IGas today provides the following statement in relation to trading for the period 1 January to 30 June 2018. This update is issued in advance of the Company’s Interim Results which will be released on 12 September 2018.
· Net production averaged c.2,300 boepd in H1 2018 and we are now expecting average net production for the year to be c.2,200 – 2,300 boepd, impacted by results at Stockbridge, with operating expenditure anticipated to be on budget at $32.5/boe in 2018 (assuming an exchange rate of £1:$1.35).
· The sale of certain non-core assets to Onshore Petroleum Limited is progressing and completion is still expected in H2 2018. Following completion net production will reduce by c.120 boepd, although this will have an immaterial impact on the 2018 net production average.
· Given the improved oil price, the Company has increased its commitment to further capital expenditure and now expects net cash capex for 2018 to be £11.0 million, of which £8.5 million will be on our producing assets and £2.5 million will be on our shale assets.
· Cash balances as at 30 June 2018 were £14.5 million with net debt of £6.8 million.
· The Stockbridge field recovery project has progressed with mixed results. Workovers on production wells have delivered above expectations, however, the side-track of a water injection well, although successfully drilled, encountered greater than anticipated reservoir connectivity and consequently the well has been abandoned. As a result we have shut in some production temporarily from the field until water management is optimised. As a consequence of the delay in reinstatement of these wells this will impact our full year production by c.100 boepd in 2018, as reflected in our guidance above.
· The Albury gas-to-grid and power generation project remains on track. The well has started to flow and full export of electricity will commence when commissioning of the relevant equipment is completed in August. Pipeline construction is underway and full production start-up (up to 170 boepd) exporting to the grid is still anticipated in Q4 2018.
· Shale appraisal and development plan:
o Tinker Lane – we have experienced some delays in our final preparations and now expect to spud our first shale appraisal well in North Nottinghamshire at Tinker Lane in Q4 2018
o Springs Road – construction works are nearing completion. As we have satisfied Condition 21 through the ongoing monitoring of site noise this has enabled us to resume works through the bird breeding season
o As announced last week we have lodged an appeal against the decision made by Cheshire West and Chester Council’s Planning and Licensing Committee, on 25th January 2018, to refuse planning consent for routine tests on a rock formation encountered in the Ellesmere Port-1 well, an existing well
o Ince Marshes application- whist the application is now complete, we have taken the decision not to submit to Cheshire West and Chester Council until the outcome of the Ellesmere Port appeal is known
· Further to the Written Ministerial Statement of 17 May 2018, the Government has now launched two consultations: one that will consider allowing exploration wells to be drilled under permitted development (i.e. without the requirement of a planning application); and the second on the inclusion of shale production projects into the Nationally Significant Infrastructure Projects regime.
· On 24 July 2018, Cuadrilla received final hydraulic fracture consent from the Department for Business, Energy & Industrial Strategy (BEIS) for its first horizontal shale gas exploration well at its Preston New Road site in Lancashire.
Stephen Bowler, Chief Executive commented:
“With production broadly in line and a significantly higher oil price, we can begin to augment our conventional work programme from the opportunities we have identified for our producing assets.
Last week, the Government awarded final consent to Cuadrilla to hydraulically fracture the UK’s first onshore horizontal shale appraisal well. This was a significant milestone for the industry and brings us a step closer to determining flow rates that will start to prove up the wider shale gas prospectivity. It also demonstrates continued commitment from Government at a time when the UK, and indeed the whole of Europe, is becoming ever more dependent on imports. We look forward to starting our own appraisal campaign in North Nottinghamshire soon.”