Industry

Centrica payment puts Cuadrilla in profit

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Cuadrilla’s Preston New Road site near Blackpool, 31 May 2018. Photo: Ros Wills

The shale gas company, Cuadrilla, has recorded an annual profit for the first time following a multi-million dollar payment from partner, Centrica.

Annual accounts showed Cuadrilla Resources Holdings Ltd made a profit of $5.457m for the year ending 31 December 2017. This compared with a loss of $11.5m for the same period in 2016.

According to the accounts, the Cuadrilla Group benefitted during 2017 from contributions from Centrica totalling $16.9m.

Of this, $13.7m represented Cuadrilla’s share of capital costs of drilling activities at Preston New Road in 2017 and were included in income for the year. These costs have been paid by Centrica under a carry arrangement relating to Centrica’s farm-in to the Bowland licence in 2013.

The accounts showed no contributions in this category for the year ending 2016.

Apart from the Centrica payment, the accounts show Cuadrilla had limited other income. Revenue from services for the exploration and appraisal of oil and gas assets was $23,000, up from $12,000 in 2016.

Cost of sales was again zero. 2017 saw financial income (interested on funds invested) of $1,000 and the company had total tax income of $218,000, compared with $151,000 in 2016.

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Delivery to Cuadrilla’s Preston New Road site near Blackpool, 31 May 2018. Photo: Ros Wills

“Debt free”

The accounts said:

“Cuadrilla remains debt free and is financed by its shareholders.”

The company is frequently described in media interviews as a “British start-up”.

The accounts confirm that the group’s parent company, Cuadrilla Resources Holdings Ltd, is jointly controlled by its shareholders:

  • 47% – A J Lucas, an Australian company providing services to the energy mining and infrastructure sector
  • 45% – Riverstone/Carlyle Global Energy and Power Fund 1V (Cayman) LP, a private equity fund registered in the Cayman islands
  • 8% – Cuadrilla employees

A J Lucas and Riverstone Holdings each had three directors in 2017.

The accounts show the holding company employed 24 staff in 2017, up one on 2016. The total payroll costs were $3.92m, up slightly on 2016. The highest paid director received $534,000 (2016: $629,000).

Tax assets

According to the accounts,

“The Group has estimated accumulated tax losses and pre trading expenditure of $59,599,000 (2016: $54,047,000) which are available for offset against future taxable income.”

The accounts added:

“The Group also has an unrecognised deferred tax asset in respect of property, plant and equipment of $4,286,000 (2016: $3,318,000).”

Trade and other receivables for the Cuadrilla group more than doubled to $7.067m, up from $3.419m in 2016.

Under joint licence operating agreements, the A J Lucas Group made contributions of $6.342m in 2017, compared with zero from 20116. These are recognised as a credit to exploration and evaluation assets.

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Deliveries to Cuadrilla’s Preston New Road shale gas site near Blackpool, 31 May 2018. Photo: Ros Wills

Plans

Cuadrilla’s Chief Executive, Francis Egan, said the company had recovered 375ft of core samples at Preston New Road from three intervals in the Bowland shale and completed wireline logs across the whole Bowland shale section. He said:

“This represents the most comprehensive data set recovered to date from any shale well drilled in the UK and the quality of the data is excellent.

“Our ongoing analysis indicates excellent rock quality for hydraulic fracturing and a high natural gas content in multiple zones within the very thick shale rock interval.”

Mr Egan said the second horizontal well at Preston New Road would be completed before the middle of the year. (The first was complete in April). He said:

“Both wells will then be hydraulically fractured and then towards the end of this year we will start an initial flow test of the gas.”

He added that the company aimed to have gas flowing from the wells into the local gas network in 2019.

The accounts were completed before the High Court in Manchester last week granted an injunction against protests at Preston New Road. But Mr Egan said of the ongoing protests:

“Whilst minimal impact has been caused to our own operations, we know that many local people and small business have been inconvenienced by protestors illegally causing roads to be closed.”


Updated 6/6/2018 to remove reference of a payment from Angus Energy for a stake in the Balcombe licence, which was made after the period of the 2017 accounts.

10 replies »

  1. Thank goodness for investment to secure future energy needs for the U.K…

    We can’t rely on intermittent renewables. At the moment wind turbines highlight this more than ever with very low wind levels for the past week also forecast to be very low into the middle of the month…

    https://www.bloomberg.com/news/articles/2018-06-05/wind-disappears-in-britain-leaving-turbines-at-a-standstill?utm_medium=social&cmpid=socialflow-twitter-climate&utm_content=climate&utm_source=twitter&utm_campaign=socialflow-organic

  2. I didn’t think that energy companies that were not commercially producing were able to show a profit.

  3. It’s all subsidies from the British gas bill payers via Centrica. Nothing to do with real money earned from profits. The subsidies will just have to get bigger and bigger until, as with DeLorean, people will realise its has all been a costly waste of time built on dreams and unrealistic promises… not to mention the environmental impacts!

  4. Just like Tesla then PhilipP! Except, a few years yet to match Mr. Musk for running a company not anything “to do with real money earned from profits”. $16.9 million, versus $3 BILLION/YEAR. Hmm-now that is “alternative”. (I see Mr. Musk managed to hang on by his finger tips against a shareholder revolt this week!)

    I think Cuadrilla have the slight excuse that they are not producing anything yet, rather than Tesla who are producing, but unable to do so and make a profit. Mr. Musk still manages to have a remuneration package which makes Cuadrilla look like Scrooge. Seems there is a lot of gravy on the “alternative” train-until it hits the buffers.

  5. Where do you get “envy” from, PhilipP? Oh yes, change the narrative after you made a silly reference. You really flounder when you branch out (not Barclay branches!) into corporate matters. I realise it was a bit of a shock that the antis activities had not taken Cuadrilla into liquidation, or anyway near it, but the finances of Cuadrilla were referenced a long time ago, so it shouldn’t have been.

    I appreciate that Mr. Musk is a particular type of original thinker, however he has a long way to go before I appreciate he can run a profitable business. He might not have any doubts, you may not, but backers and individual investors are beginning to become distinctly uneasy regarding missed deadlines. I do hope he gets it sorted, because the market is not forgiving.

    “Built on dreams and unrealistic promises.” Your words. Goodness, he even has his own version of causing accidents!

  6. I understand this payment is part of the finance, TW, not the whole contribution. Obviously, much depends on when/whether they move from exploration (cost) to production (income). Shame the antis have held them up, as it means their costs have risen and therefore it will be a long time before they pay any tax. Perhaps that should be remembered when the antis talk about costs of fracking? Costs of anti fracking?

    Not really any different in that respect to the N. Sea, and most other developments.

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