Cuadrilla saw profits drop by a third in 2018, according to annual accounts published this week.
The fall would have been bigger if the company had not sold part of its stake in the Balcombe exploration licence in West Sussex.
Assets increased in value because of drilling and fracking at the Preston New Road shale gas site, near Blackpool. The company’s highest paid director had a 15% rise but the company’s charitable and community donations were down nearly 20%.
Cuadrilla raised more than £12m in four shareholder funding rounds in 2018. There was also a £7m contribution to exploration from the Australian mining group AJ Lucas.
Chief executive, Francis Egan, described 2018 as an “exciting and unprecedented period for the business”.
During the year, the company drilled and fracked the UK’s first horizontal shale gas well at Preston New Road. It was also the first company to pass a new financial resilience assessment required for fracking companies in the UK.
Writing in the accounts, Mr Egan said 2018 was a “relentless and exhilarating year” for the Preston New Road site. He said he was also “encouraged” by results from a flow test at the Balcombe well, drilled by Cuadrilla in 2013.
Cuadrilla announced earlier this month that it intended frack the second well at Preston New Road, even though the potential of the first well was only partially tested. There were more than 50 induced earth tremors during fracking at the site in 2018. Pumping stopped prematurely four times because tremors exceeded the 0.5ML threshold on the traffic light system regulations.
Mr Egan said:
“We remain convinced that it will not be possible to establish a commercial shale gas industry in the UK within the existing 0.5 red light operating limits
“However, we understand that more data is considered to be required to support the case for a TLS review and as the only UK shale gas operator with permission to hydraulically fracture horizontal wells, it’s clearly up to us to provide it.”
The accounts, for the year to the end of December 2018, are for Cuadrilla Resources Holdings Limited.
The holding company is owned by the Australian mining group, AJ Lucas (48%), the private equity investor Riverstone Holdings (45%) and Cuadrilla’s current and former employees (7%).
It has one subsidiary, Cuadrilla Resources Limited, which in turn has 12 subsidiaries, mostly operating in England in oil and gas exploration.
For the first time, the 2018 accounts give figures in GB pounds, rather than US dollars.
Profits fell from £4,254,000 in 2017 to £2,650,000 in 2018, despite including a £1,816,000 profit from the part-sale of Cuadrilla’s stake in the Balcombe licence. Cuadrilla recorded a profit for the first time in 2017 with a $16.9m contribution from Centrica. In 2016, the company reported a loss of $11.5m.
Operating expenses rose to £3,520,000 in 2018, up from £2,975,000 in the year before.
Administrative expenses were up slightly at £3,680,000, compared with £3,627,000 in 2017.
Total comprehensive loss for the year rose to £394,000, up from £146,000 in 2017.
Cash at 31 December 2018 fell to £2,265,000, compared with £6,373,000 the year before.
Net assets rose to £47,442,000, up from £32,380,000, reflecting the operations at Preston New Road and the flow test carried out by Angus Energy at Balcombe.
Project costs were down at £7.3m, compared with £10.7m for 2017.
Decommissioning provision at 1 January 2018 £5,080,000, up from £4,562,000 in 2017
Decommissioning provision at 31 December 2018 £3,731,000, down from £5,080 in 2017
AJ Lucas contributions to exploration and evaluation assets rose to £7,179,000, up from £4,944,000 in 2017.
Share capital rose to £167.7m, with four funding rounds, up from £155.2m in 2017.
Payment to highest paid director rose from £416,000 in 2017 to £480,000 in 2018.
Charitable and community donations were £81,000, down from £100,000 in 2017.
Average number of people employed by the Cuadrilla group rose slightly to 26, up from 24 in 2017.
Estimated accumulated tax losses to set against future taxable income rose to £46,281,000 from £43,118,000 in 2017.
Receivables outstanding from Cuadrilla Resources Limited rose to £98,027,000, up from £85,864,000 in 2017.)
Updated 13/8/2019 to include decommissioning provision figures for 31 December 2018 and 31 December 2017