Could Ineos bid for IGas?
A PLANNED £640m investment in shale gas by the chemicals group Ineos has stopped the share price slide at fracking firm IGas.
And Ineos chairman Jim Ratcliffe’s ambition for the group to “become the biggest player in the UK shale gas industry” has led some to speculate it may even bid for IGas, which already holds licenses close to Ineos sites at Grangemouth and Runcorn.
IGas, which is investigating the potential for shale gas across the North West, has seen its share price knocked in recent months by negative sentiment against the oil and gas industry, and more recently by a controversial share trade at Quindell, another AIM-listed company.
The deal did not involve IGas but it has emerged that chief executive Andrew Austin had used a similar financing arrangement with the US firm Equities First Holdings (EFH).
The result was the shares lost a third of their value in a week, falling from 75p to 50p, leaving the business which holds the largest shale gas licence area in the UK with a market value of just £150m.
Stephane Foucaud, managing director of institutional research at FirstEnergy Capital, an investment bank which works in the oil and gas sector, concedes the business could be a takeover target.
“At the end of the day they have a lot of acreage, there aren’t many players with the same amount. I can see somebody being interested in that. But would shareholders be prepared to sell or go for some sort of farm out agreement, which IGas already has with Total at one location.”
He added: “The majors are cutting down on capital expenditure and are being told to maximise returns to shareholders. Anyone looking to make a bid will look very hard because there are a lot of assets on the market. But you could see the likes of Ineos, a less traditional player in the market, being interested.”
Ineos want to use the gas to bring down overheads at its chemicals plant. It has been buying up exploration rights close to its Grangemouth facility in Scotland and is bidding for licences in the Government’s 14th ongoing onshore licensing round. IGas holds the rights to large areas around the North West close to Ineos’s site in Runcorn and on Monday it started drilling an exploration well in Ellesmere Port.
“Nobody is going to bid anything until they see what happens in the 14th round,” said Adrian Reed, managing director of Manchester corporate finance house Altium and head of the firm’s energy sector. “You’re not going to see Ineos buying IGas until it knows were its own licenses are.”
The decision on the 14th round could be made next month. “At some point IGas will be very valuable to Gazprom, or someone like that,” added Mr Reed.
