Commenting today Stephen Bowler, Chief Executive Officer, said:
"I am very pleased with the way the business responded to the ongoing challenges of COVID-19 in 2021. Our production remains robust and we expect strong operating cash flow generation, in line with improved commodity prices.
We have made excellent progress on large scale geothermal, with specific provision now being made for drilling of geothermal wells in the Government's recently launched Green Heat Network Fund (GHNF). This now gives us a clearer line of sight to development as we firm up a number of rapidly emerging opportunities.
Our decision to follow an energy diversification strategy was the right one. However, what is clear, is that fossil fuels and gas in particular, will remain a significant part of the energy mix as we move towards and beyond net zero.
We welcome the Government's scientific review of shale gas by the British Geological Survey, expected before the end of June 2022, and the opportunity to demonstrate how shale gas can provide safe, secure and affordable energy for the UK.
We believe that expediting shale gas development will help alleviate the recent supply issues and high prices, alongside reducing emissions through to the replacement of imported gas."
Results Summary
Corporate and Financial Summary
• Successful redetermination under the Group's Reserve Based Lending facility (RBL) 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 for 2022 using swaps at an average price of $74/bbl and 129,000 bbls using puts with an average guaranteed minimum price, net of premiums, of $46/bbl. 15,000 bbls hedged for Q1 23 using swaps at $95/bbl.
• Excluding hedging costs of £6.6 million, net cash generated from continuing operating activities for the year was £13.9 million (2020: £(1.0) million).
• Cash balances as at 31 December 2021 were £3.3 million with net debt unchanged from 2020 year-end at £12.2 million.
• The Group invested £4.8 million across its asset base during the year (2020: £8.4 million).
• In 2022, we are forecasting a total £7.4 million of capital expenditure including site improvements, near term incremental projects to generate c.70-100 boepd, as well as longer term development projects. In addition, we have £1.8 million of cash outflow in 2022 for projects executed towards the end of 2021.
• Ring fence tax losses at 31 December 2021 were £268 million.
Operational Summary
• 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).
• In 2022, we anticipate net production of c.2,000 boepd and operating costs of c.$38/boe (assuming an exchange rate of £1:$1.35), albeit subject to the ongoing challenges that COVID-19 still presents.
• Plan to progress two development opportunities in the East Midlands in 2022:
o One infill project with the potential to add c. 100 bbls/d and 0.35 mmstb 2P reserves in 2023 with an anticipated NPV10 of £3 million;
o A two-phased project to extend an existing field adding c.200 bbls/d and development of c. 1.0 mmstb 2P reserves with the subsequent phase having the potential to add an additional 500bbls/d and the addition of c.2mmstb 2P reserves.
• Shale:
o Whilst the effective moratorium remains in place, the Government has commissioned the British Geological Survey to advise on the latest scientific evidence around shale gas extraction.
o Domestic shale development can reduce higher carbon tax imports, reduce gas prices, improve our balance of payments and the country's tax revenues, and provide jobs.
o The Group holds a significant portfolio of shale licences, totalling 292,100 net acres with estimated Mean volumes of undiscovered GIIP of 93 TCF (net to IGas, independently assessed by D&M in 2016).
o Potential to deliver 5 production well pads, with each pad having up to 16 wells, which would supply 3 million homes with initial production within 12-18 months with the right Government support to rapidly accelerate the development of this strategic national resource .
• Deep geothermal:
o Made excellent progress with support from the UK Government - specific provision has been made for deep geothermal in the recently launched Green Heat Network Fund (GHNF);
o The GHNF Transition Scheme is a three year £288 million capital grant fund supporting the commercialisation and construction of new low and zero carbon heat networks including the drilling of deep geothermal wells and associated works;
o GHNF opened to applications in March 2022 and confirmed it will fund up to 50 percent of a project's total combined commercialisation and construction costs;
o Stoke-on-Trent will be the first project to apply to the fund and we are working with SSE to agree the Thermal Purchase Agreement by Q3 2022;
o Currently in discussions with six off takers, across six separate sites which equates to c.60-70 megawatts of installed heat generation; and
o Expect to announce the acquisition of our first site in the Manchester area in H1 2022.
• Collaborations announced with Cornish Lithium and CeraPhi Energy extending the geothermal portfolio Reserves
• Reserves and resources updated in DeGolyer & MacNaughton (D&M) CPR of 31 December 2021
o 1P NPV10 of $139 million: 2P NPV10 of $190 million
o Reserves have, as anticipated, declined this year driven primarily by our 2021 production and higher operating cost assumptions.
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.
