--UPDATE, ADDS COMMENTS FROM IGAS CEO AND CFO--
IGas Energy (LON:IGAS) told investors it is in the process of identifying a number of suitable sites for shale gas appraisal and fracking.
The aim will be to carry out flow testing in order to assess the potential commerciality of UK shale.
Chief executive Stephen Bowler, speaking with Proactive Investors, highlighted what is expected to be a potentially significant start to 2016 for the UK’s nascent shale sector.
A number of key projects are due planning decisions, including IGas’s own proposal for the Springs Road site, in North Nottinghamshire, where it wants to drill two exploration wells (which won’t be fracked as part of the programme).
Also in the first quarter privately-owned Third Energy is expected to hear a decision on its application to carry out a fracking programme in North Yorkshire and the planning enquiry into Cuadrilla projects near Blackpool and Preston will begin.
And, before all that, it is anticipated that the second tranche of new shale licences awards will be made by the government this side of New Year’s Eve.
“It is a very exciting time for the industry as we move into Q1 2016,” Bowler said.
He added: “And it is really topical at the moment, given the government statements around the coal power industry and plans for power stations to come offline by 2025.
“We’ll need to get our UK energy from somewhere, and I very much hope UK shale will be part of that.”
Operationally, Bowler says IGas has in the first six months of the financial year “very much” delivered against its plans for the UK shale portfolio.
As for today’s figures, the highlight according to recently appointed chief financial officer Julian Tedder is the group’s financial flexibility.
“We’ve got significant cash balances and we have about US$20mln of our own bonds – so we’ve got a good footing there,” Tedder said.
“I think, in this ‘lower for longer’ [oil price] environment, we’re going to need to and are looking at our costs again. And we believe we’ve got a range of options to pursue including buying back more bonds, investing in our operations.
“So, the message is one of financial flexibility really.”
The company ended the period with £34.5mln of cash and equivalents and its net debt had narrowed to £64mln from £80.8mln.
Away from the shale business the company continues to generate revenue from conventional oil and gas production.
In the six month period production amounted to 2,540 barrels oil equivalent per day, compared to 2,766 boepd in the same period of 2014. The company’s cost cutting efforts saw cost of production reduce to US$31 per barrel oil equivalent, from US$38 per barrel last year.
The impact of weaker oil prices is still apparent in the financial results, however, with revenue down to £17.6mln compared a 2014 comparative of £34.5mln.
Earnings (adjusted EBITDA) reduced to £7.4mln, versus £14.8mln, and the company made an impairment of £19.5mln. Loss after tax amounted to £19.3mln.
Looking at the current period, the company pointed out that it has hedged 555,000 barrels of production, with a floor price of US$62 per barrel, for the fifteen month period between October 2015 to December 2016.