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