IGas Energy PLC (AIM:IGAS, OTC:IGESF) is keeping the spotlight on the UK government, as it told investors that along with last week’s lifting of the fracking ban the authorities must also support the industry by streamlining the regulatory process.
“We welcomed the government's announcement last week on the lifting of the effective moratorium on hydraulic fracturing in England and the review of energy regulation,” said Chris Hopkinson, interim executive chairman of IGas, in today’s financial results statement.
“However, the accelerated development of this strategic natural resource, which we believe is imperative in helping with the ongoing energy and cost-of-living crisis, can only be achieved through a streamlined regulatory process, something the government has committed to and we look forward to working constructively with the new administration.”
IGas added that it is looking forward to working constructively with government to deliver timely shale gas production in the national interest, whilst it also intends to “work closely with local communities to ensure they share in the benefits of domestic shale gas development”.
The company, which today reported a near doubling of first-half revenue due to higher oil and gas pricing, highlighted its ambitions to develop geothermal energy projects as potential decarbonised solutions to satisfying the UK’s heating demands.
Heating remains a significant unresolved problem for the UK, according to IGas, which pointed to data stating that 44% of UK energy demand is for heating homes and buildings and in turn, that is responsible for 37% of the UK’s greenhouse gas emissions.
Deep geothermal – delivered through the drilling of deep geothermal wells – is the “only utility scale source of renewable heat suitable for deployment in urban areas”, it added.
The company said it intends to make applications for grant funding under the government’s Public Sector Decarbonisation Scheme, with plans to develop six geothermal schemes aiming to supply heat to NHS trusts.
Hopkinson commented: “With the submission of grant applications to the Green Heat Network Fund for our pathfinder Stoke-on-Trent geothermal project and the building of a strong pipeline of project opportunities, we are moving the geothermal business forward materially.”
In terms of IGas’s current core business, oil and gas production, the interim financials were in rude health. First-half revenue was reported at £30.5mln, up from £16.6mln last year, whilst it reported a £19.4mln profit after tax for its continuing operations compared to last year’s £12.2mln loss.
The company noted that it estimates it will pay around £200,000 under the UK’s Energy Profits Levy (the ‘windfall tax’) and that it retains some £263mln of ring-fenced tax losses.
Operating cash flows (before hedging related adjustments) improved significantly to £16.4mln, up from £6.4mln in the same period of 2021. Net debt was reduced to £9.7mln from £13.2mln.
The company ended June with some £2.7mln of cash and equivalents and it noted that it had some US$12mln of headroom in a US$22mln reserves-based lending (RBL) facility which was redetermined in line with the prevailing market in July. It noted that the RBL requires a portion of its oil and gas production (70,000 barrels) to be hedged.
IGas reported a net production rate of 1,865 barrels of oil equivalent (boepd) in the first half of 2022, versus 2,005 boepd in H1 2021, due to equipment failure which it said was a “run-on consequence” of the supply chain issue from the COVID-19 pandemic.
The company forecasts full-year net production in the range of 1,900 to 1,950 boepd as impacted wells come back online. It noted that its underlying operating cash cost per barrel is expected to be around US$40.40.
"Commodity prices were exceptionally strong during the period with a resulting positive impact on income and cash generation from the underlying conventional oil and gas assets,” Hopkinson added.
“This continues to give us financial flexibility, enabling a reduction in our net debt by over £2.5 million and allowing capital to be allocated to sustaining, and in the future, increasing our conventional production as well as to our growth businesses, geothermal and now shale.”
IGas shares are up some 542% in the year to date, though were down around 3% today, changing hands at 87.04p following the interim results statement.