Angus Energy has raised a £1.5m loan facility to pay for the costs of decommissioning oil and gas wells.
In a statement this morning, the company estimated it faced bills of about £2m to clean-up four sites.
£1m of the loan has been drawn down immediately, Angus said. The proceeds, after £102,500 costs, would be set aside to fund the future restoration of oil sites at Brockham in Surrey and Lidsey in West Sussex.
Their total clean-up costs were estimated at £650,000, which would go into a dedicated bank account, Angus said.
It said it had decided that Brockham and Lidsey would not generate enough money from oil production to fund decommissioning. The company said they had:
“no near term cash flow horizon sufficient to absorb abandonment reserving from prospective and identifiable reserves.”
It also estimated that decommissioning costs at the newly acquired Saltfleetby gas field in Lincolnshire would be £1.25m. Costs for the remaining site, the Balcombe oil well which Angus took over operatorship from Cuadrilla, were estimated at about £100,000.
Angus said Saltfleetby and Balcombe had a “high probability of generating revenue to absorb abandonment costs”. 15% of revenues from these sites would be reserved quarterly in a dedicated account until 100% of potential liability had been covered, the company said.
Angus also said it was exploring insurance against abandonment as an alternative to long-term cash reserve.
Managing director, George Lucan, said the company had decided not to reserve 100% of the cost of eventual abandonment because of exceptionally low interest rates and the cost of tying up shareholders’ capital.
“The policy adopted, we believe, draws a line under this issue and sets Angus up as best in class in the industry in the thoroughness and professionalism of its approach to its statutory duties to properly abandon and restore its sites to the satisfaction of all stakeholders.
“Most importantly, and as regards new business opportunities, Angus is able to evidence to potential partners its commitment to behave as a responsible and financially capable Operator.”
The loan can be converted into shares and the company’s share price opened sharply down on the news. It recovered but still ended the day down 6.09% at 1.08p.
This is well below the price of 1.375p, described by Lord Lucan as the “bottom” when DrillOrDrop interviewed him earlier this month.
Angus Energy’s deal for Saltfleetby included a £2m contribution towards abandonment liability. Angus was criticised by environmental campaigners when it said it would use this money to reconnect the field to the gas main.
The company is still waiting for a decision by the regulator, the Oil & Gas Authority, on whether the Saltfleetby operator’s licence should be transferred from Wingas.