igasplc.com
The company explores and develops gas and oil reserves at onshore locations in the northwest of England, in north Wales, in the East Midlands and in southern England.
With almost a decade of experience in onshore drilling, IGas is able to exploit prolific and lower-cost hydrocarbon reserves which contribute to Britain’s energy security while at the same time delivering value to IGas investors.
IGas Energy shares boosted by “transformational” acquisition
Shares in North West England-focused IGas Energy (LON:IGAS) were up 5.8 per cent at 50.5 pence in mid-morning trading today after the firm provided an update on its Doe Green project and announced it was buying Star Energy Group’s UK onshore production assets.
IGas is paying £110 million (funded by a US$140 million new debt facility through Macquarie Bank) for Star Energy’s assets. These have been estimated at 11.1 million barrels of oil equivalent 2P reserves as well as 4.5 million barrels of 2C resources. The assets are estimated to produce 2,800 barrels of oil equivalent per day during 2011.
The deal will also give IGas the potential to significantly accelerate its taxes losses since the firm will acquire significant tax losses from Star Energy that are readily utilisable, said IGas.
The firm added that the deal works out at a cost per 2P barrel of US$12.70, which has the potential to be reduced to US$8.50 per barrel once fiscal synergies have been taken into account.
Meanwhile, IGas will gain a “first class onshore operating team” as well as extensive operating equipment, including workover rigs and generating plant, from Star Energy as part of the deal.
“This is a transformational deal for IGas Energy,” said Andrew Austin, IGas’s chief executive officer. “With this acquisition we will be creating a substantial onshore oil and gas company in the UK. The enlarged group is expected to have a growing production profile as IGas Energy’s combined oil and gas resources are developed. It is anticipated that this growing production profile could potentially see the combined group being financed without the need for further recourse to additional equity.”
At the IGas’s Doe Green coal-bed methane (CBM) project, near Warrington in Cheshire, the firm’s DG-3 well spudded in late July. This well involves several laterals being drilled into a different seam to the one from which IGas’s current production is derived (DG-2). To date, said the firm, lateral sections encountering around 1,500 feet of coal have been drilled and further lateral sections are planned before the well is completed.
Based on results from DG-3 so far, said IGas, plans for a further production well, DG-4, are now at an advanced stage and DG-4 is expected to be drilled in direct continuation from DG-3.
IGas also said that a Competent Person’s Report (CPR) by independent assessor Senergy had upgraded its assets. The resulting resources estimates are for 1.4 trillion cubic feet at 1C, 1.8 trillion cubic feet at 2C and 2.4 trillion cubic feet at 3C, which work out slightly greater than earlier estimates (1C: 1.2tcf; 2C: 1.74tcf; 3C:2.5tcf).
IGas also reported its interim results for the six months to June 30 this morning. These showed that the firm made an operating loss of £1.1 million, compared with £0.5 million in H1 2010, on revenue of £21,000 (H1 2010: £252,000). The firm had cash and cash equivalents of £28 million at the end of June (June 30 2010: £16 million).
