An owner of UK fracker Cuadrilla is again facing financial difficulties as fracking operations in the UK remain on hold.
AJ Lucas – who own 30% of the notorious hydraulic fracturing company – has been running out of cash for some time. Last month the company issued a warning that it was to seek Aus $35m in extra funding. This recapitalisation was due to happen in October, but CEO Allan Campbell has had trouble finding shareholders who believe in the company’s prospects. The company will try again in July.
AJ Lucas’ share price is at its lowest level for five years.
The Australian company’s problem is debt. After being suspended on the Australian stock exchange last year AJ Lucas almost ran out of cash, largely due to its over-sized debt repayments.
The company was bailed out by Hong Kong investors Kerogen. A key factor in attracting this funding bonanza was Cuadrilla’s announcement of a huge discovery of natural gas under the Lancashire countryside in September 2011. Two days before the official announcement, the Hong Kong investors declared they were in.
AJ Lucas uses the promise of Cuadrilla’s future earnings to attract investment which will then pay off some of their debt. Those future earnings, however, have been put in jeopardy while the UK government dithers about what to do about fracking in the face of mounting public anger.
The company is currently touting its asset around investors, recently presenting at the JP Morgan Shale Corporate Acess Day.
The company is struggling in other areas. Last week Lucas looked set to lose an Australian contract due to its failure to pay millions of dollars to subcontractors on time.