Industry

Ineos cuts £63+m from value of UK shale assets because of fracking moratorium

Ineos’s shale gas business has cut the value of its exploration assets to zero following the government moratorium on fracking in England.

Ineos shale gas licences. Map: Ineos Upstream Limited

Accounts for the year ending December 2019 show Ineos Upstream Limited wrote down the entire value of more than £63m in exploration and evaluation assets and almost £1m in oil and gas properties.

The company said:

“As at the year-end date, all exploration and evaluation assets (£63,081,000) and oil and gas properties assets (£917,000) were impaired to nil value following the UK Government’s November 2019 moratorium on shale production”.

It also said:

“The Company concluded that the non-current carry values cannot be commercially supported and consequently the assets were fully impaired.”

The moratorium was introduced almost a year ago and is still in force. It followed a series of small earthquakes caused by fracking carried out by Cuadrilla at its site at Preston New Road in Lancashire.

This is the second year, Ineos has reduced the value of assets in its onshore business. In 2018, it cut £18m from the value of oil and gas properties. It also wrote off £58m in exploration and evaluation costs. Both related to licences in Cheshire, Scotland and the East Midlands said to have “no potential for a commercial development”.

The strategic aim of Ineos Upstream Limited remained unchanged in the 2019 accounts, published by Companies House this morning:

“to explore for hydrocarbons in the UK and generally help promote and develop the safe extraction of unconventional gas in the UK”.

As in 2018, Ineos Upstream said it aspired to “quickly but deliberately explore onshore opportunities in the UK and rapidly develop producing assets where that exploration is successful”.

But the 2019 accounts made no reference to two sites where Ineos Upstream is the operator and has planning permissions for exploration: Bramleymoor Lane, in the village of Marsh Lane, in north east Derbyshire, and Common Road, Harthill, in South Yorkshire. No work has been carried out at either site, where planning consent was granted in summer 2018 after separate public inquiries.

The accounts said 2019 business focussed on two sites in north Nottinghamshire, operated by Ineos’s joint venture partner, IGas.

One of the sites, Tinker Lane, has been abandoned and restored after drilling failed to encounter the target Bowland Shale.

A vertical well was drilled at the other site, Springs Road, in 2019. Planning permission expires next month and IGas has said it will apply for an extension.  

The accounts predicted future activity at its interests in the east midlands were likely to be “severely restricted in the near term” because of the moratorium.

They also showed that Ineos Upstream declared a loss for 2019 of more than £77.5m, compared with a loss of nearly £90m in 2018 and £10.6m in 2017.

For a second year, the company has not given an estimate of losses available to be set off against future trading profits. The accounts said:

“The directors consider that the company should not recognise any deferred tax asset as there is insufficient certainty over the future utilisation of its deferred tax assets”.

Ineos Upstream Services Limited, the sister company supporting Ineos’s oil and gas business, reported a loss for 2019 of more than £4m, compared with a loss of £2.9m in 2018. Revenues were down from £5.6m in 2018 to £91,000 in 2019.

  • Moody’s Investors Service reported on 19 October 2020 that the rating outlook for Ineos Group Holdings remained negative. It affirmed the corporate family rating at Ba3 (where the highest is Aaa and the lowest C).

2019 key figures for Ineos Upstream Limited

Gross loss: £64,144,000; 2018 £76,031,000; 2017 not listed

Administrative expenses: £5,159,000; 2018 £7,735,000; 2017 £6,257,000

Operating loss: £69,303,000; 2018 £83,858,000; 2017 £6,257,000

Loss for the financial year: £77,545,000; 2018 £89,931,000; 2017 £10,659,000

Non-current assets: now zero; 2018 £53,307,000; 2017 £84,804,000

Current assets: £4,420,000; 2018 £7,472,000; 2017 £15,179,000

Total assets: £4,420,000; 2018 £60,779,000; 2017 £99,983,000

Total amounts owed to group undertakings: £192,441,000; £164,194,000
Ineos Upstream Limited has a loan agreement with Ineos Industries Holdings Limited, with an interest rate of 4.5%

Company relations: The immediate parent company of Ineos Upstream Limited is Ineos Upstream Holdings Limited. The ultimate parent is Ineos Limited. The most senior parent entity producing publicly-available financial statements is Ineos Industries Limited. The ultimate controlling party is Jim Ratcliffe.

18 replies »

  1. So, taxation reduced as a result of the moratorium.

    Wonder if the antis will crowd fund to make up the difference? LOL

    • Now, as your (probably industry funded) arguments and comments go, this one sounds even more desperate than usual. Especially as Ratcliffe has made it clear by his move to Monaco, that he’s not interested in paying tax of any kind if he can avoid it.

      • Ahh, the reaction stirs in the night-or tries to!

        I would place a wager that Sir Jim pays a lot more UK tax than yourself, old chap, and then pays out a lot more to help fund good causes that he wants to support where he believes he can target his wealth better than the Government. A somewhat greater contribution to society than a dabble into crowd funding, or an attempt upon the £5k photo prize, with the ladies undies upon a fence montage. But, perhaps your knighthood was lost in the post?

        But you are in good company of those who want to show they know little but still want to make out they do, and by so doing, show they know little!

        I see I am again “probably industry funded”. Didn’t realise my posts were seen as that professional, but thanks for the compliment. Regarding industry funded, then, if I was, I would pay more tax, wouldn’t I?! (Unless I utilised an ISA to “avoid” tax. But is that avoiding, or is that just operating within the existing tax system, set up over decades to allow and ENCOURAGE individuals and companies to manage their finances in the UK rather than elsewhere?)

        Still puffing around in the 3 litre diesel BMW? May get a little second hand bonus there if new ones have 10% added to their price from the start of 2021. There, if you had bought/leased British, you would have helped to narrow the gap between what UK tax you pay and Sir Jim pays! Shock/horror-reaction “avoided” UK taxation. What a hoot.

        Even so, Sir Jim will still pay far more tax in Germany than yourself. As he does in Belgium and USA, plus many other countries.

  2. Less fossil fuels being extracted and burned, less local air pollution, no industrialisation of the countryside, no fracking related quakes, a brilliant result for communities and the planet.

    • Use of fossil fuels daily from many uk resources, and preaching no earthquakes, of which there has only been one recorded source, PNR! oh the irony!!

    • No industrialisation of the country? You must be meaning all those wind turbines and solar farms, KatT.

      Most can see what you are unable to see. Might be best not to keep demonstrating that.

    • Kat

      While the absence of fracking will lead to less frack activity in the countryside, it is not the key driver in the industrialisation of that area.

      Industrial farming is leading the charge, followed by onshore wind (with a large visual impact) and solar farms.

      gov.net/wg/news.nsf/articles/Environment+Agency+prosecutes+Lancashire+farm++contractors+for+polluting+river+10102019142800?open

      So – the countryside is being industrialized, and its nothing to do with fracking or the small onshore oil and gas industry.

      What to so? A number of individuals are taking action by rewilding (or making better) sections of the countryside to counteract that industrialisation – good for them.

      https://saxilbynatureproject.wordpress.com/blog-2/

      Or mixing chickens with solar?

      Click to access NSC_-Guid_Agricultural-good-practice-for-SFs_0914.pdf

      • But, no mixing of gannets and wind turbines!

        What is that, you say? They are just more collateral damage to be accepted to allow the bits to be hammered into the jigsaw?

        Perhaps Mr. Seely is also needing to review his views on imported oil versus IOW oil, with current events unfolding.

  3. So the non-uk tax payer is shedding assets. Funnily enough, in the midst of my tears, you might just notice the beginnings of a smirk. It’s probably the Marsh Lane/Harthill/Woodsetts jinx … should never have even looked at the area, let alone threaren to filth up the tgree villages. The sooner they wipe themselves off their spreadsheets entirely, the better

  4. Do not under estimate the might of Ineos and Sir Jim!

    It amazes me the anti’s use of fossil fuels, significantly gas, without the thought 💭 of common sense ⛽️, you can’t have your cake and eat it!

    He pays more UK corporation tax than all D&D, Extinction Rebellion, Green Peace, and associated anti’s 🐜 combined! FACT

    • But still Sir Jim pays less tax than he should, tax that funds public services like the NHS and education. Plus most people reading or commenting on D or D etc are not multimillionaires. But no doubt most people reading D or D etc do pay their fair share of tax and do not employ teams of accountants, that incidentally, were embarrassed by the extent of Sir Jim’s scheme to avoid paying tax. So all in all a rather irrelevant comment. And personally I use no gas through both choice and thought.

      • Hi KatT – you use gas generated electricity if you are on the grid. We all do. The grid does not choose which electrons you get despite what all the green providers would like us to believe. Perhaps someone can estimate the tax take from all Sir Jim’s employees?

      • What a strange comment!

        Is there a booklet detailing how much tax a person SHOULD pay?? Yes, there is. It is the tax code for each country that details how someone may be eligible for tax. Think you will find Sir Jim does pay all tax he is required to pay in each country. He has the flexibility to decide if he thinks that unfair to readjust where he operates.

        The irrelevance of your comment is that the DoD article clearly identifies Sir Jim’s office is STILL in London.

        If there was no moratorium upon UK shale he would be required to pay MORE tax, and would do so. Yet, you want him to be saddled with some sort of transferred guilt that is more of the antis making than anyone else’s! Not very good at accepting the potential consequences of your activities, are you.

  5. E-G:

    Obviously the antis have some guilt about the moratorium costing the public purse and therefore, public services, and are reacting accordingly. They did the same after the £400k cost for the Wressle enquiry. The usual smoke screen tactics to try and mask that their actions have consequences, just as some do regarding the issues with cobalt supplies.

    When they all get rid of their diesels (around 50% of UK diesel IMPORTED, so more tax diverted off-shore ie. tax avoidance) the comments may look a little more sensible, rather than hypocrisy. The 50% figure does make you wonder about the intelligence of those in Government who decided to encourage the use of diesel not so long ago. Might have been wiser to do so AFTER UK increased it’s diesel processing capacity?! Just another example of the inability for any sensible energy policy to be produced by UK Government. So, whilst such continues, international companies will simply concentrate upon countries that have more sense in that respect, and they will receive more of the taxation resulting.

    Mind you, it is equally interesting that the antis seem to have conveniently missed/deliberately ignored the protest outside INEOS head office-in LONDON, not in Monaco- in order to produce their fake news!

  6. Surely this article should tell the whole story that underpins our Government’s U-turn on it’s support and facilitation of the fracking industry.
    Namely that after causing several uncontrollable swarms of Hydrofrac Earthquakes, including the 2.9 Richter Scale, Intensity Level 6 event on August Bank Holiday Monday, that caused property damage to the tune of £10,000 to a house some 3 miles away from the Cuadrilla Preston New Road fracking site, further activities were simply politically untenable.
    Other properties were also damaged but these claims are still ongoing.

  7. Yes, quite a biblical event, where the antis, near and far, were not spared but the believers were!

    I see quite a cheap solution-become a believer.

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