Revenue from oil and gas is funding Star Energy’s move to geothermal energy, company accounts have revealed.

In results for the first half of 2024, the company said:

“We have set out our strategic aim to be a profitable energy business positioned to transition into geothermal and we will deliver on this over time, providing a significant growth opportunity both in the UK and in Europe. 

“However, we recognise that, for now, all our revenue is generated by our oil and gas operations.”

Star Energy changed its name in 2023 from IGas to “reflect the transition to a lower carbon economy”.

Its chief executive, Ross Glover, said in the accounts:

“Our UK oil and gas business, for now, remains the driver of revenue”.

He said:

“We will continue to safeguard and maximise this crucial revenue stream by investing in quick returning optimisation projects leading to incremental production and/or a reduction in operating expenditure.” 

But he said government plans to change the energy profits levy would make the company’s transition to geothermal more difficult.

The levy has been extended for a year to the end of March 2030, the tax rate will rise in November 2024 from 35% to 38% and the 29% investment allowance will be abolished.

Mr Glover said this would:

“curtail our profits, limiting investment into the transition and drive us to look for business opportunities in other jurisdictions reducing the investment we make into the UK.  These changes are counter-productive, leaving the UK less able to transition, more dependent on energy from other more dependent on energy from other countries and, in the short to medium term, more exposed to international energy price volatility.”

The accounts showed that Star Energy generated revenue of £23.2m for the first half of 2024 from sales of 355,800 barrels of oil, 3,644Mwh of electricity and 171,542 terms of gas. Revenue was down slightly on the same time in 2023, despite increased Brent crude prices.

Oil and gas earnings before interest, taxes, depreciation and amortisation (EBITDA) were down £1.2m on the same period in 2023. This was mainly because of higher administrative and one-off reorganisation charges and the costs of refinancing and other corporate activities.

Cash capital expenditure for the first six months of 2024 was £3m. The full year’s capital expenditure is expected to be £7.7m, mainly on conventional oil and gas assets, the accounts said.

Average net production was 2,012 barrels of oil equivalent per day (boepd) in the first half of the year, down slightly on the same period in 2023 (2,071 boepd). Full year production is expected to be a predicted 2,000 boepd, the company said.

Operating costs were down because of fewer workovers and less maintenance activity.

Administrative expenses increased because of legal costs from refinancing borrowings, restructuring costs and inflation.

The company spent £2m on preparing the sale of what it described as a non-core asset. The accounts, which did not identify the asset, said the expected sale proceeds would exceed costs.

Star Energy wrote off £1.8m in exploration and evaluation assets, up from nil in the six months to June 2023. Most of these costs were incurred in PEDL235, the Godley Bridge licence in Surrey and West Sussex. This expired in the first half of 2024 and was not renewed, Star Energy said.

In 2019, as IGas, the company announced proposals to drill for oil and gas in PEDL235, north of the Surrey village of Dunsfold. A consultation event planned for the summer of that year was later postponed and the project suspended. (Dunsfold is also the site of controversial plans for gas exploration by UK Oil & Gas in the neighbouring licence, PEDL234).

Oil and gas plans

Star Energy said:

“The focus in recent months has been to identify the best way to optimise our oil and gas business in order to make it as capital efficient as possible and to generate strong and sustainable cashflows”. 

Corringham, Glentworth, Bletchingley The accounts said the company would capitalise on “shovel-ready projects” it had developed at three oil and gas sites at Corringham and Glentworth in Lincolnshire and Bletchingley in Surrey.

Singleton The accounts also said work had begun on a project to generate electricity from gas produced alongside oil at its Singleton site in the South Downs National Park. Star Energy said this would use gas that was currently being flared. The proposal has planning consent and a grid connection. The first export of electricity from the site was expected in mid-2025, the accounts said. Official data shows that in 2023 more than a third of the gas flared onshore in the UK was at Singleton.

Shale gas Star Energy fully impaired its shale assets in 2023. The company said it was now “relinquishing early-stage exploration and shale licences whilst retaining a core exploration acreage adjacent to our existing operations in the East Midlands”.  It had also “re-organised and simplified” the operating licence structure.

Geothermal

Salisbury NHS Foundation Trust, Wiltshire: Seismic data acquired early in September 2024. Data processing and planning application due by the end of the year.

Wythenshaw Hospital, Greater Manchester: Reprocessing legacy data underway and further seismic data to be acquired in first quarter of 2025.

Manchester spa and waterpark: feasibility project

Stoke on Trent: No longer progressing in original form. Work is continuing on a geothermal project with Stoke-on-Trent City Council and major energy users, the accounts said.

Key figures for six months to June 2024

Revenue: £23.2m (six months to June 2023: £23.8m)

EBITDA oil and gas: £8.9m (six months to June 2023: £10.1m)

Net debt: £1.9m (six months to June 2023: £4m)

Cash and cash equivalents: £4.2m (six months to June 2023: £1.5m)

Loss after tax: £2.5m (six months to June 2023: profit of £0.5m)

Operating costs: £10.4m (six months to June 2023: !2.3m)

Administrative expenses: £4.1m (six months to June 2023: £2.4m)

Deferred tax asset: £40.6m (six months to June 2023:  £42.1m)

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