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