AJ Lucas launches cash raise for UK frac during moratorium

Less than a week after the UK government installed a second moratorium on fraccing, Australian business AJ Lucas has launched a capital raise for its onshore shale gas Preston New Road project.
AJ Lucas launches cash raise for UK frac during moratorium AJ Lucas launches cash raise for UK frac during moratorium AJ Lucas launches cash raise for UK frac during moratorium AJ Lucas launches cash raise for UK frac during moratorium AJ Lucas launches cash raise for UK frac during moratorium

Paul Hunt

Senior Journalist: Oil & Gas, Policy.

Paul Hunt

Today it announced a 19-for-20 pro-rata entitlement offer to raise A$46.3 million, offering shares at 6.5 cents per share, a 27.8% discount on its last closing price of 9cps to progress the controversial Lancashire project.

The capital raise comes at a time when regulations for onshore oil and gas developments are in a state of flux.

AJ Lucas holds a 47.68% in operator of the project, Cuadrilla Resources. 

Last week the UK Oil and Gas Authority ruled it would not grant "further consents for fraccing" after Cuadrilla's fraccing operations at a second well allegedly caused a 2.9 magnitude earthquake.

The government subsequently instituted a moratorium on the practice despite its longer term hopes of native gas supply from the highly prospective Bowland Basin.

AJ Lucas said this morning it will use the proceeds from the raise to meet its share of costs for flow testing the PRN-2 well and "appraisal of other prospective sites."

Some cash will also be used to grow its business in Australia and to service debt.

Cuadrilla has drilled and completed two wells, PNR1 and PNR2 at its flagship project in Lancashire, however the operations have not been without controversy.

Constant opposition from activists over underground tremors saw activities stopped in December.

Operations eventually resumed this year and were completed in February.

The fraccing programs were conducted in line with the UK's "traffic light" regulations for induced seismicity, which require companies to shut down operations following minor earthquakes and seismic events caused by the frac.

Should fraccing cause a tremor of just 0.5 magnitude on the Richter scale, work will be halted for 18 hours.

Last year Cuadrilla and AJ Lucas called on the British government to relax regulations around the system, saying it was hurting investment and making Preston New Road unviable.

In late October this year AJ Lucas announced the results of gas samples taken from the PNR2 well, with exciting results.

Cuadrilla announced that the gas samples were the "highest quality" encountered onshore in the UK, causing AJ Lucas' shareprice to jump by 5%.

At the time the venture said "there can be no doubt the UK is sitting on a huge natural resource of the highest quality."