Industry

IGas 2020 accounts reveal cost of Covid-19

IGas saw revenue drop by nearly half last year following production cuts and a falling oil price during the Covid-19 pandemic.

Welton Gathering Centre, Lincolnshire. Photo: IGas

The company’s accounts for the year to December 2020 also reported big falls in earnings and cash, along with a near doubling of net debt.

In a statement this morning, the company’s chief executive, Stephen Bowler, described 2020 as “an exceptionally difficult year for everyone”.

IGas shares ended the day down more than 5.5% at 24.80.

DrillOrDrop reported cost-cutting measures at IGas during 2020, including redundancies, field shut-ins and the closure of the company’s London head office.

Today’s figures showed that revenue was down last year to £21.6m, compared with £40.9m in 2019.

The company’s favoured measure of underlying performance – adjusted earnings before interest, taxes, depreciation and amortization – was down by more than 70%. It fell from £13.8m in 2019 to £4m in 2020.

Last year also saw an underlying operating loss of £2.7m, compared with a profit of £4.6m in 2019. Cash fell by 71%.

Oil production was down 18% to 1,907 barrels of oil equivalent per day (boepd), compared with 2,325 boepd in 2019. The shut-in of some fields in May and June 2020, cut production by about 600 boepd, the accounts said.

The shut-ins reduced operating costs (down £3m), and the furlough of some staff had “a positive impact on cash” of about £0.5m, the accounts said. Operating costs per barrel of oil equivalent (boe) were £25.8 ($33.3), compared with £23.6 ($30.1) in 2019.

Losses after tax narrowed to £42.1 million, compared with £49.8 million in the previous year. This was because of a smaller write-off of oil and gas assets in 2020.

Administrative expenses increased by £0.8m because of redundancy costs and the acquisition of the geothermal company, GTE.

IGas’s capital expenditure programme was cut by half to focus on maintenance, abandonment and projects already underway. £8.5m was spent on assets, mainly water injection work at Scampton North and Welton in Lincolnshire.

Water injection began at Scampton North in July 2020, on schedule and to budget, IGas said. This aimed to increase production by 180 thousand barrels (mbbl) and reduce the need to truck water to the Welton Gathering Centre. A processing facility would reduce the need for venting and increase the amount of gas for generating electricity.

The Welton scheme was delayed by the pandemic but brought online in January 2021, largely on budget, IGas said. It would add more than 100 bopd to production.

Plans for 2021

On fracking, IGas said it continued to work with regulators to demonstrate it “can operate safely and in an environmentally responsible manner”. A moratorium remains on fracking in England because of concerns about earthquakes caused by operations at Cuadrilla’s shale gas site near Blackpool.

IGas said reprocessing of 69 sq km of 3D seismic data acquired in 2014 from around its Springs Road shale gas site in Nottinghamshire showed that the Gainsborough Trough had “structural simplicity and limited faulting”.

A planning application to extend the life of Springs Road is with Nottinghamshire County Council. A decision date is not yet known.

No decision had been announced on IGas’s shale gas testing plans at Ellesmere Port, which are to be decided by the Secretary of State, after an appeal.

Plans to explore for gas near Godley Bridge in Surrey would “ramp-up again once there is more certainty in energy prices”, the accounts said.

Approximate location of IGas proposed Godley Bridge oil and gas site, south west of Loxhill and north of Dunsfold. Source: IGas website

A 14mw deep geothermal project by GTE in Etruria Valley, Stoke on Trent, is waiting for a decision on planning permission, the company said. All geothermal work has been completed and the necessary permitting was in place. But construction had halted on the heat network and the thermal purchase agreement not completed.

On IGas’s hydrogen plans, the company said it had initially identified two of its existing sites in south east England where gas could be turned into grey hydrogen and sold to local or national customers. The company said: “We expect to advance these projects in 2021.”

The accounts suggested oil prices would remain depressed in the short term but chief executive Stephen Bowler said:

“[IGas] continues to adapt its business to operate, both in the current environment, and to develop its business strategies to deliver a long-term and sustainable business.

“as commodity prices improve we will continue to invest in our assets where appropriate and to move ahead purposefully with our geothermal and hydrogen projects.”

The company estimated that net production in 2021 would be 2,150-2,350 boepd and operating costs would fall to $32/boe

It expected to make further cash savings of £1m in 2021, to add to the £0.6m in 2020. London based staff would continue to work remotely, it said.

Key figures

Source: IGas 2020 annual accounts

Revenues £21.6m (2019 £40.9m)

Adjusted earnings before depreciation, interest, tax etc (EBITDA) £4m (2019 £13.8m)

Loss after tax £42.1m (2019 £49.8m)

Gross loss £1.9m (2019 gross profit of £11.3m)

Underlying loss £2.7m (2019 profit of £4.6m)

Net debt £12.2m (2019 £6.2m)

Operating cash flow before working capital adjustments £3.3m (2019 £14.3m)

Cash and cash equivalents £2.4m (2019 £8.2m)

Net production 1,907 boepd (2019 2,325 boepd)

Operating costs £17.5m (2019 £20.5m)

Operating costs per barrel of oil equivalent $33 (2019 $30)

Administrative costs £5.3m (2019 £4.5m)

Net cash generated £3.6m (2019 £12m)

Net assets £73.3m (2019 £113.1)

Total liabilities £93.730m (2019 £86.416m)

Abandonment costs £1.3m (2019 £1.8m)

Investment in assets £8.5m (2019 £6.4m)

Oil sales £20.5m (2019 £39.2m)

Electricity sales £438,000 (2019 £966,000)

Gas sales £594,000 (2019 £687,000)

8 replies »

  1. Thank you, shared to Singleton Forest Watch … What does a £12m net debt mean in terms of financial viability?

  2. Ermm, a lot less than for Tesla or every Premier League football club.

    With borrowing costs at very little, debt is suddenly very attractive. Just take a look at Government debt around the world. US debt is enormous.

    Pandemics cost a lot of money. Good job borrowing is very cheap. Of course, UK debt which has grown massively, will need repaying, so, thankfully, companies like IGAS will take some of that burden rather than put it on the shoulders of the young to pay in increased personal taxation. Those same youngsters get NO help in that respect from imported oil.

    Interesting though that the change in IGAS share price is worthy of noting on DoD but the change in UKOG share price needs excluding!

  3. I’ll help you out with the missing info, Martyn.

    IGAS shares are down 95% over 5 years whereas UKOG shares are down merely 93% over the same period. Both companies obviously at the top of their game. Maybe they could profit from your own financial acumen.

    I am not sure I understand how a loss making company can actually help to reduce the burden of debt. I always thought that Corporation Tax was paid on profit not on losses – but I may have got this wrong.

    Incidentally, there is a “downside” to cheap borrowing . Low interest rates encourage the take-up of Sub Prime Debt with a high coupon which firms like IGAS are dependant on. I have said many times that onshore petroleum exploration in the UK is meat and drink to the money markets. Highly leveraged companies provide the opportunity to create all sorts of esoteric financial products and derivatives that are the lifeblood of the industry. Profit is made on the finance not on the hydrocarbons. Hence the poor results from IGAS and UKOG.

  4. Nope, that was no help at all.

    There is no need to look at share price over 5 years. You did so because it suited a false narrative you tried to create, which apart from anything ese TOTALLY removed any impact of the pandemic, whilst the details from IGAS made it quite clear that the pandemic had been a major factor during 2020. Just as it has been for many companies and their 2020 results will and are showing a similar picture. So, in order to create your narrative you need your readers to be totally ignorant of that. There may be one or two who are but I would prefer to address my remarks to the majority who are not.

    Yes, profit is made on the finance for many AIM or similar companies, with the hope/expectation from the investor that returns will come from trading opportunities-just like MANY found yesterday and the previous day at UKOG (showing that long term holders are not as major as you would suggest)-or returns in the future. That is no different to the situation with Tesla where no profit was made for something like 15 years-except the amounts are very different. Yet, Mr. Musk will have paid a large amount of tax (hopefully!) and so will his employees and his supply chain, so Corporation Tax is the cherry on the cake for the Tax Authorities to await.

    But, if you are really concerned about maximizing tax revenues from the likes of IGAS then why do you do your bit to delay or prevent that from being achieved? Back to the one sided equations that are so loved by the antis who can’t get an equation to balance! Meanwhile, I would like to see companies such as IGAS succeed and contribute as much as they are able to the UK Tax Authorities, which imported oil does NOTHING for, with even most of the ships now foreign owned and foreign crewed.

  5. I am sorry for presenting an inconvenient truth, Martyn.

    The five year tanking of the IGAS share price is not a “false narrative” – it is a simple matter of fact. If shareholders in IGAS were as optimistic as you then they would not have baled out. . The share price was rubbish even before the pandemic : its price in March 2020 was pretty much the same as it is today..

    And what is the point of continuing to use Tesla in all your many posts ? The war chest that Elon Musk has been able to draw on as he develops his electric vehicles is unmatched by the scrambling for cash of small cap UK Companies seeking out hydrocarbons. I think you will find it has something to do with Financial Resilience.

  6. I think you will find it is something to do with loans, and debt, pT-just the same as IGAS but on a much larger scale. And, very close calls as to being able to repay those loans in the not too distant past, and searching for partners to bale them out. Research some of Mr. Musk’s own comments and you will see how close a call they had.
    That is the point of continuing to use Tesla as an “alternative” example of what is the same situation, or worse, as some would attempt to place upon other companies as a unique situation. That is an inconvenient truth to you. For me, Tesla are a gift that keeps on giving, including a rather inconvenient environmental record.

    So, no, you have not presented a truth, certainly not a unique one that applies to the likes of IGAS and does not apply to many others. .

    As far as IGAS is concerned, did you really expect them to have a good financial year in 2020??

    What share holders baling out? Some always do in such companies, but then others take their place. They are not a large home for long term holders. I have heard the same old nonsense about small UK oil exploration/development companies constantly on DoD. I have yet to see any situation where the nonsense comes to mean anything, other than some get rich quick lot decide to find somewhere else to try and get rich and others move in.

    Meanwhile, those smug punters who made so much money last week on UKOG may just decide to spend some of it on IGAS, or they may prefer UJO. But, I suspect, from your previous “truth”, you will think because the share price at UKOG fell on Friday that means not much money was made. Nope, the money will still have been made, and that might mean that many have also been able to increase their holdings. Your nonsense about share price a while ago compared to current price TOTALLY ignores that-and that is a major reason why many do invest and trade in this type of company and make money several times over within your 5 year period. If you do not see how that happens, and many on DoD have had that same problem, then you do have company. But, maybe best not to make comments that place you within that company if you want to be taken seriously.

    By the way, I am not invested in IGAS but I have been within the last 5 years. So, I lost money? Nope. I baled out? Well, I am no longer holding IGAS shares, but I would not say I baled out, I just traded a profit and saw what appeared a better opportunity for the following period-and it was NOT Tesla. Although, Tesla have offered the same, and greater, trading profit opportunities over the last 5 years where much more money could have been made by repeat trades than a 5 year long hold. Trouble trying to do that with Tesla is that Mr. Musk has a habit of making unfortunate comments every now and then which upset the patterns that could otherwise be calculated.

    However, I would still prefer to see UK companies paying UK tax on UK production, when possible, rather than importation of those exact same goods where that is not the case. So, the fact that IGAS have come through 2020, maintains that going forward, and I do see that as a positive.

    And, finally, I have had an election leaflet placed through my letter box today-when I understood election campaigns were halted. From whom? The Green Party! Unbelievable.

  7. It was you who raised the subject, Martyn. You complained that DOD had mentioned the fall in the IGAS Share Price but not the recent rise in UKOG.

    I simply provided a historical perspective of the two companies because it is easy to get a little giddy when a Penny share suddenly doubles in value.

    I don’t see why highlighting something already in the public domain should cause you to write [edited by moderator]

  8. “As usual it lacks any coherent point”!!

    Anti speak for “oops, the reality does not support my dogma”.

    So, Penny shares DO sometimes double in value then pT?? And, maybe 5 years hence they will be back to where they were? Maybe. DOH-just maybe that is why many do invest in Penny shares? Not for the 5 year gain but the short term volatility? If you look at the trading pattern last week at UKOG I think even you would find that difficult to deny, but will find solace in just referring to a 5 year start and end point-which is like saying a footie club was 12th in the division at the end of the 2nd month of the season and 12th five seasons later, so not worthy of support, and ignoring everything that happened in between!

    No, that would not be anti coherent-but it is the reality.

    Just to please you, since Tesla has joined the S&P 500 at the end of last year, noticed how the share price has gone? Another oops. And as you like to find signs of baling out you can now research those who are baling out of Tesla-and note there are some significant funds who have done so. Not the so called mug punters, but some large investment funds. Seems to be quite a common event with investors. I suspect when the price is at the level others find attractive, the reverse will happen. I did note within that “pattern” one of the funds I hold within pensions has increased their holding and another has reduced it! Shock/horror-the same thing is apparent in the wider, non fossil fuel world! Is that coherent? It certainly is reality.

    (For Jack- for that reason I would quite like Tesla to do well, however, I do not expect it to be immune from factors it has no control over- and China boost or disappointment would be my worry-any more than IGAS has control against a pandemic.)

    But thanks for reminding me of the joys of the oxymoron! An anti posting about coherence! I could list a large number of incoherent statements from your buddies that fit that description, but would be moderated again, so will not waste my time and erode my keyboard. Regular readers will already be aware.

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