Tax relief has pushed the shale gas company, Cuadrilla, into profit, company accounts have revealed.
Financial statements for the 12 months to June 2021 show that Cuadrilla Resources Limited made a profit of £115,000, after recognising a corporation tax credit of £310,000.
In the previous full year accounts, to December 2019*, the company had a record loss of £38.5m. It last made an annual profit (£18,000) in the year ending December 2017.
Cuadrilla Resources described its exploration sites as “largely non-operational” because of the moratorium on fracking in England.
But in the latest accounts, the company reported it obtained a £50,000 loan from HSBC bank as part of the government’s bounce back loan scheme, introduced to help businesses through the covid pandemic.
The loan is unsecured and repayable in monthly instalments from June 2021-May 2026 at a fixed interest rate of 2.5%. The first 12 months of interest was covered by the government through a business interruption payment. HSBC small business loans currently have an interest rate of 7.1% APR.
Cuadrilla Resources also said it had an income of £361,000 in management fees for operational and administrative services provided to subsidiary companies.
The accounts have raised doubts about financial support from the ultimate parent, the Australian mining group, AJ Lucas (AJL).
AJL said it would continue provide the “necessary financial support” to enable Cuadrilla Resources to trade and meet its liabilities.
But this commitment was subject to successful refinancing of existing loans taken out by AJL that are due to mature.
Cuadrilla’s auditors, Ernst and Young, concluded:
“Accordingly, the ability of AJL to provide this financial support is uncertain”.
For the second full year, the auditors said there was a “material uncertainty” about the ability of Cuadrilla Resources Limited to continue as a going concern.
According to the accounts, Cuadrilla Resources Limited owed £109,862,000 to its immediate parent company, Cuadrilla Resources Holdings Limited. Net liabilities were £45,764,000.
Operating losses for the year to June 2021 fell to £192,000. This compared with a loss of £1,083,000 for the six months to June 2020.
This is the second time that accounts have shown the benefits of tax credits for Cuadrilla’s operation.
In the six months to December 2020, AJL said Cuadrilla received research and development tax credits of $A3m. These are paid by the UK government to companies that work on what are described as “innovative science and technology projects”. It can be claimed on unsuccessful projects and is payable to companies that aim to create an advance in the overall field – not just their own business.
In the first half of 2021, interim accounts revealed that Cuadrilla spent $900,000 on strategies to lift the fracking moratorium and administer its licences.
The company said it had provided “written input” and offered “full cooperation” to the review of fracking science, commissioned by ministers from the British Geological Survey. The conclusions of the review were due to be submitted to the UK government last week.
But in the Post balance sheet events section of the accounts, Cuadrilla made no reference to a proposal reported by last weekend’s Telegraph that it would offer 6% of shale gas revenues to communities that host shale gas sites, if the moratorium were lifted. DrillOrDrop asked Cuadrilla to verify the article but it did not respond to our questions.
Revenue: £361,000 (six months to June 2020 £862,000)
Admin expenses: £553,000 (six months to June 2020 £1,945,000)
Operating loss: £192,000 (six months to June 2020 £1,083,000)
Corporation tax credit: £310,000 (six months to June 2020 £250,000)
Total assets: £64,426,000 (at 30 June 2020 £64,950,000)
Total liabilities: £110,190,000 (at 30 June 2020 £110,829,000)
Net liabilities: £45,764,000 (at 30 June 2020 £45,879,000)
*Cuadrilla Resources Limited changed its annual accounting period from the end of December to the end of June, to bring it into line with AJL.