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IGas Energy welcomes UK fracking breakthrough

Last updated: 12:58 25 May 2016 BST, First published: 08:43 25 May 2016 BST

tanker at an IGas well site onshore UK
IGas hopes to spud two new wells in the first half of next year

A stock market statement from IGas Energy Plc (LON:IGAS) - ahead of today’s AGM and after yesterday’s UK fracking breakthrough - has highlighted progress with the company’s five-year UK shale plan.

IGas shares gained a further 5.26% on Wednesday, and adding to the previous day’s gains is now up some 30% this week.

The company said it expects final determination of its planning application for the Springs Road project (part of PEDL 140), in the Bowland basin, during the third quarter of this year.

It also noted the submission of a planning application for the Tinker Lane project to Nottinghamshire County Council in May.

Meanwhile, it has now concluded the preliminary interpretation of data from a 3D seismic programme, and ecological surveys underway ahead of site selection ahead of applications for flow tests.

“Progress continues against our five year shale development plan and, subject to planning and permitting, we expect to spud two carried wells in the first half of 2017,” said chief executive Stephen Bowler.

It comes after Third Energy, a privately owned company, yesterday received planning approval for a fracking project on an existing well in North Yorkshire. It was the first planning approval for fracking in five years.

Bowler this morning added: “We were delighted that Third Energy were granted planning permission to hydraulically fracture their existing KM8 well and welcome the decision taken by North Yorkshire County Councillors in their careful consideration of the facts and the recognition that this established onshore industry can carry out its operations safely and environmentally responsibly. 

“There is a pressing need to deliver lower carbon energy that is home grown, provides important energy security for the future alongside economic benefits to the local communities as well as the country as a whole.”

Whilst the five-year shale plan represents an exciting future for IGas, in the group’s present day conventional oil and gas production operation remains important.

IGas told investors that production remains stable, with guidance for 2,500 to 2,700 barrels oil equivalent per day for the full year.

It added that gas monetisation projects are progressing, and that planning permission has been granted for the Bletchingley asset.  The company has also secured approval for two additional wells at the Singleton field.

The company also highlighted that its operating costs are expected to be US$30 per barrel of oil equivalent, and that it had some 405,000 barrels hedged to June 2017 at a floor price of US$50.25 per barrel (as of April 30 2016).

It estimates US$10mln of capital expenditure over the course of the year, and noted that at the end of April it had £22.5mln of cash.

City broker repeats 'buy' recommendation and highlights 'strong' position

Sam Wahab, analyst at Cantor Fitzgerald, in a note, said: “the company remains in a strong financial position, with production stable and within guidance.

“Encouragingly in our view, the company continues to identify projects to enhance production and utilise its stranded gas.

“Progress also continues with regards to the company’s five year shale development plan and, subject to planning and permitting, IGas expects to spud two carried wells in the first half of 2017.2

Repeating a ‘buy’ recommendation and a 41p price target (current price 20p), Wahab added:  “IGas benefits from strong combination of stable production and cashflow generation, a considerable portfolio of UK onshore conventional fields, as well as a fully funded high impact shale exploration and testing programme – one of the only few UK listed companies with this exposure.

“With strategic partners in INEOS, Total and GDF Suez providing key financial and technical input against a backdrop of potentially transformational resource upside, we see compelling value in IGas’ current valuation.”

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