IGas blamed the Covid-19 outbreak and a low oil price for falls in production and revenue, along with a rise in debt, in the first half of the year.
The company’s interim results published today, warned that uncertainty remained and future impacts on the business were possible.
It said a continuing low oil price could “cast doubt on the group’s ability to continue as a going concern” in the rest of 2020.
IGas shut about 15 sites at the start of the Covid-19 outbreak amid falling oil prices. Five sites remain closed, the company said today.
The accounts show revenues fell more than 50% to £10.5m, down from £21.2m in the same period in 2019.
Production was down 18% at 1,940 barrels of oil equivalent per day (boepd), compared with 2,360 boepd in the first half of last year. Annual net production has been downgraded to 1,850-2,050 boepd, from 2,250-2,450 boepd estimated in April 2020.
In the first half of 2020, cash balances fell more than 80% to £2.6m, down from £14.4m a year ago. Operating cash flow fell 78% at £1.9m, compared with £8.7m.
Debt increased 90% from 5.9m in the first six months of 2019, up from £11.2m for the same period this year.
Chief executive, Stephen Bowler, said the group expected it could continue for the foreseeable future. But he warned:
“should oil price or demand (and therefore revenue) fall further, the Company may not have sufficient funds available for 12 months from the date of approval of these financial statements.
“if oil prices remain low for a prolonged period of time, we cannot rule out future impacts on the business.”
DrillOrDrop previously reported savings at IGas in redundancies, salary replacement for directors and a proposed reduction in benefits. Gross cash savings at the end of September 2020 were expected to be £1.6m, IGas said today.
It said capital expenditure had been cut to concentrate on maintenance, abandonment and projects already underway. Work on other projects had been temporarily delayed until energy prices improved.
Water injection began at Scampton North in Lincolnshire in July 2020. The Welton waterflood project was delayed and is now due to be completed in early 2021.
IGas announced last week that it had acquired the geothermal company, GT Energy. The accounts said all IGas operated fields were being assessed for other development opportunities, including Carbon Capture and Storage (CCS) and geothermal energy.
The decision on whether to allow flow testing at IGas’s Ellesmere Port shale gas site is still awaited. An announcement by the local government secretary had been expected in April 2020. IGas said it had written recently to the government to “seek a decision as soon as possible”.
Revenue: £10.5m; six months to June 2019 £21.2m
Sales: 335,687 barrels of oil (including third party oil), 4,411 Mwh of electricity and 966,445 therms of gas; six months to June 2019 409,470 barrels of oil, 9,000 Mwh of electricity and 746,410 therms of gas
Adjusted earnings before interest, tax and depreciation (EBITDA): £2.2m; six months to June 2019 £7.7m
(Loss) and profit after tax from continuing activities: (£30.0m); six months to June 2019 £0.8m
Operating cash flow: £1.9m; six months to June 2019 £8.7m
Net debt: £11.2m; six months to June 2019 £5.9m
Cash and cash equivalents: £2.6m; six months to June 2019 £14.4m
Net production: 1,940 boepd; six months to June 2019 2,360 boepd
Cost of sales: £12.9m; six months to June 2019 £14.2m
Administrative costs: £2.8m; six months to June 2019 £2.5m
Investments in asset base: £4.9m; six months to June 2019 £3.4m
Investment in conventional assets (mainly Scampton and Welton): £3.5m; six months to June 2019 £1.6m
Investment in shale programme and conventional exploration opportunities: £1.4m; six months to June 2019 £1.8m
Net assets: £84.4m; six months to June 2019 £113.1m
Underlying cash operating costs: £10.2m; six months to June 2019 £10.6m