The only company to carry out high volume fracking onshore in the UK has said the prospects for the shale gas industry worsened in the past year.

Cuadrilla said shale’s political and policy environment deteriorated in 2023 with the reintroduction of the moratorium on fracking in England.

And its chief executive, Francis Egan, said:

“That backdrop has, if anything, worsened in the past year.”  

Writing in the annual report of Cuadrilla’s parent company, Mr Egan said:

“The policy focus of the new UK Labour Government is very much on accelerating onshore and offshore wind and onshore solar power.

“The oil and gas sector offshore and onshore has been subject to “windfall” taxation and enjoys little political support. This is even though it is widely acknowledged that the UK will require significant volumes of oil and gas for decades to come.

“Failing to invest in indigenous production will increase the reliance on long distance, higher emitting, hydrocarbon imports with all the attendant price and security of supply risks that entails.”

The report, for the 12 months to June 2024, showed that Cuadrilla spent more than £1m on administration and what it described as other holding expenses. This included about £100,000 on licence costs and the revaluation of future decommissioning obligations, the accounts said.

Mr Egan said Cuadrilla, 95% owned by the Australian mining group A J Lucas, “continued to believe and maintain” there was a “significant UK natural gas resource available for development and use, subject to the required political will and policy support”.

Mr Egan said:

“During 2024 financial year Cuadrilla’s focus has been on maintaining its prime UK shale gas exploration licences at minimum cost to the Group, whilst progressing a number of onshore conventional gas opportunities capable of generating near-term revenue.

“We continue to maintain a low-cost presence in the UK, with the objective of increasingly “self-funding” that position through conventional gas production whilst continuing to hold an option on a very significant discovered shale gas accumulation.”

But the annual report also said:

“as a result of the adverse political circumstances in the UK, the Group is no longer planning or budgeting substantive expenditure on further exploration and evaluation in its specific shale exploration licences areas.”

Preston New Road

Cuadrilla has retained its exploration licence in Lancashire, where it fracked for shale gas at Preston New Road in 2018 and 2019, causing multiple small earthquakes.

Mr Egan said Cuadrilla “continued to prepare” to plug and abandon the two Preston New Road wells. The North Sea Transition Authority has ordered the company to decommission the wells by December 2024. Preston New Road must be returned to farmland by the end of June 2025 under the terms of the planning permission.

At the nearby conventional gas site at Elswick, Mr Egan said processing facilities had been refurbished. The company had also replaced an electricity generator and failed gas engine at the site. It plans to export electricity to the local grid in September 2024.

Cuadrilla’s partner in the Elswick project, a subsidiary of Spirit North Sea Gas, has withdrawn from the licence, Mr Egan said. The 25% interest has been transferred to Cuadrilla and AJ Lucas.

Mr Egan also said some of Cuadrilla’s shale gas exploration licences in Yorkshire and the Midlands had been terminated. This happened after the regulator declined the company’s request to extend the exploration term, which expired in July 2024. More on this in a detailed DrillOrDrop report coming soon.

Key figures for UK operation

All figures are in Australian dollars

Revenue from UK operations: loss of $ 2,054,000 (2023 loss of $2,422,000)

Depreciation and amortisation: minus $ 7,470,000 (2023 minus $7,180,000)

Impairment of exploration assets: zero (2023 minus $157,324,000)

Net finance cost: $140,000 (2023: zero)

Earnings before interest and tax: $21,693,000 (2023 minus $140,880,000

Net loss: $714,000 (2023 $153,253,000)

UK segment assets: $3,881,000 (2023 $2,571000)

UK segment liabilities: $10,667,000 (2023 $10,023,000)

UK capital expenditure: $396,000 (2023 $523,000)

UK overhead costs: $1,942,000 (2023 $1,457,000

Francis Egan remuneration

• Salary: $551,803 ($505,085)
• Incentives accrued: $273,506 (zero)
• Total: $825,309 ($505,085)

A J Lucas recorded revenue of $159.1 million [£82m] (FY23: $157.6 million), and Group EBITDA of $29.2 million, an increase of 23.4%.

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