Nick Grealy’s math suggests Cuadrilla and the U.K.’s Bowland Shale are already worth a billion dollars before the first yield results are even published.
Opponents of UK onshore gas have consistently said it won’t make any money. Well here goes that theory.
Cuadrilla Resources is getting closer to getting gas out of the ground each week, and this from Australian Financial Review reveals that a new investor in AJ Lucas, which owns 45% of Cuadrilla, sees the Lancashire Bowland as a now being a billion dollar shale play.
OK, that’s Australian dollars which is US$ 785 million, but still far less an exaggeration than London buses run on coffee grounds for just one recent story.
Cuadrilla is owned by 45% Riverstone, 45% AJL and 10% from the founders.
A private UK-based fund will take a stake in AJ Lucas as part of a $22 million placement, while the engineering services and shale gas company will also seek to raise further funds from existing shareholders to cut debt and finance drilling in north-west England.
The placement to the new investor, which AJ Lucas has not named, is priced at 32¢ per share, a 23 per cent discount to the last closing price of 41.5¢. The entitlement offer, planned for later in January, is to be a one-for-six offer at the same price and will not be underwritten.
Chairman Phil Arnall said the main draw for the new investor, which will have a stake of about 5.5 per cent in AJ Lucas, is the exposure to the prospective Bowland shale project in Lancashire.
“There is an increasing level of interest in the UK about onshore shale gas as a credible energy source for the UK,” Mr Arnall said.
“In any roadshow with any investor, the focus is on the UK shale operations. That is the biggest item on our balance sheet and is our most prospective investment.”
If someones investment of $22 million in AJL is but a 5.5% share of that company, the total AJL share has a value of $440 million, giving a total value of $1billion Australian dollars.
Significantly, no results have yet been made public, but few people, especially the former Goldman Sachs partners behind the investment, would put down $22 million without some comfort they’ll get their money back. Or even better, that the investment will grow in any number of ways.
We know more than we can reveal, but if this isn’t yet the starting gun firing on UK shale, then it’s the cocking of the pistol.
Just in case, you haven’t seen it, the fundamentals behind UK shale are obvious