Angus Energy 'validated' by updated Saltfleetby report

Angus Energy reported on the updated competent persons report (CPR) for the Saltfleetby Gas Field on Tuesday, which reflects higher revenues expected from the field.

The AIM-traded firm said the report, performed by Oilfield International, gives the net present value of the cash flows from the field, including the impact from the revised capital expenditure, the loan facility debt service costs, the associated royalties and the mandatory hedging.

Oilfield International used a conservative discount rate of 10%, the board said.

It said the CPR showed a conservative case, or P90, net present value with a 10% discount (NPV10) of £25.4m, from a previous £16.7m, and a mid-case, or P50, NPV10 of £38.5m, having previously been £25.2m.

Alternatively, expressed as estimates of net future cash flows after all taxes, but without discounting, Angus' 51% interest could be summarised as a conservative or P90 sum of future cash flows to Angus of £31.7m, from a previous £21.5m, and a mid-case, or P50, sum of future cash flows to Angus of £55.9m, having previously been £36.3m.

“In summary, the report estimates production giving rise to gross field revenues, before costs etc on a mid-case basis of £230m - previously £141m - of which Angus's share is 51%,” the board said in its statement.

“This approximates to a gas price of 64p per therm, being a mix of the actual volumes already hedged at 43p per therm, and the remaining unhedged volumes accorded prices derived from the quoted and traded NBP forward curve to December 2026 and thereafter escalated by 1.5% per annum.

“The gross volume of reported gas reserves is unchanged.”

In the light of “extraordinary” global logistical disruptions, meanwhile, Angus noted that the CPR made a conservative assumption of 15 March first gas date, even though the company was still pursuing its schedule of commissioning and first gas during February.

In addition, the CPR noted, for similar reasons, that there existed uncertainty about the precise start date for the side-track well.

That uncertainty was due to one major piece of rig equipment being sourced from overseas, and currently awaiting shipping.

All suppliers had been advised of the potential bottleneck, and the firm said it was evaluating the best management of the simultaneous operations of drilling concurrent with construction of parts of the process facilities.

“We do not presently anticipate any overrun into the commissioning period but will plan for all eventualities,” the board said.

The CPR also noted a 16% anticipated cost overrun on the side-track, some of which was the result of rising material and logistics costs recently advised to Angus.

Additionally, the firm undertook a full third-party reprocessing of the 3D seismic, and had reinterpreted a limited block around the target well path.

“Obviously this report is a solid validation of our efforts to restore this great onshore gas field to production with the help of our many UK based suppliers, advisors and contractors,” said chief executive officer George Lucan.

“Regardless of near-term fluctuations in the gas price, the higher forward gas price curve from mid 2022 onwards, which is reflected in this CPR valuation, is the result of structural gas supply-demand imbalances which, whilst only brought to light recently, are likely to favour producers for many years to come and highlight the national importance of this domestic gas supply.”

At 1235 BST, shares in Angus Energy were down 0.32% at 0.997p.