Industry

Third Energy’s accounts reveal “financial melt down”, say campaigners

180401 KM Eddie Thornton

Third Energy’s Kirby Misperton fracking site, cleared of equipment in April 2018. Photo: Eddie Thornton

The government should refuse consent for Third Energy’s fracking plans in North Yorkshire, campaigners said this morning in response to publication of the company’s annual accounts.

The figures for Third Energy UK Gas Limited for the year ending December 2017 show liabilities had risen to £63.9m and annual losses to £3.5m. Turnover was down from £757,000 in 2016 to £191,000 last year.

The company said it was “actively seeking” new sources of funding. It said it needed £14m to develop the Ryedale gas field and more cash injections to keep afloat. But the accounts said there was “significant doubt” about Third Energy’s ability to continue as a going concern and the company is up for sale.

Russell Scott, of the campaign group, Frack Free Ryedale, said:

“Third Energy’s latest accounts show a company in financial meltdown.

“”The firm is openly admitting they don’t know who or how they will fund future development.

“For the last three years we have been warning the government that Third Energy do not have the capability to operate competently.”

A year ago, Third Energy told Kirby Misperton residents it was ready to frack the KM8 well in Kirby Misperton. But in January 2018 the Business Secretary, Greg Clark ordered an assessment of the company’s financial resilience. Since then, the site has been cleared and there has been no news on consent from the government.

Russell Scott added:

“Third Energy’s latest set of accounts prove what we already knew – they cannot be considered financially stable and minister Greg Clark should ensure final fracking consent is denied.”

The financial statement said the Ryedale gas wells were producing low volumes, revenues were falling and Third Energy UK Gas Limited was dependent on sourcing finance to fund further exploration and development. It said:

“the company will require significant capital expenditure to develop the conventional and unconventional resources of £14m, £5m of which is forecast in the next 12 months. In addition, the Company needs further cash injections even to operate without the additional capital expenditure.”

Third Energy UK Gas Limited relies for day-to-day funding on Third Energy Holdings Limited, which is based in the Cayman Islands. The ultimate parent company of the holding company is Barclays PLC, which has said it intends to dispose of the Third Energy group.

According to today’s financial statement, the group is “actively seeking alternative sources of funding”, which may involve disposing of Third Energy UK Gas limited and the rest of the onshore gas business. It said:

“Third Energy Holdings Limited is not expected to provide the required funding to support the necessary activities to enable the group to progress to cash generation and continue as a going concern.”

The directors said they were confident they would find a buyer but they said this could not be guaranteed or that a sale would be agreed before financial support was withdrawn. There was also no certainty about the intentions of a future owner, they said.

“These conditions represent a material uncertainty that may cast significant doubt on the ability of the Company to continue as a going concern and, therefore, to continue realising its assets and discharging its liabilities in the normal course of business.”

The accounts show that the Third Energy group had a contract with Halliburton Manufacturing and Services Limited for onshore gas services. Halliburton may receive unquantifiable additional payments in future if activities are successful, the accounts said.

Third Energy UK Gas Limited had 15 employees in 2017, one down on the previous year. Annual staff costs of £560,000 were paid by Third Energy Holdings Limited and Third Energy Onshore Limited.

Last month, two directors, Keith Cochrane and Lord Jitesh Gadhia, resigned after just a year inn the job (DrillOrDrop report.

More reaction

Steve Mason, of Frack Free United, said:

“It just goes to show how unreliable fracking is – we have one company on the floor financially and another on shaky ground because of earthquakes. Third Energy is a company in financial meltdown – over 60 million in debt and is likely to be sold.

“How can this government even claim that shale gas will give the UK energy security when fracking is proving to be a losing bet and has such an uncertain future?”

Simon Bowens, Yorkshire campaigner for Friends of the Earth, said:

“It’s no surprise that Third Energy want to sell their onshore fracking business. Fracking is a failing fossil fuel industry.

“In light of the IPCC’s recent report where the wold’s leading climate scientists laid out the radical action needed to avoid climate chaos, wise investors would be much better off investing in solutions like energy efficiency and renewables.”

Key figures

Cost of sales: 2017 (£1,642,000); 2016 (£1,768,000)

Administrative expenses: 2017 (£1,930,000); 2016 (£1,768,000)

Operating loss: 2016 (£3,381,000); 2016 (£3,216,000)

Loss for financial year: 2017 £3,582,000; 2016 £3,405,000

Net current liabilities: 2017 (£63,965,000); 2016 (£54,652,000)

Of this, owed to group undertakings: £62,555,000; 2016 £55,709,000

Of this, owed to Third Energy Holdings: £59,181,000; 2016 £48,165,000

Deficit on shareholders’ funds: 2017 (£37,054,000); 2016 (£33,472,000)

Staff costs: 2017 £560,000; 2016 £540,000

 

29 replies »

    • Again, we do not need to rely on the countries you have mentioned, yet again, in you bid to claim a spot on the fracking job list……

    • My understanding from what I have heard and read is that we will still be importing oil and gas even if we frack. Most of the UK gas imports come from Norway and circa 15% is LNG. Best estimates from the industry, as stated by Ken Cronin amongst others, is that fracking will only reduce UK gas imports by circa 50%. And how many wells would need to be drilled? One report was stating around 6,000 wells to deliver a 50% reduction in imports. And as for these foreign countries you name, we seem happy to sell weapons to Saudi Arabia and we get only about 1% of our gas from Russia. If having our own gas supply is so important to UK political power and energy security as you claim, then why are we still exporting NS Gas? The answer of course is that the gas does not belong to the UK PLC it belongs to the private companies that extract it and sell it to make exorbitant profits. And the same will be true of any fracked gas if produced it will be sold on the gas markets at the highest price they can get. Plus no doubt some will be going directly to INEOS’ cracker plants for feedstock and power.

      [Comment edited at poster’s request]

  1. It’s funny how pro-frackers say we must develop our own energy supplies (but not renewable ones) because a “foreign power may hold us to ransom.” At the same time we import as much food as we import energy, and yet I hear no calls for us to be growing our own oranges, grapes, soya beans, etc, etc. Because presumably at some point potato growers in the EU are going to hold us to ransom and not supply any more spuds. Or the Spanish with their lettuces.

    It’s funny how free trade is okay for some essential products but not for others. The reason we don’t have energy security is because the market has been allowed to decide that that is the cheapest thing to do since 1979. Security of supply does not enter into the lexicon of the free market. Same with food. Hypocrites every last one of them.
    We all know that if any fracked gas was ever produced, it would go onto the international futures market and be shipped or piped to the highest bidder, the “threat to energy security” message is just more propaganda.

    It is indeed true, we do have an energy crises, because 30 years of neo-liberalism has left us in a state with under-invested infrastructure, afterall, shareholders were more important. But with the IPCC report in mind, and future Degrowth required, the impending energy gap should be an opportunity to restucture our society to use less energy overall.

    • I guess I agree that it is relatively unlikely that Russia or the Middle East regimes would interrupt gas imports to the U.K. I think however that I would prefer not to take risks and produce some of our own gas. It is ultimately “one of the greatest responsibilities of the government to keep the lights on” (can’t remember the source of that quote). They do that by government policy. I guess their support for fracking is part of that objective. Onshore gas will also generate tax revenues which could be used, in a small way, to finance the infrastructure developments you mention. I’m just an old fashioned Torygraph reader who wonders how things get paid for. Regarding neo-liberalism I am old enough to remember when nationalisation of our state industries produced self-serving loss-making monopolies. It’s also worth noting that fracking in the USA has produced gas prices a third of those in Europe while also significantly reducing CO2 emissions in partnership with renewables. Compare and contrast with German energy policy.

  2. Queen Lyrics, slightly altered

    “Another One Bites The Dust”

    Oh! Let’s go!

    TE walks warily down dead end street
    With the brim pulled way down low
    Ain’t no sound but the sound of his feet
    Account sums ready to go

    Are you ready, hey, are you ready for this?
    Are you hanging on the edge of your seat?
    Out of the doorway the accountants rip
    To the sound of the bleat

    Another one bites the dust
    Another one bites the dust
    And another one gone, and another one gone
    Another one bites the dust
    Hey, they’re gonna get you, too
    Another one bites the dust

    How do you think you’re gonna get along
    Without money when its gone?
    You took them for everything that they had
    And they kicked you out of town

    Are you happy, are you satisfied?
    How long can you stand the heat?
    Out of the doorway the accountants rip
    To the sound of the bleat

    Another one bites the dust
    Another one bites the dust
    And another one gone, and another one gone
    Another one bites the dust
    Hey, they’re gonna get you, too
    Another one bites the dust

    Oh, take it
    Bite the dust
    Bite the dust

    Another one bites the dust
    Another one bites the dust
    Another one bites the dust
    Another one bites the dust

    There are plenty of ways truth can collapse a sham
    And bring it to the ground
    You can’t beat it, you can’t cheat it
    Truth can treat it bad and kick it when it’s down

    But we’re ready, yes, we’re ready for you
    We’re standing on our own two feet
    Out of the doorway the accountants rip
    Repeating to the sound of the bleat

    Another one bites the dust
    Another one bites the dust
    And another one gone, and another one gone
    Another one bites the dust
    Hey, they’re gonna get you, too
    Another one bites the dust

    Fracker
    Alright

    • GBK, one well is not proof the industry is safe nor is it proof it is viable. The industry itself has stated they would need to frack numerous wells before they could determine whether or not the industry in the UK is economically viable. I think they drilled and fracked around 40 in Poland before the industry pulled out. I don’t think those opposed to fracking think for a moment that every single fracking well will have catastrophic problems. What we do know is that a percentage do go wrong and because of the high number of wells that need to be drilled and fracked that percentage means that a significant amount do have problems. When things go wrong, the impacts can be catastrophic with very damaging environmental and human consequences. A number of shale gas workers in the US have very sadly been killed or badly injured from blow outs, fires and explosions on fracking sites. There are issues surrounding the treatment of waste and risks associated with accidents and spills. Add to that the risk of seismic events, the negative impact on local air quality, high volumes of traffic including large HGVs and of course the global issue of climate change. Extracting more fossil fuels will only increase the amount of fossil fuels burned. Long term liability is a worry too. These issues are not myths but fact and to refer to them as myths, to quote you GBK, is barmy.

  3. Third Energy will get approval to frack KM-8 if PNR goes okay.

    If PNR has problems / shut down due to seismicity (seems unlikely now) or blows out (never going to happen as fracks are too small according to some “experts” on this BB so no gas to blow out) KM-8 won’t happen.

    The accounts issue is a delaying tactic.

    • PNR not gone so well today!

      Earthquake of 0.8 closed the site down for 18 hours for assessment!

      Earthquakes getting stronger as each event causes upset in faults, both natural and those affected by Cuadrilla’s Preese Hall siesmicity seven years ago.

      Time for our MP Mark Menzies to demand the site is permanently closed!

  4. Just as the Government has been captured by the Fracking Industry, so in turn has the Fracking Industry been captured by the Banking Industry. Shale Gas Exploration requires a sea of sub prime lending ,sourced by Private Equity Partnerships, to deliver the working capital needed to drill.

    Sub prime lending is a dream for Financiers because it gives birth to a raft of Credit Default Swaps that provide cover for default. These products exceed the original loans many times over. Thus Fracking has been come a limitless casino with tables spreading out into the distance.

    GNRI Ltd which is behind Third Energy Holdings will now be negotiating with the Insurance companies on the hook for a pay out if the loans default. If the company can stay afloat with the introduction of a bit more money this may prove cheaper to the Insures than paying out the claim s in full

    Believe me, the Finance is way more complicated to understand than the geology that harbours shale gas.

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