Shale gas company emphasises need for alternative energy sources post-Brexit

Stephen Bowler

The need to establish new domestic energy sources in the wake of Brexit was emphasised by the boss of shale gas company IGas Energy today.

In a trading update for the year to December 31, 2019, he said: “As we transition to becoming independent from the EU and focus on our climate change ambitions, there is a growing need to develop domestic energy sources, including oil and gas, which have both economic and environmental advantages.”

As part of the update the company, which has drilling operations around the North West and Midlands including Ellesmere Port and Warrington, revealed its reserves and resources have improved over the past year.

As at December 31, 2019, it had 10.55 million barrels of oil equivalent (boe) on a low estimate of commercially recoverable reserves (1P), compared with 9.58m a year ago. On a best estimate of commercially recoverable reserves (2P) it had 16.05m boe, up from 14.56m the previous year, or, on a high estimate of commercially recoverable reserves (2C), it had 19.6m boe, compared with 19.2m in 2018.

Net production averaged 2,325 boe per day for the year, within guidance, while operating costs for the year were around $30/boe (at an average 2019 exchange rate of £1:$1.28).

The company anticipates net production of between 2,250-2,450 boepd and operating costs of around $30/boe (assuming an exchange rate of £1:$1.30) in 2020.

The report said that, in respect of the ongoing moratorium on issuing Hydraulic Fracturing Consents, it is continuing to work with our partners and the relevant regulators to demonstrate that we can operate safely and environmentally responsibly, as we have done onshore in the UK for many decades.

It said: “It is acknowledged that each site and basin can have substantially different geology and we continue to analyse and understand the data available to us.”

Approximately £15.5m of free operating cash flow was generated in 2019 from the conventional business before administrative expenses, capital investment and finance costs.

Cash balances, as at December 31, 2019, stood at £8.2m and net debt at £6.2m.

The Company incurred net cash capital expenditure of £6m in 2019 and expects net cash capital expenditure for 2020 to be £10m, of which £3m will be on its producing assets and £7m will be on future development.

IGas Energy chief executive, Stephen Bowler, said: “The production business has performed well in 2019 and continues to generate strong free operating cash flow.

“The good performance by our production assets alongside project results and progression means that we have today reported over 250% 2P reserves replacement, demonstrating the significant upside in our conventional portfolio.

“The independent expert’s valuation of our conventional assets is c. US$180m on a 2P NPV10 basis, an increase of US$20m compared to a year ago, which is significantly in excess of our current market capitalisation.

“During 2019, ahead of the moratorium, we also made significant progress on our shale assets in the East Midlands, confirming our prognosis that we have a world-class gas resource in the Gainsborough Trough.”

He added: “The UK currently imports in excess of 50% of its energy requirements.

“As we transition to becoming independent from the EU and focus on our climate change ambitions, there is a growing need to develop domestic energy sources, including oil and gas, which have both economic and environmental advantages.”

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