AJ Lucas (AJL) has acquired Riverstone’s interest in the UK shale gas explorer, Cuadrilla Resources. As a result, AJL’s holding in Cuadrilla will increase from 47.6% to c 93%. Under the terms of Cuadrilla’s shareholders’ agreement, AJL has offered to acquire the shares of Cuadrilla’s remaining shareholders on the same terms as those being acquired from Riverstone; this step is now underway. The remaining shares are primarily held by current and former Cuadrilla employees. The transaction should simplify decision making and alignment as AJL and Cuadrilla continue to work with regulators and other UK shale gas operators, providing information to allow the UK government to lift the current moratorium on hydraulic fracturing.
Written by
AJ Lucas Group |
Riverstone’s interest in Cuadrilla acquisition |
Increased stake in Cuadrilla |
Oil & gas |
6 February 2020 |
Share price performance
Business description
Analysts
AJ Lucas Group is a research client of Edison Investment Research Limited |
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AJ Lucas (AJL) has acquired Riverstone’s interest in the UK shale gas explorer, Cuadrilla Resources. As a result, AJL’s holding in Cuadrilla will increase from 47.6% to c 93%. Under the terms of Cuadrilla’s shareholders’ agreement, AJL has offered to acquire the shares of Cuadrilla’s remaining shareholders on the same terms as those being acquired from Riverstone; this step is now underway. The remaining shares are primarily held by current and former Cuadrilla employees. The transaction should simplify decision making and alignment as AJL and Cuadrilla continue to work with regulators and other UK shale gas operators, providing information to allow the UK government to lift the current moratorium on hydraulic fracturing.
Year-end |
Revenue |
Gross profit |
Operating cash flow (A$m) |
Adj EBITDA* |
Capex |
Net debt |
06/18 |
127.1 |
21.6 |
(13.1) |
15.4 |
(13.5) |
75.0 |
06/19 |
143.8 |
24.8 |
14.8 |
21.1 |
(27.4) |
109.5 |
06/20e |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
06/21e |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
Note: *Before share of loss from equity accounted investees, asset sales and one-off costs, before UK investment overhead and after Australian overheads.
AJL’s acquisition of Riverstone shares in Cuadrilla shows its commitment to developing shale gas in the UK. The transaction allows AJL greater input and alignment with Cuadrilla on setting a strategy and operating plans in the Bowland area and allows for more direct exposure and influence within the industry. With c 93% interest, AJL will have a better ability to manage fund allocation in Cuadrilla.
In 2020, AJL expects limited operational activities at Preston New Road, although Cuadrilla will focus on working with industry peers and regulators providing information to allow the UK government to lift the current moratorium on hydraulic fracturing. This could potentially unlock a new domestic source of natural gas for the UK and help the country meet its climate change goals.
Our forecasts remain under review.
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