The announcement last week that Sound Energy (AIM: SOU) is not going to make an offer for Angus Energy (AIM:ANGS), the onshore oil and gas company must have been a bit of a blow. This was the fourth proposal from Sound Energy since December 2021, and after careful consideration and a well-established due diligence process – stated Sound Energy – it concluded that it will not pursue the acquisition.
The share price dipped around 20% on the news, from 1.45p to 1.12p, although it was nowhere near its 52-week low of 0.56p in December 2021.
Raising funds
The news of the failed takeover was swiftly followed by Angus Energy raising £675,000 through the placing of 61m shares at 1.1p per share, representing less than 5% of the enlarged capital of the group. CEO George Lucan, who had stated that the two companies were unable to agree terms, said that the issue of shares was to ensure that the group remains funded until a more substantial revenue stream is available from Saltfleetby.
If 2021 is anything to go by, then Angus Energy may have to raise more funds again soon: as of 30 September 2021 Angus Energy had £6.16m cash available, however last year the company recorded a net cash outflow from operating activities of £4.7 million (2020: £1.59 million). The company raised just under £1.9m gross through equity placings during the year.
£12m loan facility
In June 2021, Angus Energy entered into a four-year amortising £12m debt facility with Mercuria Energy (METS) and Aleph Commodities in order to complete the development of the Saltfleetby processing facilities. As part of the condition of the loan facility, Angus Energy Weald Basin No 3 Ltd (AWB3) entered into a derivative agreement with METS under a Swap contract. The derivative instrument was used to mitigate price risk on the expected future cash flow from the production of Saltfleetby Gas Field.
Under the Swap contract, AWB3 pays METS the floating price while METS pays AWB3 the fixed price on the sale of gas from the field. Angus Energy has committed to future cash flows as a result of the derivatives in place which are due even if first gas is delayed. The derivative instrument means Angus Energy recorded an unrealised loss of £13.1m for FY2021.
The auditor, Crowe UK stated that if Angus Energy cannot meet its timeline for first gas, “there would exist a material uncertainty that may cast doubt regarding the Group’s ability to continue as a going concern.” So, with no revenue and an adjusted loss of £2.455m (2020: loss of £2.5 million) – all eyes are on Saltfleetby First Gas.
Targeting first gas by 1 June
Nevertheless, the company has stated that it is on target, although a week later than stated in the annual report. No further regulatory or planning permissions are required at this juncture either: the Environment Agency has issued its Variation Notice for the existing Saltfleetby gas field permit which now encompasses the new activities of processing and compressing of gas for direct export to National Grid.
And, despite some delays due to additional noise abatement and other necessary modifications, Angus Energy states that there is no impact either on the overall timeline. Dry commissioning is expected to begin on 26 April with select hydrotesting of key site pipework. This will be augmented with electrical and control tests during early May. Wet commissioning is expected to begin at or around 15 May and is expected to last approximately two weeks, with first gas by 1 June allowing for one full month of unhedged production.
