IGas today announced its unaudited interim results for the six months to 30 June 2021.

Corporate & Financial Summary

Cash balances as at 30 June 2021 were £2.8 million (H1 2020: £2.6 million) with net debt of £13.2 million (H1 2020: £11.2 million).
£2.6 million of capex incurred during six months to 30 June 2021.  Net cash capex for FY 2021 expected to be £5.6 million, primarily relating to our conventional assets.
Operating cash flow before working capital movements and realised hedges in H1 2021 of £6.4 million (H1 2020: cash outflow £1.4 million).
Successful Reserve Based Lending facility (RBL) redetermination in June (a semi-annual recalculation), confirming US$27 million (£19.5 million) of debt capacity and headroom of US$8.8 million (£6.4 million).
Hedging in place for H2 2021 of 190,800 bbls using swaps and collars. Average price including collar upside of c.$49/bbl. 126,000 bbls are currently hedged in 2022 using swaps at an average price of $63/bbl and 114,000 bbls using puts with an average guaranteed minimum price, net of premiums, of $44/bbl. The RBL requires IGas to hedge c.50% of the next twelve months' production on a rolling basis.

Operational Summary

• Net production averaged 2,005 boepd in H1 2021 (H1 2020: 1,940 boepd) with operations, maintenance and project activities all being directly and indirectly impacted by COVID-19.  Excluding the total COVID-19 impact in H1 2021, which averaged c.180 boepd, production in H1 2021 would have been 2,185 boepd.
• Full year net production is now forecast to be c.2,000 boepd, with underlying cash operating costs per boe anticipated to be c.$38/boe (based on an exchange rate of £1:$1.39).

Material progress on deep geothermal

• Planning approval received for  Stoke-on-Trent and MoU with SSE to deliver the heat network
• Constructive discussions with Government in respect of downstream financial support. In addition, there has been a geothermal Ministerial roundtable and a Westminster Hall Debate - on 'Opportunities for geothermal energy extraction.'
• MoU signed with CeraPhi to jointly develop geothermal energy projects which repurpose and utilise IGas's existing wells and other infrastructure and use CeraPhi's patented technology, CeraPhiWell, a closed loop downhole heat exchanger.
• The planning applications for the Albury and Bletchingley hydrogen projects have been submitted and validated by Surrey County Council.
• Full CPR published in February 2021: 2P reserves replacement ~ 250% (1P ~275%)

Commenting today Stephen Bowler, Chief Executive Officer, said:
"The health, safety, societal and economic impacts of the COVID-19 pandemic have presented a unique set of challenges for our production business. Despite these challenges, production remains robust. We continue to focus our technical and operational expertise on offsetting the underlying natural decline in our fields through the execution of incremental production opportunities that demonstrate commercial benefit via our delivery assurance processes. 

The Group's existing operational expertise as the UK's largest onshore operator gives us the opportunity to use our existing business platform to play an important role in the UK's transition to net zero. Our sub-surface expertise is relevant both to drilling for geothermal resources, and assessing the potential for carbon capture and storage.  We have extensive experience of dealing with onshore regulators and planning authorities. We have predictable operating cash flows to help fund new initiatives and assets to repurpose in a readily accessible onshore environment.

We have progressed our low-carbon projects during the period. We have submitted planning applications to produce hydrogen from two existing sites in Surrey - Albury and Bletchingley. Should we be successful in developing these blue hydrogen projects, IGas is on track to produce the UK's first blue hydrogen ahead of other, refinery scale projects. This demonstrates that small-scale, distributed hydrogen production will allow blue hydrogen to be offered to the market rapidly and will build resilience into new energy networks.

In geothermal, the Stoke-on-Trent project could be the first in a new generation of British-backed heat plants. It will support the decarbonisation of heat, move us along the path to net zero and help tackle climate change. Whilst we await the necessary Government support for the Stoke-on-Trent project, we are receiving an increasing number of enquiries from local councils and other large-scale users of heat.

We believe there is significant commercial potential for geothermal energy production and the development of localised hybrid energy systems generating both heat and power."

Development assets

Petroleum
The Welton (C-1) waterflood project was brought online in Q2 2021 and completed on budget with good results as anticipated, injecting an average of c.400 bbls/d of water which is expected to increase field recovery by approximately 660 Mbbls adding over 100 bopd incremental production which will be realised in 2022. Scampton North is on the lower end of expectation encountering higher than anticipated injection pressure, injecting c. 90 bbls/d of water. Work is ongoing to resolve the lower injection rates and higher pressure but even at lower than expected results it is still anticipated to increase ultimate field recovery. These projects not only add incremental value but also improve environmental impact by reducing emissions and reducing vehicle movements in water handling. 

A permit application has been submitted to convert an existing, suspended well in the Stockbridge field to a water disposal well; this will allow for the resumption of c. 50 bbls/d of suspended production to be brought back on line. The project will also provide more operational flexibility in handling produced water in the Stockbridge area. This work is anticipated to be completed in early 2022.

Energy Diversification

IGas continue to evaluate the viability of enhancing our UK sites to include renewable energy. It is feasible that a number of our UK sites could become integrated hybrid energy hubs, encompassing combinations of solar, modular hydrogen, Carbon Capture, Utilisation and Storage (CCUS) and battery storage. 

Geothermal

Good progress is being made in developing our UK geothermal business.  Igas have now received planning approval for the Stoke-on-Trent project from both Stoke-on-Trent City Council and Newcastle-under-Lyme. The Company have signed a Memorandum of Understanding (MoU) with SSE Heat Networks Limited (SSE) for roll-out of geothermal district heating project in Stoke. The MoU grants exclusivity to each of SSE and GTE with regard to the project for a period of 12 months with certain milestones including executing a heat offtake agreement in relation to GTE's future geothermal plant. IGas are in dialogue with the Government regarding grant funding to support the project - which has public backing from the council and the Staffordshire Chamber of Commerce - to provide renewable heat to the Stoke heat network.

IGas continue to have positive discussions with the Government regarding future financial support for the UK geothermal industry. A working group with the Department for Business, Energy and Industrial Strategy (BEIS) has been established to look at the policy gap for non-domestic renewable heat and a financial model for the long-term  support of deep geothermal heat. The Company still await publication of the delayed BEIS Heat and Building Strategy.

In April 2021, a new industry report on the economic and environmental importance of UK deep geothermal resources by the ARUP Group and the Association for Renewable Energy and Clean Technology (REA) was published. The Report estimates that, with immediate government support, the UK could deliver 360 geothermal projects by 2050. This would include an estimated 12 projects being operational by 2025 with 1,300 jobs created and c.£100 million of investment flowing into the UK economy. 

The Committee on Climate Change stated that only decarbonisation of heat in the UK could deliver the major reduction in emissions needed to meet the 2050 net zero target. By delivering on average 12 heat projects per year over the next three decades, the UK could expect to generate up to 15,000 GW hours (GWh) of heat from geothermal, annually by 2050.  

As local authorities and other large-scale users of heat transition away from fossil fuels we are receiving an increasing number of enquiries looking to geothermal as a solution and through this growing pipeline of development opportunities, IGas is well positioned to deliver a solution to the long-term decarbonisation for heat in the UK. 

Hydrogen

Significant work has been undertaken in order to understand the potential for low carbon energy production from the Company's existing asset base. This has resulted in the recent planning applications to produce hydrogen from two existing sites in Surrey - Albury and Bletchingley.  

At Albury, IGas have now submitted a planning application that has been validated by Surrey County Council to install a hydrogen generation system on the existing site. The steam methane reformation (SMR) unit will generate 1000kg/day of hydrogen. 
 
A second application at our existing Bletchingley site was submitted in late August. This is a bigger project involving two SMR units with initial generation of 2000kg/day and a potential of up to 6000kg/day depending on reserves.  

The projects are being developed in phases, the first phase being to establish the principle of hydrogen production at the sites. The second, to produce blue hydrogen, is now being accelerated following positive feedback from key regulators and interest from local communities.

KeyFacts Energy: IGas Energy UK country profile