Production continuing as normal at shale gas sites, says operator IGas

Production carries on as normal, but capital expenditure has been cut back at IGas, the shale gas operation which has drilling operations around the North West and Midlands including Ellesmere Port, Salford and Warrington.

In a trading update it said operations remain on track and production is currently within the guidance range given in the trading statement of February 6, 2020, of 2,250-2,450 boepd (barrels of oil equivalent per day), notwithstanding the current, rapidly changing macro environment.

Operating costs in sterling terms are also in line. The company benefits when the dollar is stronger, and at an exchange rate of $1.2:£1, it expects operating costs to average around $27.5/boe for the year.

As at March 1, 2020, the group had hedged a total of 340,000 bbls (standard 42 gallon barrel) for the remainder of 2020 at an average rate of $53.77/bbl. It has also hedged $9m into sterling at an average rate of $1.17:£1.

Cash balances at February 29, 2020, were £8.1m and net debt was £5.2m.

Given the fall in oil prices IGas has reviewed its capital expenditure programme for the year and reduced it principally to maintenance capex, abandonment and capital for projects already in execution, which, in aggregate, is anticipated to be around £6m in 2020.

It said: “We continue to keep costs under review across the business in light of oil price and market volatility.”

IGas added that the coronavirus is a deeply concerning international public health emergency which everyone hopes to see contained quickly: “The primary focus is the health and safety of our employees and other stakeholders, and we have acted promptly in that regard.”

Currently, all of the group’s operations continue to function effectively.

Of its 148 employees, those that are able to work from home have been doing so in a phased way since early March.

It said: “We have approximately 65% of staff who are in operational roles and have been identified by the Government as key workers.

“Many of these are ‘lone’ workers who had already been ‘identified, trained and equipped’ pre-COVID-19 so the pandemic does not represent a significant change to existing procedures or protocols.

“In respect of IGas’s operational sites, our facilities are designed with operational control provisions that ensure safe and compliant operation within the normal operational envelope and automated shutdown functionality should there be an unexpected excursion outside of these routine conditions.

“In addition to these local control and shutdown systems, IGas has the ability to monitor the site operations from remote locations utilising its digital systems, which allow efficient intervention by operational and maintenance staff to be coordinated alongside the standard monitoring visits that are conducted by our staff.

“Whilst we are reliant on transporting oil to UK refineries, we have significant capacity for managing our production inventory. All key contractors in terms of transport and refineries are also classified as key workers.”

The group said it continues to monitor the situation closely and act within Government guidelines and to that end is working up a number of contingency plans should its operations be significantly affected by the coronavirus.

However, the inbuilt control systems are able to make any site and well safe without the need for human intervention: “We continue to liaise with all our regulators.”

A further announcement regarding its final results will be made once a revised date for publication has been determined in accordance with the FCA (Financial Conduct Authority) and its advisers.