IGas declared a pre-tax loss of £59.1m for 2019 in its group annual results published today. This was up from £25.1m in 2018.
The company, which operates 80 sites across 28 fields, also saw its operating losses more than double.
Revenues fell because of lower oil prices and a smaller volume of oil sales, the company said, while regulatory, production and workover costs rose.
The chief executive, Stephen Bowler, described the results as “solid”. But there was a warning that the ability of the group to meet its financial covenants depended on future oil prices and foreign exchange rates.
The IGas share price closed the day down 5.7% at 15.30p.
IGas has seen its shale gas plans derailed by a government moratorium on fracking in England in force since November 2019.
The report said spending in the Gainsborough Trough in the East Midlands before the moratorium had been in excess of £10m. There was £31.6m of capitalised exploration expenditure allocated to the region.
The company described the shale gas in the Gasinborough Trough as “world class” after drilling wells at Springs Road and Tinker Lane in Nottinghamshire.
But an application to frack the Springs Road well, near Mission, was not submitted during 2019 as planned because of the moratorium. The Tinker Lane well failed to encounter the Bowland Shale and the site has been restored back to farmland.
Today’s annual report repeated previously-made commitments to work with regulators to demonstrate that the company could frack environmentally and responsibly. But it added:
“The group will work with Joint Venture Partners and the Government to undertake a body of scientific work to allow the submission of a Hydraulic Fracture Plan.”
IGas said this would be in “a basin that is known to be less geologically complex”.
Cuadrilla’s fracking operations in the Fylde region of Lancashire in 2011, 2018 and 2019 caused earthquakes.
IGas said it would now consider data and reprocessed 3D seismic for the Gainsborough Trough. This would allow it to start planning “a future potential appraisal programme” and a pilot development.
A decision by the Secretary of State on IGas plans to test its Ellesmere Port well in Cheshire been “delayed until further notice”, the annual report said.
The company said it had £5.9m of capitalised exploration expenditure relating to the site, which it referred to as “unconventional”.
The annual report included no targets for 2020. But it gave some details of planned initiatives.
Scampton North, Lincolnshire: A £2m project to convert a suspended well into a water reinjector was likely to be completed in the summer 2020. The company forecast the work would double current output in the field to more than 200 barrels of oil per day (bopd) and increase ultimately recovery in the field.
Welton, Lincolnshire: Plans to convert another suspended production well to a water injector to increase field recovery.
Weald Basin, Surrey: Plans to drill two wells in the Portland sandstone and Kimmeridge micrites near Dunsfold in Surrey had temporarily ceased, the report said. It added:
“when energy prices improve, we will seek to submit a planning application given the significant returns available. As part of the planning process, IGas would undertake community consultation to take account of feedback from local residents before submitting the full planning application.
IGas said it had allocated £4m to spend on exploration in the Weald.
Trust and social licence
IGas said support of local community was a “key component” of its social licence to operate. The report said the company was “committed to open and transparent communication and listening and reacting to the concerns of the public”.
Cuth McDowell, the interim non‑executive chairman, said:
“Trust can only be earned, and kept, if people see that we share their concerns and hopes for the future. They can only see that if we are transparent about what we do and why we do it. Transparency goes beyond publishing financial results; it is about being as open as we can be with all our stakeholders.
“The more transparent we are about our activities, the better equipped our investors, communities and wider society are to decide whether we merit their trust.”
Revenue: £40.9m; 2018 £42.9m
Earnings before interest, taxes, depreciation and amoritization (EBITDA): £13.8m; 2018 £10.8m
Underlying operating profit: £4.6m; 2018 £4.0m
Loss before tax: £59.1m; 2018 £25.1m
Loss after tax: £49.8m; 2018 £21.4m
Operating loss: £55.0m; 2018 £21.2m
Net cash generated from operating activities: £12m; 2018 £12.9m
Net debt: £6.2m; 2018 £6.4m
Cash and cash equivalents: £8.2m; 2018 £15.1m
Net assets: £113.1m; 2018 £161.7m
Exploration costs written off: £53.9m; 2018 £29.1m
Cost of sales: £29.6m; 2018 £28.8m
Operating costs: £20.5m; 2018 21.9m
Admin expenses: £4.5m; 2018 £5.5m
Exploration expenses: £53.9m; 2018 £29.1m
Conventional capital expenditure: £702,000; 2018 £137,000
Unconventional capital expenditure committed but not spent: £163,000; 2018 £2,573,000
Production: 2,325 bodpd – target was 2,200-2,400 boepd; 2018 2,258 boepd
Operating costs per barrel of oil equivalent: £30.1 boepd
Net finance costs: £3.4m; 2018 £3.9m
Investment in asset base: £6.4m; 2018 £10.6m
Carried gross work programme from Ineos Upstream Limited: £161m; 2018 £170m
Borrowing: £13.1m; 2018 £21.0m
Staff costs: £12.727m; 2018 12.960m
Average monthly number of employees: 152; 2018 153