Trading Update

RNS Number : 5721M

Igas Energy PLC

08 May 2015

 

8 May 2015

IGas Energy plc

("IGas" or the "Company")

Trading Update

IGas (AIM: IGAS), one of the leading producers of onshore hydrocarbons in Britain, is pleased to provide a trading update summarising recent activities and giving guidance in respect of the financial year ended 31 March 2015. This is in advance of the Company's Final results, which are scheduled for release at the end of June 2015. The information contained herein has not been audited and may be subject to further review.

Financial Review

Cost Reductions

In light of the prevailing oil price environment, IGas has undertaken a review of its cost base. We have been working with suppliers to make meaningful savings across the business. We have also had to make the difficult, but necessary, decision to reduce the size of our workforce and number of consultants employed. Overall, there will be headcount reductions of more than 25% including the closure of the former Dart office in Stirling, Scotland. The implementation of the cost reduction exercise is already showing significant benefits. We currently anticipate total charges to the Company for operating costs and S,G&A of approximately US$39.4/boe (£26.3/boe) for the year to 31 March 2016, excluding reorganisation costs of circa £2.6 million which will be incurred in the period.

Current Financial Position

As at 31 March 2015, the Company had cash of £19.0 million (US$28.0 million) and net debt of £90.9 million (US$134.9 million). This net debt figure takes into account bond repurchases with a face value of US$15.7 million in March 2015; including US$1.0 million of unsecured bonds. The average price paid for the bonds was 84 cents on the dollar.

As announced yesterday, we have now completed the INEOS Upstream ("INEOS") Farm-out and Purchase ("FOPA") agreement, first announced on 10 March 2015, and we have now received the £30 million cash consideration.

IGas continues to benefit from its ongoing hedging programme. The significant hedging we had in place, in the six month period to 31 March 2015, resulted in receipts of £5.4 million (US$8.0 million) from our hedging counterparties. We currently have 540,000 barrels hedged in the period to 31 March 2016. This is through a mixture of puts, swaps and zero-cost collars, with downside protection ranging from US$55.0 to US$84.0 per barrel. We continue to actively manage the hedging of our production.

Operational Review

Producing assets

The Company has benefitted from strong cash flows throughout the year, initially from selling oil at high prices and latterly from our hedging strategy. We have maintained investment in the business, including water injection projects, digital oilfield initiatives and various workovers. As a result, we have continued to benefit from strong production in the year to 31 March 2015, with production averaging 2,737 boepd (net) (2013/2014 : 2,783 boepd). The aim is to maintain production at around 2,750 boepd (net) for the next 12 months.

Appraisal Programme

With the INEOS transaction now complete, IGas will benefit from a gross funded work programme of up to $285 million from third parties across our key shale gas acreage from major partners, including Total E&P UK Limited ("Total"), GDF SUEZ E&P UK Limited ("GDF") and now INEOS. We are working with our partners to optimise a five year integrated development plan for the carried work programme across the North West and East Midlands. This will include seismic acquisition, multi-well drilling, hydraulic fracturing; and early commercialisation. In the North West, we continue to progress site identification and seismic acquisition. Planning is ongoing for the 3D seismic survey in the North Dee area with work expected to commence in the next few months.

Following the successful Ellesmere Port-1 well, completed in December 2014, which encountered over 400m of gas-mature shale, an extensive programme of log and core analysis has been commissioned. The results from the core analysis indicate Total Organic Carbon (TOC) averaging greater than 2% and enhanced porosity and permeability values when compared to the Barton Moss well results. Whilst the full analysis is yet to be completed, the findings to date combined with those from Barton Moss and Ince Marshes, are being utilised to drive the next phase in the basin appraisal programme and specifically to help design future hydraulic fracturing programmes.

In the East Midlands at the Springs Road site within PEDL 139/140, where we operate on behalf of Total, Egdon and Ecorp, we have commenced planning consultations including a Scoping Report prior to the submission of a planning application. The planning application will be for the drilling of two exploratory wells (one vertical and one with horizontal section). An extensive and comprehensive stakeholder engagement programme associated with this project is underway and further details can be found at www.igas-engage.co.uk.

International Assets

We have made excellent progress in disposing of the non-core Dart assets. We have now disposed of, or have signed agreements to dispose of, our assets in Australia and Singapore. Our only remaining investments, outside the UK, are in Indonesia, were we are in advanced discussions with a third party, and our 10% holding in an exploration and production contract in the Assam region of India.

ENQUIRIES

For further information please contact:

IGas Energy plc

Tel: [phone]

Andrew Austin/Stephen Bowler/Ann-marie Wilkinson

Jefferies International Limited (NOMAD and Joint Corporate Broker)

Tel: [phone]

Sara Hale

Graham Hertrich

Canaccord Genuity (Joint Corporate Broker)

Tel: [phone]

Henry Fitzgerald-O'Connor

Vigo Communications

Tel: [phone]

Patrick D'Ancona/Chris McMahon

 

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