Oil and gas company Jadestone has agreed to acquire BP’s entire 16.67 percent working interest in the Cossack, Wanaea, Lambert, and Hermes oil fields in the North Carnarvon basin offshore north-west Australia.
The fields, also known as the North West Shelf Oil Project, are operated by Woodside Energy. The project comprises 13 subsea wells producing through the Okha FPSO vessel.
The FPSO was installed at the fields in 2011 and has 60,000 bpd of oil processing capacity, along with water handling and gas processing, and reinjection facilities. The Cossack, Wanaea, and Hermes fields are currently in production and are estimated to contain aggregate gross 2P reserves of 30.3 mmbbls.
Gross average production from the fields in 2021 was 12,461 bpd with the first quarter of 2022 production averaging 14,178 bpd gross.
The fields also produce associated gas, with the partners in the North West Shelf Oil Project having the rights to use the gas required to fuel the Okha FPSO, with the remainder being used as feedstock in the North West Shelf LNG project.
The four fields are mid-life producing assets with significant original oil in place, which Jadestone estimates at approximately 890 mmbbls, and which provides the opportunity for further investment to increase recovery factors.
The transaction is structured as an asset purchase, which includes BP’s 16.67 percent working interest in the Cossack, Wanaea, Lambert, and Hermes fields, subsea infrastructure, FPSO, and abandonment liabilities.
Jadestone will pay an initial headline cash consideration of $20 million based on an economic effective date of January 1, 2020. Further consideration of up to $4 million in aggregate is payable to BP upon certain upside scenarios, which are tied to potential full-year oil price outcomes in 2022 and 2023. On completion of the transaction, Jadestone will make a payment of $41 million to the North West Shelf Oil project’s decommissioning trust fund.
Jadestone will make further payments to the decommissioning trust fund via two equal installments of $20.5 million payable on or about December 31, 2022, and December 31, 2023.
Oil from the North West Shelf Oil Project is sold on an equity basis with a typical parcel size of 650,000 bbls. The most recent cargo of oil sold attributable to BP’s interest was in January 2022.
The acquired assets generated EBITDA of approximately $20 million in the year ended December 31, 2021, based on a realized oil price of $56.28/bbl. The acquired assets are expected to generate EBITDA of approximately $40 million in 2023, based on a realized oil price of $100/bbl.
According to Jadestone, the acquisition will be funded from the company’s on-hand cash resources and will not impact its ability to fund planned capital spending or shareholder returns.
It is worth noting that the North West Shelf Oil project joint venture partners have waived their pre-emption rights and given their in-principle consent to the acquisition, thus reducing the conditionality of the transaction.
Completion of the Acquisition is subject to customary closing conditions, including regulatory approvals from the National Offshore Petroleum Titles Administrator and the Foreign Investment Review Board. Jadestone anticipates the completion of the transaction during the fourth quarter of 2022.