IGas has confirmed it has relinquished the Tinker Lane shale gas licence in Nottinghamshire and written off £10m in exploration costs.
But the company said it was continuing to work with regulators and government to end the moratorium on fracking in England.
In interim accounts for the six months to June 2021, the company said relinquishing PEDL200, where the Tinker Lane was drilled unsuccessfully in 2018, would allow it to focus on the Gainsborough Trough.
“Following the moratorium on fracking, we continue to work with the OGA [Oil & Gas Authority], BEIS [Department of Business, Energy and Industrial Strategy] and No 10 Policy Unit to demonstrate that we can develop shale in this area in a safe manner.
“Our discussions have focused on the new science that would be brought forward on a sector wide and site specific basis that would allow the moratorium to be lifted.”
The company added “the safe development of shale could play a critical role in the UK’s energy transition and in the creation of jobs and wealth to a number of key areas”.
In July 2021, IGas was refused an extension of planning permission at its other shale gas site, at Springs Road, near the Nottinghamshire village of Misson.
The company said in the accounts it still believed Springs Road was “of national importance”:
“We are considering our options along with our partners including our right to bring forward an appeal.”
Most of IGas’s capitalised exploration expenditure continues to focus on shale gas.
According to the accounts, the company has £6.3m allocated to its Ellesmere Port site in Cheshire, where a decision is still awaited on an appeal against refusal of planning permission for testing.
Another £23.1m in capital expenditure was related to the Gainsborough Trough, where, IGas said, there was “significant shale potential”.
Capital expenditure in conventional oil and gas was £4.9m, the accounts said.
IGas saw increased revenues in the six months to June 2021, mainly because of higher oil prices: up to £16.6m, compared to £10.5m for the same period in 2020.
Net production and sales of oil, electricity and gas increased. Operating costs and admin expenses were down because of cuts to transport, staff and licence costs during the Covid-19 pandemic.
The period saw a net loss of £12.3m, compared with £40.8m for the same period a year before.
Stephen Bowler, IGas’s chief executive said production remained “robust”, despite Covid-19 challenges:
“We continue to focus our technical and operational expertise on offsetting the underlying natural decline in our fields through the execution of incremental production opportunities that demonstrate commercial benefit via our delivery assurance processes.”
IGas has submitted planning applications to produce hydrogen at Albury and Bletchingley, two existing methane sites in Surrey.
Mr Bowler described the schemes as “blue hydrogen projects” and said if they were successful IGas would be “on track to produce the UK’s first blue hydrogen ahead of other, refinery scale projects”.
Blue hydrogen requires the capture, use and storage (CCUS) of carbon dioxide. The planning applications do not include facilities for CCUS and, if successful, would produce grey hydrogen.
Elsewhere in the accounts, the company said:
“The projects are being developed in phases, the first phase being to establish the principle of hydrogen production at the sites. The second, to produce blue hydrogen, is now being accelerated following positive feedback from key regulators and interest from local communities.”
Key figures for 6 months to 30 June 2021
Revenue: £16.6m (H1 2020: £10.5m)
Gross profit: £5.6m (H1 2020: loss of £2.4m)
Operating loss: £12.2m (H1 2020: £34.6m)
Net loss: £12.3m (H1 2020: £40.8m)
Depreciation, depletion, and amortization: £2.4m (H1 2020: £3.5m)
Adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization): £2.7m (H1 £2.2m)
Operating costs: £8.6m (H1 2020: £9.3m)
Admin expenses: £2.3m (H1 2020: £2.8m)
Cash balances: £2.8m (H1 2020: £2.6m)
Operating cash flow: £6.4m (H1 2020: £1.4m)
Net production: 2,005 boepd (H1 2020: 1,940 boepd)
Oil sales: 3322,199 barrels – £15.2m (H1 2020: 318,751 – £10.0m)
Electricity sales: 7,112 Mwh – £550,000 (H1 2020: 4,411 Mwh – £181.000)
Gas sales: 1,247,946 therm – £740,000 (H1 2020: 966,445 – £247,000)
Cost of sales: £11.0m (H1 2020: £12.9m)
Net debt: £13.2m (H1 2020: £11.2m)
Investment in assets: £2.6m (H1 2020: £4.9m)
Net assets: £61.9m (31 December 2020: £73.3m)
Full year net production forecast: 2,000 boepd
Full year cash estimated operating costs: $38/boe
Dept capacity: estimated at £19.5m and headroom at £6.4m