Losses widen at Angus Energy on derivative swap

Angus Energy has reported widening annual losses because of a derivative swap.

Angus Energy’s Saltfleetby gasfield, Lincolnshire. Photo: Angus Energy

In a statement, the company announced a pre-tax loss of £111.9m for the year to 30 September 2022. This compared with a loss of £15.6m in the previous year.

The difference was mainly because of a £110.309m loss on a derivative instrument on gas sales from the Saltfleetby field in Lincolnshire.

In annual accounts, Angus directors and its auditors identified a “material uncertainty which may cast a significant doubt about the group and company’s ability to continue as a going concern”.

The company said it had introduced “cost saving measures where possible to preserve working capital”.

It said:

“working capital from the expected revenue generation are sufficient for the expenditure to date as well as the planned forecast expenditure for the forthcoming twelve months”.

But the forecast cashflows relied on no suspension of gas production at Saltfleetby for “an unforeseen significant period”, the company said.

It also said further funding may be required to meet a catch-up derivative payment of £4.175m in June 2023, if there was a “timing difference between cash inflows and outflows”.

The derivative agreement dates from June 2021, when Angus Energy’s Weald Basin No. 3 company entered into a swap contract with Mercuria Energy Trading SA. Angus was to pay Mercuria the floating price, while Mercuria would pay Angus the fixed price on the sale of gas from the Saltfleetby gas field.

Production delays at Saltfleetby led to revisions of the hedge profile, the company said.

At the reporting date, Angus said the expected cash flow on gas sales was £186.332m, resulting in a loss of £158.680m. The loss on the swap was a result of steep rises in gas prices, it said.

Production revenue rose during the year, mainly because of resumed gas flows at Saltfleetby, the accounts said.

The company said it would now focussing on the southern lobe of the Saltfleetby gasfield. It said the best estimate of contingent gas resources was 20 billion cubic feet. The site also had “great gas storage potential”, the company said.

Angus chairman, Patrick Clanwilliam, said:

“We will continue to work with all stakeholders to assess the viability of storage opportunities either now or at the end of field life.”

Oil production had also resumed at the company’s Brockham site in Surrey, the accounts reported.

Angus said the recompletion of the Brockham BRX4Z well as a Portland producer would increase production by about 150 barrels of oil per day. The work was planned by the end of the second quarter of 2023, it said.

Key figures

(Year to 30 September 2022)

Revenue from oil and gas production: £3.142m (2021: nil)

Sale of oil: £0.097m (2021: nil)

Sale of gas: £3.045m (2021: nil)

Cost of sales: loss of £0.581m (2021: loss of £0.294m)

Gross profit: £2.032m (2021: loss of £0.294m)

Administrative costs: £2.619m (2021: 1.918m)

Operating loss: £1.398m (2021: £2.394m)

Loss before taxation and total comprehensive loss for the year: £111.947m

Derivative loss: £110.309m

Adjusted operating loss (excluding derivative loss): £1.638m (2021: £2.455m)

Loss for the company: £2.168m (2021: £1.362m)

Value of oil and gas production assets: £80.792m (2021: £6.534m)

Value of exploration and evaluation assets: £5.572m (2021: £13,073m)

Total assets: £91.349m (2021: £42.063m)

Total liabilities: £82.818m (2021: £37.525m)

Wages and salaries: £1.159m (2021: 0.971m)

Angus Energy holdings at 30 September 2022: Brockham (PL235) 80%; Lidsey (PL241) 80%; Balcombe (PEDL244) 25%; Saltfleetby (PEDL005) 100%

Substantial shareholders in Angus Energy: Forum Energy Limited (15.17%); Kemexon Ltd (9%), Aleph Fin C (7.9%)

Total issued ordinary shares at 30 September 2022: 2,764m (2021: 966m)

Number of employees at 30 September 2022: 23 (2020: 13)

Indefinitely available tax losses: £173.495m (2021: £21.014m)

Cash balance at end of reporting year: £0.747m (2021: £6.160m)

2 replies »

  1. Strange things accountancy rules!

    However, note the date of the accounts, and note what has happened since. All as expected, gas being produced as expected, extra compressor commissioned as expected, sidetrack completed as expected. Expected? Well, expected quicker by some, not by others, it appears.

    It will be the next six months that determine whether output is achieved, as expected, to provide the returns expected. If so, then additionally, I expect, less LNG may be required to be shipped into UK and will cut down on global emissions. What is not to like-apart from the risk to the investors?

  2. There is nothing strange about accountancy rules , Martyn. The Financial Wizards at Angus Energy took a punt which proved to be a spectacular disaster. The impact was quite properly recorded in the Accounts.

    But this punt provides excellent evidence of the inadvisability of letting speculators engage with the extraction of a resource that carries with it huge environmental responsibility. The tests for “Financial Resilience” are pointless if the financial strength of an Operator can be destroyed by a single punt. In fact, of course, the reality is even worse. Most Operators are financially engineered to ensure that at “end-of-life” there is nothing left in the kitty to meet reinstatement of land or to meet decommissioning costs. As a frightfully well-informed commentator you will be aware of the situation in both the USA and Canada regarding leaking and Orphan wells.

    I think there is quite a lot “not to like ” as you so casually conclude.

Add a comment

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s