RNS Number : 8915O
Igas Energy PLC
15 June 2022
15 June 2022
IGas Energy plc (AIM: IGAS)
("IGas" or "the Company")
2022 Annual General Meeting (AGM) Statement and Trading
IGas today provides the following statement in advance of the
Company's AGM, which is being held at 10.30 a.m. today.
-- Higher commodity prices drive strong operating cash flow generation
-- 50% of capital costs for Stoke-on-Trent geothermal project to be Government funded
-- Progressing development opportunities to support need for domestic energy
-- Public support for UK shale growing as evidenced by YouGov poll
Cuth McDowell, Interim Non-executive Chairman said:
"Today will be my last AGM since joining IGas as a Non-executive
Director in 2012 and as I hand over the role of Chairman to Chris
Hopkinson I would like to reflect on the past year and also discuss
some of the exciting opportunities that lie ahead for your
The constraints we all lived through over the last year
presented challenges in our efforts to drive the Company forward,
but we are pleased and grateful for the resilience shown by all our
employees. Our teams managed the impact of COVID-19 on our
operations professionally in the face of difficult circumstances.
It is testament to a great deal of hard work.
We continue to anticipate net production of c.2,000 boepd for
2022. As at 31 May 2022, cash balances were GBP3.2 million and net
debt was GBP10.3 million, a reduction of GBP1.9 million since year
Currently the Group has hedged 146,000 bbls for the remainder of
2022 using swaps at an average price of US$76/bbl, and 93,000 bbls
at an average floor price of US$44/bbl using puts. In addition, we
have hedged 60,000 bbls for the first half of 2023 using swaps at
an average price of US$95/bbl.
Operating cash flow before working capital movements expected to
be c.GBP21 million in 2022*.
Operating costs are now forecast to be c. US$ 38.8/bbl driven
primarily by increased energy costs and general price increases on
equipment. However, positively, given IGas is a net exporter of
electricity, there is a forecast net benefit to IGas of GBP1.4
million, equivalent to US $2.5/boe.
Energy Profits Levy
The Government announced on 26 May 2022 that it would introduce
an Energy Profits Levy on UK production. Whilst we are awaiting the
draft legislation, based on Government announcements we believe
that IGas' ring-fence profits will be subject to the Levy. The Levy
takes effect from 26 May 2022, and based on current forecasts* we
estimate a payment under the Levy of c.GBP2 million in respect of
2022, taking into account our current capital expenditure plans.
Given this new Levy is part of a package that includes significant
investment incentives, we will evaluate additional projects that
could be brought forward to offset the impact, once the details of
the legislation are agreed.
We have written to HM Treasury for clarification on the
definition of qualifying expenditure for investment relief for
example, in geothermal, which currently sits outside of the UK
ring-fence tax regime .
*calculated based on oil price of $100/bbl and FX of
$1.30:GBP1.00 for remainder of 2022
I would like to thank shareholders for their support of our
energy transition strategy and the steps we have taken in the past
12 months. Our geothermal business has made excellent progress and
this has been directly recognised by the UK Government.
Specific provision has now been made for drilling of geothermal
wells in the Government's Green Heat Network Fund (GHNF) launched
in March 2022. This now gives us a clearer line of sight to
development as we firm up a number of rapidly emerging
opportunities and move forward to finalise a Thermal Purchase
Agreement with SSE on the Stoke-on-Trent project.
The Government is also actively working on longer term support
for geothermal with the Department for Business, Energy and
Industrial Strategy commissioning a Deep Geothermal Energy White
Paper, an evidence-based assessment to help accelerate the
development and deployment of deep geothermal energy projects as an
opportunity to significantly contribute to the UK's net zero
The Importance of Domestic Energy Generation
What has become even more evident in the past few months, given
the heightened challenges of the war in Ukraine, is the need for
the UK to secure further indigenous supplies of energy to reduce
its reliance on imports and consider all options to reduce
spiralling energy prices.
We are progressing a number of development opportunities across
our portfolio. Whilst all at different stages of maturity they
have, in aggregate, the potential to add, in the medium term, an
initial c.900 boepd and a further c.500 boepd in subsequent
The Government's scientific review of shale gas, being
undertaken by the British Geological Survey, is underway and a
report is expected before the end of June 2022. We believe the
science, as well as the need for increased domestic production of
gas, should support a lifting of the moratorium. We will be making
the case for the safe development of our assets as we firmly
believe that the geo-mechanics of the Gainsborough Trough present a
significantly reduced risk of induced seismicity of the type
experienced elsewhere in the UK. The development of our assets in
the Gainsborough Trough can demonstrate how shale gas can provide
safe, secure and affordable energy for the UK in the near term.
IGas has the potential to deliver five production well pads,
with each pad having up to 16 wells, which would supply three
million homes with initial production within 12-18 months with the
right Government support to rapidly accelerate the development of
this strategic national resource.
New polling by YouGov has revealed renewed support for shale gas
extraction as the cost of living crisis bites.
YouGov's poll found that 29% of respondents were in favour when
asked about shale gas extraction in their local area and, if local
shale gas production meant a reduction in bills for people in the
community, then support grew even more. Excluding don't knows, more
than half of British adults (53%) would support shale
Yesterday, the Free Market Forum (part of the Institute of
Economic Affairs) published a report - Green Light, Innovative
approaches to decarbonisation which can be found here:
We welcome their recommendation that calls for the moratorium on
hydraulic fracturing to be lifted and for the traffic light system
for induced seismicity to be substituted with a ground motion based
framework as used by other extractive industries.
We are committed to producing oil and gas responsibly and
continue to invest in good return, short-term payback opportunities
within our asset base to sustain production while at the same time
generating free cash flow, underpinned by higher energy prices.
Our existing business gives us a strong platform to quickly
develop our low-carbon energy businesses from both an operational
and an investment perspective. It is an exciting time for IGas with
opportunities to deliver significant future shareholder value."
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) No 596/2014 as it forms part of UK
domestic law by virtue of the European Union (Withdrawal) Act
Ross Pearson, Technical Director of IGas Energy plc, and a
qualified person as defined in the Guidance Note for Mining, Oil
and Gas Companies, March 2006, of the London Stock Exchange, has
reviewed and approved the technical information contained in this
announcement. Mr Pearson has 21 years' oil and gas exploration and
For further information please contact:
IGas Energy plc Tel: +44 (0)20 7993 9899
Stephen Bowler, Chief Executive Officer
Ann-marie Wilkinson, Director of Corporate Affairs
Investec Bank plc (NOMAD and Joint Corporate Broker) Tel: +44 (0)20 7597 5970
Sara Hale/Virginia Bull/Jeremy Ellis
Canaccord Genuity (Joint Corporate Broker) Tel: +44 (0)20 7523 8000
Henry Fitzgerald-O'Connor/James Asensio
Vigo Consulting Tel: +44 (0)20 7390 0230
Patrick d'Ancona/Finlay Thomson/Kendall Hill
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June 15, 2022 02:00 ET (06:00 GMT)
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