Industry

Rathlin Energy’s £33.9m debt “casts doubt” over company viability – accounts

West Newton A

Rathlin Energy’s West Newton-A site in East Yorkshire. Photo: DrillOrDrop

The exploration company, Rathlin Energy, owed nearly £34m, according to annual accounts published yesterday (7 November 2018).

A statement from the auditors, KPMG, said the debts “constitute a material uncertainty that may cast significant doubt on the Company’s ability to continue as a going concern”.

At the time the accounts were signed off, Rathlin owed £33,974,160 to its ultimate company, the Canadian-based Connaught Oil & Gas Ltd.

The sum was used to cover day-to-day working capital requirements and was repayable on demand, the accounts said. Rathlin was “dependent on these loans not being recalled” and there was “uncertainty as to the ultimate parent’s ability to continue to finance the company’s operations.”

According to the accounts, Rathlin planned to settle the outstanding loan through share issues, equity financing due to raise £4.7m and farm-in agreements.

pedl183

PEDL183. Map: Oil & Gas Authority

Earlier this week, the investment company, Reabold Resources, announced it had taken a £3m stake in Rathlin’s single exploration licence, PEDL183, in East Yorkshire. Rathlin also agreed a farm-in agreement with Union Jack Oil plc and Humber Oil Ltd, giving the two new partners a 16.665% stake each in PEDL183.

The accounts said the expected equity cash flows were “projected to be sufficient to fund the company’s obligations for at least the next 12 months”.

“The Company will use the proceeds to finance significant capital expenditures on the appraisal and development of its oil and gas assets”.

Rathlin’s interests centre on the West Newton-A site, north of Hull, where an exploration well was drilled in 2013 and tested in 2014. The planning consent, which includes permission to drill a second well, has been extended once and is due to expire on 21 December 2018.

The company has said it plans to drill the second well “without delay” and has applied for another 36-month extension, this time taking the permission to 2021 (see DrillOrDrop report).

But according to the accounts, Rathlin expects to operate the site for at least another 12 years after that. The company has allocated nearly £1m for decommissioning the site. The accounts said the sum:

“represents the present value of the amounts that are expected to be incurred during 2033 to decommission the West Newton site.”

Key figures

Owed to ultimate parent company at 31 December 2017: £32,869,601

Owed to ultimate parent company at finalisation of accounts: £33,974,160

Net current liabilities: £32,458,290

Losses carried forward for tax purposes: £42,533,729

18 replies »

  1. These cowboys would not be allowed to trade if they were a normal business , no lessons learned from Carillion yet the likes of Rathlin & Third energy can raise cash from investors with no guarantee of a return and every chance of going bust . What happens when they haven’t got the cash to return the land to how it was before they ruined it ?

  2. Reabold Resources invested in Rathlin Energy on 5.11.18 & a “condition precedent of the investment is that Connaught has agreed to settle a liability of £33.8 million owed to it by Rathlin immediately on completion.” So in essence this is a “non story”.

    • Well that’s a worry as RR’s strap line states ‘Focused on generating returns through the participation in low-risk projects with high potential upside’….not talking about shale then?

  3. The so-called problem with wind farms is “The UK now draws more electricity from renewable energy sources than from fossil fuels.”
    It is so successful that it highly likely to be able to repay its loans and investors.

  4. These financial statements fail all the OGA Financial Viability Criteria, and also have a qualified audit opinion.

    Exploration / first mover businesses are expected to lose money in the early years, but this generally comes thru burning a pot of money raised for that purpose. Rathlin’s pot is running dry according to the Notes to the accounts, and it is scratching around trying to sell off assets to keep going. The provision for remediation is worth nothing if the funding dries up.

    Ripe for an asset strip.

  5. Ruth, Can people please stop spreading lies regarding Rathlin Energy. Please try and keep this site as it purports to be ‘unbiased’ and ‘independent’.

    Rathlin energy are not in financial trouble.

    Yet again rumours are being spread and misinformation [edited by moderator]

    • Alan, an audit qualification covering material uncertainty as to whether the subject company is a going concern is generally not an indicator of financial health.
      Nor are statements regarding reliance on parent support that go onto state that continuity of such support is uncertain.

  6. “uncertainty as to the ultimate parent’s ability to continue to finance the company’s operations.”

    There’s also uncertainty on who actually is the ultimate beneficiary.. ERYC are going to have to tread very carefully here because it seems that the Canadian investment company behind Rathlin are in deep financial crisis, which is reflected in the state of Rathlin’s books. Do ERYC really want to take the risk of having to pay to clean up after a potential bankruptcy? Is it really worth it?

  7. Ruth seriously. I’m invested I a self suffient country but not at the detriment of the country side. Give. Brexit and rising fuel costs we need companies like Rathlin to be successful onshore.

    I follow drill or drop for what used to be an unbiased view point. You have seriously called out financial liabilities which are non existent as Withnellblu has clearly called BS on. You are exposing your unlying agenda here at the detriment of a self sufficient country. Shameful Ruth. Really shameful.

  8. As I have said before, the Financial Instruments that are used to obtain working capital for Fracking are much more complicated than the geology from which shale gas is to be extracted.. Both Rathlin Energy and Third Energy are supported by Private Equity Partnerships. But the funds raised through Equity are very little : the Equity refers to the investment by the Partners not the source of funding for the exploration. Nearly all the money for development is borrowed and thus the financial model is extremely heavily leveraged.

    There is only a short window in which flowing gas will provide sufficient revenue to service the loans – never mind paying them back. It is the reason why most Fracking in the US is completely uneconomic and results in bankruptcy

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