The falling share price of Cuadrilla part-owner AJ Lucas last week. A Lucas document shows the UK fracker is unable to calculate the business case for fracking in the UK
The part-owner of UK fracker Cuadrilla Resources – AJ Lucas – revealed last week it is unable to value its Lancashire drilling field.
The Australian company – which owns 43% of Cuadrilla – hired PKF – a “bad debt and limited resource” consultancy – to value the UK’s favourite fracker. PKF’s report states “there is insufficient information available to calculate (Cuadrilla’s) production flow rates, extraction costs and other information necessary” (p14 of link).
This stands in sharp contrast to Cuadrilla’s hypothesis (launched at Lancashire County Council last year) that its wells could create thousands of jobs and millions in investment and tax.
The report is part of a share offer document sent to AJ Lucas shareholders. It show that the company owes the Australian Tax Office $40m Aus and is attempting to sell new shares to raise the cash. A further $11.5m AUS of shares are slated for Cuadrilla.
It states: “The fact that (Cuadrilla’s) assets have neither been valued, nor the economic feasibility opined on by a technical expert, means these assets may have … a value either higher or lower than their historical cost and there is uncertainty as to their value” (see p14 again).
While the parent company has “uncertain” ideas of extraction costs and revenue, Cuadrilla maintains: “production operations could create 5,600 jobs in the UK, with around 1,700 of these jobs being created in Lancashire.” The company also promises wide-scale industrial investment and millions in tax revenue.
Lucas furthermore avoids a fundamental element in its cost analysis: costs surrounding significant local opposition. Cuadrilla has already been forced to spend an unexpected £1.5m on seismic surveys after fracking operations caused earthquakes in 2011. Local anti-fracking groups in Lancashire – among them Ribble Estuary Against Fracking and Residents Action on Flyde Fracking – are influential voices.
Meanwhile Cuadrilla’s inadequate analyses are well-known. The company is still unable to identify the underground fault that caused last year’s earthquakes. Two tankers of radioactive water remain on its Lancashire frack pad after previous fracking operations – there is no plan for their disposal.
With hydraulic fracturing high on the news agenda operations remain suspended. As the Lucas report notes: “there are uncertainties over whether (it) will recommence.”
And with Cuadrilla saying one thing and and its distant parent saying another, it’s hard to avoid the suspicion that figures are being manipulated to suit whoever is listening.
