Industry

2019 – disappointing year for many onshore oil and gas investors

191231 Angus share price

Angus Energy share price – down 93% in 2019. Source: LSE

Shareholders in most UK onshore oil and gas companies could be forgiven for looking forward to the end of 2019.

The year saw share price falls averaging a third across eight companies reviewed by DrillOrDrop.

Angus Energy, dubbed “Anguish Energy” by long-suffering shareholders, saw its share price collapse by 93% in 2019.

Only two companies in our review posted share price gains over the year: Union Jack Oil up 33% and Reabold Resources up 5%.

Both companies have an interest in the West Newton site in East Yorkshire, described by Reabold as “potentially the largest hydrocarbon discovery onshore in the UK since 1973″.

The year continued the previous trend of lacklustre share performance in the onshore industry.

Five of the eight companies we reviewed hit five-year lows in November 2019. Only one company, Union Jack Oil, saw its share price achieve a five-year high in 2019.

191231 shares

Source: share price data

The share price clearly matters to investors.

But it also matters to the industry.

For stock market-listed exploration companies it is the main way to raise money to fund new projects.

If the share price is disappointing, investors may be deterred from buying new shares.

What went wrong?

Each company has its own story, but there are some common themes.

Oil exploration in southern England has been more difficult than many investors had expected.

Some wells have not performed to expectations, depriving companies of the income they needed for future operations. This forced them to issue more shares, which in turn depressed the share price.

pnr 190820 Ros Wills

Gooseneck at Cuadrilla’s Preston New Road shale gas site, 20 August 2019. Photo: Ros Wills

Shares in AJ Lucas, the largest investor in Cuadrilla, reached a 2019 high point on 22nd August. This coincided with fracking on the second well at Cuadrilla’s Preston New Road near Blackpool. But by the year end, after a series of earth tremors and a fracking moratorium announced by the government, the shares were down 67%.

The wider gas exploration industry in the UK faced another threat in 2019 as wholesale gas prices halved, finishing the year at 29.8 pence per therm.

This is currently significantly below the government’s central price assumption for 2020 of 48 pence per therm.

The fall in price has been driven by various factors, including a slow-down in China and increasing competition between US shale gas exporters and Arab countries, such as Abu Dhabi.

In 2017, Cuadrilla’s director Matt Lambert was reported as saying shale gas could be viable for his company with prices of 40 pence per therm. This raises questions over whether fracking can be economic in the UK at present prices.

Low gas prices could also cause problems for Angus Energy, as it seeks to reinstate the flow of gas at Saltfleetby in Lincolnshire. The company’s cash flow projections, which assume a gas price of 50.3 pence per therm, could be significantly affected if the present low prices continue.

11 replies »

  1. “2019-a year to achieve low cost investment into UK on shore oil and gas for investors”.

    A different “headline” for the same scenario.

    Maybe 2020 will show which headline is of greatest impact to those poor mug punters?

  2. Oh yes-employment being created. Taxation being generated. Glad even Jono approves.

    Markets up 25% in 2019.

    Perhaps investors had the opportunity to take a gamble upon some more risky AIM investments with some of those gains and suffer very little disappointment?

  3. Strange, David. Do we therefor ignore the rise in the price of Shell today??

    You may be confused, but the reality is that resource stocks and biotech are renowned for big gains or spectacular falls-particularly those in development stage and sitting on AIM. Those mug punters-or most of them-are pretty well aware of that, and recognise that trading opportunities are offered as a result of volatility. Share certificates stuffed in a drawer and looked at a year later may be how DoD present the market but it is very old fashioned.
    However, those companies that have developed still offer the best incomes via dividends for investors and capital gains to go with it, over a long term.

    The alternative of stocks like Tesla offer no income over many years, but the opportunity to feel self righteous. Personally, I prefer my charitable donations to go to someone in real need, rather than to subsidise the life style of a $billionaire.

    • MARTIN ,

      I’m delighted to see that you’ve recovered from your finger aliment…… I can only assume, it was some sort of a repative strain ailment to your keyboard fingers that prevented you from wishing old Jack and Co a Merry Christmas on the DOD webpage .

      Haven’t you heard the news MARTIN ??????
      As we are close allies of America , I’m sure you will be delighted to hear of the booming stock price growth in the US company Tesla

      https://bgr.com/2019/12/23/tesla-stock-price-deliveries-model-3-china-loan/

      • Booming???

        Hasn’t reached the price that Mr. Musk stated some while ago yet, little green jack (what a growth industry the Jacks are!)-after which he was fined for misleading the market!!

        So, just like UK on shore oil and gas stocks, it all comes back to what price you buy at, and what price you sell at-certainly no dividends to consider from either.

        But, you will be pleased to know that some investors will have looked at UK on shore oil and gas today and the lucky ones/mug punters may have trousered more in a few hours than the interest they could have obtained in a YEAR from a savings account! Probably “disappointed” it was not more, but tomorrow is another day, when they can start all over again.

        See Wall Street is now forcing the US frackers to produce better returns for investors, rather than wild expansion ahead of the market requirement! Watch out Mr. Musk! May be a lesson there?

        But, happy new decade Jack. I had a lovely quiet Christmas enjoying my cheap spuds and relatively cheap turkey-so much for the BBC fake news!
        What will the 20s bring? Hmm, more people and therefore more fossil fuel use and thus more issues regarding energy security. If you could solve the more people bit Jack, then the rest would be easy, but as the Jacks seem to multiply out of control, not convinced you will be able to do that.

        • You will like this one Jack!!

          From Equinor:

          Equinor expects to deliver returns from wind farms of about 9-11%. Mr. Cook (executive vice president) said that increasing them to the 30%+ level seen in its core Norwegian oil and gas business will be “challenging”!!

          Hmm.

          “Humanity really does need to pay attention to arithmetic and the laws of physics”

          (The late government chief scientific adviser, Professor Sir David McKay.)

          Ohh-energy security? Brent up to nearly $70/barrel today due to events in the Gulf.

          • ” You will like this one ” MARTIN
            GREAT NEWS
            From EQUINORS own webpage …………Quote, ” The world needs more offshore wind to meet global climate goals. Now we’re constructing the world’s largest offshore wind farm, Dogger Bank, which will produce renewable energy equivalent to powering 4.5 million British homes. ”
            YES you did read that correctly, 4 5 million homes .
            What’s ” challenging ” about that ???????

  4. Are end of life financial projections available for Cuadrilla’s depleted fracked wells including site restoration expenses but more importantly the costs of settling law suits for health and property damage?
    Adding on law suits for the destruction of the tourism and agriculture industries will totally wipe out any profit for the fracking industry and it’s financial and political enablers.

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