AJ Lucas has investments in the exploration and commercialisation of shale gas in the UK through licence equity interests and a stake in Cuadrilla. It also has an Australia-based operating business unit: Lucas Drilling Services (LDS).
AJ Lucas offers investors exposure to the most advanced UK shale appraisal programme. Current activity is focused at Preston New Road (PNR) where AJL became the first operator to have flowed gas from a horizontal shale gas well in the UK. Gas flowed at a peak rate of 0.2mmcfd with only two of the 41 stages fully fractured. AJL estimates that a 2.5km horizontal well, with all stages fractured, would have a potential initial production rate of 3–8mmcfd. In August, AJL recommenced hydraulic fracturing at its second horizontal well at PNR. We will revise our last valuation of A$0.94/share to incorporate the recent announcement that the drilling division had an order book expected to deliver over A$200m in revenues over the next two years. Given current uncertainty around Bowland shale type curves, well costs, rig availability and gas prices, we use a probabilistic approach to valuation.
AJ Lucas has investments in the exploration and commercialisation of shale gas in the UK through licence equity interests and a stake in Cuadrilla. Central government supports the exploitation of shale gas resource in order to increase domestic energy security and to support intermittent renewable energy sources.