Trading and Reserves Update

RNS Number : 2852D

Igas Energy PLC

02 March 2022

 

2 March 2022

IGas Energy plc ("IGas" or "the Company")

Trading and Reserves Update

IGas (AIM: IGAS) provides an operational, reserves and financial update for the year ended 31 December 2021. The information contained in this statement has not been audited and may be subject to change.

Operational Highlights

· Net production, in line with guidance, averaged 1,962 boepd for the year, with operations, maintenance and project activities all being directly and indirectly impacted by COVID-19. Excluding COVID impacts, production would have been c.2,100 boepd. 

· Underlying operating costs for the year were c.$37/boe (at an average 2021 exchange rate of £1:$1.38).

· We anticipate net production of c.2,000 boepd and operating costs of c.$38/boe (assuming an exchange rate of £1:$1.35) in 2022, albeit subject to the ongoing challenges that COVID-19 still presents.

· Stockbridge 27 project is on track - a suspended injection well, is being recompleted as a water disposal well. Upon successful completion of the project in early Q2, a c.50 bbls/d uplift in production is anticipated.

· Surrey County Council is still to confirm the date of the planning committee determination hydrogen projects at Albury and Bletchingley.

· Deep Geothermal:

o  At the Stoke-on-Trent project, we are working with SSE Energy Solutions towards agreeing a thermal purchase agreement for the offtake of geothermal heat in Q3 this year and subject to securing government support, this will enable the project to progress towards financial close in Q4 2022.

o  We are engaging with network operators to utilise capital from The Green Heat Network Fund (GHNF) Transition Scheme which supports the commercialisation of low-carbon heat network projects.

o  We are currently reviewing additional sites for geothermal at strategic locations across the North West of England and we would expect to announce the acquisition of our first site in the Manchester area in H1 2022.

o  We have had several meetings with senior ministers including the Secretary of State for the Department for Business, Energy and Industrial Strategy (BEIS) where it is recognised that the next challenge for the UK in meeting its net zero ambitions is the decarbonisation of heat

§ As a result, a working group has been established by BEIS to look at the policy gap for the long-term support of deep geothermal heat. 

· Following the announcement of an agreement with CeraPhi, a programme has been agreed with an initial single well to be repurposed at Nettleham, to the northeast of Lincoln. Following the repurposing, scheduled for April/May 2022, a period of testing will be undertaken.

· IGas recently announced Heads of Terms with Cornish Lithium to jointly develop geothermal energy projects in areas where it is believed there are significant lithium resources. The projects will supply renewable heat to end users whilst lithium is extracted from the brines. 

Reserves Update

Key highlights from the Competent Persons Report (CPR) carried out by DeGolyer & MacNaughton (D&M).

IGas Group Net Reserves & Contingent Resources as at 31^st Dec 2021 (MMboe)*

	1P	2P	2C
Reserves & Resources as at 31st Dec 2020	11.74	17.12	20.34
Production during the period	(0.71)	(0.71)	-
Additions & revisions during the period	(0.46)	(0.62)	-
Reserves & Resources as at 31st Dec 2021	10.57	15.79	20.34

*Oil price assumption of c. $67/bbl for 2022-2024 then escalated at an average rate of 2.5% thereafter

· 1P NPV10 of $139 million: 2P NPV10 of $190 million

· Reserves have, as anticipated, declined this year driven primarily by our 2021 production and higher operating cost assumptions.

The full report will be uploaded to https://www.igasplc.com/investors/publications-and-reports  

Financial Highlights

· RBL redetermination exercise concluded in December 2021 confirming £19.3 (US$26.2) million of debt capacity and headroom of £7.1 million as at 31 December 2021.

· 231,000 bbls are currently hedged in 2022 using swaps at an average price of $74/bbl and 114,000 bbls using puts with an average guaranteed minimum price, net of premiums, of $44/bbl.

· Cash balances as at 31 December 2021 were £3.6 million with net debt of £12.2 million. The Company incurred net cash capex of £4.8 million in 2021. 

· Ring fence tax losses at 31 December 2021 were £267 million.

Stephen Bowler, Chief Executive, commented:

"2021 was a challenging year for all, with COVID-19 impacting production through resource and supply chain constraints.  As we emerge out of the pandemic, and with higher commodity prices, we will balance capital investment with deleveraging the Group.

The recognition that the strength and depth of our existing operational onshore expertise gives us in playing an important role in the UK's transition to net zero, is evidenced by the number of new opportunities that we have announced over the last few months.

The rationale for the rapid development of deep geothermal in the UK is compelling.  A combination of higher gas prices and a need to decarbonise large scale heat has resulted in a number of proposals and enquiries for this technology to provide a solution for end users.

We believe in the opportunities that the energy transition presents and that they will create value for our shareholders as well as contributing to the low carbon ambitions of the UK. "

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 2018.

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 production experience. 

For further information please contact:

IGas Energy plc    Tel: [phone]

Stephen Bowler, Chief Executive Officer

Ann-marie Wilkinson, Director of Corporate Affairs

Investec Bank plc (NOMAD and Joint Corporate Broker)                        Tel: [phone]

Sara Hale/Virginia Bull/ Jeremy Ellis

Canaccord Genuity (Joint Corporate Broker)                                            Tel: [phone]

Henry Fitzgerald-O'Connor/James Asensio

Vigo Consulting     Tel: [phone]

Patrick d'Ancona/Finlay Thomson/Kendall Hill

Glossary   The lawful currency of the United Kingdom $ The lawful currency of the United States of America 1P Low estimate of commercially recoverable reserves 2P Best estimate of commercially recoverable reserves 3P High estimate of commercially recoverable reserves 1C Low estimate or low case of Contingent Recoverable Resource quantity 2C Best estimate or mid case of Contingent Recoverable Resource quantity 3C High estimate or high case of Contingent Recoverable Resource quantity AIM AIM market of the London Stock Exchange boepd Barrels of oil equivalent per day bopd Barrels of oil per day GIIP Gas initially in place MMboe Millions of barrels of oil equivalent

 

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