Lower commodity prices hit Star Energy last year, the company revealed today in annual accounts.

Revenue fell 16% to £49.5m in 2023 and the operating profit was down 46% to £7.2m.

The company ended the year with a loss after tax of £5.5m.

Star Energy said its oil and gas sites saw higher production, up from 1,898 barrels of oil equivalent per day (boepd) in 2022 to 2,100 boepd in 2023. This followed “positive results from workovers and other well optimisation and stimulation activities carried out during the year”, the company said.

But this was “offset by lower commodity prices and a weaker US dollar compared to 2022”.

Oil revenue was down 24%, from £59.2m in 2022 to £44.8m in 2023. Gas revenue fell further, down 55%, from £4.2m in 2022 to £1.9m in 2023. Revenue from electricity sales fell 56% from £2.7m in 2022 to £1.2m in 2023.

The accounts report that the realised price per barrel of oil was $79.9 in 2023, compared with $82.7 in 2022. Over the same period, administrative expenses per barrel of oil rose from $11.5 to $12.

The accounts also report that Star Energy’s administrative costs rose to £7.3m, up 18% on the £6.2m in 2022. This was mainly because of legal and professional costs of buying a Croatian geothermal business and refinancing the group.

The company said it had written off £0.5m exploration and evaluation costs on oil and gas assets with no further development prospects.

But it reported it had invested £7.6m in oil and gas assets. This was mainly for site preparation and purchase of items required for development at Corringham in Lincolnshire, rationalisation at the Holybourne site in Hampshire and projects to increase production at existing wells. It also invested £0.3m in oil exploration opportunities at existing fields.

The accounts show that Star Energy paid £1.1m in the windfall tax or energy profits levy (EPL) in 2023.

Company chairman, Philip Jackson, said:

“The EPL is an unwelcome obligation that we do not believe was ever designed to encumber the minor onshore sector, and in particular, a company which has taken a strategic decision to pivot from its fossil fuel roots to a renewable future as cashflows permit over time.”

He also criticised delays in the permitting process:

“We continue to suffer from regulatory creep and ever-increasing delays in obtaining regulatory approval for environmental permits.  In 2023, waiting times to have an application ‘duly made’ and then addressed by an officer, were commonly in excess of 12 months.  The Environment Agency acknowledge these significant delays, but do not seem able to adequately address the issue.” 

The company’s net tax charge rose to £8.3m, from £6.6m in 2022, because of a reduction in the deferred tax asset related to tax losses. The lower deferred tax asset also contributed to a fall in net assets from £58.3m in 2022 to £54.9m in 2023.

Star Energy said it had repaid £3.3m of RBL loan, reducing net debt in 2023 to £1.6m (£6.1m in 2022).

It also secured a new €25 million loan from Kommunalkredit for geothermal activities. As part of the loan, Star Energy and some of its subsidiaries signed a security agreement, giving Kommunalkredit’s security agent a fixed charge over property, leases, licences, pipelines, plant, buildings and equipment.

Sites update

Bletchingley, Surrey Gas-to-wire project has planning consent, environmental permits and a grid connection

Corringham, Lincolnshire Site preparation for drilling an additional well was completed in the final quarter of 2023. Phase one of project will be assessed after the company refinancing in April 2024. Initial production is expected to be about 110 bopd.

Glentworth, Lincolnshire Planning permission was granted April 2023 for an appraisal well and up to six horizontal development wells. The appraisal well has the potential to add about 200 bopd, the accounts said. The development wells could add 500 bopd. Environmental permit applications were submitted in October 2022 and still awaited, Star Energy said.

NHS hospital trust geothermal projects The feasibility study is underway for the Salisbury project. The Wythenshaw feasibility study will start in second quarter of 2024. A project in Preston depends on a government funding decision.

Singleton The workover at the site and a programme of well optimisation and stimulation had added 50 barrels of oil equivalent per day (boepd).

Stoke geothermal scheme Star Energy reported continued delays with the project but said the technical and commercial aspects of scheme had been signed off in autumn 2023.

Other sites: Star Energy said it fully abandoned three wells in 2023 and partially abandoned three others, all unnamed. The accounts do not refer to plans to restart oil production at Avington in the South Downs National Park, reported in 2023 by UK Oil & Gas, a partner in the site.

Plans for 2024

The accounts said Star Energy was committing to spend £4.5m on projects with “short cycle returns” to take advantage of current high commodity prices. The projects also included maintenance and optimisation of existing conventional sites.

Expected net production for 2024 was 2,000 boepd and operating costs of $41/boe, the accounts reported.

Key figures for the year to 31 December 2023

Revenue: £49.5m (2022 £59.2m)

Gross profit: £17.1m (2022 £28.8m)

Admin expenses: £7.3m (2022 £6.2m)

Research and non-capitalised development costs: £2.0m (£2022 £0.1m)

Underlying operating profit: £9.1m (2022 £16.1m)

Operating profit: £7.2m (2022 £13.3m)

Profit before tax: £2.8m (2022 £18.4m)

Loss after tax: £5.5m (2022 £11.8m)

Total assets: £145.3m (2022 £149m)

Total liabilities: £90.4m (2022 £90.7m)

Net assets: £54.9m (2022 £58.3m)

Net debt: £1.6m (2022 £6.1m)

Adjusted EBITDA: £16.1m (2022 £21.1m)

Cash and cash equivalents at year end: £3.9m (2022 £3.1m)

Net production: 2,100 boepd (2022 1,898)

Gross total tax losses: £362.1m (2022 £355.3m)

Realised price per barrel: $79.9 (2022 $82.7)

Admin expenses per barrel: £12 (2022 $11.5)

Oil revenue: £44.8m (2022 £59.2m)

Gas revenue: £1.9m (2022 £4.2m)

Electricity revenue: £1.2m (2022 £2.7m)

Cost of sales: £32.3m (2022 £30.3m)

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