Wednesday, December 6th 2023

Angus Energy PLC

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All aboard the Angus Express…


“…All of which leaves companies with gas projects ready to go, like Angus Energy, in a strong position to meet demand, right now. After several dry years frustrated by planning setbacks the company seems set to spark into life this summer as production gets underway…”


After a few quiet years it’s all happening at Angus Energy (AIM:ANGS), on the cusp of first gas at Saltfleetby, and weighing a proposed takeover by a fellow gas development company.

ANGS has a cluster of legacy oil producing fields across southern England, with 80pc interests in Brockham (PL235) and Lidsey (PL 241), 25pc in Balcombe (PEDL244), and 12.5pc in the A24 Prospect at Holmwood (PEDL 143). But the company is now firmly oriented towards gas, pursuing a 51pc interest in the Saltfleetby Gas Field (PEDL005) in Lincolnshire, and a set of emerging geothermal, hydrogen, carbon capture and waste-to-energy projects. ANGS is led by Managing Director George Lucan, who has 30 years experience in the private equity energy and alternative energy sectors, Non-executive Chairman Patrick Clanwilliam, who has served with Eurasia Drilling Company Limited, SOMA Oil & Gas and OJSC Polyus Gold, and Technical Director Andrew Hollis, with a background managing oil and gas projects across the Former Soviet Union.

First gas at Saltfleetby


ANGS’ primary focus is moving Saltfleetby into production in early summer to take advantage of gas prices that have surged to 229p per therm. A revised Competent Persons Report published last October estimates the field is capable of generating £230m in gross revenue, which would secure ANGS, with its 51pc interest, a cashflow of £55.9m on a mid-case (P50) basis, and £31.7m on a conservative (P90) basis.

Fabrication, testing, assembly and certification is well advanced, with the site expected to be ready for commissioning later this month. ANGS is targeting gross production of 1.5m therms per month worth £7.2m at today’s forward price. The company is aiming to begin sidetracking operations at Saltfleetby’s first well in June. The final local authority permissions required for first gas were confirmed last month. The push towards production was supported by a £1.4m fundraise in February.

Diversifying from legacy oil


Elsewhere, ANGS has continued its efforts ‘to realise value from Balcombe, Brockham and Lidsey through either the resuming of production or through a sales process’. The company persists in its efforts to secure planning permission for well testing at Balcombe, which has been repeatedly declined by the local authority. An appeal has been submitted against the most recent rejection, last March. It is confident that the appeal, citing ‘a wealth of information on socio economic benefits and the projects’ alignment with the public interest case for oil in terms of energy security’, will be successful. ANGS’ most recent final results, published earlier this month, said the company was doubling-down on its efforts to secure planning, noting that regulators ‘are being more pro-active and pre-emptive, and we must anticipate their needs and expectations better than we have in the past.’ ANGS is working ‘to maintain better dialogue with all regulators and planners and engage in more frequent use of pre-approval procedures where they are available.’

The company is also seeking the green light from local regulators to resume production at Brockham’s Portland reservoir, following the approval of a Field Development Plan by the Oil & Gas Authority. ANGS is processing new seismic data acquired at Lidsey, which indicates a promising structure extending beyond the licence area. It has opened ‘a dialogue with the holder of that surrounding licence to consider how we might proceed together to address the future of the field’. The company still holds a 12.5pc interest in the A24 Prospect at Holmwood, where the previous operator UKOG relinquished its interest after concluding the field’s wells were technically and economically unviable.

ANGS is advancing a set of renewable projects, notably a pilot geothermal initiative at Saltfleetby. Geothermal offers the possibility of safe, sustainable, base load electricity generation using technologies with which oil and gas operators are already familiar. Initial studies suggest Saltfleetby has the potential to generate up to 2 MW that could be used to power the site, support enhanced covered cash crop agriculture, and provide an electricity surplus for other local projects. In addition, ANGS is investigating a 35 km2 area at Austinbridgeporth, south-western England, where analysis has identified unusually high heat flows. Initial meetings have been held with the National Grid to establish a connection point with 200 MW capacity to act as a centralised offtake point. Discussions are underway with five landowners to negotiate heads of terms for the prospective project.

ANGS is also exploring Saltfleetby’s potential to contribute to the Humber Hydrogen Initiative. Connected to all of the production facilities on the Humber, the field has potential as a feedstock source or a potential storage field for hydrogen or CO2 once the remaining natural gas has been produced. The company has installed hydrogen tight thermoplastic pipes at Saltfleetby, allowing for a smooth transition to the gas if hydrogen blending is distributed into the grid.

ANGS is undertaking feasibility studies to assess the viability of pursuing Waste to Energy (WtE) projects that would combust non-recyclable waste products into energy in the form of steam, electricity or hot water for distribution into the grid or directly to end users. WtE has the potential both to reduce landfilled waste and while produce green energy.

Sound Energy shows interest


Earlier this year ANGS’ story was complicated by a takeover bid by Sound Energy (AIM:SOU), a gas developer focused on North Africa. In January SOU announced it was ‘evaluating a possible all-share offer for the entire issued and to be issued share capital of Angus’ to create an enlarged business that ‘would represent the combination of two complementary businesses, with attractive onshore gas developments in high gas price jurisdictions’. SOU holds the largest area of onshore petroleum licences in Morocco, totalling 28,129 sq2, where it is developing a natural gas discovery at Tendrara. With electricity needs growing at a sustained yearly rate of about 5pc Morocco is investing in renewables and 3,900 MW of new gas-fired power capacity as an alternative to coal.

SOU has so far submitted three non-binding indicative proposals of 1.00, 1.30 and 1.40 pence per ANGS share, all of which have been rejected. But ANGS last month confirmed that it had entered into a strategic review and formal sale process with ‘discussions and mutual due diligence between the parties … ongoing’. The current deadline by which SOU has to make a firm offer is 8 April, but regulations allow for a further extension.

Helping meet the UK’s gas demand


ANGS’ busy year, as it progresses to first gas at Saltfleetby and weighs SOU’s offer, comes as gas prices continue to soar: at the time of writing the gas price forward curve shows average prices of over 400 pence per therm for 2022. The supply of gas was already a concern for Western economies before Russia’s invasion of Ukraine: now energy security has moved to the top of the political agenda.

The UK is less dependent on Russian fossil fuels than much of continental Europe, which supply 8pc of its oil and 4pc of its gas: 40pc of the country’s gas comes from domestic sources. But the Government is nevertheless preparing a revised ‘energy supply strategy’ to enhance Britain’s self-sufficiency – the UK still relies on oil and gas for 75pc of its energy needs. The new strategy is likely to support longer term production from the North Sea than previous statements supporting a ‘Green Industrial Revolution’ had envisaged. Boris Johnson has already urged producers to increase investment in the basin, where output is forecast to fall by 5pc to 7pc year-on-year. Energy secretary Kwasi Kwarteng has said it would be ‘completely insane’ for Britain to turn its back on North Sea fuel, arguing that boosting domestic reserves would weaken Russian president Vladimir Putin’s ‘malign grip on the west’.

Shell, which pulled out of the proposed Cambo project last year under intense pressure from lobbyists, has resubmitted plans for the development of the Jackdaw field off the Aberdeen coast. The field would supply an estimated 6.5pc of the total gas output from the UK sector of the North Sea, producing enough energy to heat 1.4m homes. The move could signal renewed interest in the venerable basin, for which an exploration licensing round has not been held since 2020. But quite apart from the political difficulties in reinvigorating the sector, new North Sea production would not help ease the UK’s energy concerns until around 2030: the Oil and Gas Authority estimates the time lag between a discovery and a field reaching production to be as much as eight years. 

The Prime Minister has also asked ministers to take another looking at fracking, which was placed under an indefinite moratorium three years ago. Onshore oil and gas trade body UKOOG claims that the recovery of only 10pc of the estimated resources would make the UK ‘self-sufficient in natural gas for 50 years’. But those projections are fiercely contested: very little fracking and substantive exploration took place before the ban. And any attempt to lift the moratorium would meet intense political opposition.

The Government remains committed to ramping up the UK’s solar and offshore wind sectors, in which it is already a world leader. But new projects face tough regulatory and planning processes, and, again, considerable local opposition. Nuclear is another option, but the UK’s current fleet of stations is nearing retirement, and new plants take many years to come on stream.

An interesting year ahead


All of which leaves companies with gas projects ready to go, like ANGS, in a strong position to meet demand, right now. The company currently has cash in the bank, £6.16m as at 30 September 2021. A lot is riding on Saltfleetby: ANGS recorded a loss of £15.598m last year after organising a £12m loan facility to prepare the field for production. The company’s adjusted loss was £2.455m. ANGS took another – modest – hit last year when it reached a settlement agreement with a financial services provider with whom it had been in dispute regarding the Saltfleetby loan facility, involving the issue of 39,200,000 shares at 0.002 pence each, representing approximately 3pc of its total share capital. It hopes the settlement ‘will avoid further and considerable expenditures on legal costs and the burdensome call on management time at a critical juncture in the Company’s development.’

ANGS’ stock has risen sharply over the past few weeks as the market anticipates production at Saltfleetby, its share price rising 80pc from 0.8p to around 1.4p at the time of writing, taking its market cap to £18m. After several dry years frustrated by planning setbacks the company seems set to spark into life this summer as production gets underway. SOU’s interest in the company makes the narrative somewhat more complicated, but ANGS is one to watch this spring.