Star Energy today announced its unaudited interim results for the six months to 30 June 2024.

Commenting today Ross Glover, Chief Executive Officer, said:
"We have strengthened our balance sheet with the new facility arranged with Kommunalkredit Austria AG,  and this gives us the opportunity to reinvest some of our operating cashflows into our oil and gas business to further drive its profitability and sustainability.  We continue to successfully deploy capital into quick returning optimisation projects, generally investing small amounts to optimise specific wells. We continue to position the Company to take advantage of the exciting opportunities we see as the energy transition continues, both by reinforcing a very robust foundation of cashflow generating assets and also looking at how best to progress our geothermal portfolio.

Our UK oil and gas business, for now, remains the driver of revenue and we plan to maximise our economic recovery as we seek to capitalise on the shovel-ready projects we have developed at Corringham, Glentworth and Bletchingley. However the recent and proposed changes to the Energy Profits Levy ("EPL") have made this and our transition a more difficult exercise.

We were pleased to welcome the launch of GB Energy and the National Wealth Fund. Both schemes recognise the importance of establishing Britain as a clean energy superpower and the increasing need to build energy independence in today's febrile geopolitical climate. GB Energy plans to invest in leading technologies and projects deploying local energy production to communities across the country. Its focus will be the production of 'clean low carbon energy'. 
 
Whilst we have a very large growth opportunity in UK geothermal, to date, geothermal has received sporadic support from various government schemes. We welcome the new government taking a longer term, more strategic view of the support required to start industries, just as Feed-in Tariffs, the Renewable Obligation and now the Contracts for Difference Scheme have for wind and solar.
 
Following the satisfaction of the Ernestinovo licence commitment, our technical teams are making good progress with their assessment of the technical data and updating development plans so that we can prioritise development within this business unit.
 
However, a fundamental aspect of this transition to renewable sources of energy is for the industry to leverage the cashflows and skills of the workforce in the oil and gas industry into this effort. The recent and proposed changes to the Energy Profits Levy regime will curtail our profits, limiting investment into the transition and  drive us to look for business opportunities in other jurisdictions reducing the investment we make into the UK. These changes are counter-productive, leaving the UK less able to transition, more dependent on energy from other countries and, in the short to medium term, more exposed to international energy price volatility."

Corporate & Financial Summary

• Cash balances as at 30 June 2024 were £4.2 million (31 December 2023: £3.9 million) with net debt of £1.9 million (31 December 2023: £1.6 million).
• Adjusted EBITDA from oil and gas operations was £1.2 million lower than H1 23 primarily due to higher administrative and one-off reorganisation charges, and costs related to the refinancing and other corporate activities.
• Operating cash flow before working capital movements and realised hedges in H1 2024 of £4.4 million (H1 2023: £8.5 million). Higher cashflows from oil and gas operations were offset by geothermal investments, costs of refinancing, expenses related to rationalising a non-core asset and preparing it for sale, and a lower allocation to capital projects .
• £3.0 million of cash capex incurred during the six months to 30 June 2024.  Net cash capex for FY 2024 expected to be £7.7 million, primarily relating to our conventional assets.
• Hedged 400bbl/d for H2 2024 and H1 2025 with swaps at an average price of $83.4/bbl and $79.8/bbl, respectively.
• The estimated EPL charge based on taxable profits in H1 2024 is £1.7 million. The full year estimate is dependent on the outcome of the Government's review of the treatment of capital allowances under the EPL regime. Tax due on the 2024 taxable profit is payable in October 2025.
• Ring fence tax losses of £237 million at 30 June 2024.

Operational Summary

• Net production averaged 2,012 boepd in H1 2024 (H1 2023: 2,071 boepd). Full year production is expected to be c.2,000 boe/d, in line with our previous guidance.
• Satisfied the Ernestinovo licence commitment, following which we commenced a full technical review of our Croatian portfolio.

Board Changes

In June, Chris Hopkinson stepped down from the Board and his CEO position. Ross Glover succeeded Chris as CEO and joined the Board as a director at the conclusion of the 2024 AGM. Ross has been with the Company since 2017 and has been its Chief Operating Officer since January 2023. 

Production Operations

Net production for the period averaged 2,012 boepd (H1 2023: 2,071 boepd) and we are expecting to meet our full year guidance of c.2,000 boepd.

The rolling programme of well optimisation and stimulation continues. We are growing our existing oil and gas reserves while investing in quick returning projects generally deploying small amounts of capital to optimise specific wells.

Development Projects

Work has begun on our Singleton Gas to Wire project which will deliver c.100 boe/d utilising gas which is currently being flared. The project now has planning consent and a secured grid connection. Procurement for long lead items is underway with a first export of electricity from the site expected in mid-2025.

Licence Rationalisation

Following the full impairment of our shale assets in 2023, we have started to rationalise our portfolio of exploration licences, relinquishing early-stage exploration and shale licences whilst retaining a core exploration acreage adjacent to our existing operations in the East Midlands. Alongside this, we have re-organised and simplified our operating licence structure. This re-organisation will lead to reduced costs and lower administrative burden.

Geothermal Development

UK Projects
Seismic data acquisition was completed in early September 2024 for the Salisbury NHS Foundation Trust project. Processing and interpretation of the data acquired will be complete by year end. We anticipate that a planning application will also be submitted by then.
 
In Manchester, at the Wythenshawe Hospital project, reprocessing of legacy data is underway. Further seismic data will be acquired in Q1 2025, with the survey design largely completed and applications for the necessary permits being made.

In August 2024, we were awarded a feasibility project by the Therme Group to assess the viability of geothermal energy for their planned waterpark, thermal bathing and well-being spa in Manchester. We completed the drilling of a 200m deep test borehole in late August and testing will be completed during September, allowing the design of a geothermal array that will supply heating and cooling to the facility.

In partnership with Scottish and Southern Energy (SSE), an application for grant funding for our Stoke-on-Trent project was made to the Green Heat Network Fund in November 2022. The grant was to support the deployment of a city-wide district heating network, fed by a deep geothermal heat source. Since the application submission, SSE have been refining their technical and commercial models and engaging in further discussions with both the council and other end users in Stoke-on-Trent. Unfortunately, SSE have proposed a new 'Energy from Waste' plant to supply the network and, therefore, the Stoke-on-Trent geothermal project in its original form is no longer progressing. Based on the extensive data and heat demands, we continue to believe that there is a viable geothermal project in Stoke-on-Trent and continue to work with the Stoke-on-Trent City Council and major energy users in the area on an alternative scheme. The opportunity forms part of our pipeline of projects but we do not foresee progression in the near-term. We have therefore fully impaired the development costs of £4.3 million, the majority of which arose as part of the GT Energy UK Limited acquisition. A significant portion of the contingent consideration for the acquisition was based on achieving various milestones on the Stoke-on-Trent project. As a result of its cancellation, £2.3 million of the contingent consideration provision was released in the period.

Croatia Projects
Following the acquisition of the Ernestinovo licence in August 2023, the exploration licence commitment was satisfied in March 2024.  The licence is currently in the process of being converted from its exploration phase to its exploitation phase and we expect to formally delineate the field in Q4 2024, leading onto the grant of the exploitation licence in H1 2025. 

The Sjece and Pcelic licences were awarded in October 2023. Approvals have now been received to commence the acquisition of magnetotelluric data across the licences. This data will, at a low cost, delineate the reservoir and allow us to update our estimates of reservoir size. All our Croatian licences are in areas where substantial offset data sets are available from previous conventional oil and gas drilling activities. 

Alongside this, our technical teams are at an advanced stage of consolidating all existing and new data for each of our three licences in Croatia. This analysis will allow us to bring the development plans for each licence up to date and will inform our next steps and the optimal sequencing for the licences' commercial development. Preliminary conclusions point to good prospects within our Croatian portfolio, with high temperatures recorded in existing wells comparable with other Croatian geothermal reservoirs. We look forward to completing this work within Q4.

KeyFacts Energy: Star Energy Group UK country profile