Industry

A J Lucas raises funds for PNR frack site – and the prospect of 72 wells drilled from single pad

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Cuadrilla’s Preston New Road fracking site, 31 October 2018. Photo: Eddie Thornton

Cuadrilla’s major investor, A J Lucas, has said up to 72 lateral wells could be drilled from a shale gas site like Preston New Road, near Blackpool.

The Australian mining group is seeking to raise $46.3m in a share offer. The money will be used to fund its contribution to future operations at Preston New Road and to repay a loan from Kerogen.

In a presentation to investors, A J Lucas said there “may be considerable” resistance from the public and regulators to fracking. (DrillOrDrop report on record high for opposition).

It also warned:

“It is not certain that Cuadrilla will be able to recover hydrocarbons in its concession areas in the quantities or at a cost that makes production commercially feasible.”

And it said it should not be assumed that the government would lift the moratorium on fracking, imposed after record-breaking fracking-induced seismicity at the Preston New Road site in August 2019.

“Low hanging opportunity”

But A J Lucas described the Bowland shale as “a low-hanging opportunity” to overcome what it describes as the UK’s energy challenges.

pnr 191107 A J Lucas stacked wells

Diagram of stacked wells. Source: A J Lucas presentation to investors, 7 November 2019.

The company said the formation “lends itself to “a stacked lateral well configuration”, targeting six already-identified production zones.

J-shaped wells could be drilled at vertical intervals of 200m, on a 2km pad, A J Lucas said. In each horizontal zone, up to 12 lateral wells could be drilled, each up to 2.5km long.

“Under this scenario, up to 72 lateral wells could be drilled over time from a single well pad, i.e. 12 lateral wells in each of 6 production zones.”

It added:

“The use of multi-well production pads would significantly reduce surface infrastructure requirements and make production management more efficient – this is attractive both economically and environmentally.”

Early data

A J Lucas, which holds 47% of Cuadrilla, said there had been “very encouraging” early data from the second well at Preston New Road, PNR2. This is despite only six stages being fracked as planned before the operation was suspended by regulators.

The content of gas from PNR2 was approximately 89% methane, 6% ethane and 2% propane, A J Lucas said.

“Once separated at surface from accompanying water the gas could with limited treatment flow directly into the local gas network.”

The company revealed that it needed funds for its share of outstanding costs for the PNR-2 fracturing and flow-testing programme and for ongoing costs in 2020.

Because of the fracking moratorium, A J Lucas said next year’s work programme at Preston New Road would be “significantly reduced”. But it said:

“Cuadrilla will continue to review and assess the prospectivity of other sites on its extensive acreage.”

Risks

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The presentation included a detailed list of risks to investment in the Bowland shale. These included increased regulation of shale gas operations or a complete ban on fracking.

A J Lucas said the data from the site was:

“insufficient at this stage to conclusively evaluate the likelihood of commercial recovery of unconventional hydrocarbons.

“There is a risk that that unconventional hydrocarbon extraction and recovery may not be feasible at all in Cuadrilla’s concessions with existing technology”.

The company cited technical complications and faults that may be prone to tremors as a result of fracking, reservoir pressure, fracture complexity and conductivity.

There was a risk, the presentation warned, that the Bowland licence:

“may not be commercially viable due to the costs of the technology, drilling, equipment and other resources needed to extract the hydrocarbons from the reservoirs”

A J Lucas also warned about the prospect of future damage from fracking-induced tremors:

“If, following future hydraulic fracturing, further seismic events were to be felt at ground level, it is possible that Cuadrilla may see further claims sought for damages (whether real or spurious).

“This may result in additional resources taken to clear such claims, and if any real damages were validated, compensation may be made.

“While Cuadrilla has third party insurance in place under which it can seek relief to valid claims, it is possible that a claim or claims could exceed limits under these policies.”

If the Preston New Road site proved to be commercial, there was no guarantee about whether Cuadrilla would get approval for production, A J Lucas added.

The presentation also revealed that Centrica, which invested £60m in the Lancashire bowland licence, has an option to sell back its equity interest to Cuadrilla and A J Lucas. If Centrica opted to do this, it would forfeit another £46.7m investment which was to be paid after Cuadrilla met certain operational milestones.

Cuadrilla declined to comment on the presentation.

23 replies »

  1. Ruth – The presentation also made it clear that they had received approximately 100 claims relating to property damage”

    Mr Egan said in his PA interview on 28th October that “the number of reports of damage were in the “low two figures” and there was no clear evidence that the earthquake had caused them.”

    These can’t both be true. Do you think you could ask Mr Egan which it is?

  2. I think financial offerings HAVE to tell the truth and identify risks about their offerings!
    Egan and his cronies only exist by peddling untruth, exaggeration or omission!

  3. I presume AJ Lucas would be investors have read the Preese Hall report. If not they really should do. It is quite clear from the information in that report and from the seismic events at PNR that Cuadrilla cannot guarantee a direct connection between the amount of fluids they inject, the pressure they inject it at, and the level of seismicity they produce. If those factors cannot be linked together I fail to see how you can ever accurately equate volumes of recoverable gas. Not really what investors would want to hear.

    https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/48330/5055-preese-hall-shale-gas-fracturing-review-and-recomm.pdf

  4. Planning for 72 wells when Cuadrilla have failed in each of the two wells drilled so far ( Preese Hall and PNR) -100% failure rate.
    One would have thought that a major investment firm like AJ Lucas would employ someone with sufficient mathematical ability to spot an alarming trend……….

  5. Failed??

    Can you enlighten us on the details regarding the gas being produced in the current flow tests then Jon?

    I seem to have missed that bit.

    By the way-AJL are NOT a major investment firm! File that one with Barclay Brothers owning Third Energy and non antis owning shares in INEOS.
    Not too difficult to do the basic research, Jon. But, it seems many antis just can’t be bothered.

    • I think having to stop prematurely at both wells due to repeatedly not being able to keep within the limits of the TLS they themselves helped to design counts as failure Martian.

      I think provoking a pro-fracking government into instituting a moratorium due to repeatedly not being able to keep within the limits of the TLS they themselves helped to design counts as failure Martian.

      I certainly don’t think releasing a few puffs of gas that they need a nitrogen lift to initiate and extra propane to ignite counts as a success Martian, particularly as they won’t ever be allowed to exploit their site at PNR commercially however wonderful the gas flow might have been.

  6. Thanks for letting me know you “think” delayed reaction. I shall file that under news.

    It all depends on definition of “failure”. and what testing is supposed to achieve. My understanding of testing, in this context, is to gain information. I had no expectation that PNR was suddenly going to be belching out all of the gas the UK uses. I suspect Cuadrilla are not that wedded to PNR either.

    What information they have gained you will speculate about, because you don’t know. Whether they will ever be able to utilise that information, we can all speculate about, because we don’t know. So basically, whether it is failure, we don’t know.

    Bit like courting. A “failure” in others eyes may just be a route to subsequent success.

  7. Martin. You had no expectation that PNR was suddenly going to be belching out all the gas the UK uses. Fair enough, no one expected that but Francis Egan did say LAST year that Lancashire would be cooking their Christmas dinners with gas from PNR. It’s nearly Christmas again and there’s still no sign of that other than a lot of dirty black smoke coming out of the flare stacks from time to time.

    • Did he say which Christmas, Pauline??

      “A lot of dirty black smoke”!!!!

      Careful, you will be at odds with delayed. Interesting how quickly you antis can start contradicting each other-well, not strange, just proves the amount of speculation.

      You will just have to hope Mr. Trump gets another 4 years and keeps the world gas price low. That will enable you to have many Christmases, like the last one, where you can cook your Christmas dinner with his gas from his fracking-even if you cook with electric.

      • Martin. Yes. Mr Egan did refer to last Christmas.
        I see no contradiction in what I said about the black smoke. Judging from the amount of Flo Gas propane that is delivered almost daily, along with a tanker of nitrogen they’re putting far more gas in than they are getting out.

  8. Well Martin, I assume you will be rushing to buy in to AJ Lucas as you always seem to want to support the industry, or is it that taking it too far, even for you?

  9. Well TP, how would that support the industry??? You seem to have speculated about my financial powers above and beyond the reality. Seems that is what is required. Do you get the badge?

    I might look at AJL at some time, not related to fracking, but China. But, Australian politics also involved, so a bit complicated and I suspect there are better options that fit both considerations.

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