Industry

Fracking firm Third Energy records loss of £3.4m in delayed 2016 accounts

KM8 from KM Claire Head1

Third Energy’s fracking site at Kirby Misperton. Photo: Claire Head

The company behind plans to frack at Kirby Misperton in North Yorkshire released its long-awaited 2016 accounts this morning, declaring a loss of £3.405m.

The accounts, due more than four months ago, showed Third energy UK Gas Ltd, owed £55.7m to parent and sister companies.

The delay in publishing the accounts was cited by the Business Secretary, Greg Clark, last week as one of the reasons there had been no final decision on whether fracking should be approved at Kirby Misperton. Mr Clark said he had asked for further checks on Third Energy’s financial resilience. DrillOrDrop report

Details

The total loss for the year to the end of December 2016 was down by 12% on the 2015 figure, continuing a trend since 2014.

Turnover was £757,000, up 76% on 2015, but still below the 2014 figure of £897,000.

The total owed to companies in the group increased by 10% or £4.8m.

The amount owed to the parent company, the Cayman Islands-based Third Energy Holdings, was £48.16m. This was up from £44.475m in 2015 and £40.667m in 2014.

According to the accounts, this sum is repayable on demand. But the directors of Third Energy Holdings had confirmed it was “not their intention to seek repayment of this amount within the 12 months following the signing of these accounts”.

Third Energy UK Gas Ltd said in the accounts:

“The directors believe that, with the continued support of its parent company, the Company can continue as a going concern, and has the necessary funding available to ensure that it continues to trade on the going concern basis, for the reasonably foreseeable future.”

Tax asset

Third Energy UK Gas Ltd paid no tax in 2016.

Should Third Energy UK Gas Ltd start making a profit, it could pay £33.3m less in tax because of accumulated tax losses and accelerated capital allowances.

But for a second year, the accounts said the tax asset had not been recognised because:

“it is not certain that the Company will have sufficient taxable profits for the losses to be utilised in the foreseeable future”.

Pay and staffing

The accounts show that Third Energy UK Gas Ltd employed 16 people in 2016. There were no figures for payments to directors because they were made by Third Energy Holdings Ltd. Its accounts are not available.

Third Energy

Key figures

Total loss: £3.405m (2015: £3.854m, 2014: £4.416m)

Turnover: £757,000 (2015: £428,000, 2014: £897,000)

      Sales of gas to fellow subsidiary: £75,000 (2015: £399,000, 2014: £667,000)

      Recharges to development partners: £682,000 (2015: 29,000, 2014: £230,000)

Intangible fixed assets: £24.094m (2015: £22.403m, £20.607m)

Tangible fixed assets (mainly gas development and production): £619,000 (2015: £896,000, 2014: £623,000)

Operating loss: £3.216m (2015: 3.676m, £4,245m)

Net current liabilities: £54,652,000 (£2015: £50,019,000, 2014: £44.270m)

     Owed to Third Energy Holdings: £48.165m (2015: £44.475m, 2014: £40.667m)

     Owed to fellow subsidiary companies: £7.544m (2015: £6.396m, 2014: £5.147m

Staff costs: £540,000 (2015: £624,000, 2014: £593,000)

Total staff: 16 (2 managerial and 14 operational/technical) (2015: 18, 2014: 18)

Admin expenses: £2.205m (2015: £2.252m, 2014: 2.138m)

Tax paid: £0 (2015: £0, 2014: 0)

Group structure

According to the accounts, the immediate parent of Third Energy UK Ltd is Third Energy Onshore Ltd. The immediate parent company of Third Energy Onshore Ltd is Third Energy Holdings Ltd. The ultimate parent company of Third Energy Holdings Ltd is Barclays Bank PLC

Other accounts

Also published today are accounts for three other companies in the Third Energy group.

Third Energy Trading Ltd, which generates electricity from gas produced by group companies, made a loss in 2016 of £1,162,000 (2015: £694,000). Turnover was down £1,025,000 (2015: £1,534,000), as were cost of sales (the direct cost of business): £1,627,000 (2015: £1,650,000)

The accounts for Third Energy Onshore Ltd, described as an intermediate holding company and a subsidiary of Third Energy Holdings Ltd, showed no details of profit before taxation. It had net assets of £262,000, unchanged on 2015: £262,000. Lord Gadhia, a Conservative Party donor, was appointed a director of the company on 22 January 2018.

Third Energy Services Ltd, which provides management to fellow group companies, made a profit for 2016 of £319,000 (2015: £96,000). According to the accounts, it employs 11 staff and other companies in the Third Energy group owe it £9,828,000 (2015: £6,922,000).

52 replies »

  1. Linda-“losses” are often an accountants way of being able to mitigate against taxation. All perfectly legal and standard. Just a case of where certain costs are allocated.

    Bankrupt=false hope, in this case.

    • So Martin. Accountancy 101.
      All businesses aim to make a profit. Any profits can be offset against capital investment and future costs. Today’s complex world finds parent company’s registered in tax havens whilst operating subsidiaries are registered in the country of operation for PR purposes and claiming grants and tax breaks. These ‘companies’ are not to produce profit but to hold the company debts so that they can go bust when things get tough and the grants by then are uploaded to the no tax liability offshore accounts.

      Losses are not to mitigate against taxation, they are to rip the shareholder/inland revenue/genuine bank customers off.

      Sadly as stated, all perfectly legal and standard.

      A Ltd. company does not become bankrupt – that’s an individual or partnership – it becomes insolvent.

      Whilst the limited company, when first introduced, was a suggested way to promote entrepreneurship as individuals and partnerships should not lose their homes when things went bad, now it has got out of hand as there is very little in the way of limitation on debt or enforcement when the rules are broken; is too easy for persons to go bust and then set up a new company and repeat the process after drawing large director’s salaries from companies that do not generate income.

      • Yes. I believe you’ll find scores of companies involved in fracking in the US have gone belly up, declared insolvency and walked away from liabilities only to magically reappear in a different form a while later.

  2. “What’s not to like?”

    For second year running, this company has filed its accounts late. For avoidance of doubt, late filing is a criminal offence in the UK.

    Oil & Gas Authority has four Financial Viability Criteria. OGA Financial Guidance states that the purpose of these criteria is to give OGA confidence that “each group of companies on a licence is at all times able to continue in sound financial health for the foreseeable future. Each company (even if it is applying for a Promote licence) must therefore demonstrate its basic Financial Viability”.

    “A company that meets the following criteria will be deemed to be financially viable”. Scores for Third Energy UK Gas Ltd:

     1. Positive Total Net Assets (Shareholders’ Funds); Third Energy UK Gas Ltd has negative net assets (i.e. net liabilities) of £33.5m. FAIL
     2. Current Ratio of 1.00 or better; Third Energy UK Gas Ltd has a negative current ratio, since its current liabilities exceed its current assets, FAIL
     3. Gross Gearing of 75% or less; Third Energy UK Gas Ltd has borrowings from its parent and other group companies totalling £55.7m, compared with equity (excluding losses) of £17.4m, meaning its gross gearing of 320% considerably exceeds the 75%. FAIL
     4. Interest Cover of 2.00 or better. Since it is loss making, Third Energy UK Gas Ltd has nil interest cover. FAIL

    So, failure on 4/4. When Igas was at risk of failing in 2017, it at least managed to satisfy 2 out of the 4 criteria.

    This company is wholly dependent upon financial support for its parent, an offshore, Caymans Islands company, which is not subject to UK corporate legislation. The directors feel it necessary to state that Third Energy UK Gas Ltd is a going concern, which is the corporate equivalent of a football club’s board giving a beleaguered manager a vote of confidence.

    Assuming that the appropriate volumes of weasel words, smoke & mirrors are employed to justify letting this strawman organisation actually receive approval to frack, at the very least it should be required to post a substantial cash bond.

  3. A pretty poor attempt Gledders.

    The bond idea has already been rejected and it has been confirmed in a recent article on DOD that a legal agreement has been agreed for Third Energy to pay a deposit into a fund intended to cover the cost of site restoration and after care. In December 2017 a fund of £160k was agreed between NYCC and the company.

    For antis and “excellent analyses”, read, “ignore the key facts”.

    • ‘ In December 2017 a fund of £160k was agreed between NYCC and the company’ – that’s like me ordering an Aston Martin and saying my neighbour will pay for it………

  4. Don’t like the facts, Jono?

    Suggest you pay Ruth a little more respect rather than ignore great big chunks of what she researches and details. Perhaps the antis, as a whole, would actually gain from not being so obvious in their attempts to manipulate facts. You might even get some sympathy for claims about those who are not antis are in that position because THEY have not done their research.

    Do you think the payment was a direct debit from the Barclays Brother’s account, PhilipP?

    The truth only hurts if you are concentrating on bending it, and it springs back at you.

    • Goodness Martin! You’ve just made Jono’s point for him. This perpetual recycling of smears about the Antis being a ‘They’ as if all completely disregarding facts while not addressing a single one of Gledders 4 points yourself (to help make your point). THEN banging on about a single slip I made about a month ago which BTW I was happy to correct on the same day …. you are perpetually recycling that as well! Record – Groove – Stuck, are words that very much spring to mind. Please apply that last line to yourself.

    • Be careful what you wish for? If he says yes, there will be hell to pay after Carillion and now Capita, and how many others in that particular cracked pipeline?,If Greg Clark says no, there will be hell to pay from all the other industry operators and a flurry of insolvencies and bankruptcies and takeovers, all of which will need new permissions.

      Lets see what the accounts reveal shall we?

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