Independent oil and gas production company, Jadestone Energy Inc. has announced the voluntary relinquishment and termination of Service Contract 56 (SC56), offshore of the Philippines.
Jadestone’s wholly-owned subsidiary Mitra Energy (Philippines SC-56) Ltd, together with operator Total E&P Philippines BV (Total), have notified the Philippines Department of Energy of their voluntary surrender of their entire interest in, and termination of, SC56.
The offshore Block CS56, located in the Sulu Sea, covers a total area of around 4,300 square kilometres, in water depths ranging from 200 to 3,000 metres .
President and CEO of Jadestone, Paul Blakeley, said the company remains focused on its strategy of delivering value from producing fields and near-term developments in the Asia Pacific region, while avoiding early-phase greenfield exploration plays such as SC56, requiring multi-year capital programmes prior to production and cashflow.
“Nor would the major investments in new pipelines and facilities fit our sustainability objectives which include a focus on maximising use of existing infrastructure,” Mr Blakeley said.
“SC56 was a legacy asset inherited from the previous management and only had option value through a carried well. The decision not to drill the well now removes any interest for Jadestone to continue further, requiring as it would, new deep-water frontier exploration commitments.”
“It would also not compete with existing portfolio investment options, nor potentially some of the more interesting inorganic opportunities moving into the market in the coming 12 to 18 months,” he said.
“While we have appreciated great support and cooperation, and long association with the government and regulator in the Philippines, it is now time to relinquish our interest in SC56, as we continue to deploy our production optimisation and field-life extension skills across the region.”
As a condition of the surrender and termination of SC56, the partners will be subject to a payment in respect of unfulfilled work commitments. Jadestone’s share will be met from a portion of the proceeds of the arbitration ruling announced on 9 January 2020.
The company also anticipates that it will record a one-time impairment charge of approximately US$50.5 million, relating to historical capitalised exploration expenditures on SC56 predominantly associated with previous management, with no associated cash impact or tax benefit.