IGas buys UK oil and gas firm for £110m

19th Sep 2011 07:53

AIM-quoted coal bed methane (CBM) gas producer IGas Energy is to acquire Petronas's Star Energy Group for £110m in a "transformational deal"."This is a transformational deal for IGas Energy. With this acquisition we will be creating a substantial onshore oil and gas company in the UK. The enlarged group is expected to have a growing production profile as IGas Energy's combined oil and gas resources are developed," said chief executive Andrew Austin.As of 30 June, Star Energy's probably reserves estimate stood at 11.1m barrels of oil equivalents, while production is expected to average 2,800 barrels of oil equivalents per day in 2011.The consideration is to be funded by a $140m new debt facility and cash generated by Star Energy prior to closing. IGas said its own cash - which totaled £28m at 30 June (up from just £16m the year before) - will continue to go towards its accelerated drilling programme.IGas expect that its enhanced production profile (after the acquisition) could see the combined group being financed without further recourse to additional equity.The group also signed a gas sales agreement with Petronas Energy Trading, which offers an "important partnership and a customer for our gas as it comes on stream," Austin said.Meanwhile, the firm reported an operating loss of £1.14m in the six months to 30 June, higher than the £0.55m loss the year before, due to costs associated with the expansion of the team.Revenues amounted to just £21,000 in the period, compared with £252,000. IGas said that the acquisition of Nexen Exploration earlier in the year meant that the services provided for CBM activities that were previously charged to to Nexen are now delivered in-house. Electricity generation revenues were also lower as the Doe Green (project in Cheshire) pilot production was shut-in ahead of drilling activity.Following the DG-3 well on Doe Green spudding in late July, IGas said that drilling is in progress and planning for a further production well (DG-4) is at an advance stage. A facilities upgrade is now in progress, with new wells being added to accommodate increased production.BC