By Amy McLellan
There’s a change at the top at IGas, with CEO and co-founder Andrew Austin stepping down from the Board after ten years and CFO Stephen Bowler taking over the helm as CEO. Austin’s departure comes after the AIM-quoted onshore producer completes its farm-out to chemicals giant INEOS, a deal that puts real financial fire-power behind its shale gas acreage in the UK. The AIM-quoted onshore oil producer agreed the deal in March, which will see INEOS assume operatorship of PEDLs 133, 145 and 193 and EXL 273.
Under the terms of the transaction, IGas received £30 million in cash and a funded work programme of up to £138 million gross, with Igas’s share of these costs, reckoned to be about £65 million, to be funded fully by INEOS. In the North West, INEOS will acquire a 50 per cent interest in IGas’ PEDL, 147, 184, 189, and 190 licences and a 60 per cent interest in PEDL 145, 193 and EXL 273 (collectively known as the Bowland Licences).
Once commercial production starts from the Bowland Basin licences, IGas would pay back its net share of the carry out of 50 per cent of its net free cashflow. In the East Midlands, INEOS has the option to acquire 20 per cent in PEDL 012 and 200 and in Scotland INEOS will acquire IGas’ entire working interest in the acreage held under PEDL 133 in the Midland Basin and assume operatorship.
Speaking at the announcement of the farm-out in March, Austin said the deal underpinned the “quality, scale and significant potential of our licences”. Gary Haywood, CEO of INEOS Upstream, said these “first class assets [had] the potential to yield significant quantities of gas in the future”.
INEOS is keen to advance the UK’s shale gas industry, believing an indigenous shale gas industry could transform UK manufacturing and lower feedstock costs for its Grangemouth petrochemical plant. Partnering with IGas makes sense because the AIM company is at the forefront of the UK’s fledgling shale industry.
And for IGas the tie-up adds further financial firepower to its shale portfolio. The transaction means the shale gas wanna-be is now in partnership with industry heavyweights Total, GDF and INEOS in the UK with a gross carried work programme of US$285 million to unlock shale gas potential across the North West and East Midlands. This will give IGas a significant, funded work programme going forward, including 15 wells, flow tests and gas handling stations.
In the meantime, in light of the prevailing oil price environment, IGas, which pumps around 2,700 boepd from its fields in the UK, has been cutting costs, with headcount reductions of more than 25 per cent, including the closure of the former Dart office in Stirling, Scotland. At the end of March the company has cash of £19 million and net debt of £90.9 million. This has since been bolstered by the £30 million in cash from the INEOS farm-out.