration, including short-term
and long-term incentives, and remuneration of the non-
executive directors; and
l Be independent and willing to justify the decisions of the
Remuneration Committee to executive directors and senior
management;
l Annually assessing the contribution and effectiveness
of each director, as well as the competencies and
characteristics each director is expected to bring to the
Board.
Responsibilities of the Remuneration Committee Chair include:
l Setting agendas, chairing committee meetings and ensuring
all tasks delegated to the Committee are dealt with;
l Leading consultations with shareholders on the Company’s
remuneration policy;
l Answering questions about remuneration more generally
with shareholders.
l Be willing and able to resist inappropriate demands from
executive directors and senior management;
l Be prepared to seek external advice when necessary;
l Be willing to seek and take into consideration the views
of shareholders; committing sufficient time to the role to
develop the necessary skills and knowledge (including,
for example, current market practice, taxation and legal
requirements), and to work as part of a small committee;
l Conduct an annual review of the Remuneration Committee
advisers, and the fees charged for advice and other
services, including a review of their independence and
potential conflicts of interest; and
l Review the Group's legal obligations, including changes
to employment and discrimination law, company law and
relevant regulations as well as the effect of any changes to
tax law or rates of tax.
96
Letter from the
Committee Chair
Dear shareholder,
On behalf of the Board, I am pleased to present
the Remuneration Committee report for the year
ended 31 December 2021.
The first section describes the in-place total reward structure
and explains its application and implementation in 2021
and beyond, including the application of long-term incentive
(“LTI”) policies, which were approved by shareholders on
15 May 2019.
As noted in the 2020 report and disclosed earlier, Jadestone
is now in the final stages of a three-year transition towards
remuneration structures that are typical of a UK-listed company
and away from North American structures and norms.
Key changes in 2021 and 2022
In response to the extraordinary financial challenges the
upstream industry faced in 2020 resulting from the COVID-19
pandemic, the remuneration of the CEO, the CFO and the
Board was subject to a six-month reduction in 2020, in order to
maximise the resiliency of the business during the most severe
period in the pandemic. As a result, remuneration figures in the
total remuneration table for 2021 are higher than 2020.
Changes to CEO remuneration
The most significant remuneration event in 2021 arose from
the relocation of Jadestone’s CEO from Singapore to Australia,
in order to be closer to the Group's current producing
operations, as well as to both Australian and New Zealand
governments, regulators and trade bodies, in an attempt to
seek to further influence outcomes in favour of Jadestone.
As a result, the Remuneration Committee has reviewed
the CEO’s remuneration and benefits package, taking advice
from its external remuneration, tax and legal advisers.
As part of the review, the Remuneration Committee also took
the opportunity to rebalance and simplify the CEO’s existing
package, particularly taking into account feedback received
from shareholders desiring a greater weighting towards
performance pay and long-term incentive.
The review also reflected on the CEO’s contractual terms and
conditions, external market practice, affordability and the best
practice expectations of investors within UK financial markets,
following the Company’s pivot to a UK domicile. As a result,
the CEO’s package will be more transparent and better aligned
to shareholder interests through the performance linkage.
To be clear, this is a rebalancing of the CEO’s package, and
represents a nil increase in total remuneration.
The CEO received assistance to relocate to Australia, amounting
to US$240,000. This covered one-off items such as temporary
accommodation, shipping costs, medical costs and relocation
flights during a period when hard lockdown measures were in
place.
The table below illustrates the pre and post relocation
packages for the CEO in more detail.
CEO remuneration summary
Element (all figures in US$)
Annual Base Salary - delivered as a mix of cash and RSU’s (US$50,000)
Pension - 10% of salary paid in cash
Annual performance pay at target - 75% of salary (in a range of zero to 150%)
Long term incentive - 95% of salary
Tax protection on benefits in kind/allowances
International allowances and benefits
Payroll tax
Total
Full package
entitlement
pre relocation
Full package
entitlement post
relocation
550,000
55,000
412,500
522,500
119,464
543,017
0
650,000
65,000
487,500
617,500
0
280,000
101,851
2,202,481
2,201,850
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JADESTONE ENERGY 2021 ANNUAL REPORT
CORPORATE GOVERNANCE REPORT
Changes to CFO remuneration
To further align the CEO and CFO remuneration packages,
and based on the feedback from shareholders as referenced
above, the Remuneration Committee also took the opportunity
to rebalance and simplify the CFO’s existing package, which
applied to Daniel Young before he stepped down as CFO and
Director on 29 April 2022.
It was decided to reduce overseas and international allowances
by US$162,237. Just over half of this reduction was applied to
base salary, increasing it by US$90,000, and fed through into
annual performance pay and long-term incentive. As a result,
the package was considered to be more transparent and better
aligned to shareholder interests through the increased amount
of pay which is performance linked.
CFO remuneration summary
Element (all figures in US$)
Salary
Pension - 10% of salary paid in cash
Annual performance pay at target - 65% of salary (in a range of zero to 130%)
Long term incentive - 80% of salary
Tax protection on benefits in kind
International allowances and benefits
Total
1 Applied to Daniel Young's remuneration prior to him stepping down as CFO and Director on 29 April 2022.
2021 package
2022 package1
340,000
34,000
221,000
272,000
40,092
362,237
430,000
43,000
279,500
344,000
0
200,000
1,269,329
1,296,500
In conducting its work, the Remuneration Committee sought
the support of several independent specialist service providers.
Mercer provided independent advice including advice on
governance best practices, remuneration benchmarking and
cost of living differentials between Singapore and Australia.
Advice was also received from PwC and Ernst & Young in
respect of certain tax and legal aspects of the CEO’s relocation.
I welcome any feedback from investors on our remuneration
arrangements. You can get in touch with me via the Group's
Investor Relations Manager.
Yours sincerely,
Cedric Fontenit
Non-Executive Director and Chair of the Remuneration
Committee
Ongoing evolution of LTI
As part of the three-year transition to UK remuneration
norms from North American norms, in 2019 we announced a
transition under the LTI programme away from time-vested
share options to a performance share plan (“PSP”), with
three-year cliff vesting linked to specific stretch performance
conditions. The LTI awards made to management in April 2022
are delivered 25% in the form of share options and 75% in the
form of performance shares. The April 2022 awards represent
the final year in the three-year transition in which options will
form part of the long-term incentive awards for management.
Other key matters in relation to 2021
remuneration
During the course of 2021, other key matters considered by the
Remuneration Committee included:
l Reviewing and providing constructive input on the CEO’s
2021 performance contract, and agreeing on outcomes
relating to performance pay;
l Reviewing recommendations for increases in remuneration
for 2021, including reflecting the gradually improving
economic environment following the COVID-19 pandemic;
l Reviewing and agreeing on performance share plan metrics
and agreeing on LTI plan grants for individuals;
l Acknowledging an overall 2021 performance of 50.5% of
total objectives for 2021, as further detailed below;
l Reviewing fees for Non-Executive Directors, which are paid
in cash, in alignment with UK remuneration norms; and
l Conducting a review of foreign service allowances.
98
Total rewards structure
Jadestone’s total rewards structure offers a competitive
package aligned to the principles of performance and delivery.
The Group believes its emphasis on performance pay and
long-term incentives, with clear goal setting, helps to deliver a
results-oriented culture that generates exceptional results with
visible recognition and rewards in the event of the delivery of
agreed objectives.
a Remuneration at a glance
Total
reward
component
Detail
Base salary
To enable the recruitment
and retention of individuals
who possess the appropriate
experience, knowledge,
commercial acumen and
capabilities required to
deliver sustained long-term
shareholder value
Eligible
employees
All permanent
employees
Pension
Aligned to pension standards
in the country of jurisdiction
All permanent
employees
Performance
pay
Annual performance
pay target for eight job
bands with performance
pay ranging from 0-10%
to 0-150%. Annual
performance pay depends
on both employee and Group
performance against
agreed KPIs
All permanent
employees
Long-term
incentive
Transition from share option
plan to a PSP to align with
pivot to UK market norms.
Implemented over a three-
year transition with 100% PSP
to be awarded as part of the
2022 remuneration cycle
Limited to
permanent
employees at
a senior job
band who can
most influence
corporate
outcomes
b Executive employment agreements
Mr. Blakeley is party to an executive employment agreement
which provides that, in the event of a change of control
of Jadestone and where notice of termination is given by
Jadestone to Mr. Blakeley in connection with such change of
control, Mr. Blakeley is entitled to payment in the amount of
twenty-four (24) times his monthly salary; two (2) times the
annual performance pay target (the annual performance pay
target amount in respect of the year preceding the date of
notice, if the date of notice precedes the date upon which such
performance pay amount would have been paid and, a pro-
rata portion of the annual performance pay target amount in
respect of that portion of the current year to the date of notice)
and an amount equivalent to US$500,000 as compensation for
the loss of overseas allowances and all other benefits over the
period of twenty-four (24) months.
Until he stepped down as CFO and Director on 29 April 2022,
Mr. Young was similarly party to an executive employment
agreement which provided that in the event of a change of
control of Jadestone and where notice of termination was given
by Jadestone to Mr. Young in connection with such change of
control, Mr. Young was entitled to payment in the amount of
twelve (12) times his monthly salary; one (1) times the annual
performance pay target (the annual performance pay target
amount in respect of the year preceding the date of notice,
if the date of notice preceded the date upon which such
performance pay amount would have been paid and, a pro-
rata portion of the annual performance pay target amount in
respect of that portion of the current year to the date of notice)
and an amount equivalent to US$100,000 as compensation
for the loss of foreign service allowances and all other benefits
over the period of twelve (12) months.
c
Illustration of policy application
The following table presents the targets and maximum
payments possible for each component of the total rewards
structure.
Reward
component
2021 base salary
Pension allowance
Performance pay
Long-term incentive
Position
Position
CEO
CFO
CEO
CFO
CEO
CFO
CEO
CFO
Annual salary of US$625,0001
Annual salary of US$340,0002
10% of base salary
10% of base salary
0 – 150%
0 – 130%
95% of base salary
80% of base salary
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2
In 2021 Mr Blakeley received a base salary of US$625,000 being three months under his 2020 salary of US$550,000 and nine months under his new
salary of US$650,000. Mr Blakeley has continued to receive US$50,000 of his annual base salary in the form of restricted share units. Note that RSUs
are only used as an alternative to cash under exceptional circumstances to provide greater alignment with shareholder objectives.
In 2021 Mr Young received a base salary of US$335,000 being three months under his 2020 salary of US$320,000 and nine months under his new
salary of US$340,000.
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JADESTONE ENERGY 2021 ANNUAL REPORT
CORPORATE GOVERNANCE REPORT
2021 Remuneration report
a Total remuneration
The table on the bottom half of this page sets out the total
remuneration, including the value of LTI awards, for both the
executive directors and the non-executive directors for 2021,
as compared to 2020 and 2019.
Pursuant to Project Clover, the Group's cash flow savings and
efficiency programme implemented during the COVID-19
pandemic, Executive and Non-Executive Directors agreed to
a 25% reduction in base salary, and Executive Directors to a
20% reduction in overseas allowances, for a 6-month period in
2020. For that reason, 2019 remuneration is also included to
illustrate a 12-month period without the temporary reduction
to remuneration to compare with 2021.
The 2019 remuneration cycle was the final time that Non-
Executive Directors received any form of long-term shares
or share option-based incentive awards (awarded in April
2020). Following an external review of non-executive cash
remuneration within the peer group, the Non-Executive
Director fees were adjusted to compensate for the loss in
value of stock options with fees targeted at around the 50%
percentile of the peer group. This increase in board fees was
finally awarded in December 2020, having been withheld as
part of the Project Clover initiative to reduce 2020 costs.
Category
Annual fee prior to fee revision (US$)
Revised annual fee – 1 December 2020 (US$)
Non-Executive Chair
Non-Executive Director
Audit Committee Chair
Rem Com Chair
Reserves Chair
HSSE Chair
Committee Member
Board fee structure
Name and position
Year1
Salary or
fees (US$)
125,000
60,000
20,000
10,000
10,000
10,000
5,000
150,000
80,000
20,000
15,000
10,000
10,000
5,000
Pension
allowance
(10%
of base
salary)
Perform-
ance pay
(US$)2
Committee
or meeting
fees
(US$)
Value of
overseas
allowance
support
(US$)
LTI3
(US$)
Other
benefits4
Total
fixed
remun-
eration
Total
variable
remun-
eration
Total
remun-
eration
Executive Directors
A. Paul Blakeley
Director, President and
Chief Executive Officer
Daniel Young
Director and CFO5
2021
2020
2019
2021
2020
2019
625,000
487,500
500,000
335,000
280,000
320,000
62,500
55,000
50,000
33,500
32,000
32,000
492,375
536,250
585,000
199,000
225,420
224,000
Nil
Nil
Nil
Nil
Nil
Nil
356,708
443,332
516,926
365,899
328,460
331,538
347,763
359,810
312,566
181,036
193,501
195,347
29,219
36,256
28,751
24,468
20,826
18,351
1,073,427
1,022,088
1,095,677
840,138
896,060
897,566
1,913,565
1,918,148
1,993,243
758,867
661,286
701,889
380,036
418,921
419,347
1,138,903
1,080,207
1,121,236
Non-Executive Directors
Cedric Fontenit
Director
Robert Lambert
Director and
Deputy Chair
Iain McLaren
Director
Dennis McShane
Director and Chair
David Neuhauser
Director
Eric Schwiter
Director
Lisa Stewart
Director
2021
2020
2019
2021
2020
2019
2021
2020
2019
2021
2020
2019
2021
2020
2019
2021
2020
2019
2021
2020
2019
80,000
56,667
56,250
80,000
56,667
56,250
80,000
56,667
56,250
150,000
114,583
125,000
80,000
56,667
56,250
n/a
n/a
56,250
80,000
56,667
5,000
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
n/a
n/a
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
n/a
n/a
Nil
Nil
Nil
Nil
15,000
9,792
10,000
15,000
13,125
12,500
25,000
21,875
25,000
5,000
4,375
5,000
Nil
Nil
Nil
n/a
n/a
10,000
10,000
17,500
833
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
n/a
n/a
Nil
Nil
Nil
Nil
Nil
11,395
19,853
Nil
11,395
19,853
Nil
11,395
19,853
Nil
17,093
26,470
Nil
11,395
19,853
n/a
n/a
19,853
Nil
11,395
28,343
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
n/a
n/a
Nil
Nil
Nil
Nil
95,000
66,459
66,250
95,000
69,792
68,750
105,000
78,542
81,250
155,000
118,958
130,000
80,000
56,667
56,250
n/a
n/a
67,619
90,000
74,167
5,833
Nil
11,395
19,853
Nil
11,395
19,853
Nil
11,395
19,853
Nil
17,093
26,470
Nil
11,395
19,853
n/a
n/a
19,853
Nil
11,395
28,343
95,000
77,854
86,103
95,000
81,187
88,603
105,000
89,937
101,103
155,000
136,051
156,470
80,000
68,062
76,103
n/a
n/a
87,472
90,000
85,562
34,176
1
The performance pay for 2019 & 2020 has been restated to an accruals basis to reflect the performance pay awarded in the following year based
on the performance targets of the reporting year. Therefore, the performance pay of 2020 was cash paid in 2021 based on the performance criteria
achieved in 2020. The annual reports for 2019 and 2020 reflect the cash bonus paid during the year so the performance pay of 2020 was based on the
performance criteria of 2019. Performance pay is finalised and approved in March of the year following the prevailing year, based on the achievement
of various corporate targets and objectives. The amounts shown in 2021 reflect performance pay paid in 2022 with respect to 2021 performance.
LTI represents the market value of the share options awarded during the year, there have been no awards to the non-executive directors in 2021.
2
3 Overseas allowance support includes International Talent Allowance / Benefits in Kind (Housing, Schooling, Home Leave) and tax protection on
benefits in kind and allowances.
4 Other benefits comprise healthcare and life insurance plans.
5 Resigned as Director and CFO in December 2021, effective 29 April 2022.
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b Comparison of fixed and variable
remuneration
The following charts illustrate the 2021 remuneration mix
for the CEO and CFO, based on their prevailing total rewards
plan and target outcomes. Note that variable pay, including
performance pay and LTI, with respect to a calendar year
compensation cycle, is not ultimately determined and granted
until April of the following year.
CEO – 2021 remuneration mix, at target
(not actual), in thousands of US dollars
CEO
Fixed
100%
1,024
Fixed
STI
LTI
CEO
Target
48%
23%
29%
2,129
Fixed
Maximum
100%
33%
1,024
32%
Fixed
35%
STI
3,080
LTI
Target
0
48%
500
1,000
23%
1,500
29%
2,000
2,129
2,500
3,000
3,500
33%
Maximum
CFO
CFO – 2021 remuneration mix, at target
Fixed
803
1,000
(not actual), in thousands of US dollars
Fixed
2,000
1,500
2,500
100%
500
35%
32%
0
3,080
STI
3,000
LTI
3,500
CFO
Target
62%
17% 21% 1,296
Fixed
Maximum
100%
47%
803
26%
28%
1,721
Fixed
STI
LTI
Target
0
62%
500
17% 21% 1,296
1,000
1,500
2,000
2,500
3,000
3,500
Maximum
47%
26%
28%
1,721
0
500
1,000
1,500
2,000
2,500
3,000
3,500
STI = short-term incentive
c Overseas allowance support
Overseas allowances are provided to individuals on assignment
in a host location with the objective of providing market
competitive benefits consistent with the role and location of
the posting.
Jadestone Energy plc is a company incorporated in England
and Wales with shares listed on AIM, but the Group operates
in Southeast Asia and Australasia with offices in Singapore,
Malaysia, Indonesia, Vietnam, Australia and New Zealand.
The Group does not maintain a staffed office in the UK.
This unique approach, among its listed peers, of locating
Jadestone’s leadership close to our key assets, ensures
management works closely with the activities and operations
in the Asia-Pacific region, and the team is dispersed in order
to provide coherent and aligned leadership throughout the
business. This has an advantage both in managing the day-
to-day activities of the Group, as well as being able to interact
directly with external stakeholders. It also eliminates the cost
of maintaining an office in the UK.
Because the CEO and CFO are foreigners working in a host
location, aligned with standard market practice, they receive
support to recognise the extra costs arising from living in that
overseas host location. These allowances are independently
reviewed and benchmarked on an annual basis with Mercer.
d Other benefits
The CEO and CFO are provided with private medical insurance
and covered under Group insurance plans (Group term life,
long-term disability and personal accident).
e Project Clover savings in 2020
As noted above, remuneration for the Executive and Non-
Executive Directors was reduced in 2020 in recognition of
the extraordinary financial challenges the upstream industry
faced at that time. All Non-Executive Directors agreed to a 25%
reduction in their board fees for the six-month period 1 June
to 30 November 2020, while the Executive Directors agreed to
a 25% reduction in base salary and a 20% reduction to cash
based allowances (excluding pension) for the same period.
f 2021 Executive remuneration review
Mercer has undertaken an annual review of executive
remuneration in 2021 and against Jadestone’s peer group.
The review showed that the gross salary for the CEO remained
below market whilst incentives remained within market.
As a result, and pursuant to the CEO’s relocation to Australia,
the Remuneration Committee agreed to a base salary increase
for the CEO to US$650,000 per annum effective 1 April 2021.
However, this was fully offset by a reduction in the overseas
allowance to represent a nil increase in total compensation.
The CEO continues to receive US$50,000 of base salary in the
form of restricted share units.
g CEO relocation costs
The CEO received assistance to relocate to Australia, amounting
to US$240,000. This covered one-off items such as temporary
accommodation, shipping costs, medical costs and relocation
flights for him and his family.
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1
2 Fixed pay comprises base salary (including US$50,000 for CEO paid as RSUs), pension allowance, overseas allowance, and other benefits.
3 Target pay comprises fixed pay plus performance pay at target (CFO at 65% and CEO at 75%) and assumed LTI value.
4 Maximum pay comprises fixed pay plus performance pay at maximum pay-out (CFO at 130% and CEO at 150%) and assumed LTI value.
5
Values for performance shares and stock options are based on the independently verified values at the time of the grant. Maximum award to achieve
200% performance outcome requires >80% share performance compared with Jadestone’s peer group for relative TSR and >40% increase in share
price for absolute TSR. Further details see pages 103 to 104.
101
JADESTONE ENERGY 2021 ANNUAL REPORT
CORPORATE GOVERNANCE REPORT
h Performance pay
Performance pay is tracked by the Remuneration Committee
directly back to the achievement of KPIs set out in the CEO’s
performance contract. These KPIs are also distilled into the
management team’s performance evaluation.
The following table summarises the KPIs in the CEO’s
performance contract, which were used to determine
performance pay in respect of 2021 and paid in 2022.
Each of these categories contains at least four sub-sections
with outcomes for each target assessed by the Remuneration
Committee. Performance pay is paid 100% in cash with no
deferral.
Performance measure
Weighting
Key targets summary
Achieve 2021 operations targets
30%
Deliver continuous improvement
in ESG performance
Deliver per share accretive growth
in the Asia-Pacific region
Create sustainable shareholder
value
20%
30%
20%
100%
Deliver plan production & operating cost targets.
Capital programmes and work programmes.
Performance improvement targets.
Maintain top quartile HSE.
Maintain MSCI ESG Rating at BBB – strive to progress to A
Deliver improving performance on environmental targets.
Build a strong, diverse and sustainable organisation.
Adhere to top quartile governance standards.
Maintain delivery of strategic objectives
Complete one or more new accretive acquisitions.
Improve market value and share price growth.
Maintain sustainable funding and leverage.
Investor Relations
20%
5%
5%
5%
5%
5%
2.5%
2.5%
10%
20%
12.5%
2.5%
5%
Assessed
overall 2021
performance
12.0%
13.0%
11.5%
14.0%
50.5%
The following table summarises the long-term incentive awards
granted to the Executive Directors in 2022 as part of the 2021
remuneration cycle.
Valuations of both performance share awards, and stock option
awards were independently assessed and verified by Mercer.
i LTI awards during the year
LTI awards were granted to senior executives and personnel
in March 2022 as part of the 2021 remuneration cycle. This is
the final time the Company is including stock options within its
LTI awards mix, with 75% of the 2021 LTI award in the form of
performance shares and 25% in the form of stock options.
This move away from stock options was announced in 2019
as part of the Company’s transition away from North American
long-term incentive norms (stock options) to UK norms
(performance shares).
LTI grants are subject to a three-year cliff vest. The LTI awards
granted to Jadestone employees under the performance share
plan are aligned to Group and individual performance and are
subject to Board approval. Awards granted under both the
Company’s performance share plan and its stock option plan
are subject to good leaver/bad leaver, malus and clawback
provisions.
Type of
remuneration
security
Number of
remuneration
securities
Date of
issue or
grant
Unit value
at issuance
(GBp)
Closing price of
security or underlying
security at year end
(GBp)
Name and position
A. Paul Blakeley
Director, President and
Chief Executive Officer
Performance shares
Stock options
350,005
260,382
9 March 2022
9 March 2022
Daniel Young
Director and CFO
Performance shares
Stock options
0*
0*
N/A
N/A
0.98
0.92
N/A
N/A
0.92
0.92
N/A
N/A
Expiry date
8 March 2032
8 March 2032
N/A
N/A
* Daniel Young resigned as CFO in December 2021 and therefore was not eligible to participate in 2022 LTIP grant.
102
The table below lays out the transition of the LTI awards to
performance shares. It is worth re-emphasising that this
transition did not apply to the Non-Executive Directors, who
did not receive any LTI awards from 2020, in line with UK best
practice.
Remuneration
year1
SOP grant
allocation
PSP grant
allocation
2019
2020
2021
2022
75%
50%
25%
0%
25%
50%
75%
100%
LTI performance measures in 2021
The performance measures set by the Remuneration
Committee have not changed from 2020. They incorporate
a balance of relative and absolute total shareholder return
(“TSR”) to reward outperformance vs. peers (relative TSR) and
alignment with shareholders (absolute TSR).
Jadestone continues to consider several other performance
metrics, but in the context of volatility in the sector share price
performance and the oil price, the Remuneration Committee
considers that TSR-based metrics continue to offer the
most transparent and efficient way to measure long-term
performance.
Performance share award details
The performance share awards granted by the Company in
March 2022 as part of the 2021 remuneration cycle will vest in
accordance with a pre-defined set of performance measures,
unchanged from 2020, to be determined over a three-year
performance period.
Performance measure 1: absolute TSR (weighting: 30%)
Share price plus dividend, to be set at the start of the
performance period and assessed annually. The threshold
share price plus dividend has to be equal to or greater than a
10% increase in absolute terms to earn any payout at all and
must be 25% or greater for the target payout.
Jadestone's peer group
Cooper Energy
Energean
Enquest
Genel Energy
Gulf Keystone
Harbour Energy
Horizon Oil
Pharos Energy
Serica Energy
* Senex Energy
Transglobe
Tullow Oil
*
For the 2022 – 2025 performance cycle, Senex Energy will be removed
from Jadestone’s peer group and replaced by Hibiscus Petroleum.
Senex Energy is no longer considered a peer following the takeover by
POSCO in 2021.
In early 2022, Mercer was commissioned to review Jadestone’s
relative and absolute TSR performance, in order to provide an
interim assessment of the 2021 LTI award. As disclosed above,
the performance conditions for the 2021 LTI award follow the
same structure as the 2021 remuneration cycle and are based
on both absolute TSR and relative TSR over the three year
period 2020-2022.
Parameters for the interim assessment of the
2021 LTIP award
Full performance period
1 January 2020 to 31 December 2022
Performance testing date
31 December 2021
% of performance period elapsed
67%
The charts below illustrate the relationship between absolute
and relative TSR and vesting outcome.
Relative TSR vs. peer group (70% of 2020 & 2021 awards)
)
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150%
100%
50%
0%
50th
60th
80th
Jadestone’s 3-year average2 TSR ranking vs peer group
Performance measure 2: relative TSR (weighting: 70%)
Absolute TSR (30% of 2020 & 2021 awards)
Jadestone’s TSR as measured against the TSR of our agreed
peer companies. The size of the payout is based on Jadestone’s
ranking against the TSR outcomes of our peer group.
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150%
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50%
0%
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10%
25%
Jadestone’s 3-year average2 TSR
40%
1 LTI is typically assessed and awarded by the Committee in March of the following remuneration year.
2
3-year average TSR is calculated as the average annual TSR over 3 years.
103
JADESTONE ENERGY 2021 ANNUAL REPORT
CORPORATE GOVERNANCE REPORT
Interim assessment: TSR calculation and outcome of the absolute performance measure
Year 1 TSR
(2020)
Year 2 TSR
(2021)
Year 3 TSR
3-year
average TSR
Absolute TSR
outcome
Absolute TSR
vesting outcome
Actual performance to
31 December
(16.1)%
57.5%
n/a
20.7% Between threshold
and target
85.7%
Jadestone’s average TSR across the first two years of the
performance period was 20.7%, equating to a 85.7% vesting
for the absolute TSR element. To achieve target performance
of 25% and a 100% vesting for the absolute TSR element,
Jadestone would need to deliver an average 33.6% total
shareholder return during 2022, the final year of the
performance period.
Jadestone’s average TSR of 20.7% across the first two years of
the performance ranks seventh out of 13 companies, or the
50th percentile, which currently equates to 50% vesting for the
relative TSR component.
j Statement of the Board’s shareholding interests
Directors are encouraged to acquire a meaningful shareholding
interest in the Company; however the Company does not
impose mandatory share ownership guidelines. The Committee
believes the total rewards policy is appropriate to ensure
alignment of interests between the Board and shareholders.
The number of shares held by Directors at 31 December 2021
are set out in the table below:
Interests in
share incentive
schemes, subject
to performance
conditions
Shares
owned
outright
4,232,798
5,601,542
1,179,579
Nil3
453,651
420,000
166,208
525,000
153,919
425,000
32,319,1671
200,0002
275,000
125,000
Nil
125,000
Director
A. Paul Blakeley
Director, President and
Chief Executive Officer
Daniel Young
Director and CFO
Dennis McShane
Director and Chair
Iain McLaren
Director
Robert Lambert
Director and
Deputy Chair
David Neuhauser
Director
Cedric Fontenit
Director
Lisa Stewart
Director
2021 Peer Group
Company
Transglobe Energy
Gulf Keystone
Serica Energy
Senex Energy
EnQuest
Horizon Oil
Jadestone Energy
Energean
Tullow Oil
Genel Energy
Pharos Energy
Cooper Energy
Harbour Energy
TSR
162.0%
53.0%
49.0%
31.0%
27.6%
25.4%
20.7%
4.8%
3.7%
(4.1)%
(12.6)%
(29.2)%
(36.3)%
Interim assessment outcome
Combining the outcomes of both the absolute and relative TSR
measures with their respective weights would imply an overall
61% vesting for the first two years of the performance period.
Vesting outcome
Weight
Absolute TSR element
Relative TSR element
85.7%
50.0%
30%
70%
Overall result
60.7%
1 Mr. Neuhauser does not own any ordinary shares of the Company directly, but as managing director of Livermore Partners LLC, exercises control
or direction over the ordinary shares beneficially owned by Livermore Partners LLC.
2 Mr. Fontenit owns 200,000 ordinary shares of the Company directly. He also holds an indirect beneficial interest in the Company through 443.5565
units of a fund managed by Tyrus Capital S.A.M. (the “Fund”) holding an interest in the ordinary shares of the Company. However, Mr. Fontenit does
not exercise control or direction over the Fund’s holding in the Company.
3 Mr Young resigned from the Group in December 2021 and as a result of his leaver status, the share options and performance shares were
forfeited.
104
k KPIs enshrined into CEO’s 2022 performance contract
Performance measure
Weighting
Key targets summary
Achieve 2022
operations targets
Deliver continuous
improvement in ESG
performance
Deliver per share accretive
growth in Asia-Pacific
Create sustainable
shareholder value
30%
25%
25%
20%
l Deliver plan production targets (20%)
l Deliver plan capital programmes (5%)
l Deliver work programmes with improved performance (5%)
l Maintain H&S performance at top quartile (5%)
l Maintain MSCI ESG rating at BBB but striving to progress to level “A” (5%)
l Deliver environmental targets consistent with improving performance (5%)
l Conduct GHG emission review reducing current Scope 1 & 2 intensity
l Announce a Net Zero emissions target and strategy to TCFD (5%)
l Build a strong, diverse and sustainable organisation (2.5%)
l Maintain top quartile governance standards (2.5%)
l Maintain delivery on strategic objectives (5%)
l Complete one or more new acquisitions (value accretive on key metrics) (20%)
Improve market value and share price by 1.1.23 (12.5%)
l
l Maintain sustainable funding & leverage (2.5%)
l
Investor relations (5%)
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105
JADESTONE ENERGY 2021 ANNUAL REPORT
CORPORATE GOVERNANCE REPORT
Governance and Nomination
Committee report
Committee members and meeting attendance
In 2021 the Governance and Nomination Committee
comprised:
l Dennis McShane (Committee Chair)
l Cedric Fontenit
Iain McLaren
l
l A. Paul Blakeley
Meeting Attendance:
Dennis McShane
Cedric Fontenit
Iain McLaren
A. Paul Blakeley
Meetings:
2 out of 2
2 out of 2
2 out of 2
2 out of 2
4 March 2021 | 18 November 2021
Role of the Committee
The Governance and Nomination Committee exercises general oversight with respect
to the Group's corporate governance practices, to ensure the Board has a strong and
responsible leadership together with a wide range of skills, knowledge and experience
to support business success and generate long-term shareholder value. It also reviews
the qualifications of, and recommends to the Board, proposed nominees for election
to the Board, and appraises the framework for assessment of the Board performance
and evaluation.
Activities during the year
March 2021:
November 2021:
l Considered results of the Board skills matrix – assessed
l Agreed on search criteria for independent Non-Executive
the necessary skillsets on the Board compared to current
Director skills and qualifications;
l Considered diversity and inclusivity objectives for the Board;
Director ("INED") recruitment;
l Agreed on 2022 Board evaluation process – to introduce a
third-party independent evaluation to the annual process;
l Agreed on the process for the annual Board evaluation
l Conducted first round interviews for INED candidate; and
and measuring Board performance; and
l Reviewed executive and senior employee succession
and talent management.
l Reviewed and re-approved committee terms of reference.
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Letter from the
Committee Chair
Dear shareholder,
It is my pleasure to present the Governance and
Nomination Committee Report for the year ended
31 December 2021.
The report summarises the objectives and responsibilities of
the committee, the work carried out during the year, and plans
for the coming year.
As was disclosed in the 2020 Annual Report, the Remuneration
and Nomination Committee was split into separate committees
for 2021, reflecting the pivot away from the Company’s
Canadian heritage and towards norms and practices more
typical of a UK incorporated entity. Furthermore, at the end
of 2021, the Board resolved to add oversight of the Group's
corporate governance policies, practices and performance to
the Nomination Committee’s responsibilities, resulting in a
renamed Governance and Nomination Committee.
Principal responsibilities of the committee
l Oversee the Group's corporate governance practices,
including regular reviews of Board mandates and
committees, develop and review the Group's corporate
governance policies, and assess and prepare an annual
statement on the compliance of the Company with the
QCA Code;
l Considering succession planning for directors and other
senior executives, considering tenure on the Board,
evolving challenges and opportunities facing the Group,
and the skills and expertise required to manage these
challenges and opportunities;
l
Identifying and nominating candidates for appointment
as directors, ensuring rigorous and transparent selection
and appraisal procedures, with the ultimate appointment
of directors made by the Board based on the
recommendations of the committee;
l Monitoring the structure, size, and composition of
the Board as a whole and the committees, making
recommendations for changes as may be necessary
to achieve an appropriate balance of experience,
independence and diversity; and
l Commissioning a Board performance evaluation
process annually, reviewing the results and making
recommendations.
The terms of reference for the Governance and Nomination
Committee are reviewed annually and aligned with the QCA
guidelines.
Governance
The Board Chair's Corporate Governance Statement and
Compliance Statement to the QCA Code Principles can be
found on pages 78 to 85.
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Board changes
The Company announced in December 2021 that Daniel Young,
Chief Financial Officer (CFO) had decided to leave the Company
at the end of April 2022. A thorough recruitment search is in
the process of being undertaken to provide a comprehensive
evaluation of candidate skills, technical and executive
experience. Shortlisted candidates have been interviewed
by Jadestone senior leadership and Board Directors.
Towards the end of 2021, it was agreed to recommend to the
Board that an additional Non-Executive Director should be
recruited to Jadestone's Board to complement the Board’s
existing experience, diversity, and skills. A recruitment process
commenced in November 2021 with a particular focus on
senior level Asia-Pacific executives with regional experience of
Environmental, Social and Governance (ESG) practices. Jenifer
Thien was subsequently appointed as independent Non-
Executive Director of Jadestone on 7 April 2022.
Diversity and inclusion
The Governance and Nomination Committee recognises the
importance of building a diverse Board and is focused on
continuing to increase diversity at both the Board and senior
leadership level within Jadestone.
The Board remains diverse in terms of its culture, nationality,
and international experience. The Board’s core expertise covers
upstream oil and gas, ESG, technical, operational, financial,
governance and commercial. The Committee will continue to
monitor and consider diversity for Board appointments.
The Board continues to support diversity across the
organisation considering national origin, race ethnicity, gender
and sexual orientation to maintain an inclusive workplace.
All appointments are made based on merit, experience and
performance, whilst actively seeking diversity of skills, gender,
social and ethnic backgrounds. The Committee’s oversight role
includes ensuring that diversity and inclusion are integrated
into Human Resources standards and recruitment processes.
The Committee maintains its current policy of embracing
diversity in its broadest sense, including gender, ethnic
and social diversity but without setting formal, measurable
objectives.
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JADESTONE ENERGY 2021 ANNUAL REPORT
Socia UK (https://www.socia.co.uk/) has been engaged by
Jadestone to support the 2022 independent Board evaluation.
Its review will focus on:
l A comprehensive benchmark of the Board’s performance
against the principles of the QCA Code;
l Feedback that allows the Board to address any long-
standing issues and/or areas for development with
recommendations for action;
l Data to encourage improved collaboration across the Board
– especially between Executives and Non-Executives;
l A plan of action to improve the contribution of the Board
to the changing needs of the business;
l
Individual feedback and ongoing support to assist with
the implementation of any recommendations from the
review; and
l A self-assessment tool for future internal Board reviews.
Yours sincerely,
Dennis McShane
Non-Executive Director and
Chair of the Governance and Nomination Committee
CORPORATE GOVERNANCE REPORT
Succession planning
The Governance and Nomination Committee maintains a
comprehensive succession plan for appointments to the
Board ensuring there is an appropriate balance of skills and
experience that aligns with its strategic aims. The Group's
succession plan also includes contingency plans for the sudden
or unexpected departure of Executive Directors and other
senior roles.
Consequently, the Board has a detailed understanding of talent
management and succession planning across the Group,
as well as the plan to continually recognise and develop
internal talent.
Board and committee performance evaluation
The Board retains overall responsibility for the implementation
of its annual performance evaluation. The 2021 evaluation
process included a review of the Board's core skills and
a Board self-assessment.
The outcome of this review reflected a broad range of skills
in strategic and governance, financial controls and specific
upstream E&P experience. It was recognised that there was
a skills gap in the area of sustainability which continues to
be a core area of focus for the Group. The Board believes
that the appointment of Jenifer Thien to the Board in April
2022 has addressed this gap, given her experience in leading
sustainability programs in major corporations, as well as her
recent experience advising corporations on ESG.
In December 2021, the Board also undertook an individual
self-assessment. The outcomes of this assessment reflected
the Board operates effectively, focusing on the right level of
issues, that the committees and the Board work effectively
together as an integrated governance system to process the
work required by the business and to address the risks that the
business faces. It was recognised that there is a requirement to
review the diversity of the Board, and to further focus on both
succession planning and performance evaluation for the Board.
The Committee agreed that for calendar year 2022 and going
forward, an independent third-party would be engaged to
undertake an annual Board evaluation review. This review will
incorporate the following:
l Board composition and dynamics;
l Board efficiency and effectiveness;
l Governance; and
l Futureproofing.
108
Health, Safety,
Environment and Climate
Committee report
Committee members and meeting attendance
In 2021, the HSEC Committee comprised:
l Robert Lambert (Committee Chair)
l Lisa Stewart
l A. Paul Blakeley
Meeting Attendance:
Robert Lambert
Lisa Stewart
A. Paul Blakeley
Meetings:
3 out of 3
3 out of 3
3 out of 3
11 February 2021 | 19 May 2021 | 13 October 2021
Role of the Committee
The Committee assists the Board in obtaining assurance that appropriate policies,
controls and reporting systems are in place to effectively manage the health, safety,
social, environmental and climate (“HSSEC”) risks in relation to the Group’s operations
and ensure that the Group’s activities are planned and executed in a safe and responsible
manner. The Committee reports to the Board, which has ultimate responsibility for HSSEC
matters, including those related to climate change. The Committee meets at least three
times per year and otherwise as required.
Responsibilities of the Committee include:
l
formulating the Group’s policies and systems for identifying
and managing HSSEC risks within Jadestone’s operations;
l evaluating the effectiveness of the Group’s policies and
systems for identifying and managing HSSEC risks within
Jadestone operations;
l assessing the policies and systems within the Group for
ensuring compliance with HSSEC regulatory requirements;
l assessing the performance of the Group with regard to
the impact of HSSEC relations decisions, climate change,
and actions upon employees, communities and other third
parties. The Committee also assesses the impact of such
decisions and actions on the reputation of the Group;
l on behalf of the Board, receiving reports from management
concerning all serious safety-related incidents within the
Group and actions taken by management as a result of
such incidents;
l evaluating and overseeing, on behalf of the Board,
the quality and integrity of any reporting to external
stakeholders concerning HSSEC issues;
l ensuring that the Group maintains an appropriate level of
l
l
engagement in industry HSSEC initiatives;
reviewing and recommending changes to the HSSEC
framework management system annually; and
reviewing the results of independent audits of the
Group’s performance in regard to HSSEC matters, and any
strategies and action plans developed by management in
response to issues raised, and where appropriate making
recommendations to the Board concerning the same.
* Effective 15 December 2021, the name has changed from HSE
Committee to HSEC Committee
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JADESTONE ENERGY 2021 ANNUAL REPORT
CORPORATE GOVERNANCE REPORT
Letter from the
Committee Chair
Dear shareholder,
I am pleased to present the HSEC Committee
Report for the year ended 31 December 2021.
The Health, Safety, Environmental and Climate committee
(“HSEC Committee”) provides assurance to the Board on
occupational health, safety, environmental and climate
leadership. It is primarily focused on ensuring that the Group's
policies related to HSSEC are adopted and applied across the
Group, and the safety leadership of both management and the
workforce is visible and impactful.
Effective 15 December 2021, the HSEC Committee’s
mandate was expanded to include sustainability and social
responsibilities into its remit, and therefore the terms of
reference of the HSEC Committee were amended and the
committee’s name changed to reflect the same. The Board
believes that the expanded remit is important for the Group
given the ever-increasing prominence of HSSEC issues,
particularly climate change, on the corporate agenda and the
need for the Board and senior management to devote sufficient
time to considering these matters in detail. This report includes
key performance of the HSEC Committee during the 2021
calendar year.
During 2021, the HSEC committee met three times to discuss
matters pertaining to health, safety and environmental issues
which, at times, were dominated by the continuing threat of
COVID-19 within the workforce. The Group’s management
and workforce have operated within both challenging onshore
and offshore environments over multiple jurisdictions. New
processes were developed and deployed to minimise the risk
of COVID-19 infection at all workforce sites. These actions,
which included onshore staff working from home and reduced
offshore crew sizes, were successful at minimising workplace
transmission.
110
We continue to strengthen the review of key operations and
enhanced safety control measures over both production
facilities and drilling operations. These improvements were
acknowledged within the inspection reports received over the
year.
In addition, Jadestone has supported the recommendations of
the Task Force on Climate-related Financial Disclosures since
2019. The TCFD aims to improve the disclosure of climate-
related risks and opportunities and provide stakeholders with
the necessary information to undertake robust and consistent
analyses of the potential financial impacts of climate change.
We recognise the value that the recommendations bring and
continue to align and enhance our climate-related disclosures.
In summary, Jadestone remains committed to strong
performance in safety management and high health, safety,
social, environmental and climate standards.
Yours sincerely,
Robert Lambert
Non-Executive Director and
Chair of the HSEC Committee
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Accomplishments over the course of 2021
l Achieved high performance in environmental management
and reductions in discharges while improving monitoring
activities;
l Continued to successfully monitor and support the Group’s
response to COVID-19 challenges in terms of workforce
wellbeing and the safe management of operations;
l Evaluated HSSEC performance against industry standards;
l Assessed regulator feedback and monitored the
implementation of recommendations to ensure that
required actions are enacted, while also enabling the Board
to reflect the latest regulatory views in their decisions;
l Reviewed major and reportable incidents and investigations,
then followed up on lessons learned; and
l Reviewed the Group’s sustainability and ESG related
communications, including the composition and preparation
for issuance of the Group’s 2021 Sustainability Report.
Key activities during the year
During 2021, the Committee met regularly to review and
deliberate the Group’s safe and responsible operations,
measured against specific metrics, and compliance with
regulatory requirements pertaining to health and safety,
environmental protection and conservation activities.
The Committee also addressed several prioritised topics which
included:
Process safety
l A review of Jadestone’s practices and performance relating
to health, safety and environment, including the safe
condition and responsible operations of Jadestone’s assets,
with a focus on both employees and contractors.
l A review of all major incidents that impacted, or had the
potential to impact, Jadestone’s safety and environmental
performance.
– The Committee, with input from senior management,
reviewed the trends of workplace safety incidents (e.g.
medical treatment cases, near misses) within the wider
context of pandemic related restrictions and changes to
work conditions.
– Pandemic related risks to the workforce were also
assessed, including increased stress from quarantine
conditions and extended separation from home. It
was noted that such increased stress was identified
as a wider industry challenge and not limited to the
Group. In fact, Australia’s Work Safe Commissioner
characterised Jadestone’s approach to pandemic related
restrictions as “best in class”.
– The Group engaged a physician to evaluate fatigue
management practices and propose improvements.
l A review of measures completed to improve safety
performance and respond to regulator directions, including
the review and improvement of corrosion management
under the safety management system.
–
In 2021, the Committee followed up on NOPSEMA’s
General Direction 801 related to the Stag marine
breakaway coupling and General Direction 810 relating
to corrosion management on the Montara facility.
General Directions 801 and 810 were closed in February
2021 and November 2021 respectively.
– Ensuring the benefits of such improvements and
corrective actions/lessons learned are applied at other
Group facilities.
l Assessment of Jadestone’s overall sustainability
performance and provided input to Jadestone’s annual
reporting and disclosures regarding sustainability.
Climate risk
l Significantly enhanced Jadestone’s climate reporting under
the TCFD framework;
l Commissioned an independent climate scenario analysis;
and
l Engaged with shareholders to understand how climate
considerations are integrated into investment decisions.
The 2021 Sustainability Report details the Group’s 2021
ESG performance, covering sustainability, environmental
management, climate change and greenhouse emissions,
occupational health and safety and critical incident risk
management.
Planned enhancements for 2022
l Development of a Net Zero decarbonisation plan,
underpinning Jadestone’s Net Zero by 2040 pledge for its
operated assets;
l A continuing review of the Group’s process safety and
personal safety; and
l Evaluation of the Group’s HSE performance against internal
metrics, regulatory requirements and industry standards.
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JADESTONE ENERGY 2021 ANNUAL REPORT
CORPORATE GOVERNANCE REPORT
112
Disclosure
Committee report
Committee members and meeting attendance
In 2021, the Disclosure Committee comprised:
l Daniel Young (Committee Chair)*
l A. Paul Blakeley
l Neil Prendergast
* Daniel Young stepped down as a director and the chair of the
Disclosure Committee effective 29 April 2022.
Role of the Committee
Meeting Attendance:
Daniel Young
A. Paul Blakeley
Neil Prendergast
Meeting: 8 December
1 out of 1
1 out of 1
1 out of 1
The Disclosure Committee assists the Board in fulfilling its responsibilities in respect
of the Group's disclosure obligations arising under the Market Abuse Regulation (EU)
No. 596/2014 (“MAR”) and the AIM Rules.
It also ensures the Group takes reasonable steps to establish and maintain adequate procedures, systems and controls
to enable it to comply with its obligations in this regard, and it oversees the appropriateness of disclosures included in the
Group's financial and non-financial reporting, which includes sustainability and climate-related disclosures.
Letter from the Committee Chair
Dear shareholder,
I am pleased to present the Disclosure Committee
Report for the year ended 31 December 2021.
Key Matters Considered by the Disclosure
Committee in 2021
The Disclosure Committee continued to monitor and review the
Group's processes for continuous disclosure and reviewed the
Group's related policies and procedures, with particular due
regard to the changes arising from the April 2021 corporate
reorganisation including the addition of Jadestone Energy plc as
the new ultimate holding company of the Group.
Matters considered, among others, included:
l
l
the procedures around filings for the issuance and the
exercise of stock options, including disclosure of changes to
total share capital issued;
the process to ensure compliance with the timescale and
obligations under the MAR / part B of the Company’s
Dealing Code;
l changes to the Annual Report and to the notice of AGM
arising from the change to the ultimate holding company
to a UK plc;
l
the maintenance of insider lists;
l communication protocols around closed periods;
l case studies on the application of AIM rules specific to
disclosure; and
l externally delivered training on identification and
management of inside information.
The committee members also ensured that all relevant policies
and procedures remained in compliance and up-to-date with
MAR, and the AIM Rules.
2022 Priorities
l assess and manage the impacts to disclosure obligations
and practices as a result of the Company ceasing to be a
reporting issuer under Canadian legislation; and
l assess and advise on the controls and procedures related
to the disclosure of ESG data.
Yours sincerely,
A. Paul Blakeley
Executive Director and
Acting Chair of the Disclosure Committee
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JADESTONE ENERGY 2021 ANNUAL REPORT
Consolidated
and Company
financial
statements
For the year ended 31 December 2021
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Directors' responsibility statement
117 - 128
Independent auditor’s report
129
130
131
132
Consolidated statement of profit or loss and other comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
133 - 188
Significant accounting policies and explanation notes to the financial statements
189
190
Company's statement of financial position
Company's statement of changes in equity
191 - 195 Notes to the financial statements
Jadestone Energy plc
Company Number: 13152520
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JADESTONE ENERGY 2021 ANNUAL REPORT
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CONSOLIDATED AND COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
Directors’
responsibilities statement
The Directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable law
and regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
are required to prepare the Group’s financial statements in
accordance with International Accounting Standards (“IAS”) in
conformity with the requirements of the Companies Act 2006
and have elected to prepare the parent company’s financial
statements in accordance with United Kingdom Generally
Accepted Accounting Practice (United Kingdom Accounting
Standards and applicable law), including FRS 101 “Reduced
Disclosure Framework”. Under Company law the directors must
not approve the accounts unless they are satisfied that they
give a true and fair view of the state of affairs of the Company
and of the profit or loss of the Company for that period.
In preparing the parent company's financial statements, the
Directors are required to:
l Select suitable accounting policies and then apply them
consistently;
l Make judgments and accounting estimates that are
reasonable and prudent;
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company’s
and the Company’s transactions and disclose with reasonable
accuracy at any time the financial position of the Company and
enable them to ensure that the financial statements comply
with the Companies Act 2006. They are also responsible for
safeguarding the assets of the Company and hence for taking
reasonable steps for the prevention and detection of fraud
and other irregularities.
The Directors are responsible for the maintenance and
integrity of the corporate and financial information included
on the Company’s website. Legislation in the United Kingdom
governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
Responsibility statement
We confirm that to the best of our knowledge:
l The financial statements, prepared in accordance with the
relevant financial reporting framework, give a true and fair
view of the assets, liabilities, financial position and profit or
loss of the Company and the undertakings included in the
consolidation taken as a whole; and
l State whether applicable UK Accounting Standards have
l The strategic report includes a fair review of the
been followed, subject to any material departures disclosed
and explained in the financial statements; and
l Prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
development and performance of the business and the
position of the Company and the undertakings included
in the consolidation taken as a whole, together with a
description of the principal risks and uncertainties that
they face.
A. Paul Blakeley
Director
3 June 2022
In preparing the Group's financial statements, IAS 1 requires
that Directors:
l Properly select and apply accounting policies;
l Present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
l Provide additional disclosures when compliance with the
specific requirements in IFRSs are insufficient to enable
users to understand the impact of particular transactions,
other events and conditions on the entity's financial
position and financial performance; and
l Make an assessment of the Group's ability to continue as
a going concern.
116
Independent Auditor’s report
To the members of Jadestone Energy plc
Report on the audit of the financial statements
1
OPINION
In our opinion:
l The financial statements of Jadestone Energy plc (the ‘parent company’) and its subsidiaries (the ‘Group’) give a true and fair
view of the state of the Group’s and of the parent company’s affairs as at 31 December 2021 and of the Group’s loss for the
year then ended;
l The Group’s financial statements have been properly prepared in accordance with United Kingdom adopted international
accounting standards and International Financial Reporting Standards (IFRSs) as issued by the International Accounting
Standards Board (IASB);
l The parent company’s financial statements have been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice, including Financial Reporting Standard 101 “Reduced Disclosure Framework”; and
l The financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements which comprise:
The Group financial statements:
l
l
l
l
l
the consolidated statement of profit or loss and other comprehensive income;
the consolidated statement of financial position;
the consolidated statement of changes in equity;
the consolidated statement of cash flows; and
the related Notes 1 to 46, including a summary of significant accounting policies as set out in Note 3 to the financial statements.
The parent company financial statements:
l
l
l
the company statement of financial position;
the company statement of changes in equity;
the related Notes 1 to 10, including a summary of significant accounting policies as set out in Note 3 to the financial statements.
The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law,
United Kingdom adopted international accounting standards and IFRSs as issued by the IASB. The financial reporting framework
that has been applied in the preparation of the parent company’s financial statements is applicable law and United Kingdom
Accounting Standards, including FRS 101 “Reduced Disclosure Framework” (United Kingdom Generally Accepted Accounting
Practice).
2
BASIS FOR OPINION
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the auditor’s responsibilities for the audit of the financial statements
section of our report.
We are independent of the Group and the parent company in accordance with the ethical requirements that are relevant to our
audit of the financial statements in the UK, including the Financial Reporting Council’s (the ‘FRC’s’) Ethical Standard as applied to
listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
117
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JADESTONE ENERGY 2021 ANNUAL REPORT
INDEPENDENT AUDITOR’S REPORT
3
SUMMARY OF OUR AUDIT APPROACH
Key audit matters
The key audit matters that we identified in the current year were:
l
l
Impairment assessment of oil and gas properties;
Impairment assessment of intangible exploration assets; and
l Peninsular Malaysia acquisition.
Within this report, key audit matters are identified as follows:
NEW
Newly identified
«
«»
«
Increased level of risk
Similar level of risk
Decreased level of risk
Materiality
Scoping
Significant changes
in our approach
The materiality that we used for the Group financial statements was US$4,441,000, which was
determined by using 1% of the primary benchmark being the combined intangible exploration assets
& oil and gas properties. A secondary benchmark was considered being net assets to which a 3%
factor was applied. It was concluded that the primary benchmark was appropriate.
The materiality that we used for the parent company financial statements was US$2,220,500, which
was determined by using 1% of the selected benchmark being the net assets.
We structured our approach to the audit to reflect how the Group is organised and including the
revenue generating and asset holding components. The audit work was undertaken and performed
by a group audit team based in Ireland and component teams based in Singapore, Australia, Malaysia
and Vietnam.
The audit work covered 23 components, of which seven were deemed significant components. These
were subject to full scope audits with the remaining components subject to analytical procedures.
The Group successfully completed an internal reorganisation with this being the first year of audit of
the newly reorganised group. This is the first year we have been appointed as auditors to the Group
with the audit having previously been performed by Deloitte Singapore. We undertook a number of
transitional procedures to prepare for the audit. Before we commenced our audit, we established our
independence of the Group and held discussions with the previous Group’s auditors to develop our
understanding of the Group. Key audit matters considered by the Group’s auditors in the prior year
were broadly aligned with the items identified above.
4
CONCLUSIONS RELATING TO GOING CONCERN
In auditing the financial statements, we have concluded that the Directors' use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.
Our evaluation of the Directors' assessment of the Group’s and parent company’s ability to continue to adopt the going concern
basis of accounting included:
l Obtaining an understanding of the relevant controls relating to the going concern assumption;
l Testing the clerical accuracy of the cash flow forecast model;
l Performing an assessment of the cash resources available;
l Completing an assessment of the consistency of the models used to prepare the forecasts in line with other areas of our audit,
such as key inputs relating to future costs, production to other financial and operational information;
l Challenging management as to the reasonableness of commodity pricing assumptions applied, based on benchmarking
to market data;
l Performing a look back analysis of the historical accuracy of forecasts prepared by management;
l Assessing the appropriateness of the sensitivity analysis prepared by management; and
l Assessing the adequacy of the disclosures in the financial statements.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the Group's and parent company’s ability to continue as a going concern
for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections
of this report.
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5
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to
fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy; the allocation of
resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.
5.1. Impairment assessment of oil and gas properties
NEW
Key audit matter
description
As at 31 December 2021, oil and gas properties had a carrying value of US$353,592k which represents
48% of the Group’s total assets. These assets relate to the Montara and Stag projects in Australia, and
the recently acquired Peninsular Malaysia assets.
The Directors performed an assessment of the internal and external factors of the oil and gas
properties’ carrying values to determine whether there is any indicator of impairment noting that no
impairment indicators had been identified.
The valuation of oil and gas properties is an area of significant estimation and judgement. The
estimation of reserves and the future of viability of the oil fields will impact the carrying value of these
properties and thus impairment has been identified as a risk for the Group.
The assessment requires significant judgement and assumptions in respect to the estimated reserves.
The Directors have also engaged an independent qualified reservoir engineer to validate the proved,
probable and possible reserves for its oil and gas properties and the resulting the future net cash
flows arising from such.
Refer to Note 22 to the financial statements.
How the scope of our
audit responded to the
key audit matter
We obtained an understanding of relevant controls around accounting for producing assets in line
with IFRS and the impairment process.
We reviewed the internal and external factors set out in IAS 36 Impairment of Assets and used by the
Directors to determine impairment indicators.
We assessed the competence, capability and objectivity of the Directors' expert involved in the
preparation of the reserve reports.
We integrated an internal reservoir engineering and valuation specialist into our team to challenge the
reserve reports prepared by management’s expert relating to the Group’s estimated oil reserves.
We extended inquiries to individuals outside of the Directors and the accounting department to
corroborate the Directors' ability and intent to carry out plans that are relevant to developing the
estimate.
We reviewed the financial statements to ensure all relevant disclosures were appropriately included in
relation to oil and gas properties.
Key observations
We have no observations that impact on our audit in respect of impairment of oil and gas properties.
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JADESTONE ENERGY 2021 ANNUAL REPORT
INDEPENDENT AUDITOR’S REPORT
5.2. Impairment assessment of intangible exploration assets
NEW
Key audit matter
description
As at 31 December 2021, the Group recorded US$93,241k of intangible exploration assets, which
represents 13% of the Group’s total assets. These assets relate to the Montara oil field in Australia, the
Lemang oil field in Indonesia and two Vietnamese productions sharing contracts.
How the scope of our
audit responded to the
key audit matter
The Directors performed an assessment of the internal and external factors of the intangible
exploration assets’ carrying values to determine whether there is any indicator of impairment noting
that no impairment indicators had been identified.
Extraction at the Vietnam and Indonesia sites is dependent on government approval and should
approval not be granted these assets would be impaired. Moreover, the impact of climate change and
the future of viability of the oil and gas fields may impact the carrying value of such assets and thus
impairment has been identified as a risk.
The assumptions applied by the Directors in the valuation of intangible assets are inherently
judgemental as the projects are not at a stage where the outcome of the activities or forecasted
cash flows can be predicted. The Directors performed an assessment of the technical feasibility and
commercial viability of extracting a mineral resource and whether there is any adverse information
that will affect the final investment decision to commercialise the asset. The Directors have also
engaged an independent qualified reservoir engineer to estimate the gross contingent resources for
all of the intangible exploration assets in previous years. Where the Directors have not obtained a
revised reserve report, the Directors have assessed that given that these are exploration assets, there
are no significant developments in the current year that will negatively impact contingent resources.
Refer to Note 21 to the financial statements.
l We obtained an understanding of relevant controls around accounting for intangible exploration
assets in line with IFRS.
l We reviewed the internal and external factors set out in IFRS 6 Exploration for and Evaluation of
Mineral Resources and used by the Directors to determine impairment indicators.
l We assessed the competence, capability and objectivity of the Directors’ expert involved in the
preparation of the reserve reports.
l We assigned an internal reservoir engineering and valuation specialist to challenge the reserve
reports prepared by the Directors’ expert relating to the Group’s estimated oil reserves and
resources to determine whether they impact the recoverable amount. Where the Directors have
not obtained a revised reserve report, the Directors have assessed that given that these are
exploration assets, there are no significant developments in the current year that will negatively
impact contingent resources.
l We reviewed the Group’s budget to evaluate whether the Directors have a budget and plan for the
assets, including the funding options for future capital expenditure to be able to realise the future
cash flows.
l We performed a retrospective review of prior year’s work budget and current year’s actual
activity to determine the reliability of the Directors’ plan and budget for the purpose of assessing
impairment indicators.
l We extended inquiries to individuals outside of the Directors and the accounting department to
corroborate the Directors’ ability and intent to carry out plans that are relevant to developing the
estimate.
l We reviewed the financial statements to ensure all relevant disclosures were appropriately
included in relation to intangible exploration assets.
Key observations
We have no observations that impact on our audit in respect of impairment of intangible exploration
assets.
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5.3. Peninsular Malaysia acquisition
NEW
Key audit matter
description
On 1 August 2021, the Group completed the acquisition of the Peninsular Malaysia assets through the
acquisition of the SapuraOMV Upstream (PM) Inc. (renamed as Jadestone Energy (PM) Inc.) company
with the fair value of consideration being US$23,279k. The acquisition was accounted for as a business
combination.
There is a risk associated with the acquisition accounting in accordance with IFRS 3 Business
Combinations, given the judgements around elements such as the fair value of contingent
consideration, oil and gas properties and asset restoration obligations.
For a business combination, the key assumptions that underlie the fair values of the producing assets
include estimated reserves, oil prices (must reflect the conditions at the date of completion), and
discount rates. There is also judgement involved in the determination of contingent consideration.
Refer to Note 19 to the financial statements.
How the scope of our
audit responded to the
key audit matter
l We assessed the design and determined implementation of the Group’s controls around
accounting for acquisitions in line with IFRS and determining the fair value of assets and liabilities
acquired.
l We reviewed the purchase agreement to identify key elements related to the acquisition and
ensure they are appropriately reflected in the accounting treatment adopted.
l We challenged the Directors’ assessment of the acquisition including application of the
concentration test set out in IFRS 3 to determine whether the transaction is a business
combination or asset acquisition.
l We challenged the identification and fair value of assets and liabilities acquired in a business
combination, including identifiable intangible assets, through review of models with reference to
relevant supporting documentation and relevant accounting standards including IFRS 3 and IAS 38
Intangible Assets. This includes assessing the fair value of the oil and gas properties acquired in
line with the procedures noted in section 5.1 above.
l We assessed the competence, capability and objectivity of the Directors’ expert involved in the
valuation of oil and gas properties and asset restoration obligations acquired.
l We reviewed the measurement of consideration, including contingent consideration, and
determination of what is part of the business combination.
l We challenged the calculation of goodwill arising from the business combination with reference to
the requirements of IFRS 3.
l We assessed the financial statements to ensure all relevant disclosures were appropriately
included in relation to the Peninsular Malaysia acquisition.
Key observations
We have no observations that impact on our audit in respect of the Peninsular Malaysia acquisition.
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JADESTONE ENERGY 2021 ANNUAL REPORT
INDEPENDENT AUDITOR’S REPORT
6
OUR APPLICATION OF MATERIALITY
6.1. Materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic
decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of
our audit work and in evaluating the results of our work.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Group financial statements
Parent company financial statements
Materiality
US$4,441,000
Basis for determining
materiality
1% of combined intangible exploration assets &
oil and gas properties (see details of secondary
benchmark considered in section 1 above)
US$2,220,500
1% of net assets
Rationale for the
benchmark applied
We believe that the benchmark set out above is
appropriate because there is a direct correlation
with the future economic performance of the
Group. This benchmark also tends to be less
volatile than other possible benchmarks.
We believe that the benchmark set out above is
appropriate as it is stable and reflects the limited
operations of the parent company given its
purpose is to hold investments in subsidiaries.
Combined intangible
exploration assets
& oil and gas properties
US$446,833k
Group materiality
US$4,441k
Component materiality range
US$1,776k to US$2,842k
Clearly trivial reporting threshold US$222k
6.2. Performance materiality
We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and
undetected misstatements exceed the materiality for the financial statements as a whole.
Group financial statements
Parent company financial statements
Performance materiality
80% of Group materiality
80% of parent company materiality
Basis and rationale
for determining
performance materiality
In determining the performance materiality, we considered a number of factors.
The nature of the business has remained consistent with the prior year and with that the benchmarks
selected have remained relatively stable in the current year when compared to the prior year. No new
accounting issues that require significant judgement have been noted other than the acquisition and
internal reorganisation.
We have considered the previous experience with audit adjustments and management’s willingness
to correct errors and also the likelihood that misstatements from the prior period will recur in the
current period.
We have considered the experience and stability of the finance team as well as our understanding of
the Group’s control environment including entity-level controls and any turnover of key personnel.
6.3. Error reporting threshold
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of US$222,050, as
well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit
Committee on disclosure matters that we identified when assessing the overall presentation of the financial statements.
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7
AN OVERVIEW OF THE SCOPE OF OUR AUDIT
7.1. Identification and scoping of components
We determined the scope of our group audit by obtaining an understanding of the Group and its environment and assessing the
risks of material misstatement at the group level. The Group consists of 23 components with a presence in 10 jurisdictions.
Seven components were deemed significant components and subject to full scope audits.
1.
Jadestone Energy plc;
2.
Jadestone Energy (Australia) Pty Ltd;
3.
Jadestone Energy (Eagle) Pty Ltd;
4. Mitra Energy (Vietnam Nam Du) Ltd;
5. Mitra Energy (Vietnam Tho Chu) Ltd;
6.
Jadestone Energy (Lemang) Pte Ltd; and
7.
Jadestone Energy (PM) Inc.
These significant components were located in United Kingdom, Australia, Vietnam, Indonesia and Malaysia.
Significant components were subject to full audit of the component. This scope covered 100% of the Group revenue, 39% of the
Group loss before tax and 89% of the Group net assets.
At the parent company entity level, we also tested the consolidation process and carried out analytical procedures to confirm our
conclusion that there were no significant risks of material misstatement of the aggregated financial information of the remaining
components not subject to audit or audit of specified account balances.
0%
11%
39%
Revenue
Loss before tax
Net assets
61%
100%
89%
Full audit scope
Specified audit procedures
Review at Group level
7.2. Our consideration of the control environment
We have not relied upon the GITCs (General Information Technology Controls) as part of our audit.
Operating effectiveness testing was performed over controls in the revenue business cycle following assessment of design and
determination of implementation. On the basis of the testing performed it was determined that the controls reliance could be relied
upon for the year-end audit of the Group.
7.3. Our consideration of climate-related risks
The Group has set out their climate policy and Net Zero commitment in their sustainability review on pages 24 to 44. The Group
have also identified climate change and resulting physical and transition risks as part of their principal risks and uncertainties in the
strategic report on pages 57 to 63.
We considered whether the risks identified by management within their climate change risk assessment and related documentation
were complete and challenged assumptions impacting the financial statements. The key market-related matter which could have
a material impact on the valuation of the items noted above is in respect of future demand for, and pricing of, oil and gas as the
energy mix evolves in response to climate change risk and other matters.
As part of our audit, we have obtained management’s climate-related risk assessment and made inquiries of management to
understand their process for considering the impact of climate-related risks. The Group reflected the impact of climate change on
assumptions used in disclosing critical judgements and key estimates recorded in the financial statements in accordance with IFRS
requirements by considering the impact of Paris compliant oil prices.
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JADESTONE ENERGY 2021 ANNUAL REPORT
INDEPENDENT AUDITOR’S REPORT
We have performed our own risk assessment of the potential impact of change on the Group and how it may impact critical
judgements and key estimates included in the financial statements. The main climate-related implications considered as part of
our audit relate to the impact of climate change on cash flow projections, underlying oil and gas properties, intangible exploration
assets, deferred tax assets and asset retirement obligations. Future demand for, and pricing of, oil and gas as the energy mix
evolves in response to climate change risk and other matters could have a material impact on the valuation of these items.
The projections could also be materially impacted by changes in underlying assumptions including oil and gas prices, costs of
carbon, decommissioning costs, future climate-related capital expenditure required to meet the Net Zero commitment and
legislation in the locations in which the Group operates.
Our audit procedures were performed with the involvement of our sustainability and valuation specialists. We also challenged how
the Directors considered climate change in their assessment of going concern.
We have also read the Group’s disclosure of climate-related information in the front half of the Annual Report, including the
sustainability review on pages 24 to 44.
7.4. Working with other auditors
Direction and supervision was provided to component auditors through a combination of:
l
Issuance of group referral instructions;
l Upfront team briefings to all component teams;
l Centralisation of key areas of the audit;
l Discussions with internal reservoir engineering and valuation specisalists;
l Regular progress calls;
l Virtual component visits; and
l Risk assessment discussions and detailed workpaper reviews.
8
OTHER INFORMATION
The other information comprises the information included in the Annual Report, other than the financial statements and our
auditor’s report thereon. The Directors are responsible for the other information contained within the Annual Report.
Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated
in our report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be
materially misstated.
If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives
rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that
there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
9
RESPONSIBILITIES OF DIRECTORS
As explained more fully in the Directors’ responsibilities statement, the Directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors
determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due
to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s and the parent company’s ability
to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis
of accounting unless the Directors either intend to liquidate the Group or the parent company or to cease operations, or have
no realistic alternative but to do so.
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10
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial
statements.
As part of an audit in accordance with ISAs (UK), we exercise professional judgment and maintain professional scepticism
throughout the audit. We also:
l
Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error,
design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate
to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for
one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control. We include an explanation in our report of the extent to which the audit was capable of detecting irregularities,
including fraud.
l Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.
l Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by the Directors.
l Conclude on the appropriateness of the Directors’ use of the going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt
on the group’s ability to continue as a going concern. If we conclude that the use of the going concern basis of accounting
is appropriate and no material uncertainties have been identified, we report these conclusions in our report. If we conclude
that a material uncertainty exists, we are required to draw attention in our report to the related disclosures in the financial
statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence
obtained up to the date of our report. However, future events or conditions may cause the Group to cease to continue as
a going concern.
l Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether
the financial statements represent the underlying transactions and events in a manner that achieves fair presentation (i.e., gives
a true and fair view).
l Where we are required to report on consolidated financial statements, obtain sufficient appropriate audit evidence regarding
the financial information of the entities or business activities within the Group to express an opinion on the consolidated
financial statements. As Group auditors, we are responsible for the direction, supervision and performance of the group audit.
As Group auditors, we remain solely responsible for the audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit
and significant audit findings, including any significant deficiencies in internal control that we identify during the audit.
For listed entities and public interest entities, we also provide those charged with governance with a statement that the auditor
has complied with relevant ethical requirements regarding independence, including the FRC’s Ethical Standard, and communicate
with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable,
related safeguards.
Where we are required to report on key audit matters, from the matters communicated with those charged with governance,
we determine those matters that were of most significance in the audit of the financial statements of the current period and
are therefore the key audit matters. We describe these matters in our report unless law or regulation precludes public disclosure
about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our
report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits
of such communication.
For public interest entities, other listed entities, entities that are required, and those that choose voluntarily, to report on how they
have applied the UK Corporate Governance Code, and other entities subject to the governance requirements of The Companies
(Miscellaneous Reporting) Regulations 2018, we are required to include in our report an explanation of how we evaluated the
Directors assessment of the entity's ability to continue as a going concern and, where relevant, key observations arising with
respect to that evaluation.
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JADESTONE ENERGY 2021 ANNUAL REPORT
INDEPENDENT AUDITOR’S REPORT
11
EXTENT TO WHICH THE AUDIT WAS CONSIDERED CAPABLE OF DETECTING IRREGULARITIES, INCLUDING
FRAUD
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which
our procedures are capable of detecting irregularities, including fraud is detailed below.
11.1. Identifying and assessing potential risks related to irregularities
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws
and regulations, we considered the following:
l The nature of the industry and sector, control environment and business performance including the design of the Group’s
remuneration policies, key drivers for Directors’ remuneration, bonus levels and performance targets;
l Results of our enquiries of the Directors and the audit committee about their own identification and assessment of the risks of
irregularities;
l Any matters we identified having obtained and reviewed the Group’s documentation of their policies and procedures relating to:
–
Identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of non-
compliance;
– Detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or alleged fraud;
and
– The internal controls established to mitigate risks of fraud or non-compliance with laws and regulations.
l The matters discussed among the audit engagement team including significant component audit teams and relevant internal
specialists, including internal reserve engineer and valuation, climate and industry specialists regarding how and where fraud
might occur in the financial statements and any potential indicators of fraud.
As a result of these procedures, we considered the opportunities and incentives that may exist within the organisation for fraud and
identified the greatest potential for fraud in respect to revenue recognition and our three key audit matters:
l
l
Impairment assessment of oil and gas properties;
Impairment assessment of intangible exploration assets; and
l Peninsular Malaysia acquisition.
In common with all audits under ISAs (UK), we are also required to perform specific procedures to respond to the risk of
management override.
We also obtained an understanding of the legal and regulatory frameworks that the Group operates in, focusing on provisions
of those laws and regulations that had a direct effect on the determination of material amounts and disclosures in the financial
statements. The key laws and regulations we considered in this context included the UK Companies Act 2006, AIM Regulations and
tax legislation in the jurisdictions in which the Group operates.
In addition, we considered provisions of other laws and regulations that do not have a direct effect on the financial statements but
compliance with which may be fundamental to the Group’s ability to operate or to avoid a material penalty. These included the
Group’s operating licences, health and safety legislation, anti-bribery legislation and environmental regulations in the locations in
which the Group operates.
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11.2. Audit response to risks identified
As a result of performing the above, we did not identify any additional key audit matters related to the potential risk of fraud or
non-compliance with laws and regulations.
Our procedures to respond to risks identified included the following:
l Reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with provisions of
relevant laws and regulations described as having a direct effect on the financial statements;
l Enquiring of the Directors, the audit committee and in-house and external legal counsel concerning actual and potential
litigation and claims;
l Performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material
misstatement due to fraud;
l Reading minutes of meetings of those charged with governance and reviewing correspondence with relevant tax authorities;
l
l
l
l
l
In addressing the risk of impairment of oil and gas properties we have challenged the assumptions underlying the valuations
and made enquiries outside the finance team;
In addressing the risk of impairment of intangible exploration assets we have challenged the assumptions underlying the
valuations and made enquiries outside the finance team;
In addressing the risk of in respect to the Peninsular Malaysia acquisition we have challenged the fair value of the assets and
liabilities recognised as part of the acquisition;
In addressing the risk of fraud in revenue recognition we have tested a sample of revenue transactions to ensure appropriate
application of the revenue recognition requirements and that valid sales transactions have occurred; and
In addressing the risk of fraud through the management override of controls, testing the appropriateness of journal entries and
other adjustments; assessing whether the judgements made in making accounting estimates are indicative of a potential bias;
and evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business.
We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members
including internal specialists and significant component audit teams, and remained alert to any indications of fraud or non-
compliance with laws and regulations throughout the audit.
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127
JADESTONE ENERGY 2021 ANNUAL REPORT
INDEPENDENT AUDITOR’S REPORT
Report on other legal and regulatory requirements
12
OPINIONS ON OTHER MATTERS PRESCRIBED BY THE COMPANIES ACT 2006
In our opinion, based on the work undertaken in the course of the audit:
l The information given in the strategic report and the Directors’ report for the financial year for which the financial
statements are prepared is consistent with the financial statements; and
l The strategic report and the Directors’ report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Group and the parent company and their environment obtained
in the course of the audit, we have not identified any material misstatements in the strategic report or the Directors’ report.
13
MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION
13.1. Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if, in our opinion:
l We have not received all the information and explanations we require for our audit; or
l Adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been
received from branches not visited by us; or
l The parent company’s financial statements are not in agreement with the accounting records and returns.
We have nothing to report in respect of these matters.
13.2. Directors’ remuneration
Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of Directors’ remuneration have
not been made.
We have nothing to report in respect of this matter.
14
USE OF OUR REPORT
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to
state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for
the opinions we have formed.
Cathal Treacy (Senior statutory auditor)
For and on behalf of Deloitte Ireland LLP
Chartered Accountants and Statutory Auditor
Deloitte & Touche House, Charlotte Quay, Limerick, Ireland
3 June 2022
128
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
for the year ended 31 December 2021
Revenue
Production costs
Depletion, depreciation and amortisation
Administrative staff costs
Other expenses
Impairment of assets
Other income
Finance costs
Other financial gains
Profit/(Loss) before tax
Income tax expense
Loss for the year
Loss per ordinary share
Basic and diluted (US$)
Consolidated statement of comprehensive income
Loss for the year
Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Gain on unrealised cash flow hedges
Hedging gain reclassified to profit or loss
Tax income relating to components of other comprehensive income
Other comprehensive income
Notes
5
6
7
8
11
13
14
15
16
17
18
33
33
17
Total comprehensive income for the year
(13,742)
All comprehensive income is attributable to the equity holders of the parent.
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2021
USD’000
340,194
(206,523)
(80,215)
(25,068)
(26,181)
-
7,682
(9,075)
266
1,080
(14,822)
(13,742)
2020
USD’000
217,938
(105,338)
(84,642)
(21,903)
(26,918)
(50,455)
26,376
(12,655)
359
(57,238)
(2,940)
(60,178)
(0.03)
(0.13)
(13,742)
(60,178)
-
-
-
-
-
26,093
(31,364)
(5,271)
1,583
(3,688)
(63,866)
129
JADESTONE ENERGY 2021 ANNUAL REPORT
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(Company Registration Number: 13152520)
as at 31 December 2021
Notes
2021
USD’000
2020
USD’000
Assets
Non-current assets
Intangible exploration assets
Oil and gas properties
Plant and equipment
Right-of-use assets
Other receivables and prepayment
Deferred tax assets
Total non-current assets
Current assets
Inventories
Trade and other receivables
Tax recoverable
Restricted cash
Cash and cash equivalents
Total current assets
Total assets
Equity and liabilities
Capital and reserves
Share capital
Merger reserve
Share-based payments reserve
Accumulated losses
Total equity
Non-current liabilities
Provisions
Lease liabilities
Tax liabilities
Deferred tax liabilities
Total non-current liabilities
Current liabilities
Borrowings
Lease liabilities
Trade and other payables
Provisions
Derivative financial instruments
Tax liabilities
Total current liabilities
Total liabilities
Total equity and liabilities
21
22
23
24
28
26
27
28
29
29
30
32
34
35
36
26
37
36
39
35
40
93,241
353,592
8,963
13,852
48,500
25,278
543,426
23,299
37,951
9,367
-
117,865
188,482
731,908
559
146,270
25,936
(31,692)
141,073
410,697
4,504
-
67,097
482,298
-
11,161
69,090
1,947
-
26,339
108,537
590,835
731,908
100,670
317,676
1,652
23,673
4,404
19,727
467,802
45,361
7,110
-
8,445
80,996
141,912
609,714
466,979
-
24,985
(331,322)
160,642
288,224
13,305
26,896
58,229
386,654
7,296
12,478
32,192
4,558
471
5,423
62,418
449,072
609,714
The financial statements were approved by the Board of Directors and authorised for issue on 3 June 2022. They were signed on its
behalf by:
A. Paul Blakeley
Director
130
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2021
Share
capital
USD’000
Merger
reserve
USD’000
466,573
-
-
-
-
-
406
406
466,979
-
-
-
-
-
-
-
-
-
-
-
(467,387)
146,270
-
-
967
-
-
-
(466,420)
146,270
Share-
based
payments
reserve
USD’000
23,857
-
-
-
-
1,128
-
1,128
24,985
-
-
-
951
-
951
As at 1 January 2020
Loss for the year
Other comprehensive income for the year
Total comprehensive income for
the year
Dividend paid (Note 31)
Share-based compensation (Note 8)
Shares issued (Note 30)
Total transactions with owners,
recognised directly in equity
As at 31 December 2020
Loss for the year, representing total
comprehensive income for the year
Capital reduction (Note 30)
Dividend paid (Note 31)
Share-based compensation (Note 8)
Shares issued (Note 30)
Total transactions with owners,
recognised directly in equity
As at 31 December 2021
559
146,270
25,936
Hedging
reserves
USD’000
Accumulated
losses
USD’000
3,688
-
(3,688)
(268,651)
(60,178)
-
Total
USD’000
225,467
(60,178)
(3,688)
(3,688)
(60,178)
(63,866)
-
-
-
-
-
-
-
-
-
-
-
-
(2,493)
-
-
(2,493)
1,128
406
(2,493)
(959)
(331,322)
160,642
(13,742)
(13,742)
321,117
(7,745)
-
-
-
(7,745)
951
967
313,372
(5,827)
(31,692)
141,073
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131
JADESTONE ENERGY 2021 ANNUAL REPORT
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 December 2021
Operating activities
Profit/(Loss) before tax
Adjustments for:
Depletion, depreciation and amortisation
Depreciation of right-of-use assets
Other finance costs
Assets written off
Allowance for slow moving inventories
Unrealised foreign exchange (gain)/loss
Share-based payments
(Reversal of)/Fair value loss on oil derivatives
Change in fair value of contingent payments
Accretion income on non-current VAT receivables
Interest expense
Interest income
Impairment of intangible exploration assets
Loss on ineffective hedge recycled to profit or loss
Change in Stag FSO provision
Gain from termination of right-of-use asset
Operating cash flows before movements in working capital
(Increase)/Decrease in trade and other receivables
Decrease/(Increase) in inventories
Increase in trade and other payables
Cash generated from operations
Interest paid
Tax refunded
Tax paid
Net cash generated from operating activities
Investing activities
Cash received from acquisition of Peninsular Malaysia assets
Cash paid for acquisition of Peninsular Malaysia assets
Net cash outflows on acquisition of Lemang PSC
Payment for oil and gas properties
Payment for plant and equipment
Payment for intangible exploration assets
Transfer from debt service reserve account
Interest received
Net cash used in investing activities
Financing activities
Proceeds from issuance of shares
(Placement)/Release of deposit for bank guarantee
Dividend paid
Repayment of borrowings
Repayment of lease liabilities
Net cash used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of the year
132
Notes
7
7
15
11
11
11 / 14
8
11
15 / 16
16
15
14
13
11
14
14
19
19
20
22
23
21
29
14
30
29
31
38
38
29
2021
USD’000
1,080
69,024
11,191
8,487
5,332
2,624
(1,838)
951
(471)
438
(266)
150
(80)
-
-
-
-
96,622
(11,975)
9,152
21,631
115,430
(1,505)
3,652
(15,486)
102,091
29,252
(20,033)
-
(51,380)
(682)
(3,858)
8,445
80
(38,176)
967
-
(7,745)
(7,296)
(12,972)
(27,046)
36,869
80,996
117,865
2020
USD’000
(57,238)
68,414
16,228
10,289
173
143
1,495
1,128
471
(359)
-
2,366
(257)
50,455
4
(5,047)
(1,382)
86,883
35,560
(14,071)
3,736
112,108
(1,542)
-
(25,969)
84,597
-
-
(11,959)
(4,732)
(473)
(14,253)
5,040
257
(26,120)
406
10,000
(2,493)
(42,766)
(18,562)
(53,415)
5,062
75,934
80,996
SIGNIFICANT ACCOUNTING POLICIES AND
EXPLANATION NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2021
1
CORPORATE INFORMATION
Jadestone Energy plc (the “Company” or “Jadestone”) is an oil and gas company incorporated in the United Kingdom and registered
in England and Wales. The Company was incorporated on 22 January 2021, company registration number 13152520. The Company
became the ultimate parent company of the Group on completion of an internal reorganisation (Note 2) on 23 April 2021. Prior to
the internal reorganisation, Jadestone Energy Inc., an oil and gas company incorporated in Canada, had been the ultimate parent
company of all Jadestone subsidiaries (the “Group”). These consolidated financial statements have been prepared for the Jadestone
Energy Group and reflect the full financial year ended 31 December 2021 in respect of the ultimate parent company
in accordance with IFRS, (see Note 3).
The Company’s shares are traded on AIM under the symbol “JSE”.
The financial statements are expressed in United States Dollars (“US$” or “USD”).
The Group is engaged in production, development, exploration and appraisal activities in Australia, Malaysia, Vietnam and
Indonesia. The Group’s producing assets are in the Vulcan (Montara) and Carnarvon (Stag) basins, located in shallow water offshore
of Western Australia, and in the East Piatu, East Belumut, West Belumut and Chermingat fields, located in shallow water in offshore
Peninsular Malaysia.
The Company’s head office is located at 3 Anson Road, #13-01 Springleaf Tower, Singapore 079909. The registered office of the
Company is Suite 1, 3rd Floor, 11 - 12 St James's Square, London SW1Y 4LB.
2
SIGNIFICANT EVENTS DURING THE YEAR
Internal reorganisation
The Company completed an internal reorganisation on 23 April 2021, with Jadestone Energy plc becoming the ultimate holding
company of the Jadestone group of companies. The shares of Jadestone Energy Inc., the former ultimate holding company, were
replaced on a one-for-one basis with shares of Jadestone Energy plc. Following the completion of the internal reorganisation, the
shares of Jadestone Energy plc were admitted to AIM for trading on 26 April 2021 (shares of Jadestone Energy Inc. ceased trading
on 23 April 2021).
The internal reorganisation did not result in a change in control in the ultimate holding company nor the ultimate shareholding or
management of any Jadestone group company.
The reorganisation was undertaken for several reasons. It is expected to reduce regulatory compliance burdens and raise the
Company’s profile and status amongst UK and European investors who are unable to invest in non-UK domiciled companies. It
is also expected to facilitate incremental access to equity from international capital markets, and to allow Jadestone to further
optimise its tax structure.
Acquisition of SapuraOMV Peninsular Malaysia assets
On 30 April 2021, the Group executed a sale and purchase agreement with SapuraOMV Upstream Sdn Bhd (“SapuraOMV”) to
acquire SapuraOMV’s Peninsular Malaysia assets (the "PenMal Assets"), for a total cash consideration of US$20.0 million, which
included a headline price of US$9.0 million plus further working capital adjustments of US$11.0 million. There are two separate
potential contingent payments which occur if the average Dated Brent is above US$65/bbl in 2021 and above US$70/bbl in 2022.
The Group paid the first contingent payment of US$3.0 million in January 2022. The acquisition completed on 1 August 2021,
following the satisfaction of all conditions precedent to closing the acquisition.
The economic effective date of the acquisition was 1 January 2021, meaning the Group is entitled to all net cash generated from the
PenMal Assets from 1 January 2021 to 31 July 2021, resulting in a net cash receipt at closing of US$9.2 million.
The PenMal Assets comprise four licences, two of which are operated by the Group, a 70% operated interest in the PM329 PSC,
containing the East Piatu field, and a 60% operated interest in the PM323 PSC, which contains the East Belumut, West Belumut and
Chermingat fields. The other two licences comprise 50% non-operated working interests in the PM318 and Abu, Abu Kecil, Bubu,
North Lukut, and Penara oilfields (“AAKBNLP”) PSCs.
Oil price commodity contracts
On 16 February 2021, the Group entered into commodity swap contracts to hedge 31% of its planned production volumes from
April to June 2021, to provide downside oil price protection in the lead-up period to the Group’s 2021 offshore Australia capital
programme. The average swap price, referenced to Dated Brent, was set at US$61.40/bbl.
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133
JADESTONE ENERGY 2021 ANNUAL REPORT
SIGNIFICANT ACCOUNTING POLICIES AND EXPLANATION NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of preparation
The financial statements have been prepared in accordance with UK-adopted International Accounting Standards and International
Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and in conformity with the
requirements of the Companies Act 2006 (the “Act”).
The financial statements have been prepared on the historical cost convention basis, except as disclosed in the accounting policies
below. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.
Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date, regardless of whether that price is directly observable or estimated using another
valuation technique. In estimating the fair value of an asset or a liability, the Group takes into account the characteristics of the
asset or liability which market participants would take into account when pricing the asset or liability at the measurement date.
Fair value for measurement and/or disclosure purposes in these consolidated financial statements is determined on such a basis,
except for share-based payment transactions that are within the scope of IFRS 2 Share-based Payment, leasing transactions that are
within the scope of IFRS 16 Leases, and measurements that have some similarities to fair value but are not fair value, such as net
realisable value in IAS 2 Inventories, or value in use in IAS 36 Impairment of Assets.
In addition, for financial reporting purposes, fair value adjustments are categorised into level 1, 2 or 3, based on the degree to
which the inputs to the fair value adjustments are observable and the significance of the inputs to the fair value measurement in its
entirety, which are described as follows:
l Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Group can access at the
measurement date;
l Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either
directly or indirectly; and
l Level 3 inputs are unobservable inputs for the asset or liability.
Common control transaction
As disclosed in Note 2, the Company has completed an internal reorganisation, with the shares of Jadestone Energy Inc. having
been replaced on a one-for-one basis with shares of Jadestone Energy plc. Accordingly, the shares of Jadestone Energy plc were
admitted to AIM for trading on 26 April 2021. There is no change in control in the ultimate holding company of the Group, nor the
ultimate shareholding or management of any Jadestone group company, arising from the completion of the internal reorganisation.
IFRS 3 Business Combinations does not prescribe the presentation and disclosure requirements under a common control
transaction. The Group has chosen to issue these consolidated financial statements under the name of Jadestone Energy plc, as
if they are a continuation of the financial statements of Jadestone Energy Inc. and Jadestone Energy plc had been in existence
throughout the reported financial year.
The following have been reflected in these consolidated financial statements in relation to the common control transaction:
a) The asset and liabilities of Jadestone Energy plc and Jadestone Energy Inc. (“JEI”) group have been recognised at their book
values immediately prior to the internal reorganisation;
b) The pre-internal reorganisation accumulated losses recognised in these consolidated financial statements are those of JEI
Group;
c) The amount recognised as issued equity instruments in these consolidated financial statements is the issued and paid-up share
capital of JEI immediately before the internal reorganisation. The comparative share capital is that of the Company as if the
Company headed the Group for the comparative period;
d) The equity structure appearing in these consolidated financial statements (i.e., the number and type of equity instruments
issued) reflects the equity structure of the Company;
e) A merger reserve account was created to account the difference between the carrying value and the nominal value of the
shares of the Company; and
f) The comparative information presented in these consolidated financial statements is that of JEI Group with the exception of the
composition of the equity items which reflect that of the Company as if the Company had existed for the comparative period.
134
JADESTONE ENERGY 2021 ANNUAL REPORT
Going concern
The Directors are required to consider the availability of resources to meet the Group’s liabilities for the foreseeable future.
As at 31 December 2021, the Group has a total cash and cash equivalents of US$117.9 million, and the Group managed to keep the
cash levels within the range of US$90.0 to US$105.0 million between January to April 2022, after the settlements of trade related
expenditure and US$3.0 million contingent payment paid to SapuraOMV arising from the acquisition of PenMal Assets (Notes 19
and 38). The average Dated Brent crude prices for the first four months in 2022 was US$102.73/bbl, hence the Group was able to
generate material cash inflows from the liftings in Australia and Malaysia from the beginning of 2022 up to date.
The Group regularly monitors its cash, funding and liquidity position. Near term cash projections are revised and underlying
assumptions reviewed, generally monthly, and longer-term projections are also updated regularly. Downside price and other risking
scenarios are considered, such as potential delay in the development of Lemang asset, unfavourable foreign exchanges and higher
than expected inflation rates. In addition to commodity sales prices, the Group is also potentially exposed to potential production
interruptions such as weather downtime and planned and unplanned shutdowns for workovers and repair and maintenance
activities. All these factors have been considered in the Group’s near and longer term cash projections. For the purposes of the
Group’s going concern assessment, we have reviewed cash projections for the period from 1 April 2022 to 30 June 2023, the ‘going
concern period’.
The Group is debt-free, following the final repayment of its Australian reserve based lending facility in Q1 2021. All of its operational
and capital commitments (Note 43) can be funded from the existing cash resources.
Having taken into consideration the above factors, the Directors have reasonable expectation that the Group has adequate
resources to continue in operational existence for the going concern period. Accordingly, they adopted the going concern basis in
preparing these financial statements.
Adoption of new and revised standards
New and amended IFRS standards that are effective for the current year
In the current year, the Group adopted the following amendment that is effective from the beginning of the year and is relevant to
its operations. The adoption of this amendment has not resulted in changes to the Group’s accounting policies.
Amendments to IFRS 16
COVID-19-Related Rent Concessions Beyond 30 June 2021
New and revised IFRSs in issue but not yet effective
At the date of authorisation of these financial statements, the Group has not applied the following amendments to IFRS standards
relevant to the Group that have been issued but are not yet effective:
Amendments to IAS 1
Amendments to IAS 1 and
Practice Statement 21
Amendments to IAS 81
Amendments to IAS 121
Amendments to IFRS 162
Amendments to IFRS 372
Amendments to IFRS 32
Amendments to IFRSs2
Classification of Liabilities as Current or Non-current
Making Materiality Judgements – Disclosure of Accounting Policies
Definition of Accounting Estimates
Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction
Property, Plant and Equipment – Proceeds before Intended Use
Onerous Contracts – Cost of Fulfilling a Contract
Reference to Conceptual Framework
Annual Improvements to IFRS Standards 2018 – 2020
The Group is currently performing an assessment of the impact of these amendments but does not expect a material impact on the
financial statements of the Group in future periods.
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1 Effective from 1 January 2023.
2 Effective from 1 January 2022.
135
SIGNIFICANT ACCOUNTING POLICIES AND EXPLANATION NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company
and its subsidiaries made up to 31 December of each year. Control is achieved where the Company:
l Has power over the investee;
l
Is exposed, or has rights, to variable returns from its involvement with the investee; and
l Has the ability to use its power to affect its returns.
The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or
more of the three elements of control listed above.
Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses
control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in
the consolidated statement of profit or loss and other comprehensive income from the date the Company gains control until the
date when the Company ceases to control the subsidiary.
Profit or loss and each component of other comprehensive income are attributed to the owners of the Company. Total
comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests, even if this
results in the non-controlling interests having a deficit balance.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with
the Group’s accounting policies.
All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the
Group are eliminated in full on consolidation.
Business combinations
Acquisitions of businesses, including joint operations which are assessed to be businesses, are accounted for using the acquisition
method. The consideration for each acquisition is measured as the aggregate of the acquisition date fair values of assets given,
liabilities incurred by the Company to the former owners of the acquiree, and equity interests issued by the Company in exchange
for control of the acquiree. Acquisition-related costs are recognised in profit or loss as incurred.
At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value, except that:
l Deferred tax assets or liabilities, and liabilities or assets related to employee benefit arrangements are recognised and
measured in accordance with IAS 12 Income Taxes and IAS 19 Employee Benefits respectively;
l Liabilities or equity instruments related to share-based payment transactions of the acquiree, or the replacement of an
acquiree’s share-based payment awards transactions with share-based payment awards transactions of the acquirer, in
accordance with the method in IFRS 2 Share-based Payment at the acquisition date; and
l Assets, or disposal groups, that are classified as held for sale in accordance with IFRS 5 Non-Current Assets Held for Sale and
Discontinued Operations are measured in accordance with that Standard.
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the
acquiree, and the fair value of the acquirer's previously held equity interest in the acquiree (if any) over the net of the acquisition-
date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the net of the acquisition-date
amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount
of any non-controlling interests in the acquiree and the fair value of the acquirer's previously held interest in the acquiree (if any),
the excess is recognised immediately in profit or loss as a bargain purchase gain.
Where applicable, the consideration for the acquisition includes any asset or liability resulting from a contingent consideration
arrangement, measured at its acquisition date fair value. Subsequent changes in such fair values are adjusted against the cost of
acquisition where they qualify as measurement period adjustments. Measurement period adjustments are adjustments that arise
from additional information obtained during the ‘measurement period’ (which cannot exceed one year from the acquisition date)
about facts and circumstances that existed at the acquisition date. The subsequent accounting for changes in the fair value of the
contingent consideration, that do not qualify as measurement period adjustments, depends on how the contingent consideration is
classified.
Contingent consideration that is classified as equity is not re-measured at subsequent reporting dates and its subsequent
settlement is accounted for within equity. Contingent consideration that is classified as a liability is remeasured at subsequent
reporting dates with the corresponding gain or loss being recognised in profit or loss.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination
occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are
adjusted during the measurement period (see below), or additional assets or liabilities are recognised, to reflect new information
obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts
recognised as at that date.
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The measurement period is the period from the date of acquisition to the date the Group obtains complete information about facts
and circumstances that existed as at the acquisition date and is subject to a maximum of one year from acquisition date.
Where an interest in a production sharing contract (“PSC”) is acquired by way of a corporate acquisition, the interest in the
PSC is treated as an asset purchase unless the acquisition of the corporate vehicle meets the definition of a business and the
requirements to be treated as a business combination.
Accounting for transaction that is not a business combination
When a transaction or other event does not meet the definition of a business combination due to the asset or group of assets not
meeting the definition of a business, it is termed an ‘asset acquisition’. In such circumstances, the acquirer:
l
Identifies and recognises the individual identifiable assets acquired (including those assets that meet the definition of, and
recognition criteria for, intangible assets in IAS 38) and liabilities assumed; and
l Allocates the cost of acquiring the group of assets and liabilities to the individual identifiable assets and liabilities on the basis
of their relative fair values at the date of purchase.
Such a transaction or event does not give rise to goodwill or a gain on a bargain purchase.
Transaction costs in an asset acquisition are generally capitalised as part of the cost of the assets acquired in accordance with
applicable standards.
Foreign currency transactions
The Group’s consolidated financial statements are presented in USD, which is the parent’s functional currency and presentation
currency. The functional currencies of subsidiaries are determined based on the economic environment in which they operate.
In preparing the financial statements of each individual Group entity, transactions in currencies other than the entity’s functional
currency are recorded at the rates of exchange prevailing on the dates of the transactions. At the end of each reporting period,
monetary items denominated in foreign currencies are retranslated at the rates prevailing at the end of the reporting period. Non-
monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date
when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not
retranslated.
Exchange differences arising on the settlement of monetary items, and on retranslation of monetary items, are included in profit or
loss for the period.
Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in profit or loss for the
period, except for differences arising on the retranslation of non-monetary items in respect of which gains or losses are recognised
in other comprehensive income. For such non-monetary items, any exchange component of that gain or loss is also recognised
in other comprehensive income. There is no foreign currency translation reserve created at the Group level as the functional
currencies of all subsidiaries are denominated in USD.
Joint operations
A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets,
and obligations for the liabilities, relating to the arrangement. Joint control is the contractually agreed sharing of control of an
arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing
control.
When a Group entity undertakes its activities under joint operations, the Group as a joint operator recognises in relation to its
interest in a joint operation:
l
l
l
l
Its assets, including its share of any assets held jointly;
Its liabilities, including its share of any liabilities incurred jointly;
Its revenue from the sale of its share of the output arising from the joint operation; and
Its expenses, including its share of any expenses incurred jointly.
The Group accounts for the assets, liabilities, revenue and expenses relating to its interest in a joint operation in accordance with
the IFRS standards applicable to the particular assets, liabilities, revenues and expenses.
When a Group entity transacts with a joint operation in which a Group entity is a joint operator (such as a sale or contribution of
assets), the Group is considered to be conducting the transaction with the other parties to the joint operation, and gains and losses
resulting from the transactions are recognised in the Group’s consolidated financial statements only to the extent of other parties’
interests in the joint operation.
When a Group entity transacts with a joint operation in which a Group entity is a joint operator (such as a purchase of assets), the
Group does not recognise its share of the gains and losses until it resells those assets to a third party.
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137
JADESTONE ENERGY 2021 ANNUAL REPORT
SIGNIFICANT ACCOUNTING POLICIES AND EXPLANATION NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
Changes to the Group’s interest in PSCs usually require the approval of the appropriate regulatory authority. A change in interest
is recognised when:
l Approval is considered highly likely; and
l All affected parties are effectively operating under the revised arrangement.
Where this is not the case, no change in interest is recognised and any funds received or paid are included in the statement
of financial position as contractual deposits.
Pre-licence award costs
Costs incurred prior to the effective award of oil and gas licences, concessions and other exploration rights, are expensed in profit
or loss.
Exploration and evaluation costs
The costs of exploring for and evaluating oil and gas properties, including the costs of acquiring rights to explore, geological and
geophysical studies, exploratory drilling and directly related overheads such as directly attributable employee remuneration,
materials, fuel used, rig costs and payments made to contractors are capitalised and classified as intangible exploration assets
(“E&E assets”).
If no potentially commercial hydrocarbons are discovered, the E&E assets are written off through profit or loss as a dry hole.
If extractable hydrocarbons are found and, subject to further appraisal activity (e.g., the drilling of additional wells), it is probable
that they can be commercially developed, the costs continue to be carried as intangible exploration costs, while sufficient/continued
progress is made in assessing the commerciality of the hydrocarbons.
Costs directly associated with appraisal activity undertaken to determine the size, characteristics and commercial potential of a
reservoir following the initial discovery of hydrocarbons, including the costs of appraisal wells where hydrocarbons were not found,
are initially capitalised as E&E assets.
All such capitalised costs are subject to technical, commercial and management review, as well as review for indicators of
impairment at the end of each reporting period. This is to confirm the continued intent to develop or otherwise extract value from
the discovery. When such intent no longer exists, or if there is a change in circumstances signifying an adverse change in initial
judgment, the costs are written off.
When commercial reserves of hydrocarbons are determined and development is approved by management, the relevant
expenditure is transferred to oil and gas properties. The technical feasibility and commercial viability of extracting a mineral
resource is considered to be determinable when proved or probable reserves are determined to exist. The determination of proved
or probable reserves is dependent on reserve evaluations which are subject to significant judgments and estimates.
Costs related to geological and geophysical studies that relate to blocks that have not yet been acquired, and costs related to blocks
for which no commercially viable hydrocarbons are expected, are taken direct to the profit or loss and have been disclosed as
exploration expenses.
Oil and gas properties
Producing assets
The Group recognises oil and gas properties at cost less accumulated depletion, depreciation and impairment losses. Directly
attributable costs incurred for the drilling of development wells and for the construction of production facilities are capitalised,
together with the discounted value of estimated future costs of decommissioning obligations. Workover expenses are recognised
in profit or loss in the period in which they are incurred, unless it generates additional reserves or prolongs the economic life of the
well, in which case it is capitalised. When components of oil and gas properties are replaced, disposed of, or no longer in use, they
are derecognised.
Depletion and amortisation expense
Depletion of oil and gas properties is calculated using the units of production method for an asset or group of assets, from the date
in which they are available for use. The costs of those assets are depleted based on proved and probable reserves.
Costs subject to depletion include expenditures to date, together with approved estimated future expenditure to be incurred in
developing proved and probable reserves. Costs of major development projects are excluded from the costs subject to depletion
until they are available for use.
The impact of changes in estimated reserves is dealt with prospectively by depleting the remaining carrying value of the asset over
the remaining expected future production. If reserves estimates are revised downwards, earnings could be affected by higher
depletion expense, or an immediate write-down of the property’s carrying value.
Depletion amount calculated based on production during the year is adjusted based on the net movement of crude inventories
at year end against beginning of the year, i.e., depletion cost for crudes produced but not lifted are capitalised as part of cost of
inventories and recognised as depletion expense when lifting occurs.
138
Asset restoration obligations
The Group estimates the future removal and restoration costs of oil and gas production facilities, wells, pipelines and related
assets at the time of installation or acquisition of the assets, and based on prevailing legal requirements and industry practice. In
most instances, the removal of these assets will occur many years in the future. The estimates of future removal costs are made
considering relevant legislation and industry practice and require management to make judgments regarding the removal date, the
extent of restoration activities required, and future removal technologies.
Site restoration costs are capitalised within the cost of the associated assets, and the provision is stated in the statement of financial
position at its total estimated present value. These costs are based on judgements and assumptions regarding removal dates,
technologies, and industry practice. This estimate is evaluated on a periodic basis and any adjustment to the estimate is applied
prospectively. Changes in the estimated liability resulting from revisions to estimated timing, amount of cash flows, or changes in
the discount rate are recognised as a change in the asset restoration liability and related capitalised asset restoration cost within oil
and gas properties.
The Malaysian and Indonesian regulators require upstream oil and gas companies to contribute to an abandonment cess fund,
including making periodic cess payments, throughout the production life of the oil or gas field. The cess payment amount is
assessed based on the estimated future decommissioning expenditures. For operated licences, the cess payment paid is classified
as non-current receivables as the cess payment paid is reclaimable by the Group in the future following the commencement of
decommissioning activities. For non-operated licences, the cess payment paid reduces the asset restoration liability.
The change in the net present value of future obligations, due to the passage of time, is expensed as an accretion expense within
financing charges. Actual restoration obligations settled during the period reduce the decommissioning liability.
Capitalised asset restoration costs are depleted using the units of production method (see above accounting policy).
Borrowing Costs
Borrowing costs are allocated to periods over the term of the related debt, at a constant rate on the carrying amount. Borrowings,
as shown on the consolidated statement of financial position, are net of arrangement fees and issue costs, and the borrowing costs
are amortised through to the statement of profit or loss and other comprehensive income as finance costs over the term of the
debt.
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that
necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until
such time as the assets are substantially ready for their intended use or sale.
All other borrowing costs are recognised in the profit or loss in the period in which they are incurred.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is
deducted from the borrowing costs eligible for capitalisation. All other borrowing costs are recognised in the statement of profit or
loss in the period in which they are incurred.
Government grants
Government grants are not recognised until there is reasonable assurance that the Group will comply with the conditions attached
to them and that the grants will be received.
The government grants received in 2020 related to the Australian Government’s JobKeeper Scheme, as part of the Australian
Government initiative to provide immediate financial support as a result of the COVID-19 pandemic, and applied to certain of
the Group’s Australian offshore and onshore personnel. There are no future related costs in respect of these grants, which were
received solely as compensation for costs incurred during the year. There are no unfulfilled conditions or other contingencies in
relation to the grants.
Government grants are recognised in profit or loss on a systematic basis over the periods in which the Group recognises as
expenses the related costs for which the grants are intended to compensate.
Government grants are presented on a net basis in profit or loss, where grant income is offset against the related costs, in either
“production costs” (Note 6) or “administrative staff costs” (Note 8).
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139
JADESTONE ENERGY 2021 ANNUAL REPORT
SIGNIFICANT ACCOUNTING POLICIES AND EXPLANATION NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
Plant and equipment
Plant and equipment is stated at cost less accumulated depreciation and any recognised impairment loss.
Depreciation is charged so as to write off the cost of assets evenly over their estimated useful lives, on the following:
l Computer equipment: 3 years; and
l Fixtures and equipment: 3 years.
The estimated useful lives, residual values and depreciation method are reviewed at each year end, with the effect of any changes
in estimate accounted for on a prospective basis.
Materials and spares which are expected not to be consumed within the next twelve months from the year end are classified as
plant and equipment.
Right-of-use assets are depreciated over the shorter period of the lease term and the useful life of the underlying asset. If the
ownership of the underlying asset in a lease is transferred, or the cost of the right-of-use asset reflects that the Group expects to
exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset.
An item of plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the
continued use of asset. Any gain or loss arising on the disposal or retirement of an item of plant and equipment is determined as
the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.
Impairment of oil and gas properties, plant and equipment, right-of-use assets and intangible assets
excluding goodwill
At the end of each reporting period, the Group reviews the carrying amounts of its oil and gas properties, plant and equipment,
right-of-use assets and intangible assets, excluding goodwill, to determine whether there is any indication that those assets have
suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine
the extent of the impairment loss (if any). The impairment is determined on each individual cash-generating unit basis (i.e.,
individual oil or gas field). Where there is common infrastructure that is not possible to measure the cash flows separately for each
oil or gas field, then based on the aggregate of the relevant oil or gas fields. When a reasonable and consistent basis of allocation
can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the
smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.
Intangible assets with indefinite useful lives and intangible assets not yet available for use, are tested for impairment annually, and
whenever there is an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs of disposal (“FVLCOD”) and value in use. In assessing value in use, the
estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset for which estimates of future cash flows have not been
adjusted. FVLCOD will be assessed on a discounted cash flow basis where there is no readily available market price for the asset or
where there are no recent market transactions. Assumptions relating to forecast capital expenditures that enhance the productive
capacity can be included in the discounted cash flows model, but only to the extent that a typical market participant would take a
consistent view. The post-tax discounted cash flows are compared against the carrying amount of the asset on an after-tax basis;
that is, after deducting deferred tax liabilities relating to the asset or group of assets.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount
of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit
or loss.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the
revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount
that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years.
A reversal of an impairment loss is recognised immediately in profit or loss.
Inventories
Inventories are valued at the lower of cost and net realisable value. Cost is determined as follows:
l Petroleum products, comprising primarily of extracted crude oil stored in tanks, pipeline systems and aboard vessels, and
natural gas, are valued using weighted average costing, inclusive of depletion expense; and
l Materials, which include drilling and maintenance stocks, are valued at the weighted average cost of acquisition.
Net realisable value represents the estimated selling price in the ordinary course of business less the estimated costs of completion
and the estimated costs necessary to make the sale. The Group uses its judgement to determine which costs are necessary to
make the sale considering its specific facts and circumstances, including the nature of the inventories. If the carrying value exceeds
net realisable value, a write-down is recognised. The write-down may be reversed in a subsequent period if the inventory is still on
hand, but the circumstances which caused the write-down no longer to exist.
140
Provision for slow moving materials and spares are recognised in the “other expenses” (Note 11) line item in profit or loss as they
are non-trade in nature.
Financial Instruments
Financial assets and financial liabilities are recognised in the Group’s consolidated statement of financial position when the Group
becomes a party to the contractual provisions of the instrument.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the
acquisition or issue of the financial assets and financial liabilities (other than financial assets and financial liabilities measured at
fair value through the profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as
appropriate, on initial recognition.
Transaction costs directly attributable to the acquisition of financial assets or financial liabilities measured at fair value through
profit or loss are recognised immediately in profit or loss.
Financial assets
All financial assets are recognised and derecognised on a trade date basis, where the purchases or sales of financial assets is under
a contract whose terms require delivery of assets within the time frame established by the market concerned.
All recognised financial assets are measured subsequently in their entirety, at either amortised cost or fair value, depending on the
classification of the financial assets.
Classification of financial assets
Debt instruments that meet the following conditions are measured subsequently at amortised cost:
l The financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash
flows; and
l The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and
interest on the principal amount outstanding.
Debt instruments that meet the following conditions are subsequently measured at fair value through other comprehensive income
(“FVTOCI”):
l The financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and
selling the financial assets; and
l The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and
interest on the principal amount outstanding.
By default, all other financial assets are subsequently measured at fair value through profit or loss (“FVTPL”).
Amortised cost and effective interest method
The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income
over the relevant period.
For financial assets, the effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees paid
or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) excluding
expected credit losses, through the expected life of the financial asset, or, where appropriate, a shorter period, to the gross carrying
amount of the financial instrument on initial recognition.
The amortised cost of a financial asset is the amount at which the financial asset is measured at initial recognition minus the
principal repayments, plus the cumulative amortisation using the effective interest method of any difference between that initial
amount and the maturity amount, adjusted for any loss allowance. The gross carrying amount of a financial asset is the amortised
cost of a financial asset before adjusting for any loss allowance.
Interest income is recognised using the effective interest method for financial assets measured subsequently at amortised cost
and at fair value through other comprehensive income. For financial assets other than purchased or originated credit impaired
financial assets, interest income is calculated by applying the effective interest rate to the gross carrying amount of a financial asset,
except for financial assets that have subsequently become credit impaired. For financial assets that have subsequently become
credit impaired, interest income is recognised by applying the effective interest rate to the amortised cost of the financial asset. If,
in subsequent reporting periods, the credit risk on the credit impaired financial instrument improves so that the financial asset is
no longer credit impaired, interest income is recognised by applying the effective interest rate to the gross carrying amount of the
financial asset.
Interest income is recognised in profit or loss and is included in “other income” (Note 14) line item.
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141
JADESTONE ENERGY 2021 ANNUAL REPORT
SIGNIFICANT ACCOUNTING POLICIES AND EXPLANATION NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
Impairment of financial assets
The Group’s financial assets that are subject to the expected credit loss model comprise trade and other receivables. While cash
and bank balances are also subject to the impairment requirements of IFRS 9 Financial Instruments, the expected credit loss
allowances are not expected to be significant.
The Group’s trade and other receivables are primarily with counterparties to oil and gas sales, joint arrangement partners and non-
trade related parties.
The concentration of credit risk relates to the Group’s single customer with respect to oil sales in Australia, and a different single
customer for oil and gas sales in Malaysia. Both customers have an A2 credit rating (Moody’s). All trade receivables are generally
settled 30 days after the sale date. In the event that an invoice is issued on a provisional basis then the final reconciliation is paid
within three days of the issuance of the final invoice, largely mitigating any credit risk.
The Group recognises lifetime expected credit loss (“ECL”) for trade receivables. The expected credit losses on these financial assets
are estimated based on days past due, applying expected non-recoveries for each group of receivables.
The Group measures the loss allowance for other receivables and amounts due from joint arrangement partners at an amount
equal to 12 months ECL, as there is no significant increase in credit risk since initial recognition.
Significant increase in credit risk
In assessing whether the credit risk on a financial instrument has increased significantly since initial recognition, the Group
compares the risk of a default occurring on the financial instrument as at the reporting date with the risk of a default occurring on
the financial instrument as at the date of initial recognition. In making this assessment, the Group considers both quantitative and
qualitative information that is reasonable and supportable, including historical experience and Forward looking information that
is available without undue cost or effort. Forward looking information considered includes the future prospects of the industries
in which the Group’s debtors operate, based on consideration of various external sources of actual and forecast economic
information that relate to the Group’s core operations.
In particular, the following information is taken into account when assessing whether credit risk has increased significantly since
initial recognition:
l An actual or expected significant deterioration in the financial instrument’s external (if available), or internal credit rating;
l Significant deterioration in external market indicators of credit risk for a particular financial instrument, e.g., a significant
increase in the credit spread, the credit default swap prices for the debtor, or the length of time or the extent to which the fair
value of a financial asset has been less than its amortised cost;
l Existing or forecast adverse changes in business, financial or economic conditions that are expected to cause a significant
decrease in the debtor‘s ability to meet its debt obligations;
l An actual or expected significant deterioration in the operating results of the debtor;
l Significant increases in credit risk on other financial instruments of the same debtor; and
l An actual or expected significant adverse change in the regulatory, economic, or technological environment of the debtor that
results in a significant decrease in the debtor’s ability to meet its debt obligations.
Despite the foregoing, the Group assumes that the credit risk on a financial instrument has not increased significantly since
initial recognition if the financial instrument is determined to have low credit risk at the reporting date. A financial instrument is
determined to have low credit risk if i) the financial instrument has a low risk of default, ii) the borrower has a strong capacity to
meet its contractual cash flow obligations in the near term and iii) adverse changes in economic and business conditions in the
longer term may, but will not necessarily, reduce the ability of the borrower to fulfil its contractual cash flow obligations.
The Group regularly monitors the effectiveness of the criteria used to identify whether there has been a significant increase in
credit risk and revises them, as appropriate, to ensure that the criteria are capable of identifying a significant increase in credit risk
before the amount becomes past due.
Definition of default
The Group considers the following as constituting an event of default, for internal credit risk management purposes, as historical
experience indicates that receivables that meet either of the following criteria are generally not recoverable:
l When there is a breach of financial covenants by the counterparty; or
l
Information developed internally or obtained from external sources indicates that the debtor is unlikely to pay its creditors,
including the Group, in full (without taking into account any collateral held by the Group).
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Credit-impaired financial assets
A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of
that financial asset have occurred. Evidence that a financial asset is credit-impaired includes observable data about the following
events:
l Significant financial difficulty of the issuer or the borrower;
l A breach of contract, such as a default or past due event;
l The lender(s) of the borrower, for economic or contractual reasons relating to the borrower’s financial difficulty, having granted
to the borrower a concession(s) that the lender(s) would not otherwise consider;
l
It is becoming probable that the borrower will enter bankruptcy or other financial reorganisation; or
l The disappearance of an active market for that financial asset because of financial difficulties.
Write-off policy
The Group writes off a financial asset when there is information indicating that the counterparty is in severe financial difficulty
and there is no realistic prospect of recovery, e.g., when the counterparty has been placed under liquidation or has entered into
bankruptcy proceedings, or in the case of trade receivables, when the amounts are over one year past due, whichever occurs
sooner. Financial assets written off may still be subject to enforcement activities under the Group’s recovery procedures, taking into
account legal advice where appropriate. Any recoveries made are recognised in profit or loss.
Measurement and recognition of expected credit losses
The measurement of ECL is a function of the probability of default, loss given default (i.e., the magnitude of the loss if there is a
default), and the exposure at default. The assessment of the probability of default, and loss given default, is based on historical data
adjusted by forward looking information as described above.
As for the exposure at default, for financial assets, this is represented by the assets’ gross carrying amount at the reporting date,
together with any additional amounts expected to be drawn down in the future by the default date determined based on historical
trend, the Group’s understanding of the specific future financing needs of the debtors, and other relevant forward looking
information.
For financial assets, the expected credit loss is estimated as the difference between all contractual cash flows that are due to the
Group in accordance with the contract, and all the cash flows that the Group expects to receive, discounted at the original effective
interest rate.
If the Group has measured the loss allowance for a financial instrument at an amount equal to lifetime ECL in the previous
reporting period, but determines at the current reporting date that the conditions for lifetime ECL are no longer met, the Group
measures the loss allowance at an amount equal to 12 month ECL at the current reporting date, except for assets for which the
simplified approach was used.
Derecognition of financial assets
The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it
transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group
neither transfers nor retains substantially all the risks and rewards of ownership, and continues to control the transferred asset,
the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group
retains substantially all of the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the
financial asset and also recognises a collaterialised borrowing for the proceeds received.
On derecognition of a financial asset measured at amortised cost, the difference between the asset’s carrying amount and the sum
of the consideration received and receivables, is recognised in the profit or loss.
Financial liabilities
All financial liabilities are measured subsequently at amortised cost, using the effective interest method or at FVTPL.
However, financial liabilities that arise when a transfer of a financial asset does not qualify for derecognition, or when the
continuing involvement approach applies, are measured in accordance with the specific accounting policies set out below.
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143
JADESTONE ENERGY 2021 ANNUAL REPORT
SIGNIFICANT ACCOUNTING POLICIES AND EXPLANATION NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
Financial liabilities at FVTPL
Financial liabilities are classified as at FVTPL when the financial liability is (i) contingent consideration of an acquirer in a business
combination, (ii) held for trading, or (iii) designated as at FVTPL.
A financial liability other than a contingent consideration of an acquirer in a business combination may be designated as at FVTPL
upon initial recognition if:
l Such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or
l The financial liability forms part of a group of financial assets or financial liabilities or both, which is managed and its
performance is evaluated on a fair value basis, in accordance with the Group’s documented risk management or investment
strategy, and information about the grouping is provided internally on that basis; or
l
It forms part of a contract containing one or more embedded derivatives, and IFRS 9 permits the entire combined contract to be
designated as at FVTPL.
Financial liabilities classified as at FVTPL are measured at fair value, with any gains or losses arising on changes in fair value
recognised in profit or loss to the extent that they are not part of a designated hedging relationship (see hedge accounting policy).
The net gain or loss recognised in profit or loss incorporates any interest paid on the financial liability and is included in either
“other financial gains” (Note 16) or “finance costs” (Note 15) line item in profit or loss.
Financial liabilities measured subsequently at amortised cost
Other financial liabilities are measured subsequently at amortised cost, using the effective interest method.
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense
over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all
fees paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts)
through the expected life of the financial liability, or (where appropriate) a shorter period, to the amortised cost of a financial
liability.
Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or they expire.
The difference between the carrying amount of the financial liability derecognised, and the consideration paid and payable, is
recognised in profit or loss.
Equity instruments
Ordinary shares issued by the Company are classified as equity and recorded at the fair value of the proceeds received.
Derivative financial instruments
The Group enters into a variety of derivative financial instruments to manage its exposure to commodity price and foreign
exchange risks.
Derivatives are initially recognised at fair value on the date the contract is entered into, and are subsequently remeasured to
fair value as at each reporting date. The resulting gain or loss is recognised in profit or loss immediately, unless the derivative
is designated and effective as a hedging instrument, in which case the timing of the recognition in profit or loss depends on the
nature of the hedge relationship.
A derivative with a positive fair value is recognised as a financial asset whereas a derivative with a negative fair value is recognised
as a financial liability. Derivatives are not offset in the financial statements unless the Group has both a legally enforceable right
and intention to offset. A derivative is presented as a non-current asset or a non-current liability if the remaining maturity of the
instrument is more than 12 months and it is not due to be realised or settled within 12 months. Other derivatives are presented as
current assets or current liabilities.
Hedge accounting
Those hedges which hedge exposure to the variability in cash flows that is either attributable to a particular risk associated with
a recognised asset or liability, or a component of a recognised asset or liability, or a highly probable forecasted transaction, are
classified as cash flow hedges.
At the inception of the hedge relationship, the Group documents the relationship between the hedging instrument and the hedged
item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the
inception of the hedge and on an ongoing basis, the Group documents whether the hedging instrument is effective in offsetting
changes in fair values or cash flows of the hedged item attributable to the hedged risk, which is when the hedging relationships
meet all of the following hedge effectiveness requirements:
l There is an economic relationship between the hedged item and the hedging instrument;
l The effect of credit risk does not dominate the value changes that result from that economic relationship; and
l The hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that the Group
actually hedges and the quantity of the hedging instrument that the Group actually uses to hedge that quantity of hedged item.
144
If a hedging relationship ceases to meet the hedge effectiveness requirement relating to the hedge ratio, but the risk management
objective for that designated hedging relationship remains the same, the Group adjusts the hedge ratio of the hedging relationship
(i.e., rebalances the hedge), so that it meets the qualifying criteria again.
The Group designates the full change in the fair value of a forward contract (i.e., including the forward elements) as the hedging
instrument, for all of its hedging relationships involving forward contracts. The Group designates only the intrinsic value of option
contracts as a hedged item, i.e., excluding the time value of the option. The changes in the fair value of the aligned time value of
the option are recognised in other comprehensive income and accumulated in the cost of hedging reserve. If the hedged item is
transaction related, the time value is reclassified to profit or loss when the hedged item affects profit or loss. If the hedged item is
time period related, then the amount accumulated in the cost of hedging reserve is reclassified to profit or loss on a rational basis;
the Group applies straight line amortisation. Those reclassified amounts are recognised in profit or loss in the same line as the
hedged item. If the hedged item is a non financial item, then the amount accumulated in the cost of hedging reserve is removed
directly from equity and included in the initial carrying amount of the recognised non financial item. Furthermore, if the Group
expects that some or all of the loss accumulated in cost of hedging reserve will not be recovered in the future, that amount is
immediately reclassified to profit or loss.
Note 40 sets out details of the fair values of the derivative instruments used for hedging purposes.
Movements in the hedging reserve in equity are detailed in Note 33.
Cash flow hedges
The effective portion of changes in the fair value of derivatives and other qualifying hedging instruments that are designated and
qualify as cash flow hedges is recognised in other comprehensive income and accumulated under the heading of cash flow hedging
reserve, limited to the cumulative change in fair value of the hedged item from inception of the hedge. The gain or loss relating to
the ineffective portion is recognised immediately in profit or loss in either “other financial gains” (Note 16) or “finance costs”
(Note 15) line item.
Amounts previously recognised in other comprehensive income and accumulated in equity are reclassified to profit or loss in the
periods when the hedged item affects profit or loss, in the same line as the recognised hedged item. If the Group expects that
some or all of the loss accumulated in the cash flow hedging reserve will not be recovered in the future, that amount is immediately
reclassified to profit or loss.
The Group discontinues hedge accounting only when the hedging relationship (or a part thereof) ceases to meet the qualifying
criteria (after rebalancing, if applicable). This includes instances when the hedging instrument expires or is sold, terminated or
exercised. The discontinuation is accounted for prospectively. Any gain or loss recognised in other comprehensive income and
accumulated in cash flow hedge reserve, at that time, remains in equity and is reclassified to profit or loss when the forecast
transaction occurs. When a forecast transaction is no longer expected to occur, the gain or loss accumulated in cash flow hedge
reserve is reclassified immediately to profit or loss.
Fair value estimation of financial assets and liabilities
The fair value of current financial assets and liabilities carried at amortised cost, approximate their carrying amounts, as the effect
of discounting is immaterial.
Share-based payments
Share-based incentive arrangements are provided to employees, allowing them to acquire shares of the Company.
The fair value of equity-settled options granted is recognised as an employee expense, with a corresponding increase in equity.
Equity-settled share options are valued at the date of grant using the Black-Scholes pricing model, and are charged to operating
costs over the vesting period of the award. The charge is modified to take account of options granted to employees who leave the
Group during the vesting period and forfeit their rights to the share options. In the case of market-related performance conditions,
the Group revises its estimates of the number of equity instruments expected to vest at the end of the reporting period. The impact
of the revision of the original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised
estimate, with a corresponding adjustment to the share options reserve.
Equity-settled share-based payment transactions with parties other than employees are measured at the fair value of goods or
services received, except where that fair value cannot be estimated reliably, in which case they are measured at the fair value of the
equity instruments granted, measured at the date at which the entity obtains the goods or the counterparty renders the service.
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145
JADESTONE ENERGY 2021 ANNUAL REPORT
SIGNIFICANT ACCOUNTING POLICIES AND EXPLANATION NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
Leases
The Group as lessee
The Group assesses whether a contract is or contains a lease, at inception of the contract. The Group recognises a right-of-use
asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short-term
leases (defined as leases with a lease term of 12 months or less) and leases of low value assets (such as personal computers, small
items of office furniture and telephones). For these leases, the Group recognises the lease payments as an operating expense on
a straight-line basis over the term of the lease, unless another systematic basis is more representative of the time pattern in which
economic benefits from the leased assets are consumed.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement
date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the lessee uses its estimated
incremental borrowing rate.
Lease payments included in the measurement of the lease liability comprise fixed lease payments (including in substance fixed
payments).
The lease liability is presented as a separate line in the consolidated statement of financial position.
The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the
effective interest method), and by reducing the carrying amount to reflect the lease payments made.
The Group remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) whenever:
l The lease term has changed or there is a significant event or change in circumstances resulting in a change in the assessment of
exercise of a purchase option, in which case the lease liability is remeasured by discounting the revised lease payments using a
revised discount rate;
l The lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual
value, in which case the lease liability is remeasured by discounting the revised lease payments using an unchanged discount
rate (unless the lease payments change is due to a change in a floating interest rate, in which case a revised discount rate is
used); or
l A lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease liability
is remeasured based on the lease term of the modified lease by discounting the revised lease payments using a revised
discount rate at the effective date of the modification.
During the year, the Group did not make any such adjustments. In 2020, the Group had revalued certain lease liabilities to nil
following the termination of those leases.
The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the
commencement day, less any lease incentives received and any initial direct costs. They are subsequently measured at cost less
accumulated depreciation and impairment losses.
Whenever the Group incurs an obligation for costs to dismantle and remove a leased asset, restore the site on which it is located,
or restore the underlying asset to the condition required by the terms and conditions of the lease, a provision is recognised and
measured under IAS 37. To the extent that the costs relate to a right-of-use asset, the costs are included in the related right-of-use
asset, unless those costs are incurred to produce inventories.
Right-of-use assets are depreciated over the shorter period of the lease term and the useful life of the underlying asset. If a lease
transfers ownership of the underlying asset, or the cost of the right-of-use asset reflects that the Group expects to exercise a
purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset. The depreciation starts at
the commencement date of the lease.
Right-of-use assets are presented as a separate line in the consolidated statement of financial position.
The Group applies IAS 36 to determine whether a right-of-use asset is impaired and accounts for any identified impairment loss as
described in the “Impairment of Assets” policy.
As a practical expedient, IFRS 16 permits a lessee not to separate non-lease components, and instead account for any lease and
associated non-lease components as a single arrangement. The Group has not used this practical expedient. For contracts that
contain a lease component and one or more additional lease or non-lease components, the Group allocates the consideration
in the contract to each lease component on the basis of the relative standalone price of the lease component and the aggregate
stand-alone price of the non-lease components.
146
Provisions
Provisions are recognised when the Group has a present obligation, legal or constructive, as a result of a past event, and it is
probable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the
obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end
of the reporting period, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured
using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows,
and where the effect of the time value of money is material. The provisions held by the Group are asset restoration obligations,
contingent payments, employee benefits and incentive scheme, as set out in Note 35.
Retirement benefit obligations
Payments to defined contribution retirement benefit plans are charged as an expense as and when employees have tendered
the services entitling them to the contributions. Payments made to state managed retirement benefit schemes, such as Malaysia’s
Employees Provident Fund, are dealt with as payments to defined contribution plans where the Group’s obligations under the
plans are equivalent to those arising in a defined contribution retirement benefit plan. The Group does not have any defined
benefit plans.
Revenue
Revenue from contracts with customers is recognised in the profit or loss when performance obligations are considered met, which
is when control of the hydrocarbons are transferred to the customer.
Revenue from the production of oil and gas, in which the Group has an interest with other producers, is recognised based on the
Group’s working interest and the terms of the relevant production sharing contracts.
Liquids production revenue is recognised when the Group gives up control of the unit of production at the delivery point agreed
under the terms of the sale contract. This generally occurs when the product is physically transferred into a vessel, pipe or other
delivery mechanism. The amount of production revenue recognised is based on the agreed transaction price and volumes
delivered. In line with the aforementioned, revenue is recognised at a point in time when deliveries of the liquids are transferred to
customers.
Gas production revenue is meter measured based on the hydrocarbon volumes delivered. The volumes delivered over a calendar
month are invoiced based on monthly meter readings. The price is either fixed (gas) or linked to an agreed benchmark (high sulphur
fuel oil) in advance. This methodology is considered appropriate as it is normal business practice under such arrangements. In line
with the aforementioned, revenue is recognised at a point in time when deliveries of the gas are transferred to the customer.
A receivable is recognised once transfer has occurred, as this represents the point in time at which the right to consideration
becomes unconditional, and only the passage of time is required before the payment is due.
Under/Overlift
Offtake arrangements for oil and gas produced in certain of the Group’s jointly owned operations may result in the Group not
receiving and selling its precise share of the overall production in a period. The resulting imbalance between the Group’s cumulative
entitlement and share of cumulative production less stock gives rise to an underlift or overlift.
An overlift liability is recorded as a current liability in the statement of financial position at the prevailing market price, to represent
a provision for production costs attributable to the volumes sold in excess of entitlement. An underlift asset is recorded as a current
receivable in the statement of financial position at the prevailing market price, to represent a right to additional inventory based on
its entitlement. Movements during an accounting period are adjusted through production costs such that gross profit is recognised
on an entitlement basis.
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147
JADESTONE ENERGY 2021 ANNUAL REPORT
SIGNIFICANT ACCOUNTING POLICIES AND EXPLANATION NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
Income tax
Income tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the statement of
profit or loss and other comprehensive income, because it excludes items of income or expense that are taxable or deductible in
other years and it further excludes items that are not taxable or tax deductible. The Group’s liability for current tax is calculated
using tax rates (and tax laws) that have been enacted or substantively enacted, in countries where the Company and its subsidiaries
operate, by the end of the reporting period.
Petroleum resource rent tax (PRRT)
PRRT incurred in Australia is considered for accounting purposes to be a tax based on income. Accordingly, current and deferred
PRRT expense is measured and disclosed on the same basis as income tax.
PRRT is calculated at the rate of 40% of sales revenues less certain permitted deductions and is tax deductible for income tax
purposes. In calculating the deferred tax in relation to PRRT, the PRRT rate is combined with Australian corporate tax rate of 30% to
derive a combined effective tax rate of 28%.
Malaysia Petroleum Income Tax (PITA)
PITA incurred in Malaysia is considered for accounting purposes to be a tax based on income derived from petroleum operations.
Accordingly, current and deferred PITA expense is measured and disclosed on the same basis as income tax.
PITA is calculated at the rate of 38% of sales revenues less certain permitted deductions and deferred tax is calculated at the same
rate.
Deferred tax
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial
statements, and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally
recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable
profits will be available, against which deductible temporary differences can be utilised. Such deferred tax assets and liabilities are
not utilised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of
other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, except where the
Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in
the foreseeable future.
Deferred tax assets arising from deductible temporary differences associated with such investments and interests, are only
recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the
temporary differences, and they are expected to reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no
longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled, or the asset realised,
based on the tax rates (and tax laws) that have been enacted or substantively enacted, by the end of the reporting period. The
measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the
Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax
liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax
assets and liabilities on a net basis.
Current and deferred tax for the year
Current and deferred tax are recognised as an expense or income in profit or loss, except when they relate to items credited or
debited outside profit or loss (either in other comprehensive income or directly in equity), in which case the tax is also recognised
outside profit or loss (either in other comprehensive income or directly in equity, respectively).
148
Other taxes
Revenue, expenses, assets, and liabilities are recognised net of the amount of goods and services tax (“GST”) or value added tax
(“VAT”) except:
l When the GST/VAT incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case
the GST/VAT is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and
l Receivables and payables, which are stated with the amount of GST/VAT included.
The net amount of GST/VAT recoverable from, or payable to, the taxation authority is included as part of receivables or payables in
the consolidated statement of financial position.
Cash and bank balances
Cash and bank balances comprise cash in hand and at bank, and other short-term deposits held by the Group with maturities of
less than three months. Restricted cash in the current year is presented as cash and cash equivalents in the consolidated statement
of financial position and disclosed in Note 29.
4
CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
Climate change and energy transition
The Group recognises that the energy transition is likely to impact the demand for oil and gas, thus affecting the future prices of
these commodities and the timing of decommissioning activities. This in turn may affect the recoverable amount of the Group’s
oil and gas properties and intangible exploration assets, and the carrying amount of the asset retirement obligations provision.
The Group acknowledges that there are a range of possible energy transition scenarios that may indicate different outcomes for
oil prices. There are inherent limitations with scenario analysis and it is difficult to predict which, if any, of the scenarios might
eventuate.
The Group has assessed the potential impacts of climate change and the transition to a lower carbon economy in preparing the
consolidated financial statements, including the Group’s current assumptions relating to demand for oil and gas and their impact
on the Group’s long-term price assumptions, and also taking into consideration of the forecasted long-term prices and demand for
oil and gas under the Paris aligned scenarios. See the key estimates on pages 142 and 143 for reserves estimates and impairment
of oil and gas properties.
While the pace of transition to a lower carbon economy is uncertain, oil and gas demand is expected to remain a key element of the
energy mix in the foreseeable future based on stated policies, commitments and announced pledges to reduce emissions.
Therefore, given the useful lives of the Group’s current portfolio of oil and gas assets of up to 2040, management does not expect
the potential decline on oil prices as a result of climate change and the transition to a lower carbon economy will have a material
adverse change to the operating cash flows of the Group during the lives of those assets and thus the carrying amounts of the
Group’s assets and liabilities will not be significantly impacted.
Management will continue to review price assumptions as the energy transition progresses and will take into consideration in the
future impairment assessments.
Critical accounting judgments
In the application of the Group’s accounting policies, management is required to make judgments, estimates and assumptions
about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated
assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from
these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised
in the period in which the estimate is revised, if the revision affects only that period, or in the period of the revision and future
periods, if the revision affects both current and future periods.
The following are the critical judgements, apart from those involving estimates (see below) that management has made in the
process of applying the Group’s accounting policies that have the most significant effect on the amounts recognised in the financial
statements.
l Acquisitions, divestitures and/or assignment of interests
The Group accounts for acquisitions and divestitures by considering if the acquired or transferred interest relates to that of an
asset, or of a business as defined in IFRS 3 Business Combinations. Accordingly, the Group considers if there is the existence of
business elements (e.g., inputs and substantive processes), or a group of assets that includes inputs and substantial processes
that together significantly contribute to the ability to create outputs and providing a return to investors or other economic
benefits. The justifications for this assessment on both acquisition of PenMal Assets and Lemang PSC have been set out in
Notes 19 and Note 20, respectively.
149
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JADESTONE ENERGY 2021 ANNUAL REPORT
SIGNIFICANT ACCOUNTING POLICIES AND EXPLANATION NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period,
that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial
year, are discussed below.
a) Deferred taxes
The Group recognises the net future economic benefit of deferred tax assets to the extent that it is probable that the deductible
temporary differences will reverse in the foreseeable future and the carry forward of unutilised tax credits and unutilised tax
losses can be utilised accordingly. Assessing the recoverability of deferred income tax, PRRT and PITA assets require the Group
to make significant estimates related to expectations of future taxable income. Estimates of future taxable income are based on
forecast cash flows from operations and the application of existing tax laws in each jurisdiction. To the extent that future cash
flows and taxable income differ significantly from estimates, the ability of the Group to realise the net deferred tax assets as
recorded in the statement of financial position, could be impacted.
The carrying amount of the Group’s deferred tax assets are disclosed in Note 26 to the financial statements.
Sensitivity analysis
Sensitivities have been run on the oil price assumption, with a 10% change being considered a reasonable possible change for
the purposes of sensitivity analysis. A 10% decrease/increase in oil price would not result in a change in the deferred tax asset
recognised by the Group due to the unrecognised deferred tax assets being associated with the unwinding of provision of
asset retirement obligations in the future during the decommissioning period. The Group is not expected to be in taxable profit
position during the decommissioning period to enable it to utilise the unrecognised deferred tax assets at year end.
b) Reserves estimates
The Group’s estimated reserves are management assessments, and take into consideration audits performed by an
independent third party, which includes various assumptions, interpretations and assessments. These include assumptions
regarding commodity prices, exchange rates, future production, transportation costs, and interpretations of geological and
geophysical models to make assessments of the quality of reservoirs and the anticipated recoveries. Changes in reported
reserves can impact asset carrying amounts, the provision for restoration and the recognition of deferred tax assets, due to
changes in expected future cash flows. Reserves are integral to the amount of depreciation, depletion and amortisation charged
to the statement of profit or loss and other comprehensive income, and the calculation of inventory. Based on the analysis
performed, management does not expect a five percent increase/decrease in the reserve estimates would significantly impact
the carrying amounts of the assets and liabilities of the Group at year end.
c) Impairment of oil and gas properties and intangible exploration assets
The Group undertakes a regular review of asset carrying amounts to determine whether there is any indication of impairment.
In the impairment assessment of intangible exploration assets, the Group takes into consideration the technical feasibility and
commercial viability of extracting a mineral resource and whether there is any adverse information that will affect the final
investment decision.
For oil and gas properties, management assesses recoverable amounts using the FVLCOD approach. The post-tax estimated
future cash flows are prepared based on estimated reserves, future production profiles, future hydrocarbon price assumptions
and costs. The future hydrocarbon price assumptions used are highly judgemental and may be subject to increased uncertainty
given climate change and the global energy transition. Management further takes into consideration the impact of climate
change on estimated future commodity prices with the application of the Paris aligned price assumptions.
The carrying amounts of intangible exploration assets, oil and gas properties and right-of-use assets are disclosed in Notes 21,
22 and 24, respectively.
Sensitivity analysis
Management assessed the impact of a change in cash flows in impairment testing arising from a 10% reduction in price
assumptions used at year end, sourced from independent third party, ERCE. The forecasted price assumptions are US$75/
bbl in 2022, US$70/bbl in 2023 and US$66/bbl from 2024 onwards. Based on the analysis performed, management concluded
that a price reduction in isolation under the various scenarios would not impact the carrying amount of the Group’s oil and gas
properties. Management also assessed the impact of a change in cash flows in impairment testing arising from the application
of the various Paris aligned price assumptions, being Announced Pledges Scenario (II), Net Zero Emissions by 2050 Scenario
(central) and Net Zero Emissions by 2050 Scenario (APD) as disclosed on pages 35 to 38. The oil price under the various Paris
aligned price assumptions are as follow:
2022
US$/bbl
2023
US$/bbl
2024
US$/bbl
2025
US$/bbl
2026
US$/bbl
2027 onwards
US$/bbl
Announced Pledges Scenario (II)
Net Zero Emissions by 2050 Scenario (central)
Net Zero Emissions by 2050 Scenario (APD)
71.7
67.8
71.3
70.9
65.3
70.4
64.9
57.5
64.2
59.9
50.7
58.9
56.3
46.5
54.5
63.1
42.9
51.7
150
The oil price sensitivity analysis above does not, however, represent management’s best estimate of any impairments that might
be recognised as they do not fully incorporate consequential changes that may arise, such as reductions in costs and changes
to business plans, phasing of development, levels of reserves and resources, and production volumes. As an example, as price
reduces, it is likely that costs would decrease across the industry. The oil price sensitivity analysis therefore does not reflect a
linear relationship between price and value that can be extrapolated.
Management also tested the impact of a one percent change in the discount rate used of 10% for impairment testing of oil and
gas properties, and concluded that a five percent increase/decrease in the discount rate will not result in impairment as the net
present value of either outcome is above the carrying amount of the Group’s oil and gas properties at year end.
d) Asset restoration obligations
The Group estimates the future removal and restoration costs of oil and gas production facilities, wells, pipelines and related
assets at the time of installation of the assets and reviewed subsequently at the end of each reporting period. In most instances
the removal of these assets will occur many years in the future.
The estimate of future removal costs is made considering relevant legislation and industry practice and requires management
to make judgments regarding the removal date, the extent of restoration activities required and future costs and removal
technologies.
The carrying amounts of the Group’s asset restoration obligations is disclosed in Note 35 to the financial statements.
Sensitivity analysis
Sensitivities have been run on the discount rate assumption, with a one percentage change being considered a reasonable
possible change for the purposes of sensitivity analysis. A one percentage reduction in discount rate would increase the liability
by US$41.9 million and a one percentage increase in discount rate would decrease the liability by US$36.4 million. A 10%
increase in current estimated costs would increase the liability by US$35.8 million and a 10% decrease in current estimated
costs would decrease the liability by US$35.3 million. A one year deferral to the estimated decommissioning date would
decrease the liability by US$1.1 million and an acceleration of one year to the estimated decommissioning date would increase
the liability by US$0.2 million.
5
REVENUE
The Group presently derives its revenue from contracts with customers for the sale of oil and gas products.
In line with the revenue accounting policies set out in Note 3, all revenue is recognised at a point in time.
Liquids revenue
Hedging income
Gas revenue
2021
USD’000
339,210
-
339,210
984
340,194
2020
USD’000
186,572
31,366
217,938
-
217,938
The Group entered into Australian commodity swap contracts hedging approximately 30% of its planned production for the period
January to June 2021. The commodity swap contracts were measured at FVTPL, as opposed to hedge accounting, in part because
the swap contracts cover a short time span. The swap contracts incurred a loss of US$4.6 million during the year which is recorded
as other expense (Note 11).
The hedging income in 2020 arose from the Group’s capped swap contracts from October 2018 to September 2020, by hedging 50%
of its planned production volumes during the contracts’ duration.
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151
JADESTONE ENERGY 2021 ANNUAL REPORT
SIGNIFICANT ACCOUNTING POLICIES AND EXPLANATION NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
6
PRODUCTION COSTS
Operating costs
Workovers
Logistics
Repairs and maintenance
Tariffs and transportation costs
Underlift, overlift and crude inventories movement
2021
USD’000
61,630
67,006
20,212
45,186
2,809
9,680
2020
USD’000
45,155
21,686
18,853
22,450
-
(2,806)
206,523
105,338
Operating costs predominately consists of offshore manpower costs of US$26.8 million (2020: US$20.7 million), chemical, services,
supplies and others of US$20.3 million (2020: US$20.3 million), Malaysian supplementary payments of US$8.3 million (2020: nil),
insurance of US$2.7 million (2020: US$3.0 million) and non-operated assets production costs of US$1.2 million (2020: nil).
The Malaysian supplementary payments are required under the terms of PSCs based on the Group’s entitlement to profit from
oil and gas. It is payable at 70% of the excess revenue over the base price of the sale of oil as set out under the terms of PSCs.
The payments are made to PETRONAS.
Workovers in 2021 included the Montara subsea workovers for the Skua 10 and Skua 11 wells of US$47.2 million, net of insurance
claim receivable of US$10.3 million on the well control claim for the Skua 11 well workovers.
Repairs and maintenance in 2021 include a once-in-every-three-year subsea flowline inspection and Swift North subsea control
module change out at Montara and a once-in-five-year changeout of the under-buoy hose at Stag.
The operating costs in 2020 were net of US$0.6 million received during the year from the Australian Government’s JobKeeper
scheme in respect of COVID-19 grants supporting certain of the Group’s Australian offshore workforce.
7
DEPLETION, DEPRECIATION AND AMORTISATION (“DD&A”)
Depletion and amortisation (Note 22):
Depreciation of:
Plant and equipment (Note 23)
Right-of-use assets (Note 24)
Crude inventories movement
2021
USD’000
2020
USD’000
62,586
508
11,191
5,930
80,215
68,005
601
16,228
(192)
84,642
The depreciation of right-of-use assets in 2021 includes US$1.5 million (2020: nil) associated with the Skua 10 and 11 workovers.
The crude inventories movement represents additional/reversal of depletion expense recognised during the year based on the net
movement of crude inventories at year end against beginning of the year. For the purpose of the consolidated statement of cash
flows, this amount has been excluded from the movement in working capital.
Crude inventories movement represents the year on year differential of the Group’s on hand closing inventory. The depletion
charge is calculated based on units of production and adjusted based on the net movement of crude inventories at year end
against beginning of the year. There were 274,103 bbls at the end of 2021 compared to 601,999 bbls at the end of 2020 reflecting
an additional depletion charge of US$5.9 million.
152
8
ADMINISTRATIVE STAFF COSTS
Wages, salaries and fees
Staff benefits in kind
Share-based compensation
2021
USD’000
21,066
3,051
951
25,068
2020
USD’000
17,520
3,255
1,128
21,903
The compensation of key management personnel is included in the above and disclosed separately in Note 45.
Wages, salaries and fees in 2020 were net of US$0.5 million received during the year from the Australian Government’s JobKeeper
scheme in respect of certain of the Group’s Australian onshore personnel.
9
STAFF NUMBERS AND COSTS
The average number of employees employed by the Group during the year was 278 (2020: 210), consisting of 153 onshore
employees (2020: 117) and 125 offshore employees (2020: 93). Staff costs are split between production costs (Note 6) for offshore
personnel and administrative staff costs (Note 8) for onshore personnel.
Their aggregate remuneration comprised:
Wages, salaries and fees
Social security costs
Defined contribution pension costs
Share-based compensation
Contractors and consultants costs
2021
USD’000
2020
USD’000
39,158
186
3,177
951
43,472
8,363
51,835
35,434
206
2,594
1,128
39,362
3,191
42,553
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153
JADESTONE ENERGY 2021 ANNUAL REPORT
SIGNIFICANT ACCOUNTING POLICIES AND EXPLANATION NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
10
DIRECTORS’ REMUNERATION AND TRANSACTIONS
Directors’ remuneration
Salaries, fees, bonuses and benefits in kind
Gains on exercise of options
Amounts receivable under long term incentive plans
Money purchase pension contributions
Remuneration of the highest paid director:
Salaries, fees, bonuses and benefits in kind
Gains on exercise of options
Amounts receivable under long term incentive plans
Money purchase pension contributions
The number of directors who:
Are members of a defined benefit pension scheme
Are members of a money purchase pension scheme
Exercised options over shares in the Company
Had awards receivable in the form of shares under a long-term incentive scheme
2021
USD’000
2020
USD’000
3,093
1,259
278
96
4,726
1,516
481
302
63
2,362
2,823
-
493
72
3,388
1,472
-
282
44
1,798
Number
Number
-
2
2
2
-
2
-
8
In 2021, the Non-Executive Directors were not granted any options/shares under the Company’s long term incentive plans,
compared to 2020 when all Directors were granted share options.
11
OTHER EXPENSES
Corporate costs
Assets written off
Loss on valuation of oil derivatives
Provision for slow moving inventories
Net foreign exchange loss
Rig contract deferral costs
Exploration expenses
Other expenses
2021
USD’000
2020
USD’000
11,487
5,332
4,633
2,624
950
-
-
1,155
26,181
16,642
173
475
143
2,623
3,000
972
2,890
26,918
Corporate costs in 2021 includes business development costs of US$3.2 million, professional fees in relation to internal
reorganisation of US$1.1 million and project transition costs of US$0.9 million (2020: US$1.0 million). Corporate costs in 2020
included US$9.1 million of litigation costs incurred in relation to the SC56 and Block 05-1 PSC.
Loss on valuation of oil derivatives arose from the Australian commodity swap contracts entered for the period January to June
2021.
Assets written off in 2021 includes the written off of intangible exploration assets of US$5.3 million previously capitalised as they
are not expected to generate future economic benefits.
For the purpose of the consolidated statement of cash flows, net foreign exchange loss in 2020 included net unrealised loss of
US$1.5 million.
Rig contract deferral costs in 2020 of US$3.0 million arose from the decision to defer the Australian 2020 drilling campaign in
response to the impact of COVID-19.
154
12
AUDITORS’ REMUNERATION
The analysis of the auditor’s remuneration is as follows:
Fees payable to the Company’s auditor for the audit of the parent company and
Group’s consolidated financial statements
Audit fees of the subsidiaries
2021
USD’000
2020
USD’000
383
412
795
208
174
382
No fees were paid to the Group’s auditors for non-audit services for either the Group or the Company in 2020 or 2021.
The increase in fees relates mainly to the internal reorganisation in April 2021 which required the Group auditors to be United
Kingdom rather than Singapore based.
13
IMPAIRMENT OF ASSETS
Impairment of intangible exploration assets (Note 21)
2021
USD’000
-
2020
USD’000
50,455
The impairment expense of US$50.5 million in 2020 related to management’s decision to voluntarily relinquish SC56, a deepwater
new basin entry exploration block acquired by the previous management of the Group. The effective date of relinquishment was 21
December 2020. During the year, the Group paid an exit fee of US$1.5 million to the Philippines Department of Energy and formally
exited the block. A provision was made in relation to the exit fee in 2020 which reversed out in 2021 after the payment was made.
14
OTHER INCOME
Net foreign exchange gain
Interest income
Litigation income
Reversal of Stag FSO provision
Fair value gain on foreign exchange derivatives
Gain from termination of right-of-use asset
Other income
2021
USD’000
2,525
80
-
-
-
-
5,077
7,682
2020
USD’000
48
257
11,075
5,047
3,784
1,382
4,783
26,376
Other income includes rental income from a helicopter rental contract (a right-of-use asset) to a third party of US$4.5 million (2020:
US$3.6 million). Other income in 2020 also consisted of a settlement sum of US$1.0 million received from Teikoku Oil (Con Son) Co.
Ltd, a subsidiary of Inpex Corporation, to resolve the dispute between both parties over the Block 05-1 PSC.
For the purpose of the consolidated statement of cash flows, net foreign exchange gain in current year includes net unrealised gain
of US$1.8 million.
Litigation income in 2020 represented the arbitration award granted by Singapore International Arbitration Centre in favour to the
Group in response to a breach of the SC56 farm out agreement by Total E&P Philippines BV.
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155
JADESTONE ENERGY 2021 ANNUAL REPORT
SIGNIFICANT ACCOUNTING POLICIES AND EXPLANATION NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
15
FINANCE COSTS
Interest expense
Accretion expense for asset retirement obligations (Note 35)
Interest expense on lease liabilities
Changes in provisions:
Lemang PSC contingent payments
PenMal Assets contingent payment
Accretion expense for Stag FSO provision
Other finance costs
2021
USD’000
2020
USD’000
150
5,920
1,222
314
124
-
1,345
9,075
2,366
6,312
3,341
-
-
51
585
12,655
Interest expense refers to the effective interest charge on the reserve based lending facility.
The fair value of the contingent payments payable to Mandala Energy Lemang Pte Ltd for the Lemang PSC acquisition were
revalued to US$4.8 million as at 31 December 2021 (2020: US$4.4 million), reflecting the effect of the time value of money for the
trigger events as disclosed in Note 20.
The consideration for the PenMal Assets included two separate contingent payments for US$3.0 million each if the average Dated
Brent remained equal or above US$65/bbl in 2021 and US$70/bbl in 2022. The contingent payments had a fair value of US$4.3
million (see Note 19.3) on the date of acquisition. At year end, the contingent payments were revalued at US$4.4 million, resulting
in an increase in the provision of US$0.1 million.
Other finance costs include accretion expense of US$1.2 million (2020: US$0.5 million) generated from an Australian Taxation
Office (“ATO”) 2019 repayment plan of US$43.3 million to support companies impacted by COVID-19. The repayment schedule was
between December 2020 and June 2022 but the plan was fully repaid in May 2022.
16
OTHER FINANCIAL GAINS
Change in provision:
Montara contingent payments
Accretion income from non-current Lemang PSC VAT receivables
2021
USD’000
2020
USD’000
-
266
266
359
-
359
The accretion income represents the effect of the time value of money on the non-current Lemang PSC VAT receivables. The fair
value of the VAT receivables were revalued to US$4.7 million as at 31 December 2021 (2020: US$4.4 million).
The change in provision represents the change in the fair value of the Montara contingent payments. The Group derecognised
the Montara 2020 contingent payment in 2020 as the trigger event to crystallise this payment did not arise. The fair values of the
remaining Montara contingent payments have been valued at US$ nil, as the possibility of realisation is remote.
156
17
INCOME TAX EXPENSE
Current tax
Corporate tax (credit)/charge
Overprovision in prior year
Australian petroleum resource rent tax (“PRRT”)
Malaysian petroleum income tax (“PITA”)
Deferred tax
Corporate tax
PRRT
PITA
2021
USD’000
2020
USD’000
(486)
(270)
(756)
(1,374)
9,469
7,339
5,247
3,371
(1,135)
7,483
14,822
11,020
(1,030)
9,990
1,678
-
11,668
(4,026)
(4,702)
-
(8,728)
2,940
Jadestone Energy Inc., the former ultimate holding company, was a resident in the Province of British Columbia and paid no
Canadian tax. The Group has no operating business in Canada. Following the completion of the internal organisation (Note 2),
Jadestone Energy plc became the ultimate holding company on 23 April 2021. Jadestone Energy plc’s tax domicile is Singapore and
is subjected to Singapore’s domestic corporate tax rate of 17%. Subsidiaries are resident for tax purposes in the territories in which
they operate.
The Australian corporate income tax rate is applied at 30% of Australian corporate taxable income. PRRT is calculated at 40% of
sales revenue less certain permitted deductions and is tax deductible for Australian corporate income tax purposes.
The Malaysian corporate income tax is applied at 24% on non-petroleum taxable income. PITA is calculated at 38% of sales revenue
less certain permitted deductions and is tax deductible for Malaysian corporate income tax purposes.
During the year, Stag recorded a net PRRT expense of US$2.0 million (2020: PRRT credit of US$3.0 million), after utilising PRRT
carried forward credits of US$4.7 million from 2020.
As at year end, Montara has US$3.4 billion (2020: US$3.3 billion) of unutilised PRRT carried forward credits. Based on management's
latest forecasts, the augmentation on historic accumulated PRRT net losses will more than offset PRRT that would otherwise arise
on future PRRT taxable profits. Accordingly, Montara is not anticipated to incur any PRRT expense.
PenMal Assets recorded PITA expense of US$8.3 million since the completion of acquisition on 1 August 2021.
The tax recoverable of US$9.4 million as at year end represents PITA receivable of which US$5.1 million arose from pre-economic
effective date of the PenMal Assets acquisition which will be payable to SapuraOMV following the receipt from tax refund. The
Group has recognised the payable to SapuraOMV as at year end.
The tax expense on the Group’s 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:
Profit/(Loss) before tax
Tax calculated at the domestic tax rates applicable to the profit/loss in the respective
countries (Australia 30% & 40%, Malaysia 24% & 38%, New Zealand 28%, Canada 27%
and Singapore 17%)
Effects of non-deductible expenses
Effect of PRRT/PITA tax expense
Deferred PRRT/PITA tax expense/(credit)
Effect of unutilised tax losses recognised as deferred tax asset
Overprovision in prior year
Tax expense for the year
2021
USD’000
1,080
3,948
3,803
8,095
2,238
(2,992)
(270)
14,822
2020
USD’000
(57,238)
(9,198)
16,192
1,678
(4,702)
-
(1,030)
2,940
157
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JADESTONE ENERGY 2021 ANNUAL REPORT
SIGNIFICANT ACCOUNTING POLICIES AND EXPLANATION NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
In addition to the amount charged to the profit or loss, the following amounts relating to tax have been recognised in other
comprehensive income.
Other comprehensive loss – deferred tax
Income tax credit related to carrying amount of hedged item
18
LOSS PER ORDINARY SHARE
The calculation of the basic and diluted loss per share is based on the following data:
2021
USD’000
2020
USD’000
-
(1,583)
2021
USD’000
2020
USD’000
Loss for the purposes of basic and diluted per share, being the net loss for the year
attributable to equity holders of the Company
(13,742)
(60,178)
2021
Number
2020
Number
Weighted average number of ordinary shares for the purposes of basic EPS
463,567,519
461,309,862
Effect of diluted potential ordinary shares – share options
-
-
Weighted average number of ordinary shares for the purposes of dilutive EPS
463,567,519
461,309,862
In 2021, 6,640,985 (2020: 4,679,402) of weighted average potentially dilutive ordinary shares available for exercise from in the
money vested options, associated with share options were excluded from the calculation of diluted EPS, as they are anti-dilutive in
view of the loss for the year.
In 2021, 899,306 (2020: 651,687) of weighted average contingently issuable shares associated under the Company’s performance
share plan based on the respective performance measures up to year end were excluded from the calculation of diluted EPS, as
they are anti-dilutive in view of the loss for the year.
In 2021, 140,965 (2020: 68,480) of weighted average contingently issuable shares under the Company’s restricted share plan were
excluded from the calculation of diluted EPS, as they are anti-dilutive in view of the loss for the year.
Loss per share (US$)
– Basic and diluted
2021
(0.03)
2020
(0.13)
19
ACQUISITION OF SAPURAOMV (PM) INC.
19.1 Effective date and acquisition date
On 30 April 2021, the Group executed a sale and purchase agreement (“SPA”) with SapuraOMV Upstream (PM) Sdn Bhd
(“SapuraOMV”) to acquire the entire share capital of SapuraOMV (PM) Inc. for a cash consideration of US$20.0 million, comprising a
headline price of US$9.0 million, plus customary adjustments of US$11.0 million (see Note 19.3). There are two separate potential
contingent payments to SapuraOMV of US$3.0 million each related to the annual average Dated Brent price equal or above US$65/
bbl in 2021 and US$70/bbl in 2022.
The acquisition completed on 1 August 2021, following the satisfaction of all conditions precedent. The economic effective date of
the acquisition, as set out in the SPA, was 1 January 2021, meaning the Group was entitled to all net cash generated since 1 January
2021 up to the completion date. As a result, at completion on 1 August 2021, the Group obtained cash held by SapuraOMV (PM) Inc.
of US$29.2 million, resulting in net cash receipts of US$9.2 million.
The legal transfer of ownership and control of SapuraOMV (PM) Inc. occurred on the date of completion, 1 August 2021 (the
Acquisition Date). It was at this point that the Group became able to control the key operating decisions relating to the acquired
entity. Therefore, for the purpose of calculating the purchase price allocation, management has determined the fair value
adjustments using the balance sheet of the SapuraOMV (PM) Inc. as at the completion date of 1 August 2021.
158
On 3 August 2021, the name of SapuraOMV (PM) Inc. was changed to Jadestone Energy (PM) Inc. (“JEPM”).
19.2 Business acquisition
Management has concluded that the acquisition of JEPM is that of a business as defined in IFRS 3 Business Combinations. JEPM
contains inputs and processes, which when combined has the ability to contribute to the creation of outputs (oil and gas).
Accordingly, the transaction has been accounted for as a business combination.
As a result, the Group has applied the acquisition method of accounting as at the Acquisition Date. A purchase price allocation
exercise was performed to identity, and measure at fair value, the assets acquired and liabilities assumed in the business
combination. The consideration transferred was measured at fair value. The Group has adopted the definition of fair value under
IFRS 13 Fair Value Measurement to determine the fair values.
19.3 Fair value of consideration transferred
The fair value consideration for the PenMal Assets reflected a net cash receipt of US$9.2 million, as set out below:
Asset purchase price
Crude inventory value
Cash at bank, 1 January 2021
Closing statement adjustments
Cash payment on Acquisition Date
Less: cash and bank balances acquired, 1 August 2021
Net cash receipts from the acquisition
USD’000
9,000
3,236
8,091
(294)
20,033
(29,252)
(9,219)
The crude inventory was measured at the market value and the cash at bank represents the cash on hand, as at the economic
effective date of 1 January 2021.
The closing statement adjustments relates to permitted leakages of US$0.3 million of audited intercompany charges that relate to
SapuraOMV Group (pre 1 January 2021).
In addition, there were two deferred potential contingent payments of US$3.0 million each, payable depending on the outcome of
two trigger events, namely that the average Dated Brent oil price would equal or exceed US$65/bbl in 2021 and US$70/bbl in 2022.
If either or both events occur, the respective contingent payment would be paid within 30 days from the end of each calendar year.
Management has assessed the fair value of the deferred contingent payments using a Monte Carlo option simulation model, which
considered inputs such as spot Brent oil price at completion date, the risk-free rate, a volatility factor and the length of time the
contingent payments apply. The fair value of both contingent payments was assessed to be US$4.3 million, representing US$3.0
million and US$1.3 million for the 2021 and 2022 deferred contingent payments, respectively. The 2022 contingent payment reflects
a discount of 57% from the original value, reflecting the time value of money and the likelihood of the trigger event occurring. The
assessment of 2022 contingent payment was performed as at 1 August 2021, based on the facts and circumstances existed as at
that date. Subsequent to year end, the oil prices have seen an abnormal increase, accordingly the Group is likely to pay the 2022
contingent payment in full.
The 2021 contingent payment of US$3.0 million crystalised at year end as the average Dated Brent oil price exceeded US$65/bbl,
hence the amount was recognised as an accrual at year end. The amount was paid in January 2022.
Fair value of purchase consideration
Asset purchase price
Crude inventory value
Cash at bank
Closing statement adjustments
Cash payment on acquisition date
Working capital adjustments
Deferred contingent considerations
Total
USD’000
9,000
3,236
8,091
(294)
20,033
(1,059)
4,305
23,279
159
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JADESTONE ENERGY 2021 ANNUAL REPORT
SIGNIFICANT ACCOUNTING POLICIES AND EXPLANATION NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
The Group considers that the purchase consideration and the transaction terms to be reflective of fair value for the following
reasons:
l Open and unrestricted market: there were no restrictions in place preventing other potential buyers from negotiating with
SapuraOMV during the sales process period and there were a number of other interested parties in the formal sale process;
l Knowledgeable, willing but not anxious parties: both the Group and SapuraOMV are experienced oil and gas operators under
no duress to buy or sell. The process was conducted over several months which gave both parties sufficient time to conduct
due diligence and prepare analysis to support the transaction; and
l Arm’s length nature: the Group is not a related party to SapuraOMV. Both parties had engaged their own professional advisors.
There is no reason to conclude that the transaction was not transacted at arm’s length.
19.4 Assets acquired and liabilities assumed at the date of acquisition
During the year, the Group has completed the purchase price assessment (“PPA”) to determine the fair values of the net assets
acquired within the stipulated time period of 12 months from the Acquisition Date, in accordance with IFRS 3. The adjusted fair
values of the identifiable assets and liabilities as at the Acquisition Date were:
Asset
Non-current assets
Oil and gas properties (Note 22)
Other receivables
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Tax recoverable
Cash and bank balances
Liabilities
Non-current liabilities
Provision for asset retirement obligations (Note 35)
Deferred tax liabilities
Current liabilities
Trade and other payables
Net identifiable assets acquired
USD’000
21,744
42,092*
10,343
2,853
21,276
10,226
29,252
137,786
91,552
6,177
16,778
114,507
23,279
* Other receivables represent the accumulated CESS paid to the Malaysian regulator for operated licences, which will be
reclaimable by the Group in the future following the commencement of decommissioning activities.
19.5 Impact of acquisition on the results of the Group
Included in the Group’s revenue for the year was US$46.6 million attributable to the PenMal Assets. Included in the Group’s
after tax loss for the year was a profit of US$6.5 million attributable to the PenMal Assets.
Acquisition-related costs amounting to US$0.7 million have been excluded from the consideration transferred and have
been recognised as an expense in the period, within “other expenses” line item in the consolidated statement of profit or
loss and other comprehensive income.
Had the business combination been effected at 1 January 2021, and based on the performance of the business during 2021
under SapuraOMV’s operatorship, the Group would have generated revenues of US$107.2 million and an estimated net
profit after tax of US$29.6 million.
The Directors of the Group consider these “pro-forma” numbers to represent an approximate measure of the performance
of the combined Group on an annualised basis and to provide a reference point for comparison in future periods.
160
20
ACQUISITION OF LEMANG PSC
20.1 Acquisition date
In 2020, the Group executed an acquisition agreement with Mandala Energy Lemang Pte Ltd (“Mandala Energy”) to acquire
an operated 90% interest in the Lemang PSC, for a total cash consideration of US$12.0 million, including closing statement
adjustments and subsequent contingent payments. The acquisition closed on 11 December 2020 (“Closing Date”), following
the completion of various conditions precedent at the time of signing the acquisition agreement.
20.2 Asset acquisition
Management has concluded that the acquisition of the Lemang PSC is an asset acquisition as the Lemang PSC does not
come with an organised workforce, and the Group does not take over any process in the form of a system, protocol or
standards to contribute to the creation of outputs. Hence, the acquisition does not fall within the definition of a business
acquisition under IFRS 3. Therefore, the assets acquired and liabilities assumed in the acquisition of the Lemang PSC, and
the consideration transferred have been measured at fair value, in accordance to the definition of fair value under IFRS 13
Fair Value Measurement.
20.3 Fair value of consideration transferred
The fair value consideration of the Lemang PSC reflected net cash outflows of US$12.0 million, as set out below:
Asset purchase price
Closing statement adjustments
Cash payment on acquisition date
Less: cash and bank balances acquired
Net cash outflows on acquisition
USD’000
12,000
55
12,055
(96)
11,959
The total net cash outflows on acquisition reflects the net receipts arising from the working capital adjustments at the Closing Date.
There are additional potential deferred contingent payments, dependent on the future outcome of a number of trigger events.
Please refer to Note 20.5 for the full disclosure of all the contingent payments along with the management’s assessment.
Management has reviewed all the contingent payments, and at the date of acquisition recorded an amount of US$4.4 million at fair
value for the following two contingent events:
l First gas date: US$5.0 million; and
l The accumulated receipts of VAT reimbursements received which are attributable to the Lemang Block as at the Closing Date,
exceeding an aggregate amount of US$6.7 million on a gross basis: US$0.7 million.
Management has assessed the fair value of the above contingent consideration based on the estimated timing of first gas date,
and the estimated receipts from the VAT receivables. This implies the fair value of the contingent considerations to be US$3.9
million and US$0.5 million, respectively, totalling US$4.4 million as at Closing Date. This reflects a discount of 23% and 20% for
the respective contingent consideration payments arising from the time value of money and the likelihood of the trigger event
occurring. There is no change to the fair value as at 2020 year end due to the short timeframe from the Closing Date up to 2020
year end. As at 31 December 2021, the fair value of the contingent payments are valued at US$4.8 million, reflecting the time
value of money. The contingent payments are not expected to be paid before 2024 and accordingly have been classified as
non-current liability.
The Group has not recognised other contingent payments associated with the acquisition of the Lemang PSC as management
considers the probability of outflow to be remote.
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161
JADESTONE ENERGY 2021 ANNUAL REPORT
SIGNIFICANT ACCOUNTING POLICIES AND EXPLANATION NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
Fair value of purchase consideration
Asset purchase price
Closing statement adjustment
Cash payment on acquisition date
Deferred contingent consideration
Total
USD’000
12,000
55
12,055
4,436
16,491
The Group considers that the purchase consideration and the transaction terms to be reflective of fair value for the following
reasons:
l Open and unrestricted market: there were no restrictions in place preventing other potential buyers from negotiating with
Mandala Energy during the sales process period and there a number of other interested parties in the formal sale process;
l Knowledgeable, willing but not anxious parties: both the Group and Mandala Energy are experienced oil and gas operators
under no duress. The process was conducted over several months which gave both parties sufficient time to conduct due
diligence and prepare analysis to support the transaction; and
l Arm’s length nature: the Group is not a related party to Mandala Energy. Both parties had engaged their own professional
advisors so there is no reason to conclude that the transaction was not transacted at arm’s length.
20.4 Assets acquired and liabilities assumed at the date of acquisition
The fair value of the identifiable assets and liabilities of the Lemang PSC, acquired and assumed as at the date of acquisition, were:
Asset
Non-current assets
Intangible exploration assets (Note 21)
VAT receivables
Current assets
Trade and other receivables
Inventories
Cash and bank balances
Liabilities
Non-current liabilities
Provision for asset retirement obligations (Note 35)
Current liabilities
Trade and other payables
Net identifiable assets acquired
Total
USD’000
14,825
4,393
398
3
96
19,715
2,741
483
3,224
16,491
The provision for asset restoration obligations assumed by the Group is associated with oil production by Mandala Energy that
ceased prior to the acquisition in December 2020. The obligation was assumed following the acquisition, and the decommissioning
expenditure is expected to be incurred from 2034, at the end of the life of the planned gas development.
162
20.5 Deferred contingent consideration
No.
Trigger event
Consideration
Management’s rationale
1
2
3
4
5
6
7
8
9
First gas date
US$5.0 million
Please refer to 20.3 above.
The accumulated VAT receivables
reimbursements which are attributable to the
unbilled VAT in the Lemang Block as at the
Closing Date, exceeding an aggregate amount
of US$6.7 million on a gross basis.
US$0.7 million
Please refer to 20.3 above.
First gas date on or before 31 March 2023.
US$3.0 million
It is unlikely that the first gas date will be on or
before 31 March 2023.
Total actual Akatara Gas Project “close out”
costs set out in the AFE(s) approved pursuant
to a joint audit by SKK MIGAS and BPKP is
less than, or within 2% of the “close out”
development costs set out in the approved
revised plan of development for the Akatara
Gas Project.
US$3.0 million
The Akatara Gas Project has not been sanctioned as
at year end due to ongoing preparation of project
approval documentation. It is unknown if the future
close out costs will be less than or within 2% of the
budgeted amount and it is unable to be reliably
measured as at year end.
The average Saudi CP in the first year of
operation is higher than US$620/MT.
US$3.0 million
Saudi CP is not expected to be above US$620/MT
throughout the PSC term to 2037.
The average Saudi CP in the second year of
operation is higher than US$620/MT.
US$2.0 million
Saudi CP is not expected to be above US$620/MT
throughout the PSC term to 2037.
The average Dated Brent price in the first year
of operation is higher than US$80/bbl.
US$2.5 million
The Dated Brent price is not expected to be above
US$80/bbl throughout the PSC term to 2037.
The average Dated Brent price in the second
year of operation is higher than US$80/bbl.
US$1.5 million
The Dated Brent price is not expected to be above
US$80/bbl throughout the PSC term to 2037.
A plan of development for the development
of a new discovery made, as a result of the
remaining exploration well commitment
under the PSC, is approved by the relevant
government entity.
US$3.0 million
There are no prospects or leads presently selected
for the exploration well commitment. As at
year end, it is not probable that this contingent
consideration trigger will be met.
10
The plan of development described in item 9
above is approved by the relevant government
entity and is based on reserves of no less than
8.4mm barrels (on a gross basis).
US$8.0 million
There are no prospects or leads presently selected
for the exploration well commitment. As at
year end, it is not probable that this contingent
consideration trigger will be met.
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O
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E
T
A
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P
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163
JADESTONE ENERGY 2021 ANNUAL REPORT
SIGNIFICANT ACCOUNTING POLICIES AND EXPLANATION NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
21
INTANGIBLE EXPLORATION ASSETS
Cost
As at 1 January 2020
Acquisition of Lemang PSC (Note 20)
Additions
As at 31 December 2020
Additions
Change in asset retirement obligations (Note 35)
Reversal
Written off
As at 31 December 2021
Impairment
As at 1 January 2020
Additions (Note 13)
As at 31 December 2020
Written off
As at 31 December 2021
Net book value
As at 1 January 2020
As at 31 December 2020
As at 31 December 2021
USD’000
117,440
14,825
18,860
151,125
3,934(a)
(44)(b)
(6,059)(c)
(55,715)(d)
93,241
-
50,455
50,455
(50,455)
-
117,440
100,670
93,241
(a) For the purpose of the consolidated statement of cash flows, current year expenditure on intangible exploration assets
of US$0.1 million remained unpaid as at 31 December 2021 (2020: US$4.6 million).
(b) The change in asset retirement obligations of US$0.04 million relates to assets at the Lemang PSC.
(c) The US$6.0 million reversal during the year relates to an overprovision of costs owed to a third party contractor.
The overprovision was identified following an assessment of actual costs incurred.
(d)
In November 2020, Total, as operator of SC56 voluntarily surrendered a combined 100% interest in SC56 to the
Philippines Department of Energy (“DOE”). As a result, the carrying value of US$50.4 million was impaired in Q4 2020.
The DOE acknowledged the relinquishment in February 2021 and the exit obligation terms were agreed in June 2021.
Accordingly, the carrying value was formally written off in 2021.
The Group has also written off intangible exploration assets of US$5.3 million during the year (Note 11).
164
22
OIL AND GAS PROPERTIES
Cost
As at 1 January 2020
Changes in asset restoration obligations (Note 35)
Additions
As at 31 December 2020
Changes in asset restoration obligations (Note 35)
Acquisition of PenMal Assets (Note 19)
Additions
As at 31 December 2021
Accumulated depletion and amortisation
As at 1 January 2020
Charge for the year
As at 31 December 2020
Charge for the year
As at 31 December 2021
Net book value
As at 1 January 2020
As at 31 December 2020
As at 31 December 2021
USD’000
492,985
(725)
4,732
496,992
23,894
21,744
52,864*
595,494
111,311
68,005
179,316
62,586
241,902
381,674
317,676
353,592
* The additions consist of cash payments of US$51.4 million and capitalisation of depreciation of US$1.5 million associated with
right-of-use assets in Australia in accordance with IAS 16, both associated with the drilling of the H6 infill well at Montara.
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165
JADESTONE ENERGY 2021 ANNUAL REPORT
SIGNIFICANT ACCOUNTING POLICIES AND EXPLANATION NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
23
PLANT AND EQUIPMENT
Computer
equipment
USD’000
Fixtures
and fittings
USD’000
Materials
and spares
USD’000
Total
USD’000
Cost
As at 1 January 2020
Disposal
As at 31 December 2020
Additions
Written off
Transfer
As at 31 December 2021
Accumulated depreciation
As at 1 January 2020
Charge for the year
As at 31 December 2020
Charge for the year
Written off
As at 31 December 2021
Net book value
As at 1 January 2020
As at 31 December 2020
As at 31 December 2021
2,824
280
3,104
450
-
-
3,554
1,334
323
1,657
302
-
1,959
1,490
1,447
1,595
1,315
193
1,508
232
(169)
-
1,571
1,025
278
1,303
206
(97)
1,412
290
205
159
-
-
-
-
-
7,209
7,209
-
-
-
-
-
-
-
-
7,209
4,139
473
4,612
682
(169)
7,209*
12,334
2,359
601
2,960
508
(97)
3,371
1,780
1,652
8,963
* The transfer represents the material and spares that are not expected to be consumed within the next 12 months from the year
end. The reclassification amount is net of allowance of slow moving items of US$1.9 million as disclosed in Note 11.
166
24
RIGHT-OF-USE ASSETS
Cost
As at 1 January 2020
Additions
Termination
Adjustment
As at 31 December 2020
Additions
As at 31 December 2021
Accumulated depreciation
As at 1 January 2020
Charge for the year
Termination
As at 31 December 2020
Charge for the year
As at 31 December 2021
Net book value
As at 1 January 2020
As at 31 December 2020
As at 31 December 2021
Production
assets
USD’000
Transportation
and logistics
USD’000
Buildings
USD’000
Total
USD’000
29,339
-
(29,339)
-
-
-
-
5,334
3,837
(9,171)
-
-
-
24,005
-
-
42,320
419
-
(394)
42,345
1,200
43,545
8,519
11,419
-
19,938
11,470*
31,408
33,801
22,407
12,137
3,004
472
(307)
-
3,169
1,654
4,823
1,023
972
(92)
1,903
1,205
3,108
1,981
1,266
1,707
74,663
891
(29,646)
(394)
45,514
2,854
48,368
14,876
16,228
(9,263)
21,841
12,675*
34,516
59,787
23,673
13,852
* The amount includes US$1.5 million which has been capitalised within oil and gas properties as the related right-of-use assets
were used as part of the drilling of the H6 infill well at Montara (see Note 22).
The Group leases several assets including helicopters, a supply boat, logistic facilities for the Montara field, and buildings.
The average lease term is 3 years.
The maturity analysis of lease liabilities is presented in Note 36.
Amount recognised in profit or loss
Depreciation expense on right-of-use assets
Interest expense on lease liabilities
Expenses relating to short-term leases
Expense relating to leases of low value assets
2021
USD’000
2020
USD’000
11,191
1,222
63,734
81
16,228
3,341
3,113
31
At 31 December 2021, the Group has not committed to any short-term leases (2020: US$8.1 million).
The total cash outflow for leases amount to US$13.0 million (2020: US$18.6 million).
The additions of right-of-use assets during the year represent the extension of the Group’s ongoing right-of-use assets and entered
into a five-year lease to rent an Australian office building to replace an expired lease.
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167
JADESTONE ENERGY 2021 ANNUAL REPORT
SIGNIFICANT ACCOUNTING POLICIES AND EXPLANATION NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
25
INTERESTS IN OPERATIONS
Details of the operations, of which all are in production except for 46/07, 51 and Lemang which are in the development stage, are as
follows:
Contract Area
Date of expiry
Held by
Montara Oilfield
Stag Oilfield
Indefinite
25 Aug 2039
Jadestone Energy (Eagle) Pty Ltd
Jadestone Energy (Australia) Pty Ltd
PM329
PM323
PM318
AAKBNLP
46/07
51
Lemang
SC57
8 December 2031
Jadestone Energy (PM) Inc.
14 June 2028
24 May 2034
24 May 2024
29 Jun 2035
10 Jun 2040
17 Jan 2037
Jadestone Energy (PM) Inc.
Jadestone Energy (PM) Inc.
Jadestone Energy (PM) Inc.
Mitra Energy (Vietnam Nam Du) Pte Ltd
Mitra Energy (Vietnam Tho Chu) Pte Ltd
Jadestone Energy (Lemang) Pte Ltd
14 Sept 2055
Mitra Energy (Philippines SC-57) Ltd
Group effective
working interest %
as at 31 December
Place of
operations
2021
2020
Australia
Australia
Malaysia
Malaysia
Malaysia
Malaysia
Vietnam
Vietnam
Indonesia
Philippines
100
100
70
60
50
50
100
100
90
-
100
100
-
-
-
-
100
100
90
21
*
In 2006, the Group executed an agreement with the Philippines National Oil Company (“PNOC”) to acquire a 21% working
interest in SC57. The acquisition required the approval of the Office of the President of the Philippines and in December 2021
PNOC advised that such approval will not be granted by the Philippines Department of Energy. The Group is now seeking
reimbursement from PNOC for costs of approximately US$0.9 million which it incurred in relation to a 2008 seismic acquisition
campaign. This is not recognised as a receivable as at year end as it is not sufficiently certain that the amount will be received.
26
DEFERRED TAX
The following are the deferred tax liabilities and assets recognised by the Group and movements thereon.
Australian
PRRT
USD’000
Malaysian
PITA
USD’000
Tax
depreciation
USD’000
Derivatives
financial
instruments
USD’000
As at 1 January 2020
Credited to profit or Loss (Note 17)
Credited to OCI
As at 31 December 2020
Charged to profit or loss (Note 17)
Acquisition of PenMal Assets (Note 19)
As at 31 December 2021
13,215
4,702
-
17,917
(3,371)
-
14,546
-
-
-
-
1,135
4,166
5,301
(60,445)
4,026
-
(56,419)
(5,247)
-
(61,666)
(1,583)
-
1,583
-
-
-
-
The following is the analysis of the deferred tax balances (after offset) for financial reporting purposes:
Deferred tax liabilities
Deferred tax assets
2021
USD’000
(67,097)
25,278
(41,819)
Total
USD’000
(48,813)
8,728
1,583
(38,502)
(7,483)
4,166
(41,819)
2020
USD’000
(58,229)
19,727
(38,502)
The Group has unutilised PRRT credits of approximately US$3.4 billion (2020: US$3.3 billion) available for offset against future PRRT
taxable profits in respect of the Montara field. The PRRT credits remain effective throughout the production licence of Montara. No
deferred tax asset has been recognised in respect of these PRRT credits, due to management’s projections that there will continue
to be current augmentation of PRRT credits that are more than sufficient to offset any PRRT tax to be paid. As PRRT credits are
utilised based on a last-in-first-out basis, the unutilised PRRT credits of approximately US$3.4 billion (2020: US$3.3 billion) will not be
utilised given the forecasted augmentation, and are therefore not recognised as a deferred tax asset.
168
27
INVENTORIES
Materials and spares
Less: allowance for slow moving (Note 11)
Crude oil inventories
2021
USD’000
2020
USD’000
12,011
(2,060)
9,951
13,348
23,299
21,245
(1,329)
19,916
25,445
45,361
The cost of inventories recognised as an expense during the year for lifted volumes, comprising production costs excluding
workovers, Malaysian supplementary payments and tariffs and transportation costs, plus depletion expense of oil & gas properties,
and plus depreciation of right-of-use assets deployed for operational use, is US$200.4 million (2020: US$166.9 million).
28
TRADE AND OTHER RECEIVABLES
Current assets
Trade receivables
Prepayments
Other receivables and deposits
Amount due from joint arrangement partners (net)
Underlift crude oil inventories
GST/VAT receivables
Non-current asset
Other receivables
Acquisition of PenMal Assets (Note 19)
Change in asset restoration obligations (Note 35)
Cess paid
Prepayment
VAT receivables
2021
USD’000
2020
USD’000
9,143
3,770
13,281
2,203
6,855
2,699
37,951
42,092
(672)
306
41,726
2,000
4,774
48,500
86,451
106
2,012
4,273
-
-
719
7,110
-
-
-
-
-
4,404
4,404
11,514
Trade receivables arise from revenues generated in Australia and Malaysia. The average credit period is 30 days (2020: 30 days). All
outstanding receivables as at 31 December 2021 and 2020 have been fully recovered in 2022 and 2021, respectively.
Other receivables in current year consist of insurance claim receivable of US$10.3 million on the well control claim for the Skua 11
well workovers.
Amount due from joint arrangement partners represents cash calls receivable from the Malaysian and Indonesian joint
arrangement partners, net of joint arrangement expenditures. The amount due from the Malaysian joint arrangement partner is
unsecured, with a credit period of 15 days. A notice of default will be served to the joint arrangement partner if the credit period is
exceeded, which will become effective seven days after service of such notice if the outstanding amount remains unpaid. Interest of
3% per annum will be imposed on the outstanding amount, starting from the effective date of default. The outstanding receivable
has been fully recovered in 2022.
The amount due from the Indonesian joint arrangement partner is unsecured, with a credit period of 7 days. A notice of default will
be served to the joint arrangement partner if the credit period is exceeded, which will become effective seven days after service of
such notice if the outstanding amount remains unpaid. An interest at LIBOR plus 3% per annum will be imposed on the outstanding
amount, starting from the effective date of default.
169
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JADESTONE ENERGY 2021 ANNUAL REPORT
SIGNIFICANT ACCOUNTING POLICIES AND EXPLANATION NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
Non-current other receivables represent the accumulated cess payment paid to the Malaysian regulator for the operated licences.
The Malaysian require upstream operators to contribute periodic cess payments to a cess abandonment fund throughout the
production life of the upstream oil and gas assets. This is to ensure there is sufficient funds available for decommissioning
expenditures activities at the end of field life. The cess payment amount is assessed based on the estimated future
decommissioning expenditures.
The non-current VAT receivables are associated with the Lemang PSC. It is classified as a non-current asset as the recovery of the
VAT receivables is dependent on the share of revenue entitlement by the Indonesian government after the commencement of gas
production, which is estimated to occur after 2022.
There are no trade receivables older than 30 days.
29
CASH AND BANK BALANCES
Cash and bank balances
Less: restricted cash
Cash and cash equivalents in the consolidated statement of cash flows
2021
USD’000
117,865
-
117,865
2020
USD’000
89,441
(8,445)
80,996
Cash and bank balances in 2021 contains a restricted cash balance of US$0.4 million and US$0.5 million in relation to a deposit
placed for bank guarantee with respect to the PenMal Assets and Australian office building, respectively.
Restricted cash in 2020 included US$7.4 million related to the Group’s reserve based lending arrangement (Note 37). As part of
the agreement, the Group had to retain an aggregate amount of principal, interest, fees and costs payable at each quarter-end
in a debt service reserve account (“DSRA”). The US$7.4 million was deposited in the DSRA as at 31 December 2020. The DSRA
was released on 31 March 2021, upon the repayment of the final balance outstanding on the loan. Restricted cash in 2020 also
contained a performance bank guarantee of US$1.0 million, placed with the Indonesian regulator in relation to a joint study
agreement (“JSA”). The amount was released to the Group during Q3 2021 upon the completion of the JSA.
The restricted cash of US$10.0 million held by the Group in 2019, in support of a bank guarantee to a key supplier in respect of
Stag’s FSO vessel, was released to the Group upon the termination of the FSO vessel lease agreement in 2020.
30
SHARE CAPITAL
Authorised ordinary shares issued and fully paid
As at 1 January 2020
Issued during the year
As at 31 December 2020
Issued during the year
Capital reduction, at £0.499 each
As at 31 December 2021
No. of shares
USD’000
461,042,811
800,000
461,842,811
3,238,427
-
465,081,238
466,573
406
466,979
967
(467,387)
559
On 4 May 2021, the High Court of Justice, Business and Property Court, Companies Court in England and Wales approved the
reduction of share capital of the Company pursuant to section 648 of the Act by cancelling the paid-up capital of the Company
to the extent of 49.9 pence on each ordinary share of £0.50 in the issued share capital of the Company. The effective date of the
capital reduction was 6 May 2021.
During the year, employee share options of 3,238,427 were exercised and issued at an average price of GB£ 0.33 per share (2020:
800,000; GB£0.33 per share).
The Company has one class of ordinary share. Fully paid ordinary shares carry one vote per share without restriction, and carry a
right to dividends as and when declared by the Company.
Prior to the internal reorganisation on 23 April 2021, Jadestone Energy Inc. the former ultimate holding company, has issued
1,806,666 shares, resulting to the total outstanding number of shares at 463,649,477 as at 23 April 2021. The Company has issued
1,431,761 shares post the completion of the internal reorganisation.
170
31
DIVIDENDS
The parent company has sufficient distributable reserves to declare dividends, despite the post-tax losses incurred during the year.
The dividends declared were in compliance with the Act.
The Directors plan to recommend a final 2021 dividend of 1.34 US cents/share on 6 June 2022, equivalent to a total distribution of
US$9.0 million. The dividend will be paid in July 2022.
On 9 September 2021, the Directors declared a 2021 interim dividend of 0.59 US cents/share, equivalent to 0.43 GB pence/share,
based on an exchange rate of 0.7257, equivalent to a total distribution of US$2.8 million. The dividend was paid on 1 October 2021.
On 11 June 2021, the Directors declared the second interim 2020 dividend of 1.08 US cents/share, equivalent to 0.77 GB pence/
share, based on an exchange rate of 0.7087, equivalent to a total distribution of US$5.0 million, or US$7.5 million in respect of total
2020 dividends. The dividend was paid on 30 June 2021.
On 10 September 2020, the Directors declared the first 2020 interim dividend of 0.54 US cents/share, equivalent to 0.42 GB pence/
share, based on an exchange rate of 0.7708, equivalent to a total distribution of US$2.5 million. The dividend was paid on 30
October 2020.
32
MERGER RESERVE
The merger reserve arose from the difference between the carrying value and the nominal value of the shares of the Company,
following completion of the internal reorganisation (Note 2).
33
HEDGING RESERVES
At beginning of the year
Gain arising on changes in fair value of hedging instruments during the year
Income tax related to gain recognised in other comprehensive income
Net gain reclassified to profit or loss
Income tax related to amounts reclassified to profit or loss
At end of the year
2021
USD’000
-
-
-
-
-
-
2020
USD’000
(3,688)
(26,093)
7,828
31,364
(9,411)
-
The hedging reserve represents the cumulative amount of gains and losses on hedging instruments deemed effective in cash
flow hedges. The cumulative deferred gain or loss on the hedging instrument is recognised in profit or loss only when the hedged
transaction impacts the profit or loss. The Group’s oil price capped swap expired on 30 September 2020 and accordingly, all
cumulative deferred gains were recognised in the profit or loss.
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171
JADESTONE ENERGY 2021 ANNUAL REPORT
SIGNIFICANT ACCOUNTING POLICIES AND EXPLANATION NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
34
SHARE-BASED PAYMENTS RESERVE
The total expense arising from share-based payments of US$1.0 million (2020: US$1.1 million) was recognised as ‘administrative
staff costs’ (Note 8) in profit or loss for the year ended 31 December 2021.
On 15 May 2019, the Company adopted, as approved by the shareholders, the amended and restated stock option plan, the
performance share plan, and the restricted share plan (together, the “LTI Plans”), which establishes a rolling number of shares
issuable under the LTI Plans up to a maximum of 10% of the Company’s issued and outstanding ordinary shares at any given time.
Options under the stock option plan will be exercisable over periods of up to 10 years as determined by the Board.
34.1 Share options
The Black-Scholes option-pricing model, with the following assumptions, was used to estimate the fair value of the options at the
date of grant:
Risk-free rate
Expected life
Expected volatility1
Share price
Exercise price
Expected dividends
34.2 Performance shares
Options granted on
18 March 2021
27 April 2020
0.49% to 0.61%
5.5 to 6.5 years
65.2% to 67.6%
GB£ 0.65
GB£ 0.77
1.79%
0.14% to 0.16%
5.5 to 6.5 years
42.7% to 43.9%
GB£ 0.44
GB£ 0.44
2.94%
The performance measures for performance shares incorporate a balance of relative and absolute total shareholder return (“TSR”)
on a 70:30 basis to reward outperformance vs. peers (relative TSR) and alignment with shareholders (absolute TSR).
Relative TSR: measured against the TSR of peer companies; the size of the pay out is based on Jadestone’s ranking against the TSR
outcomes of peer companies.
Absolute TSR: share price target plus dividend to be set at the start of the performance period and assessed annually; the threshold
share price plus dividend has to be equal to or greater than a 10% increase in absolute terms to earn any pay out at all, and must
be 25% or greater for target pay out.
A Monte Carlo simulation model was used by an external specialist, with the following assumptions to estimate the fair value of the
performance shares at the date of grant:
Risk-free rate
Expected volatility1
Share price
Exercise price
Expected dividends
Post-vesting withdrawal date
Early exercise assumption
34.3 Restricted shares
Performance shares granted on
18 March 2021
27 April 2020
0.06%
51.5%
GB£ 0.77
N/A
2.64%
N/A
N/A
0.08%
66.0%
GB£ 0.44
N/A
2.80%
N/A
N/A
Restricted shares are granted to certain senior management personnel as an alternative to cash under exceptional circumstances
to provide greater alignment with shareholder objectives. These are shares that vest three years after grant, assuming the
employee has not left the Group. They are not eligible for dividends prior to vesting.
The following assumptions were used to estimate the fair value of the restricted shares at the date of grant, discounting back from
the date they will vest and excluding the value of dividends during the intervening period:
Risk-free rate
Share price
Expected dividends
Restricted shares granted on
18 March 2021
27 April 2020
0.08%
GB£ 0.77
2.64%
0.08%
GB£ 0.44
2.80%
1
Expected volatility was determined by calculating Jadestone’s average historical volatility of each trading day’s log growth of TSR over a period between
the grant date and the end of the performance period.
172
Number
of options
exercisable
7,019,480
-
6,193,347
(800,000)
(200,000)
12,212,827
-
3,776,672
(3,238,427)
(1,539,905)
8.21
9.83
7.20
-
-
7.78
9.21
6.92
-
-
7.15
11,211,167
Others
USD’000
Total
USD’000
-
282,940
1,905
-
-
-
-
-
-
3,276
7,177
6,363
(725)
(843)
(359)
(5,047)
The following table summarises the options/shares under the LTI plans outstanding and exercisable as at 31 December 2021:
Performance
shares
Restricted
shares
Number of
options
Shares Options
Weighted
average
exercise
price GB£
Weighted
average
remaining
contract life
As at 1 January 2020
-
-
19,867,842
New options/shares awards issued
695,200
101,063
6,525,000
Vested during the year
Exercised during the year
Cancelled during the year
As at 31 December 2020
New options/shares awards issued
Vested during the year
Exercised during the year
Cancelled during the year
-
-
(12,000)
683,200
1,136,512
-
-
(328,058)
-
-
-
-
(800,000)
(400,000)
101,063
25,192,842
50,570
2,852,631
-
-
-
-
(3,238,427)
(3,690,244)
As at 31 December 2021
1,491,654
151,633
21,116,802
0.39
0.44
0.38
0.33
0.73
0.40
0.77
0.42
0.33
0.46
0.45
35
PROVISIONS
Asset
restoration
obligations
(a)
USD’000
Stag FSO
(b)
USD’000
Contingent
payments
(c)
USD’000
Employees
benefits
(d)
USD’000
Incentive
scheme
(e)
USD’000
As at 1 January 2020
Charge to profit or loss
Acquisition of Lemang PSC
Accretion expense (Note 15)
Changes in discount rate assumptions (Note
22)
Utilised
Fair value adjustment (Note 16)
Reversal (Note 14)
As at 31 December 2020
Charge to profit or loss
Acquisition of PenMal Assets (Note 19)
Accretion expense (Note 15)
Changes in discount rate assumptions
(Notes 21, 22 and 28)
Payment/Utilised
Fair value adjustment (Note 15)
Reversal (Note 14)
As at 31 December 2021
As at 31 December 2020
Current
Non-current
As at 31 December 2021
Current
Non-current
275,422
4,996
-
2,741
6,312
(725)
-
-
-
283,750
-
91,552
5,920
23,178
(306)
-
-
404,400
-
283,750
283,750
-
404,400
404,400
-
-
51
-
-
-
(5,047)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
851
67
-
-
-
1,312
1,304
-
-
-
(22)
(821)
-
-
-
-
359
-
4,436
-
-
-
(359)
-
4,436
-
4,305
-
-
896
1,795
1,905
292,782
-
-
-
-
-
-
-
-
202
-
-
-
202
95,857
5,920
23,178
(3,000)
(50)
(778)
(1,516)
(5,344)
438
-
-
-
-
-
-
(389)
438
(389)
6,179
846
1,017
202
412,644
-
4,436
4,436
-
6,179
6,179
858
38
896
728
118
846
1,795
1,905
4,558
-
-
288,224
1,795
1,905
292,782
1,017
-
1,017
202
1,947
-
410,697
202
412,644
173
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JADESTONE ENERGY 2021 ANNUAL REPORT
SIGNIFICANT ACCOUNTING POLICIES AND EXPLANATION NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
a) The Group’s asset restoration obligations (“ARO”) comprise the future estimated costs to decommission each of the Montara,
Stag, Lemang PSC and PenMal Assets.
The carrying value of the provision represents the discounted present value of the estimated future costs. Current estimated
costs of the ARO for each of the Montara, Stag, Lemang PSC and PenMal Assets have been escalated to the estimated date
at which the expenditure would be incurred, at an assumed blended inflation rate of 2.06%, 2.12%, 2.82% and range of
2.05% to 2.07%, respectively (2020: Montara: 1.52%; Stag: 1.48%; Lemang PSC: 2.54%). The estimates for each asset are a
blend of assumed US and respective local inflation rates to reflect the underlying mix of US dollar and respective local dollar
denominated expenditures. The present value of the future estimated ARO for each of the Montara, Stag, Lemang PSC and
PenMal Assets has then been calculated based on blended risk-free rates of 1.77%, 1.91%, 5.96% and a range of 2.81% to
3.24%, respectively (2020: Montara: 1.72%; Stag: 1.78%; and Lemang PSC: 5.86%). The base estimate ARO for Montara, Stag and
Lemang PSC remains largely unchanged from 2020. The ARO of PenMal Assets was assessed in 2021, based on the existing
facilities and wells acquired and required to be decommissioned at the end of field life.
Management expects decommissioning expenditures to be incurred from 2024, 2032, 2034 and 2035 onwards for PenMal
Assets, Montara, Lemang PSC and Stag, respectively.
In 2019, Jadestone Energy (Eagle) Pty Ltd, a wholly owned subsidiary of the Company entered into a deed poll with the
Australian Government with regard to the requirements of maintaining sufficient financial capacity to ensure Montara’s asset
restoration obligations can be met when due. The deed states that the Group is required to provide a financial security in favour
of the Australian Government when the aggregate remaining net after tax cash flow of the Group is 1.25 times or below the
Group’s estimated future decommissioning costs.
The Malaysian and Indonesian regulators require upstream oil and gas companies to contribute to an abandonment cess fund,
including making periodic cess payments, throughout the production life of the oil or gas field. The cess payment amount is
assessed based on the estimated future decommissioning expenditures. The cess payment paid for non-operated licences
reduces the asset restoration liability.
b) The provision for Stag FSO was reversed in 2020 following the termination of the FSO vessel lease.
c) The contingent payment of US$1.4 million represented the fair value of one contingent payment payable to SapuraOMV for
the PenMal Assets acquisition, based on the outlook of Brent crude oil prices in 2022 (Note 19). The contingent payment (if
triggered) will need to be made in January 2023 and accordingly has been classified as non-current liability.
The fair value of the contingent payments payable to Mandala Energy Lemang Pte Ltd for the Lemang PSC acquisition are
valued at US$4.8 million as at 31 December 2021 (2020: US$4.4 million) for the trigger events as disclosed in Note 20.
The contingent payment of US$0.4 million for the Montara acquisition was derecognised in 2020 as the liability failed to
crystallise. The Group has not recognised other contingent payments associated with Montara acquisition as the management
considers the probability of outflow is remote.
d) Included in the provision for employee benefits is provision for long service leave which is payable to employees on a pro-rata
basis after 7 years of employment and is due in full after 10 years of employment.
e) The Group’s performance pay incentive scheme is based on the Group’s and employees’ performance, and is payable annually
to employees at variable percentages of their annual wage.
174
36
LEASE LIABILITIES
Presented as:
Non-current
Current
Maturity analysis of lease liabilities based on undiscounted gross cash flows:
Year 1
Year 2
Year 3
Year 4
Year 5
Future interest charge
2021
USD’000
2020
USD’000
4,504
11,161
15,665
12,247
3,440
209
221
233
(685)
15,665
13,305
12,478
25,783
13,448
11,239
2,803
-
-
(1,707)
25,783
The Group does not face a significant liquidity risk with regards to its lease liabilities. Lease liabilities are monitored within the
Group’s treasury function.
37
BORROWINGS
Secured borrowings
Reserve based lending facility
2021
USD’000
2020
USD’000
-
7,296
At the end of Q1 2021, the Group fully repaid its reserve based lending facility, making a final principal repayment of US$7.3 million
(2020: US$42.8 million) and interest of US$0.1 million (2020: US$1.4 million).
The loan incurred interest at LIBOR plus 3% (2020: LIBOR plus 3%).
38
RECONCILIATION OF LIABILITIES ARISING FROM FINANCING ACTIVITIES
The table below details changes in the Group’s liabilities arising from financing activities, including both cash and non-cash changes.
Liabilities arising from financing activities are those for which cash flows were, or future cash flows will be, classified in the Group’s
consolidated statement of cash flows, as cash flows from financing activities.
The cash flows represent the repayment of borrowings and lease liabilities, in the consolidated statement of cash flows.
As at 1 January 2020
Financing cash flows
New lease liabilities
Termination of leases
Interest paid
Non-cash changes - interest
As at 31 December 2020
Financing cash flows
New lease liabilities
Interest paid
Non-cash changes - interest
As at 31 December 2021
Reserved based
lending facility
USD’000
Lease liabilities
USD’000
49,123
(42,766)
-
-
(1,427)
2,366
7,296
(7,296)
-
150
(150)
-
62,272
(16,603)
891
(20,777)
(1,959)
1,959
25,783
(12,972)
2,854
(1,222)
1,222
15,665
175
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A
JADESTONE ENERGY 2021 ANNUAL REPORT
SIGNIFICANT ACCOUNTING POLICIES AND EXPLANATION NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
39
TRADE AND OTHER PAYABLES
Trade payables
Other payables
Accruals
Contingent payment
Supplementary payment payables
GST/VAT payables
2021
USD’000
2020
USD’000
26,847
7,627
29,699
3,000
1,907
10
69,090
10,131
2,004
20,047
-
-
10
32,192
Trade and other payables and accruals principally comprise amounts outstanding for trade and non-trade purchases and ongoing
costs. The average credit period taken for purchases is 30 days (2020: less than 30) days. For most suppliers, no interest is charged
on the payables in the first 30 days from the date of invoice. Thereafter, interest may be charged on outstanding balances at varying
rates of interest. The Group has financial risk management policies in place to ensure that all payables are settled within the pre-
agreed credit terms.
The contingent payment of US$3.0 million payable to SapuraOMV arose from the acquisition of the PenMal Assets (Note 19).
The contingent payment was paid in January 2022 as the annual average Brent crude price in 2021 exceeded US$65/bbl.
40
DERIVATIVE FINANCIAL INSTRUMENTS
The Group uses derivatives to manage its exposure to oil price fluctuations. Oil hedges are undertaken using swaps, and in some
cases, call options. All contracts are referenced to Dated Brent oil prices. During the year, the Group entered into commodity swaps
that are carried at fair value through profit or loss (“FVTPL”). The commodity swaps expired at the end of June 2021 and the Group
has not entered into any further commodity swaps. Accordingly, there are no outstanding derivative contracts for the year ended
31 December 2021.
Derivative financial liabilities
Carried at FVTPL
Commodity swaps
2021
USD’000
2020
USD’000
-
(471)
The fair values of the commodity swaps in 2020 were classified as Level 2 and calculated using market prices that the Group would
pay or receive to settle those swap contracts.
The following is a summary of the Group’s outstanding derivative contracts in 2020:
Contract quantity
Type of
contracts
Terms
Contract price
Contracts designated as cash flow hedges
27% of Group’s actual
2PD production
67% of swapped barrels in
2019 and in the nine months
to 30 September 2020
Commodity
capped
swap: swap
component
Commodity
capped
swap: call
component
Oct 2018 -
Sep 2020
US$78.26/bbl for Q4 2018,
US$71.72/bbl for 2019 and
US$68.45/bbl for the nine
months to 30 September 2020
Jan 2019 -
Sep 2020
US$80.00/bbl for the nine
months to 30 September
2019, then US$85.00/bbl to
September 2020
Cash flow
Hedge
classification
Cash flow
Fair value
asset at 31
December
2020
USD’000
-
-
Contracts that are not designated in hedge accounting relationships
31% of Group’s anticipated
planned 2P production from
January to March 2021
Commodity
swap
Jan -
March
2021
US$49.00/bbl
FVTPL
(471)
176
The Group’s October 2018 to September 2020 capped swap programme was designated as a cash flow hedge. Critical terms of the
capped swap (i.e., the notional amount, life and underlying oil price benchmark) and the corresponding Montara hedged sales were
highly similar. The Group performed a qualitative assessment of the effectiveness of the capped swap contracts and concluded that
the value of the capped swap and the value of the corresponding hedged items was systematically changed in opposite directions
in response to movements in the underlying commodity prices.
There was, however, a source of ineffectiveness in the capped swap arrangement, arising from the slight difference in the timing of
Montara’s production and the settlement of the capped swap arrangement versus the crude sales. The overall change in value in
the capped swap transaction arose from the hedge ineffectiveness amounted to a net loss of approximately US$4,000 in 2020, and
was included in the statement of profit or loss within “other expenses” (Note 11).
The following table details the information regarding the hedged items of the commodity capped swap contracts.
Hedged items
2020
Cash flow hedges
Forecast sales
Change in value used
for calculating hedge
ineffectiveness
USD’000
Balance in cash flow
hedge reserve for
continuing hedges
USD’000
Balance in cash flow
hedge reserve arising from
hedging relationships for
which hedge accounting is
no longer applied
USD’000
4
-
-
The following table details the effectiveness of the hedging relationships and the amounts reclassified from hedging reserve to
profit or loss:
Current period
hedging gain
recognised in
OCI
USD’000
Amount
of hedge
ineffectiveness
recognised in
profit or loss
USD’000
Line item in
profit or loss
in which hedge
ineffectiveness
is included
Amount reclassified
to profit or loss
due to hedged item
affecting profit or
loss
USD’000
Line item
in profit or
loss in which
reclassification
adjustment is
included
2020
Cash flow hedges
Forecast sales
18,265
4
Other expenses
31,360
Revenue
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177
JADESTONE ENERGY 2021 ANNUAL REPORT
SIGNIFICANT ACCOUNTING POLICIES AND EXPLANATION NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
41
FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL MANAGEMENT
Financial assets and liabilities
Current assets and liabilities
Management considers that due to the short-term nature of the Group’s current assets and liabilities, the carrying amounts equate
to their fair value.
Non-current assets and liabilities
The carrying amount of non-current assets and liabilities approximates their fair values.
2021
USD’000
2020
USD’000
Financial assets
At amortised cost
Trade and other receivables, excluding prepayments and GST/VAT receivables
Restricted cash
Cash and bank balances
Financial liabilities
At amortised cost
Trade and other payables, excluding GST/VAT payables
Lease liabilities
Borrowings
Contingent consideration for Lemang PSC acquisition
Contingent consideration for PenMal Assets acquisition
Derivative instruments carried at FVTPL
31,482
-
117,865
149,347
69,080
15,665
-
4,750
1,429
-
90,924
4,379
8,445
80,996
93,820
32,182
25,783
7,296
4,436
-
471
70,168
Fair values are based on management’s best estimates, after consideration of current market conditions. The estimates are
subjective and involve judgment, and as such are not necessarily indicative of the amount that the Group may incur in actual
market transactions.
Commodity price risk
The Group’s earnings are affected by changes in oil prices. The Group manages this risk by monitoring oil prices and entering into
commodity hedges against fluctuations in oil prices where considered appropriate.
Montara
The Group hedged 50% of its planned production volumes for the 24 months to 30 September 2020. The hedge was a capped
swap, providing downside price protection via swaps, while allowing for participation in higher commodity prices via purchased
call options. The call strike was set at US$80/bbl for the nine months to 30 September 2019 and US$85/bbl for the twelve months
to September 2020. The swap price was set at US$78.26/bbl for Q4 2018, US$71.72/bbl for 2019 and US$68.45/bbl for the nine
months to September 2020. Approximately two thirds of the swapped barrels in 2019 and 2020 had upside price participation via
purchased calls. The effective date of the hedge contracts was 1 October 2018.
In December 2020, the Group entered into a commodity swap arrangement to hedge 31% of its planned production volumes from
January to March 2021, to provide downside oil price protection. The swap price was set at US$49/bbl.
On 16 February 2021, the Group entered into a commodity swap arrangement to further hedge 31% of its planned production
volumes from April to June 2021. The swap price was set at US$61.40/bbl.
Commodity price sensitivity
The results of operations and cash flows from oil and gas production can vary significantly with fluctuations in the market prices of
oil and/or natural gas. These are affected by factors outside the Group’s control, including the market forces of supply and demand,
regulatory and political actions of governments, and attempts of international cartels to control or influence prices, among a range
of other factors.
The table below summarises the impact on profit/(loss) before tax, and on equity, from changes in commodity prices on the fair
value of derivative financial instruments. The analysis is based on the assumption that the crude oil price moves 10%, with all
other variables held constant. Reasonably possible movements in commodity prices were determined based on a review of recent
historical prices and current economic forecasted estimates.
178
Effect on the
result
before tax for the
year ended
31 December 2021
USD’000
Effect on other
comprehensive
income before tax
for the year ended
31 December 2021
USD’000
Effect on the
result
before tax for the
year ended
31 December 2020
USD’000
Effect on other
comprehensive
income before tax
for the year ended
31 December 2020
USD’000
Increase by 10%
Decrease by 10%
-
-
-
-
(1,348)
1,348
-
-
Foreign currency risk
Foreign currency risk is the risk that a variation in exchange rates between United States Dollars (“US Dollar”) and foreign currencies
will affect the fair value or future cash flows of the Group’s financial assets or liabilities presented in the consolidated statement of
financial position as at year end.
Cash and bank balances are generally held in the currency of likely future expenditures to minimise the impact of currency
fluctuations. It is the Group’s normal practice to hold the majority of funds in US Dollars, in order to match the Group’s revenue and
expenditures.
In April 2020, the Group entered into a series of forward exchange contracts under which it contracted to purchase AU$10.0 million
per month, from May to November 2020, at a fixed forward AU$/US$ exchange rate of 0.6344.
In addition to US Dollar, the Group transacts in various currencies, including Australian Dollar, Malaysian Ringgit, Vietnamese Dong,
Indonesian Rupiah, Singapore Dollar, New Zealand Dollar and British Pound Sterling.
Foreign currency sensitivity
Material foreign denominated balances were as follows:
Cash and bank balances
Australian Dollars
Malaysian Ringgit
Trade and other receivables
Australian Dollars
Malaysian Ringgit
Trade and other payables
Australian Dollars
Malaysian Ringgit
2021
USD’000
2020
USD’000
6,027
4,622
2,706
48
43,219
15,094
8,043
-
1,547
-
21,233
-
A strengthening/weakening of the Australian dollar and Malaysian Ringgit by 10%, versus the functional currency of the Group,
is estimated to result in the net carrying amount of Group's financial assets and financial liabilities as at year end decreasing/
increasing by approximately US$4.5 million (2020: US$1.2 million), and which would be charged/credited to the consolidated
statement of profit or loss.
Interest rate risk
The Group’s interest rate exposure arises from some of its cash and bank balances. The Group’s other financial instruments are
non-interest bearing or fixed rate, and are therefore not subject to interest rate risk.
The Group holds some of its cash in interest bearing accounts and short-term deposits. Interest rates currently received are at
relatively low levels. Accordingly, a downward interest rate movement would not cause significant exposure to the Group.
On 2 August 2018, the Group entered into a reserve based lending agreement with the Commonwealth Bank of Australia and
Société Générale to borrow US$120.0 million, repayable quarterly to 31 March 2021. The loan was fully drawn down on 28
September 2018 and incurred interest at LIBOR plus 3%. The loan incurred establishment and other costs of US$3.2 million, which
were offset against the proceeds received.
Based on the carrying value of the reserve based loan as at 31 December 2020, if interest rates had increased or decreased by 1%
and all other variables remained constant, the impact on the Group’s quarterly net income/(loss) before tax would be immaterial.
The loan was fully repaid on 31 March 2021.
179
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A
JADESTONE ENERGY 2021 ANNUAL REPORT
SIGNIFICANT ACCOUNTING POLICIES AND EXPLANATION NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
Credit risk
Credit risk represents the financial loss that the Group would suffer if a counterparty in a transaction fails to meet its obligations in
accordance with the agreed terms.
The Group actively manages its exposure to credit risk, granting credit limits consistent with the financial strength of the Group’s
counterparties and customers, requiring financial assurances as deemed necessary, reducing the amount and duration of credit
exposures, and close monitoring of relevant accounts.
The Group trades only with recognised, creditworthy third parties.
The Group’s current credit risk grading framework comprises the following categories:
Category
Description
Basis for recognising expected credit losses
(“ECL”)
Performing
The counterparty has a low risk of default and does not
have any past due amounts.
12-month ECL
Doubtful
In default
Write-off
Amount is > 30 days past due or there has been a
significant increase in credit risk since initial recognition.
Lifetime ECL – not credit-impaired
Amount is > 90 days past due or there is evidence
indicating the asset is credit-impaired.
Lifetime ECL – credit-impaired
There is evidence indicating that the debtor is in severe
financial difficulty and the Group has no realistic prospect
of recovery.
Amount is written off
The table below details the credit quality of the Group’s financial assets and other items, as well as maximum exposure to credit risk
by credit risk rating grades:
External
credit
rating
Note
Internal
credit rating
12-month
(“12m”) or
lifetime ECL
Gross
carrying
amount (i)
USD’000
Loss
allowance
USD’000
Net carrying
amount
USD’000
2021
Cash and bank balances
Trade receivables
Other receivables
Amount due from joint
arrangement partners
2020
Cash and bank balances
Trade receivables
Other receivables
29
28
28
28
29
28
28
* The amount is negligible.
n.a
n.a
n.a
n.a
n.a
n.a
n.a
Performing
12m ECL
(i)
Lifetime ECL
Performing
Performing
12m ECL
12m ECL
Performing
12m ECL
(i)
Lifetime ECL
Performing
12m ECL
117,865
9,143
13,281
2,203
89,441
106
4,273
-*
-*
-*
-*
-*
-*
-*
117,865
9,143
13,281
2,203
89,441
106
4,273
180
(i) For trade receivables, the Group has applied the simplified approach in IFRS 9 to measure the loss allowance at lifetime ECL. The
Group determines the expected credit losses on these items by using specific identification, estimated based on historical credit
loss experience based on the past due status of the debtors, adjusted as appropriate to reflect current conditions and estimates
of future economic conditions. Accordingly, the credit risk profile of these assets is presented based on their past due status in
terms of specific identification.
As at 31 December 2021, total trade receivables amounted to US$9.1 million (2020: US$0.1 million). The balance in 2021 and
2020 had been fully recovered in 2022 and 2021, respectively.
The concentration of credit risk relates to the Group’s single customer with respect to oil sales in Australia, and a different single
customer for oil and gas sales in Malaysia. Both customers have an A2 credit rating (Moody’s). All trade receivables are generally
settled 30 days after sale date. In the event that an invoice is issued on a provisional basis, the final reconciliation is paid within
3 to 14 days from the issuance of the final invoice, largely mitigating any credit risk.
The Group recognises lifetime ECL for trade receivables. The ECL on these financial assets are estimated based on days past
due, by applying a percentage of expected non-recoveries for each group of receivables. As at year end, ECL from trade
receivables are expected to be insignificant.
The Group measures the loss allowance for other receivables and amount due from joint arrangement partners at an amount
equal to 12-months ECL, as there is no significant increase in credit risk since initial recognition. ECL for other receivables are
expected to be insignificant.
The credit risk on cash and bank balances is limited because counterparties are banks with high credit ratings assigned by
international credit rating agencies. The banks are also regulated locally, and with no history of default.
The maximum credit risk exposure relating to financial assets is represented by their carrying value as at the reporting date.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet all of its financial obligations as they become due. This includes the
risk that the Group cannot generate sufficient cash flow from producing assets, or is unable to raise further capital in order to meet
its obligations.
The Group manages its liquidity risk by optimising the positive free cash flow from its producing assets, on-going cost reduction
initiatives, merger and acquisition strategies, and bank balances on hand.
The Group’s net loss after tax for the year was US$13.7 million (2020: US$60.2 million, inclusive of non-cash SC56 impairment of
US$50.4 million). Operating cash flows before movements in working capital and net cash generated from operating activities
for the year ended 31 December 2021 was US$96.6 million and US$102.1 million (2020: US$86.9 million and US$84.6 million)
respectively. The Group’s net current assets remained positive at US$80.0 million as at 31 December 2021 (2020: US$79.5 million).
The Group believes it has sufficient liquidity to meet all reasonable scenarios of operating and financial performance for the next 18
months.
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181
JADESTONE ENERGY 2021 ANNUAL REPORT
SIGNIFICANT ACCOUNTING POLICIES AND EXPLANATION NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
Non-derivative financial liabilities
The following table details the expected contractual maturity for non-derivative financial liabilities with agreed repayment periods.
The table below has been drawn up based on the undiscounted contractual maturities of the financial liabilities, including interest,
that will be paid on those liabilities, except where the Group anticipates that the cash flow will occur in a different period. The
adjustment column represents the estimated future cash flows attributable to the instrument included in the maturity analysis,
which are not included in the carrying amount of the financial liabilities on the consolidated statement of financial position, namely
interest expense.
Weighted
average
effective
interest rate
%
On
demand or
within
1 year
USD’000
Within 2
to 5
years
USD’000
More
than
5 years
USD’000
Adjustments
USD’000
Total
USD’000
2021
Non-interest bearing
Trade and other payables
Contingent consideration for
Lemang PSC acquisition
Contingent Consideration for
PenMal Assets acquisition
Fixed interest rate instruments
-
-
-
69,080
-
-
-
4,750
1,429
Lease liabilities
5.847
12,247
4,103
2020
Non-interest bearing
Trade and other payables
Contingent consideration for
Lemang PSC acquisition
Fixed interest rate instruments
Lease liabilities
Variable interest rate instruments
Borrowings
-
-
6.049
7.570
81,327
10,282
32,182
-
-
4,436
13,448
14,042
7,445
-
53,075
18,478
-
-
-
-
-
-
-
-
-
-
-
-
-
(685)
(685)
69,080
4,750
1,429
15,665
90,924
-
-
32,182
4,436
(1,707)
25,783
(149)
7,296
(1,856)
69,697
Non-derivative financial assets
The following table details the expected maturity for non-derivative financial assets. The inclusion of information on non-derivative
financial assets is necessary in order to understand the Group’s liquidity risk management, as the Group’s liquidity risk is managed
on a net asset and liability basis. The table has been drawn up based on the undiscounted contractual maturities of the financial
assets, including interest that will be earned on those assets, except where the Group anticipates that the cash flow will occur in a
different period. The adjustment column represents the estimated future cash flows attributable to the instrument included in the
maturity analysis, which are not included in the carrying amount of the financial assets on the consolidated statement of financial
position, namely interest income.
182
Weighted
average
effective
interest rate
%
On demand
or within 1
year
USD’000
Within
2 to 5 years
USD’000
Adjustments
USD’000
Total
USD’000
2021
Non-interest bearing
Trade and other receivables, excluding
prepayments and GST/VAT receivables
Variable interest rate instruments
Cash and bank balances
2020
Non-interest bearing
Trade and other receivables, excluding
prepayments and GST/VAT receivables
Variable interest rate instruments
Restricted cash
Cash and bank balances
* The effect of interest is not material.
Capital management
-
-*
-
-*
-*
31,482
117,865
149,347
4,379
8,445
80,996
93,820
-
-
-
-
-
-
-
-
-*
-*
-
-*
-*
-*
31,482
117,865
149,347
4,379
8,445
80,996
93,820
The Group manages its capital structure and makes adjustments to it, based on the funds available to the Group, in order to
support the acquisition, exploration and development of resource properties and the ongoing operations of its producing assets.
Given the nature of the Group’s activities, the Board of Directors works with management to ensure that capital is managed
effectively, and the business has a sustainable future.
The capital structure of the Group represents the equity of the Group, comprising share capital, merger reserve and share-based
payment reserve, as disclosed in Notes 30, 32 and 34, respectively.
To carry-out planned asset acquisitions, exploration and development, and to pay for administrative costs, the Group may utilise
excess cash generated from its ongoing operations and may utilise its existing working capital, and will work to raise additional
funds should that be necessary.
Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative
size of the Group, is reasonable. There were no changes in the Group’s approach to capital management during the year ended 31
December 2021. The Group is not subject to externally imposed capital requirements.
Borrowings
Cash and cash equivalents
Restricted cash
Cash less borrowings
2021
USD’000
-
117,865
-
117,865
2020
USD’000
(7,296)
81,996
7,445
82,145
Borrowings balance in 2020 related to the reserve based lending facility that was fully repaid in March 2021. The borrowings of
US$7.3 million was based on the effective interest method financing costs, and excludes derivatives, as detailed in Note 37. Cash
and cash equivalents in 2020 included the Montara assets’ minimum working capital cash balance of US$15.0 million required
under the reserve based lending facility, while restricted cash in 2020 comprised the US$7.4 million in the DSRA. The restricted cash
of US$7.4 million in 2020 excluded a US$1.0 million cash collateralised for a bank guarantee placed with the Indonesian regulator in
respect of the JSA entered by the Group in Indonesia because the bank guarantee was removable and can then be used to fund the
business.
The Group’s overall strategy remains unchanged from 2020.
183
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A
JADESTONE ENERGY 2021 ANNUAL REPORT
SIGNIFICANT ACCOUNTING POLICIES AND EXPLANATION NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
Fair value measurements
The Group discloses fair value measurements by level of the following fair value measurement hierarchy:
i. Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1);
ii.
Inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly
(Level 2); and
iii. Inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level 3).
Financial
assets/financial
liabilities
Fair value (USD’000) as at
2020
2021
Assets Liabilities Assets Liabilities
Fair
value
hierarchy
Valuation
technique(s)
and key input(s)
Significant
unobservable
input(s)
Relationship
of
unobservable
inputs to fair
value
Derivative financial instruments
1) Oil price
-
-
-
471
Level 2
swaps and
calls
(Note 40)
Others - contingent consideration from Lemang PSC acquisition
2) Contingent
-
4,750
-
4,436
Level 3
consideration
(Note 35)
Others - contingent consideration from PenMal Assets acquisition
3) Contingent
-
4,429
-
-
Level 3
consideration
(Notes 19, 35
and 39)
Third party valuations
based on market
comparable
information.
n.a.
n.a.
Based on the nature
and the likelihood
of the occurrence
of the trigger
events. Fair value is
estimated, taking into
consideration the
estimated future gas
production schedule,
forecasted Dated Brent
oil prices and Saudi CP
prices and respective
price volatility at the
end of the reporting
period, as well as the
effect of the time value
of money.
Gas production
schedule could
be changed
depending
on future
gas contract
negotiations.
Expected future
oil price volatility
is based on an
analysis of Dated
Brent oil price
and Saudi CP
price movements
as at acquisition
date.
A change in
gas production
schedule or
significant
increase in
Dated Brent
oil prices and
Saudi CP prices
would result
in a significant
increase in the
fair value.
Expected future
oil price volatility
is based on an
analysis of Dated
Brent oil price
movements as at
the Acquisition
Date.
A slight
increase in
Dated Brent
oil prices
would result
in a significant
increase in the
fair value and
vice versa.
Based on the nature
and the likelihood
of occurrence of the
trigger event. Fair
value is estimated
using future Dated
Brent oil price
forecasts at the end of
the reporting period,
taking into account the
time value of money
and volatility of oil
prices.
184
42
SEGMENT INFORMATION
Information reported to the Group’s Chief Executive Officer (the chief operating decision maker) for the purposes of resource
allocation is focused on two reportable/business segments driven by different types of activities within the upstream oil and gas
value chain, namely producing assets and secondly development and exploration assets. The geographic focus of the business is on
Southeast Asia (“SEA”) and Australia.
Revenue and non-current assets information based on the geographical location of assets respectively are as follows:
Producing assets
Australia
USD’000
SEA
USD’000
Exploration/
development
SEA
USD’000
Corporate
USD’000
Total
USD’000
2021
Revenue
Liquids revenue
Gas revenue
Production cost
DD&A
Administrative staff costs
Other expenses
Other income
Finance costs
Other financial gains
Profit/(Loss) before tax
Additions to non-current assets
Non-current assets
2020
Revenue
Liquids revenue
Production cost
DD&A
Administrative staff costs
Other expenses
Impairment of assets
Other income
Finance costs
Other financial gains
Profit/(Loss) before tax
Additions to non-current assets
Non-current assets
293,566
-
293,566
(182,001)
(75,848)
(13,364)
(14,970)
7,038
(7,452)
-
6,969
57,130
366,959
217,938
(105,338)
(84,024)
(10,029)
(15,068)
-
14,292
(12,625)
359
5,505
11,162
349,292
45,644
984
46,628
(24,522)
(3,621)
(1,433)
(2,466)
9
(875)
-
13,720
64,117
59,532
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(281)
(1,612)
(5,875)
76
(503)
266
(7,929)
4,744
90,938
-
-
(110)
(2,228)
(9,690)
(50,455)
1
(29)
-
(62,511)
27,706
97,838
-
-
-
-
(465)
(8,659)
(2,870)
559
(245)
-
(11,680)
183
719
-
-
(508)
(9,646)
(2,160)
-
12,083
(1)
-
(232)
914
945
339,210
984
340,194
(206,523)
(80,215)
(25,068)
(26,181)
7,682
(9,075)
266
1,080
126,174
518,148
217,938
(105,338)
(84,642)
(21,903)
(26,918)
(50,455)
26,376
(12,655)
359
(57,238)
39,782
448,075
Non-current assets as shown here comprises oil and gas properties, intangible exploration assets, right-of-use assets, other
receivables, restricted cash and plant and equipment used in corporate offices. Deferred tax assets are excluded from the
segmental note but included in the Group’s consolidated statement of financial position.
Revenues arising from producing assets arose from sales to the Group’s respective sole customer in Australia and Malaysia.
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A
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185
JADESTONE ENERGY 2021 ANNUAL REPORT
SIGNIFICANT ACCOUNTING POLICIES AND EXPLANATION NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
43
FINANCIAL CAPITAL COMMITMENTS
Certain PSC’s and service concessions’ have firm capital commitments. The Group has the following outstanding minimum
commitments:
SEA portfolio PSC operational commitments
Not later than one year
One to five years
More than 5 years
2021
USD’000
400
12,000
10,700
23,100
2020
USD’000
10,000
2,000
10,684
23,084
The SEA portfolio PSC operational commitments as at 31 December 2021 amounted to US$17.3 million (2020: US$ 17.3 million), and
relates to the minimum work commitment outstanding for the Block 46/07 PSC and the Lemang PSC. The operational commitments
also include training commitment of US$5.8 million (2020: US$5.8 million), for the Block 46/07 PSC, Block 51 PSC and the PenMal
Assets.
Work commitment
Under the terms of the Block 46/07 PSC, Jadestone is committed to drill one more appraisal well on the block. The Group plans to
drill an appraisal well on the Nam Du field to facilitate transition of 3C resource to 2C status. This well would be retained for future
use as a Nam Du gas producer. Following the Group’s announcement to delay the project in 2020, the Group obtained Vietnam
Government approval on 14 September 2021 for a further extension of three years to 29 June 2024 in order to align drilling of the
appraisal well with development of Nam Du/U Minh. Discussions are continuing with Petrovietnam to agree a gas production profile
for the development, as a precursor to a gas sales contract, and ultimately attaining government sanction for the field development.
As part of the acquisition under the terms of the Lemang PSC, the Group, as the operator, has inherited unfulfilled work
commitments of US$7.3 million consisting of one exploration well and a 3D seismic programme. The work commitments should
have been completed during the exploration phase of the PSC by the previous owner. It has been agreed with the Indonesian
regulator that the work commitments can be completed after first gas in 2024 but before the end of 2026.
Training commitment
Under the terms of the Block 46/07 PSC and Block 51 PSC, the Group commits to pay an annual training commitment amount
of US$0.4 million to Petrovietnam until the expiration of the respective PSC licence. The training commitment amount is for the
purpose of developing the local employees in the oil and gas industry.
As part of the acquisition under the terms of the PenMal Assets, the Group has inherited net training commitments of US$0.3
million and US$0.1 million for PM323 PSC and PM318 PSC, respectively. Funds provided with respect to this training commitment
are applied to the development of local employees in the oil and gas industry. The training commitments are required to be
completed before the expiration of the respective PSC.
Capital commitments
The Group has the following capital commitments for expenditure that were contracted for at the end of the reporting year but not
recognised as liabilities for Stag and Montara:
Not later than one year
2021
USD’000
5,254
2020
USD’000
8,977
The capital commitment of US$5.3 million as at 2021 year end predominately arose from long leads for 50H and 51H drilling
programme at Stag, which is scheduled to occur in the middle of 2022. The 2020 capital commitment of US$9.0 million mainly
related to drilling of Montara H6 infill well and Skua 12 well planning expenditure.
186
44
CONTINGENT LIABILITY
Legal disputes
The Group has an ongoing legal dispute with a third party contractor over a long term contract. The Group disputes the claims
from the third party contractor and requested a refund for an overpaid milestone payment against the contractor. The contractor
commenced a legal proceeding against the Group in the Singapore High Court that ruled in favour of Jadestone. Following, the
contractor appealed the High Court decision and the appeal was dismissed. The contractor may initiate arbitration proceeding
against Jadestone in the future but has not commenced an action as at the reporting date. The Group may be liable for US$6.0
million in the future, if the contractor initiates the arbitration proceeding and succeed. At this time, the management does not
consider it to be probable and no provision is recognised in the financial statements.
45
EVENTS AFTER THE END OF THE REPORTING PERIOD
Russian military actions
On 24 February 2022 Russia commenced military actions against Ukraine. Following, multiple countries around the world have
imposed different forms of sanctions against Russia. The Group has assessed the sanctions imposed by the countries that the
Group is operating within and concluded that the sanctions had no impact to the operations of the Group.
The Group is monitoring the rapidly evolving sanctions situation and will perform regular assessments to identify any potential
impact in the future.
Suspension of PenMal Assets’s non-operated floating production storage and offloading (“FPSO”)
In February 2022, the Bunga Kertas FPSO, deployed at the PenMal Assets’ non-operated assets, had its class suspended, resulting
in the cessation of production. The operator of the non-operated assets anticipates that the FPSO will have its class reinstated by
July 2022 and production will be resumed by then accordingly.
Net Zero greenhouse gas emissions target update
On 1 June 2022, the Company announced its commitment to Net Zero Scope 1 and 2 greenhouse gas emissions from its operated
assets by 2040. A key element of the Company’s Net Zero commitment will be the development of detailed emissions reduction
roadmaps for its operated assets, which will be published in 2023. Jadestone's corporate strategy of maximising recovery from
existing fields while minimising their emissions, and a move towards more gas in the portfolio over time, is both responsible and
appropriate in the context of managing climate change. This also strikes the right balance in delivering secure and affordable
energy in parts of Southeast Asia where either an energy shortage exists or where coal may be used as an alternative. Jadestone
believes it can play an important role during this period of energy transition, while also demonstrating resilience and longevity to
its business. It is not possible to estimate the financial effect at this time.
46
RELATED PARTY TRANSACTIONS
Internal reorganisation
Pursuant to the internal reorganisation, on 23 April 2021, a transfer of beneficial interest agreement was entered into between
Jadestone Energy Inc. (“JEI”), Jadestone Energy Holdings Limited (“JEHL”) and Daniel Young, Chief Financial Officer. Under the
transfer of beneficial interest agreement, JEI transferred the beneficial interest in 100,000 of the Company’s shares to Daniel Young,
with a corresponding reduction in the issuance of any new JEP shares due to Daniel Young in exchange for his existing JEI shares
transferred to JEHL.
The purpose of this transfer was to ensure that the adjusted total outstanding number of Jadestone Energy plc shares of
463,649,477 at the completion of the internal reorganisation was exactly equal to the number of outstanding Jadestone Energy Inc.
shares of 463,649,477 immediately prior to the completion of the reorganisation.
Compensation of key management personnel
Short-term benefits
Other benefits
Share-based payments
2021
USD’000
2020
USD’000
7,741
1,295
692
9,728
6,440
1,006
951
8,397
The total remuneration of key management members in 2021 (including salaries and benefits) was US$9.7 million (2020: US$8.4
million) and recognised as part of the Group’s administrative staff costs as disclosed in Note 8.
187
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JADESTONE ENERGY 2021 ANNUAL REPORT
SIGNIFICANT ACCOUNTING POLICIES AND EXPLANATION NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
Compensation of Directors
Short-term
benefits(a)
USD’000
Other
benefits(a)
USD’000
Share-based
payments
USD’000
Total
compensation
USD’000
2021
A. Paul Blakeley
Daniel Young
Dennis McShane
Iain McLaren
Robert Lambert
Cedric Fontenit
Lisa Stewart
David Neuhauser
2020
A. Paul Blakeley
Daniel Young
Dennis McShane
Iain McLaren
Robert Lambert
Cedric Fontenit
Lisa Stewart
David Neuhauser
1,367
748
155
105
95
95
90
80
2,735
1,372
696
119
79
70
66
74
57
148
210
-
-
-
-
-
-
358
100
190
-
-
-
-
-
-
2,533
290
302
(75)
10
7
7
7
13
7
278
282
138
18
11
11
10
12
11
493
1,817
883
165
112
102
102
103
87
3,371
1,754
1,024
137
90
81
76
86
68
3,316
(a) Short-term benefits comprise salary, director fee as applicable, performance pay, pension and other allowances. Other benefits
comprise benefits-in-kind.
188
Jadestone Energy plc
COMPANY STATEMENT OF FINANCIAL POSITION
(Company Registration Number: 13152520)
as at 31 December 2021
Notes
USD’000
Assets
Non-current asset
Investment in subsidiary
Loan to a subsidiary
Total non-current asset
Current assets
Amount owing by subsidiaries
Cash and cash equivalents
Total current assets
Total assets
Equity and liabilities
Equity
Capital and reserve
Share capital
Merger reserve
Share-based payment reserve
Retained earnings
Total equity
Liabilities
Current liabilities
Other payables and accruals
Amount owing to a subsidiary
Total current liabilities
Total liabilities
Total equity and liabilities
During the period, the Company made a loss after tax of US$7.0 million.
5
7
7
8
9
7
25,905
365,598
391,503
4,812
2,912
7,724
399,227
559
61,068
25,936
306,408
393,971
212
5,044
5,256
5,256
399,227
The financial statements were approved by the Board of Directors and authorised for issue on 3 June 2022. They were signed on its
behalf by:
A. Paul Blakeley
Director
189
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JADESTONE ENERGY 2021 ANNUAL REPORT
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD 22 JANUARY 2021 (DATE OF INCORPORATION) TO 31 DECEMBER 2021
Jadestone Energy plc
COMPANY STATEMENT OF CHANGES IN EQUITY
for the period 22 January 2021 (date of incorporation) to 31 December 2021
Share
capital
USD’000
Merger
reserve
USD’000
Share-based
payments
reserve
USD’000
Retained
earnings
USD’000
-
25,493
31
412
-
-
-
-
-
-
(7,745)
-
321,117
Total
USD’000
68
25,562
31
343
(7,745)
382,676
-
25,936
313,372
400,935
-
(6,964)
(6,964)
61,068
25,936
306,408
393,971
-
-
-
-
-
61,068
-
61,068
-
As at incorporation date, 22 January 2021
Transfer of share-based payment reserve to the
Company following internal reorganisation
Share-based compensation:
Company
Subsidiaries
Dividend paid
Shares issued
Capital reduction
Total transactions with owners
Loss and total comprehensive income for the period
Balance as at 31 December 2021
68
-
-
-
-
321,608
(321,117)
559
-
559
190
NOTES TO THE FINANCIAL STATEMENTS
For the period 22 January 2021 (date of incorporation) to 31 December 2021
1
CORPORATE INFORMATION
The Company was incorporated on 22 January 2021 in the United Kingdom and registered in England and Wales. Its registered
office is Suite 1, 3rd Floor, 11 - 12 St James's Square, London SW1Y 4LB.
The Company’s ordinary shares are listed on AIM, a market regulated by the London Stock Exchange plc.
The principal activity of the Company is that of investment holding in the production and exploration of oil and gas. The financial
statements cover the period 22 January 2021 (date of incorporation) to 31 December 2021.
2
BASIS OF PREPARATION
The Company meets the definition of a qualifying entity under FRS 100, and as such these financial statements have been prepared
in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework (FRS 101). The financial statements have been
prepared under the historical cost convention.
As permitted by s408 of the Companies Act 2006 the Company has elected not to present its own statement of profit or loss and
other comprehensive income for the period. The loss attributable to the Company is disclosed in the footnote to the Company’s
statement of financial position. The auditor’s remuneration for the audit is disclosed in Note 12 to the consolidated financial
statements. The Company has also applied the following disclosure exemptions under FRS 101:
l paragraphs 45(b) and 46 to 52 of IFRS 2 Share-based Payment (details of the number and weighted average exercise prices of
share options, and how the fair value of goods or services received was determined), as equivalent disclosures are included
within the consolidated financial statements;
l all requirements of IFRS 7 Financial Instruments: Disclosures, as equivalent disclosures are included in the consolidated financial
statements;
l paragraphs 91 to 99 of IFRS 13 Fair Value Measurement (disclosure of valuation techniques and inputs used for fair value
measurement of assets and liabilities);
l paragraph 38 of IAS 1 Presentation of Financial Statements - the requirement to disclose comparative information in respect of:
– paragraph 79(a)(iv) of IAS 1 (a reconciliation of the number of shares outstanding at the beginning and end of the period);
and
– paragraph 73(e) of IAS 16 Property, Plant and Equipment (reconciliations between the carrying amount at the beginning and
end of the period).
l
IAS 7 Statement of Cash Flows;
l paragraphs 30 and 31 of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors (the requirement for the disclosure
of information when an entity has not applied a new IFRS that has been issued but is not yet effective); and
l paragraph 17 of IAS 24 Related Party Disclosures (key management compensation), and the other requirements of that standard
to disclose related party transactions entered into between two or more members of a group, provided that any subsidiary
which is a party to the transaction is wholly owned by such a member.
3
ACCOUNTING POLICIES
The Company’s accounting policies are aligned with the Group’s accounting policies as set out within the consolidated financial
statements, with the addition of the following:
Investment in subsidiaries
Investments in subsidiaries are held at cost less any accumulated provision for impairment losses. Investment in subsidiaries also
consist of capital contribution by the Company to its subsidiaries by assuming the ownership of the LTIP awards previously granted
by the former parent company of the Group following the completion of internal reorganisation on 23 April 2021. The share-based
payment reserve of the former parent company as at 23 April 2021 was transferred to the Company.
4
CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
In the process of applying the Company’s accounting policies, the Directors are of the opinion that there are no instances of
application of judgement which are expected to have a significant effect on the amounts recognised in the financial statements.
The Directors also believe that there are no key assumptions made concerning the future, and other key sources of estimation
uncertainty at the end of reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of
assets and liabilities within the next financial year.
191
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JADESTONE ENERGY 2021 ANNUAL REPORT
JADESTONE ENERGY PLC NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD 22 JANUARY 2021 (DATE OF INCORPORATION) TO 31 DECEMBER 2021
5
INVESTMENT IN SUBSIDIARIES
Unquoted share, at cost
Transfer of share-based payment reserve to the Company following internal reorganisation
Share-based compensation at subsidiaries
USD’000
-*
25,493
412
25,905
25,905
* Rounded to nearest thousand.
Details of the direct and indirect investments the Company holds are as follows:
Name of the company
Direct
% voting
rights and
ordinary
shares held
2021
% voting
rights and
ordinary
shares held
2020
Place of
incorporation
Nature of business
Jadestone Energy Holdings Ltd1
England and Wales
Indirect
Jadestone Energy (Australia) Pty Ltd2
Jadestone Energy (Australia Holdings) Pty Ltd2
Jadestone Energy (Eagle) Pty Ltd2
Jadestone Energy Inc.3
Jadestone Energy International Holdings Inc.4
Jadestone Energy (Lemang) Pte Ltd5
Jadestone Energy Ltd6
Australia
Australia
Australia
Canada
Canada
Singapore
Bermuda
Jadestone Energy (New Zealand) Ltd7
New Zealand
Jadestone Energy (New Zealand Holdings) Ltd7
New Zealand
Jadestone Energy (Ogan Komering) Ltd8
Mitra Energy (Philippines SC- 56) Ltd6
Mitra Energy (Philippines SC- 57) Ltd9
Jadestone Energy (PM) Inc.10
Jadestone Energy (Singapore) Pte Ltd5
Jadestone Energy Sdn Bhd11
Canada
Bermuda
BVI
Bahamas
Singapore
Malaysia
Jadestone Energy UK Services Ltd1
England and Wales
Jadestone Energy (Vietnam) Pte Ltd5
Mitra Energy (Indonesia BONE) Ltd9
Mitra Energy (Vietnam 05-1) Pte Ltd5
Mitra Energy (Vietnam Nam Du) Pte Ltd5
Mitra Energy (Vietnam Tho Chu) Pte Ltd5
Singapore
BVI
Singapore
Singapore
Singapore
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
-*
Investment holdings
100
100
100
100
100
100
100
100
100
100
100
100
-**
100
100
-***
100
100
100
100
100
Production of oil & gas
Investment holdings
Production of oil & gas
Investment holdings
Investment holdings
Exploration
Investment holdings
Production of oil & gas
Investment holdings
Production of oil & gas
Exploration
Exploration
Production of oil & gas
Investment holdings
Administration
Administration
Exploration
Exploration
Exploration
Exploration
Exploration
Registered office addresses:
1 Suite 1, 3Rd Floor 11 - 12 St James's Square London SW1Y 4LB
2 Atrium Building Level 2 168-170 St Georges Terrace, Perth WA 6000, Australia
3 10th Floor, 595 Howe St. Vancouver BC V6C 2T5 Canada
4 Suite 2600, Oceanic Plaza 1066 West Hastings St Vancouver, British Columbia V6E 3X1
5 3 Anson Road #13-01, Springleaf Tower, Singapore 079909
6 3rd Floor - Par la Ville Place, 14 Par la Ville Road, Hamilton HM08, Bermuda
7 Bell Gully, 171 Featherston Street, Wellington Central, Wellington, 6011, New Zealand
8 1605 Shelbourne St SW Calgary, Alberta T3C 2L2
9 Palm Grove House, P.O. Box 438, Road Town, Tortola, British Virgin Islands
10 Ocean Centre, Montagu Foreshore, East bay Street, P.O. Box SS-19084, Nassau, Bahamas
11 Level 15-2, Bangunan Faber Imperial Court, Jalan Sultan Ismail, 50250, Kuala Lumpur, Malaysia
*
Jadestone Energy Holdings Ltd was incorporated on 22 January 2021 for investment holdings purpose.
** Jadestone Energy (PM) Inc. was acquired by the Group from the PenMal Assets acquisition.
*** Jadestone Energy UK Services Ltd was incorporated on 19 April 2021 for administrative purposes.
192
6
STAFF NUMBER AND COSTS
The Company has one employee employed under the Company during the period.
The aggregate remuneration comprised:
Wages and salaries
Social security costs
Defined contribution pension costs
7
RELATED PARTY TRANSACTIONS
USD’000
104
4
-
108
During the period, the Company entered into a loan with its subsidiary, Jadestone Energy Holdings Limited, for the purpose of
recovering the amount of the consideration shares issued by the Company to former Jadestone Energy Inc. shareholders as part
of the internal reorganisation exercise which was completed on 23 April 2021. The loan is non-interest bearing and repayable on
demand or at any time, as agreed with the Company, before 21 April 2031.
Amount owing by subsidiaries are mainly related to payments on behalf, and a receipt on behalf of the Company by a subsidiary
for the proceeds from issuance of shares during the period. The amount owing by subsidiaries are non-trade in nature, unsecured,
non-interest bearing and repayable on demand.
Amount owing to a subsidiary is mainly related to advances received for the purpose of depositing the funds into the Company’s
bank account. The amount owing to subsidiaries are non-trade in nature, unsecured, non-interest bearing and repayable on
demand.
8
SHARE CAPITAL
Issued and fully paid
As at incorporation date, 22 January 2021, at £1 each
Sub-division of shares, at £0.50 each
Ordinary shares issued during the period, at £0.50 each
Capital reduction, at £0.499 each
As at 31 December 2021
No. of shares
USD’000
50,000
50,000
464,981,238
-
465,081,238
68
-
321,608
(321,117)
559
On 6 April 2021, the Company sub-divided its ordinary shares into 100,000 units of share, at £0.50 each.
On 4 May 2021, the High Court of Justice, Business and Property Court, Companies Court in England and Wales approved the
reduction of share capital of the Company pursuant to section 648 of the Act by cancelling the paid-up capital of the Company
to the extent of 49.9 pence on each ordinary share of £0.50 in the issued share capital of the Company. The effective date of the
capital reduction was 6 May 2021.
9
OTHER PAYABLES
Other payables
Accruals
USD’000
1
211
212
Other payables and accruals principally comprise amounts outstanding for non-trade related business expenditures. The average
credit period is less than 30 days. For most suppliers, no interest is charged on the payables in the first 30 days from the date of
invoice. Thereafter, interest may be charged on outstanding balances at varying rates of interest. The Company has financial risk
management policies in place to ensure that all payables are settled within the pre-agreed credit terms.
193
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JADESTONE ENERGY 2021 ANNUAL REPORT
JADESTONE ENERGY PLC NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD 22 JANUARY 2021 (DATE OF INCORPORATION) TO 31 DECEMBER 2021
10
EVENTS AFTER THE END OF THE REPORTING PERIOD
Russian military actions
On 24 February 2022 Russia commenced military actions against Ukraine. Following, multiple countries around the world have
imposed different forms of sanctions against Russia. The Group has assessed the sanctions imposed by the countries that the
Group is operating within and concluded that the sanctions had no impact to the operations of the Group.
The Group is monitoring the rapidly evolving sanctions situation and will perform regular assessments to identify any potential
impact in the future.
Net Zero greenhouse gas emissions target update
On 1 June 2022, the Company announced its commitment to Net Zero Scope 1 and 2 greenhouse gas emissions from its operated
assets by 2040. A key element of the Company’s Net Zero commitment will be the development of detailed emissions reduction
roadmaps for its operated assets, which will be published in 2023. Jadestone's corporate strategy of maximising recovery from
existing fields while minimising their emissions, and a move towards more gas in the portfolio over time, is both responsible and
appropriate in the context of managing climate change. This also strikes the right balance in delivering secure and affordable
energy in parts of Southeast Asia where either an energy shortage exists or where coal may be used as an alternative. Jadestone
believes it can play an important role during this period of energy transition, while also demonstrating resilience and longevity to its
business. It is not possible to estimate the financial effect at this time.
194
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195
JADESTONE ENERGY 2021 ANNUAL REPORT
Additional
information
198 - 199 Oil and gas reserves
200 - 201 Report on payments to Governments for the year ended 31 December 2021
202 - 203 Glossary
204
Shareholder information
196
JADESTONE ENERGY 2021 ANNUAL REPORT
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197
ADDITIONAL INFORMATION
Oil and gas reserves
Total Proved plus Probable reserves (net, mmboe)
Australia1 Malaysia2,3,4
Indonesia
Vietnam Total Group
Opening balance, 1 January 2021
Acquisitions
Technical revisions
Production
Ending balance, 31 December 2021
37.1
0.0
0.1
(3.7)
33.5
-
12.5
0.9
(2.2)
11.2
-
-
-
-
-
-
-
-
-
-
37.1
12.5
1.0
(5.9)
44.7
As at 31 December 2021, the Group had proved plus probable oil reserves (“2P reserves”) of 44.7 mmboe, a 20% increase on the
end-2020 figure of 31.7 mmbbls. The primary driver of the increase was the addition of 11.2 mmboe at year-end 2021 in respect of
the PenMal Assets acquisition during the year. The combined year-on-year reduction in the reserves at the Stag and Montara fields
reflected production during the year. ERC Equipoise Limited independently evaluated the Group’s year-end 2021 reserves.
Total 2C Contingent Resources (net, mmboe)
Australia
Malaysia
Indonesia5
Vietnam6
Total Group
Opening balance, 1 January 2021
Production
Acquisitions
Technical revisions
Ending balance, 31 December 2021
-
-
-
-
-
-
-
-
-
-
16.8
93.9
110.7
-
-
-
-
-
-
-
-
-
16.8
93.9
110.7
The Group's best case contingent resources (“2C resources”) were unchanged year-on-year at 110.7 mmboe. Of this figure, the
Akatara gas field development comprises 16.8 mmboe. The Group anticipates that the Akatara gas field 2C resources will be
converted to 2P reserves following development sanction of the project.
1 Proven and Probable Reserves for Jadestone's Australian assets have been prepared in accordance with the Canadian Oil and Gas Evaluation (“COGE”)
Handbook as the standard for classification and reporting. Jadestone does not believe that there are significant differences between the COGE
standard and the 2018 guidelines endorsed by SPE, WPC, AAPG and SPEE Petroleum Resource Management System.
2 Proven and Probable Reserves for Jadestone's Malaysia assets have been prepared in accordance with the 2018 guidelines endorsed by SPE, WPC,
AAPG and SPEE Petroleum Resource Management System.
3 Assumes oil equivalent conversion factor of 6,000 scf/boe.
4
5
6
The acquired 2P Reserves in Malaysia are based on an effective date of 1 January 2021. As such, the production figure of 2.2 mmboe in the table above
reflects production over the calendar year 2021. Jadestone's reported production for 2021 of 12,545 boe/d includes production from the PenMal
Assets from the completion of the assets (1 August 2021). The positive revision of 0.9 mmboe reflects an extension of economic life on the back of
higher oil prices.
Lemang PSC 2C resources based on ERCE Competent Person's Report effective 31 December 2020.
Vietnam 2C resources based on ERCE Competent Person's Report effective 31 December 2017.
198
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Licence Interests
Block
Licence
Acreage
Fields
Region
Location
Water
depth
Operator
Working
interest
Australia
Montara
AC/L7,
AC/L8
672km2
Montara, Swift/
Swallow, Skua
Timor Sea
Offshore
77m
Jadestone
100%
Stag
WA-15-L
160km2
Stag
Carnarvon Basin
Offshore
47m
Jadestone
100%
Malaysia
PM323
PM323
1,304km2
East Belamut,
Chermingat,
West Belamut
Malay Basin
Offshore
72m
Jadestone
60%
PM329
PM329
387km2
East Piatu
Malay Basin
Offshore
63m
Jadestone
PM318/
AAKBNLP
PM318/
AAKBNLP
1,698km2
North Lukut,
Penara, Puteri
Malay Basin
Offshore
59-70m
Petronas
70%
50%
Indonesia
Lemang
Vietnam
Lemang PSC
743km2
Akatara
South Sumatra
Onshore
n/a
Jadestone
90%
Block 46/07
Block 46/07
2,622km2
Nam Du
Block 51
Block 51
887km2
U Minh, Tho Chu
Malay/Tho Chu
Basin
Malay/Tho Chu
Basin
Offshore
48m
Jadestone
100%
Offshore
64m
Jadestone
100%
Pending acquisition1
Block
Licence
Acreage
Fields
Region
Location
Water
depth
Operator
Working
interest
New Zealand
Maari
Permit 38160
34km2
Maari, Manaia
Taranaki Basin
Offshore
100m
Jadestone1
69%
1 Subject to completion of acquisition and transfer of operatorship. As of 28 February 2021, the Maari field had independently assessed 2P reserves of
10.6 mmbbls, net to the 69% working interest. The Maari field produced 1,480,305 barrels of oil (gross) between 1 March 2021 and 31 December 2021,
or 1,021,410 net to the 69% working interest.
199
JADESTONE ENERGY 2021 ANNUAL REPORT
ADDITIONAL INFORMATION
200
Report on payments to
Governments for the year
ended 31 December 2021
This report sets out details of the payments made to governments by Jadestone
Energy plc and its subsidiary undertakings for the year ended 31 December 2021.
This information is required under the Disclosure and
Transparency Rules of the UK Financial Conduct Authority and
is provided in accordance with Jadestone’s interpretation of
the Industry Guidance issued for the UK’s Report on Payments
to Governments Regulations 2014, as amended in December
2015 (the “Regulations”).
The Regulations require payments to governments to be
disclosed on the following basis:
l Categories
i. production entitlements;
ii. taxes levied on the income, production or profits
of companies (excluding taxes levied on consumption
such as value added taxes, personal income taxes
or sales taxes);
iii. royalties;
iv. dividends (other than where paid to the government
as an ordinary shareholder which is paid on the same
terms as the other ordinary shareholders);
v. signature, discovery and production bonuses;
vi. licence/rental fees; and
vii. payments for infrastructure improvements.
l Single payments of less than GBP86,000 need not be
disclosed in the report, nor does any payment forming part
of a series of related payments within a financial year where
the total amount is less than GBP86,000.
l Where payments in kind are made to a government, the
report must state their value and, where applicable, the
volume of those payments.
'government' means any national, regional or local
authority of a country, and includes a department, agency
or undertaking that is a subsidiary undertaking where the
authority is the parent undertaking.
l
The following tables set out the Group’s payments to
governments for 2021 based on the principles above.
Payments to governments in Indonesia and New Zealand were
below the reporting threshold.
All figures are in US$, with original amounts translated at the
average exchange rate for the prior month.
Payments by payee
Country
Payee
Australia
Malaysia
Vietnam
Total
Australian Tax Office
NOPSEMA
Bureau of Meteorology
PETRONAS
Malaysia Tax Office
Petrovietnam
Payment by project
Country
Project
Australia
Malaysia
Vietnam
Total
Montara
Stag
Non-project related1
PM329
PM323
PM318
AAKBNLP
Block 46/07
Block 51
Fees
Taxes
Royalties
Totals
0
1,553,674
122,458
0
0
400,000
12,039,003
0
0
0
3,693,429
0
0
0
0
7,159,812
0
0
12,039,003
1,553,674
122,458
7,159,812
3,693,429
400,000
2,076,132
15,732,432
7,159,812
24,968,377
Fees
947,774
728,358
0
0
0
0
0
200,000
200,000
Taxes
Royalties
0
1,127,489
10,911,514
1,102,054
2,591,375
0
0
0
0
0
0
0
3,248,075
1,884,005
1,049,311
978,422
0
0
Totals
947,774
1,855,847
10,911,514
4,350,129
4,475,380
1,049,311
978,422
200,000
200,000
2,076,132
15,732,432
7,159,812
24,968,377
1 Australia tax plan instalments and pay as you go amounts during the year ended 31 December 2021.
201
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JADESTONE ENERGY 2021 ANNUAL REPORT
ADDITIONAL INFORMATION
2021 Annual Report glossary
2C resources,
2C
best estimate contingent resource, being
quantities of hydrocarbons which are estimated,
on a given date, to be potentially recoverable
from known accumulations but which are
not currently considered to be commercially
recoverable
DD&A
depletion, depreciation and amortisation
DFI
designated foreign issuer
direct energy
energy generated onsite at Company facilities
2P reserves,
2P
the sum of proved and probable reserves,
reflecting those reserves with 50% probability
of quantities actually recovered being equal or
greater to the sum of estimated proved plus
probable reserves
AAKBNLP
Abu, Abu Kecil, Bubu, North Lukut, and Penara
oilfields
AIM
Alternative Investment Market
the AIM Rules
the AIM Rules for Companies 2021
AGM
annual general meeting
ALARP
as low as reasonably practical
ANZECC/
ARMCANZ
Australian and New Zealand Environment and
Conservation Council/Agriculture and Resource
Management Council of Australia and New
Zealand.
APAC
the Asia-Pacific region
API
bbl
American Petroleum Institute gravity
barrel
bbls/d
barrels per day
BCSC
BMS
British Columbia Securities Commission
business management system
the Board
the board of directors of Jadestone Energy plc
boe/d
CAM
carbon
dioxide
equivalent
(or CO2-e)
carbon offsets
barrels of oil equivalent per day
competency assurance and management
standard unit used to compare and account for
emissions from various GHGs based on their
global warming potential
a reduction in GHG emissions or an increase in
carbon storage (e.g., through land restoration or
the planting of trees) that is used to compensate
for GHG emissions that occur elsewhere
CCWG
Climate Change Working Group
CEO
CFO
Chief Executive Officer
Chief Financial Officer
the Company
Jadestone Energy plc
COP
Conference of the Parties is the supreme decision
making body to the United Nations Framework
Convention on Climate Change. COP 21 was in
Paris and COP 26 was in Glasgow.
COVID-19
an infectious disease caused by the SARS-CoV-2
virus
CSR
corporate social responsibility
202
the Directors
the directors of Jadestone Energy plc
E&P
exploration and production
EBITDAX
earnings before interest tax, depreciation,
amortisation and exploration
EIA
EP
FDP
FPSO
HSE
HSEC
environmental impact assessment
environment plan
field development plan
floating production storage and offloading vessel
health, safety and environment
health, safety, environment and climate
HSE MS
health, safety and environment management
system
HSR
health and safety representatives
HSSEC
health, safety, social, environmental and climate
emissions
intensity
emissions intensity
EPCI
ESG
FID
engineering, procurement, construction
and installation
environmental, social and governance
final investment decision
fugitive
emissions
losses, leaks and other releases of gases such as
methane and carbon dioxide to the atmosphere
that are associated with industries producing
natural gas, oil and coal
FSO
GBp
GHG
floating storage and offloading vessel
British pence
Greenhouse gases, with three main gases
including carbon dioxide (CO2), methane (CH4)
and nitrous oxide N20.
GRI
Global Reporting Initiative
the Group
Jadestone Energy plc and its subsidiaries
GSA
GWP
HIPO
HR
IEA
gas sales agreement
global warming potential
Any incident or near miss that could, in other
circumstances, have realistically resulted in one
or more fatalities
human resources
International Energy Agency
IEA APS
IEA Announced Pledges Scenario
IEA NZE
IEA Net Zero Emissions Scenario
IEA SDS
IEA Sustainable Development Scenario
IEA STEPS
IEA Stated Policies Scenario
IEA WEO
IEA World Energy Outlook
IFRS
International Financial Reporting Standards
indirect
energy
energy generated offsite and purchased by the
Company
IOGP
IPCC
IPIECA
ISO
IT
International Association of Oil & Gas Producers
Intergovernmental Panel on Climate Change
originally the “International Petroleum Industry
Environmental Conservation Association”
International Organisation for Standardisation
information technology
Jadestone or
Jadestone plc
Jadestone Energy plc
kbopd
thousands of barrels of oil per day
kboepd
thousands of barrels of oil equivalent per day
KPIs
LMT
LPG
LTI
key performance indicators
likely material topics
liquified petroleum gas
long-term incentive or lost time injury
MACC
marginal abatement cost curve
MAR
mcf
M&A
Market Abuse Regulation
thousand cubic feet of natural gas
mergers and acquisitions
mmbbls/d
million barrels per day
mmboe
millions of barrels of oil equivalent
OHS
OIW
OMV
OPEC
OPEC+
occupational health and safety
oil-in-water
OMV Group
Organisation of Petroleum Exporting Countries
the 13 OPEC members and 10 of the world’s
major non-OPEC oil-exporting nations
the Paris
Agreement
a legally binding international treaty on climate
change.
PenMal
Assets
collectively, the assets acquired offshore
Peninsular Malaysia by Jadestone in 2021
PETRONAS
Petroliam Nasional Berhad
produced
water
water produced from the reservoir with crude oil
PRRT
Petroleum Resource Rent Tax
PSC
PVN
QCA
RBL
RCP
RSU
production sharing contract
Petrovietnam
Quoted Companies Alliance
reserves based loan
representative concentration pathways
restricted stock unit
SapuraOMV
SapuraOMV Upstream Sdn. Bhd.
SASB
scf
Scope 1, 2
and 3 GHG
emissions
Sustainability Accounting Standards Board
standard cubic feet of gas
direct operational emissions (Scope 1), indirect
emissions from purchased energy (Scope 2) and
remaining indirect GHG emissions emitted across
the value chain (Scope 3)
MODU
mobile offshore drilling unit
SECR
Streamlined Energy and Carbon Reporting
nature-based
solutions
rely on functioning ecosystems as infrastructure
to provide natural services to benefit society and
the environment
Net Zero
the state reached when an organisation’s GHG
emissions are reduced in line with the goals
of the Paris Agreement, and any remaining
emissions that cannot be further reduced are
fully neutralised by like-for-like permanent
removals.
NETTS
NGERS
National Energy Technician Training Scheme
National Greenhouse and Energy Reporting
scheme
NGO
non-governmental organisation
NOPSEMA
The National Offshore Petroleum Safety and
Environmental Management Authority
NOx
NPV
OECD
nitrogen oxides
net present value
Organisation for Economic Co-operation and
Development
Section 172
Section 172 of the Companies Act 2006
SID
SOx
TCFD
TRIFR
UN
senior independent director
sulphur oxides
Task Force on Climate-Related Financial
Disclosures
total recordable incident frequency rate
United Nations
UN SDGs
UN Sustainable Development Goals
US$
United States dollar
Valaris
Valaris Limited
VOC
WEF
volatile organic compound
World Economic Forum
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203
JADESTONE ENERGY 2021 ANNUAL REPORT
ADDITIONAL INFORMATION
Shareholder
information
Head office
Jadestone Energy plc
3 Anson Road
#13-01 Springleaf Tower
Singapore 079909
Investor Relations
Jadestone Energy plc
ir@jadestone-energy.com
Nominated Adviser and Joint Broker
Stifel Nicolaus Europe Limited
150 Cheapside
London, UK, EC2V 6ET
Phone (UK): +44 (0) 20 7710 7600
Joint Broker
Jefferies International Limited
100 Bishopsgate
London, UK, EC2N 4JL
Phone (UK): +44 (0) 20 7029 8000
Public Relations Adviser
CAMARCO
3rd Floor, Cannongate House
62-64 Cannon Street
London, UK, EC4N 6AE
Phone (UK): +44 (0) 203 757 4980
jse@camarco.co.uk
Registrar
Computershare Investor Services plc
The Pavilions
Bridgwater Road
Bristol, UK, BS99 6ZZ
UK: +44 (0)370 702 0000
Auditors
Deloitte & Touche LLP
Deloitte & Touche House
Charlotte’s Quay
Limerick
Ireland, V94 X63C
Solicitors
Bryan Cave Leighton Paisner LLP
Adelaide House
London Bridge
London, UK, EC4R 9HA
Competent Person
ERC Equipoise Limited
6th Floor, Stephenson House
2 Cherry Orchard Road
Croydon
London, UK, CR0 6BA
Tel : +44 (0) 20 8256 1150
enquiries@erce.energy
204
www.jadestone-energy.com