In a trading update, IGas Energy (IGAS) reiterated its previous forecasts that it can expect to achieve net production of around 2,000 boepd for 2022 while higher commodity prices are also expected to produce an operating cash flow generation of around £21 million in 2022. 

Operating costs are now forecast to be around US$ 38.8/bbl driven primarily by increased energy costs and general price increases on equipment, but given that IGas is a net exporter of electricity, it's expecting to see a forecast net benefit of £1.4 million, equivalent to US$2.5/boe.

To date, IGas has hedged 146,000 bbls for the remainder of 2022 using swaps at an average price of US$76/bbl, and 93,000 bbls at an average floor price of US$44/bbl using puts. 

In addition, the company has hedged 60,000 bbls for the first half of 2023 using swaps at an average price of US$95/bbl. As at 31 May 2022, cash balances at the oil and gas exploration company stood at £3.2m and net debt was £10.3m, a reduction of £1.9m since the year end.

Beyond its trading performance, IGas also highlighted the importance of domestic energy and the increasingly evident need for the UK to secure further indigenous supplies of energy to reduce its reliance on imports and consider all options to reduce spiralling energy prices. The company pointed to recent polling data by YouGov which revealed renewed support for shale gas extraction in the wake of the cost of living crisis in the UK. 

IGas says it could deliver five production well pads, with each pad having up to 16 wells, to supply three million homes, with initial production within 12-18 months should it receive the right Government support to rapidly accelerate the development of this national resource.

Addresings shareholders today, the company also confirmed that it will pay around £2m in respect of 2022 under the new U.K. Energy Profits Levy which took effect from 26 May 2022.

This is due to the government announcing last month that it would introduce an Energy Profits Levy on U.K. production. Whilst iGas awaits the draft legislation, based on government announcements the company believes that its ring-fence profits will be subject to the Levy.

Based on current forecasts, iGas estimates a payment under the Levy of around £2m, taking into account current capital expenditure plans. It said it will evaluate additional projects that could be brought forward to offset the impact, once the details of the legislation are agreed.

IGas also confirmed several board changes in its update. As announced at the group’s AGM, Cuth McDowell, Interim Non-executive Chair, will step down from the board and Chris Hopkinson, Non-executive Director, who joined the board in January 2022 will take over the role of Chair. 

Commenting this morning, Chris Hopkinson said: “Spiralling energy prices, exacerbated by the war in Ukraine, has put into the spotlight the real need for all forms of secure, affordable energy.  We still must, however, continue the energy transition and sustainability is key to the future.  IGas is well positioned to play a significant role in that future and our geothermal business is starting to gain real momentum particularly now we have Government support."

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