The East Yorkshire based oil and gas firm, Rathlin Energy, has said climate change will not affect its future operations.
The company, which has planning permission for 20-years of oil and gas production, said it had considered climate change in preparing its latest annual accounts.
But a directors’ report, published online with the accounts yesterday, said:
“Management has considered the implications of climate change and do no believe this will have a material impact on the company’s future operations.”
The transition to a low carbon economy was likely to have an impact on future pricing of hydrocarbons, the report said. This “may affect, either positively or negatively, the ultimate recovery of the Company’s intangible oil and gas assets”.
Rathlin said it believed “demand for sufficient supply of hydrocarbons will remain critical to the UK’s infrastructure and economy”. It added:
“We do not believe that in the event of an economic downturn it will have a material impact on the Company’s future activities.”
New prospects, production estimates and licence commitments
Rathlin Energy, now majority-owned by Reabold Resources, operates two East Yorkshire sites, West Newton-A and West Newton-B in licence area PEDL183.
Unlike some other onshore oil and gas firms, there is no indication that Rathlin plans to diversify into renewable energy.
Instead, the directors’ report suggested the company would be looking for new hydrocarbon prospects.
It said long-term commercial success depended on “the ability to find, appraise, develop and commercially produce oil and natural gas resources and reserves”.
This relied on the company’s ability to “explore and develop any properties it may have from time to time”, the report said, and “to select and acquire additional producing properties or prospects”.
The report also added:
“Rathlin’s ability to continue as a going concern may include having to make substantial capital expenditures for the acquisition, exploration, development and production of oil and natural gas reserves in the future.”
The accounting period, for the year to 31 December 2021, included tests on the West Newton B-1z and A2 wells.
Both detected the presence of liquid hydrocarbons and gas, the company said. Gas from WNB-1z was estimated to be 90% methane and 4.5% ethane, it said, while analysis of samples from WNA2 suggested a low viscosity light oil.
The report said:
“Initial gas production rates from a stimulated horizontal well estimated at 35.6 million cubic feet per day.”
Planning permissions for both sites include a condition preventing high volume hydraulic fracturing.
The report also said Rathlin was committed to acquiring and interpreting 15km2 of new 3D seismic data or 50km of 2D seismic by 30 June 2022. But the company said:
“We are currently in discussion with the OGA [now named North Sea Transition Authority] regarding this commitment and the possibility of substituting the commitment for exploration work already completed. The company estimates the cost of the seismic commitment to be about £1m gross.”
Operating loss, tax credit and cash balance
The accounts reported an operating loss of £1.18m, slightly lower than the year before.
The cash balance at 31 December 2021 was £5.3m, down from £12.2m in 2020. This includes a restricted £75,000 bond in favour of a landowner who leases land to Rathlin Energy. The accounts reported that the landowner could access the bond if Rathlin failed to fulfil its obligation to return the lease site to its original condition. The guarantee expires in June 2024.
Rathlin said the cash balance could be used to “sustain general operations and would be “sufficient to fund the company for a minimum of 12 months from the signing of these financial statements”. The company said this would it to “continue as a going concern if drilling and completion operations are delayed”. The West Newton-A production is being reviewed by the Department of Levelling Up.
During the financial year, the company received a tax credit of £206,525 for research and development work completed during 2019. Rathlin said it was “currently assessing 2020 and 2021 to determine if work completed during these periods would also qualify for a similar credit”.
Loss from operating activities before taxation: £1,182,000 (2020 £1,015,920)
Non-current assets (largely intangible oil and gas assets): £19,581,086 (2020 £14,476,819)
Current assets: £6,142,325 (2020 £12,855,850)
Cash balance at 31 December 2021: £5,346,582 (2021 £12,223,428)
Total assets: £25,735,983 (2020 £27,369,700)
Lease payments: £25,500 (2020 £25,500)
Provision for decommissioning obligations: £1,324,449 (2020 £1,263,894)
Current liabilities: £939,070 (2020 £2,020,812)
Total liabilities: £2,263,519 (2020 £3,289,983)
Payments to directors and staff: £536,465 (2020 £487,076)
Expenses for management services from Connaught Oil & Gas: £956,008 (2020 £956,540)
Carried forward losses: £7,411,523 (2020 £7,750,046)