One of the UK’s leading would-be fracking companies appears to be turning away from shale gas.
IGas plc said today it would not take legal action against the UK government over the reinstatement of the fracking moratorium in October 2022.
The company also announced it has cut the value of its shale gas assets by £30m and would abandon its only shale gas site, at Springs Road, near Misson, in Nottingham.
Last year, IGas said it “reserved the right to pursue any legal processes” to recover the losses incurred after the moratorium was reinstated by Rishi Sunak. This followed a short lifting of the moratorium by the brief Liz Truss administration.
In a statement today, in accounts for 2022, IGas’s interim executive chairman, Chris Hopkinson, said:
“Having taken advice, and reflected on our strategic goals as a business, we have decided not to pursue legal recourse further in respect to the reimposition of the moratorium on hydraulic fracturing and have fully impaired our remaining shale assets.
“We continue to believe and assert that fracking for shale gas can and will be done safely and in an environmentally responsible manner.
“There is a significant recoverable gas resource in the Gainsborough Trough, the equivalent of up to 19 years of the UK’s gas demand, that could provide this country both energy security for years to come as well as providing billions of pounds of investment into the East Midlands and the creation of thousands of skilled jobs.
“It is unfortunate that this strategic resource is unlikely to be realised.”
Value of shale gas assets cut
IGas said it had impaired its shale gas assets by £30m, leading to an annual loss after tax for 2022 of £11.8m.
IGas has 292,100 acres of shale gas licences. The company has estimated the licences hold 93 trillion cubic feet (TCF) of undiscovered gas.
But today the company said:
“The Board assessed that, given the broad political consensus in the UK on this issue, the moratorium is unlikely to be lifted in the near to medium-term and therefore that the Group is unlikely to be able to proceed with the commercial development of this asset, hence the full capitalised value was written off.”
The impairment includes £6m exploration and evaluation assets for PEDL184 in Cheshire. This follows the government’s refusal of planning permission in 2022 for testing the Ellesmere Port-1 well shale gas well. IGas said it had “no plans for further activity in the licence”.
IGas said the remaining £23.8m write-off related to the licence areas, PEDLs 12, 139, 140, 169 and 210, in the Gainsborough Trough shale gas area.
Springs Road abandonment
IGas also said its remaining shale gas well would be abandoned within a year. it said:
“the Springs Road well will be fully abandoned and restored by Q1 2024”.
The well, on the edge of the Nottinghamshire village of Misson, is at the company’s sole shale gas site. Another shale gas site, at Tinker Lane, also in Nottinghamshire, was abandoned and restored in 2019 after the well missed the Bowland shale target.
In June 2019, IGas reported “encouraging results” from the Misson. The well had encountered three targets of Bowland shale, millstone grit and arundian shale, the company said. It described the results as “a step forward to shale gas development in the east midlands”.
But in November 2019, the government announced the moratorium after fracking caused earthquakes at Cuadrilla’s Preston New Road shale gas site near Blackpool.
In July 2021, Nottinghamshire County Council refused to extend planning permission at Misson and ordered IGas to restore the site immediately.
IGas decided not to appeal against the decision but did not restore Springs Road. In November 2022, council officials took the first steps to force IGas to carry out the work.
IGas also said today it planned to change its company name.
The accounts said:
“As the Company has been reshaping its strategic direction to reflect the transition to a lower carbon economy, the Board is proposing a change in the Company’s name to Star Energy Group PLC.”
The change must be approved by shareholders at the AGM in June 2023.
Star Energy was an onshore exploration company formed in 1999 with assets in the Weald basin. It later became a subsidiary of Malaysia’s national oil company, Petronas.
IGas acquired most of Star Energy’s UK onshore production assets in December 2011. These included the Welton Gathering Centre, now the IGas headquarters, and oil fields in the East Midlands.
2022 production and accounts
IGas said net production in 2022 averaged 1,898 barrels of oil equivalent per day (boepd). This was down slightly on the 1,962 boepd in 2021. The reduction was because of equipment failure in the first half of 2022 and a backlog of well repair work, the company said.
In the October 2022, IGas said it began a production drive, returning 18 offline wells to production, converting two wells from jet to beam pumps, lowering costs and increasing water injection capacity.
The fourth quarter of 2022 saw some of the highest production levels in recent times, the company said, and at peak, production reached 2,432 boepd.
Operating costs in 2022 increased to £24m or $41.5 per barrel. This was up from £19.1m or $37.4 per barrel in 2021. IGas said this was largely because of the higher cost of materials, electricity and equipment.
Revenue rose to £59.2m, up from £37.9m in 2021.
Interim executive chairman, Chris Hopkinson, said:
“The higher oil and gas prices have been a welcome boost to revenue and cash generation giving us greater financial flexibility and enabling us to repay debt.”
Higher operating cash flow cut net debt to £6.1m, IGas reported. Cash capital spending of £7.9m was mainly on conventional assets.
IGas said it paid nothing in 2022 under the energy profits levy (windfall tax)
IGas said it would concentrate in 2023 on conventional oil and gas production opportunities that would pay back in a short time frame. It said it would focus on reducing costs and maintaining and increasing production on more profitable fields.
Well abandonment: IGas said it has set aside £6.5m for abandonment and restoration of old and uneconomic fields in 2023. The company said it was buying a rig as part of the establishment of a dedicated abandonment division.
Capital expenditure: IGas said it expected to spend £15.3m on capital projects in 2023. £5.9m would be spent on “near-term incremental projects to generate 150-170 boepd.
Avington, Hampshire: Plans to restore production at shut-in field in the South Downs National Park.
Bletchingley, Surrey: Plans for a gas-to-wire scheme that could generate 47Gwh. First power export expected late 2024 or early 2025. IGas said it expected to spend £4m on the scheme.
Corringham, Lincolnshire: New well planned for the second half of the year. Planning and permitting in place. If successful, this would add 110 barrels per day, IGas said.
Glentworth, Lincolnshire: Planning application for a new wellsite due to be heard by Lincolnshire County Council in April 2023. If successful, the site could produce 200 barrels/day, IGas said, and further drilling could add an extra 500 barrels/day.
Stoke-on-Trent geothermal project: Awaiting outcome of grant application to the Green Heat Network Fund.
Key figures for the year ending 31 December 2022
Revenue: £59.2m (2021: £37.9m)
Gross profit: £28.85m (2021: £14.02m)
Operating loss: £13.33m (2021: £8.89m)
Net debt: £6.1m (2021: £12.2m)
Adjusted earnings before interest, depreciation and amoritization: £21.1m (2021: £5.9m)
Operating cash flow before working capital movements: £19.4m (2021: £7.4m)
Loss after tax: £11.8m (2021: £6m)
Cash and cash equivalents: £3.1m (2021: £3.3m)
Ring fenced tax losses at 31 December 2022: £260m
Excellent news and delighted for the people of Misson.
Great news and a deal of common sense from Igas maybe
“Energy security for many years to come”, but we dont have many years do we if the fossil fuel industry continue to pollute the environment?
I’m so glad they’ve been able to repay their debts with high energy prices whilst plunging so many families into debt.
Finally the run off from that pad doesn’t look good, but sadly the EA doesn’t have the resources to check.
Well, Paula, one would have to consider then the reason for high energy prices! Additionally, why they have not been even higher in the UK.
I would also suggest that a visit to the opticians may be due.