Centrica taps into shale gas opportunities

Suzie Neuwirth

THE UK’S shale gas industry was given a further boost yesterday, after so-called Big Six energy giant Centrica bought a stake in a major exploration area in then north of England.

Shale gas has transformed the US energy market and offers Britain the opportunity to reduce its reliance on foreign gas imports in the face of falling natural gas production.

FTSE 100-listed Centrica, which owns British Gas, paid £40m for a quarter stake of the Cuadrilla Resources-operated Bowland shale in Lancashire, which is owned by Cuadrilla and private equity firm A J Lucas. Centrica will then pay exploration and appraisal costs of up to £60m, and a further £60m if it continues to the development phase.

“Centrica brings its technical skills to the operation and the deal is a significant step forward for the shale industry,” Tony Carruthers, commercial director at Cuadrilla, told City A.M.

Three exploration wells have been drilled in the licence area and initial data suggests that there could be 200 trillion cubic feet of gas.

“This transaction presents an attractive opportunity for Centrica to explore the potential and commercial viability of [shale gas],” said Mark Hanafin, managing director of Centrica’s international upstream business.

Bowland shale gas production could generate tax revenues of £580m per year by 2020 and up to 23,600 jobs, according to research from Deloitte.

Centrica closed up one per cent.



Big six energy firm Centrica decided to go it alone on the shale gas acquisition and did not mandate any external advisers. However, Cuadrilla Resources hired Jefferies as sole financial adviser and Allen & Overy as legal counsel. The Jefferies team was led by Alex Grant, a managing director in the energy investment banking group. He joined the firm in 2005 and was previously with ABN AMRO Corporate Finance and JP Morgan Energy & Power M&A Group. He has extensive experience advising on numerous upstream transactions, M&A deals and various strategic financial mandates. John Geraghty was the lead partner on the corporate side at Allen & Overy, aided by senior associate Sarah Farmer. Partner Lydia Challen led the tax aspects of the deal, with Jeremy Moncrieff. Geraghty is a corporate partner specialising in the energy and natural resources sector. His experience includes international M&A, cross-border joint ventures, project development and long-term commodity sales and off-take agreements. He has advised US oil company Hess Corp on the $1bn (£640m) sale of its interests in the BTC pipeline and Azeri-Chirag-Gunashli field in Azerbaijan to ONGC Videsh.