Download now: Oil Price Outlook 2024

Investing in UK Fracking Companies

Brian Hicks

Written By Brian Hicks

Posted August 14, 2013

There are two sides to every story, and in the U.K., both sides are starting to unfold in the story of fracking.

On the one hand, concerned communities and their advocates are saying fracking will damage the British countryside and rural areas will be affected for decades.

On the other are the guys who have weighed the options of fracking and assure those very same people who are against it that it is in the best interest of the people.

super frackFracking has sparked countless protests in the U.K. and caused delays in drilling, especially in the West Sussex town of Balcombe in southern England and in Lancashire to the north.

The British Geological Survey reports there could be as much as 1,300 trillion cubic feet of gas in northern England alone – that’s more than a 50-year supply of gas, and that doesn’t even cover the entirety of the country.

But the more time that passes over in Great Britain, the more they realize avoiding fracking would cost them dearly. Earlier this month, Michael Fallon, the energy minister who is responsible for U.K. fracking measures, said reserves would likely be exploited in Southern England.

The hope is that prosperity will ensue much in the same way it did for the U.S. On this side of the pond, natural gas prices are lower now than they’ve been in decades, and the economy seems to be on the rebound.

If the U.K. could realize only a fraction of the success the U.S. has seen, it would at the very least lower gas prices, provide cheap energy to consumers, and create tens of thousands of jobs.

The Prime Minister Says…

David Cameron, the U.K. Prime Minister, is probably the biggest supporter of the fracking movement. He made his stance clear over the weekend when he took to the Daily Telegraph, the U.K.’s leading newspaper.

He declared that fracking will cut energy bills and create a resurgence to the British economy, all while protecting and maintaining the countryside its people love so dearly.

He stated in his article:

“If we don’t back this technology, we will miss a massive opportunity to help families with their bills and make our country more competitive.”

His stance backed his Conservative party government, which has already pledged to create some of the friendliest tax breaks in the shale industry, bringing in jobs and money to communities throughout the country.

David Cameron knows his people need a good, swift kick in the rear, and that’s exactly what his page in the Daily Telegraph was aiming to do.

He went on to say that fracking, the controversial practice of blasting rocks with sand, water and chemicals to extract resources from shale formations, is not unsafe. And it’s not going to damage the precious countryside.

He ended:

“For centuries, Britain has led the way in technological endeavour: an industrial revolution ahead of its time, many of the most vital scientific discoveries known to mankind, and a spirit of enterprise and innovation that has served us well down the decades. Fracking is part of this tradition, so let’s seize it.”

The Breaks

With his page in the Daily Telegraph, Mr. Cameron set out all the economic benefits Great Britain would reap from fracking – cheap energy for millions of consumers, tens of thousands of jobs, and a windfall like no other to its communities as a result.

And through it all, no harm would befall the British countryside. Only minor changes would occur to its landscape.

Chancellor of the Exchequer George Osborne has suggested a 30 percent tax rate for companies involved in onshore shale gas production, as the Telegraph points out.

In December, the British government set up its Office for Unconventional Gas and Oil that will likely enact these tax measures, instill the shale strategy moving forward, and promote the industry’s usefulness.

And for residents and communities where fracking will take place, firms will offer £100,000 ($155,310) for each exploratory well. When the shale gas is eventually extracted, according to The Guardian, one percent – as much as £10 million ($15,531,000) – will go directly to the residents.

Sounds pretty sweet to me.

Getting Involved

There aren’t a whole lot of ways we investors can get in on the movement that sits right under the British thumb, but one company that does stand out, if you’re looking for exposure on the London Stock Exchange, is IGas (LSE: IGAS).

The company is exploring, appraising, developing, and producing gas and oil all over Great Britain. It mostly has licenses for conventional exploitation, but has been granted exploration licensing to find unconventional resources as well, the Telegraph says.

A lot of what it has now comes from acquisitions, like Star Energy and Singleton.

The U.K.’s largest player is Cuadrilla Resources, but this company is privately held. Cuadrilla is taking the bulk of the swings from protestors and environmental groups.

While Cuadrilla’s taking much of the heat, it may be worth taking a look at IGas. It’s expected to drill in the Bowland Shale later this year, and it has been granted six drilling licenses throughout the region, though the company still has yet to acquire fracking permits. But if the word of Mr. Cameron stands true, this won’t present a problem.

Barring any bumps along the way, IGas should secure its position within the next two years, and with over $50 million in capital expenditure in that time, IGas could explode in the U.K.

This is especially true since Cuadrilla just sold a 25 percent stake in its company to Centrica (LSE: CNA). This is another company that should grab some attention.

Right now, the U.K. is missing out big time, while North America is in the midst of an energy revolution. But with David Cameron at the helm, it looks like Britons are eyeing that sweet taste of shale.

He won’t let it pass by. And either should you.


If you liked this article, you may also enjoy:

Angel Pub Investor Club Discord - Chat Now

Brian Hicks Premium


Hydrogen Fuel Cells: The Downfall of Tesla?

Lithium has been the front-runner in the battery technology market for years, but that is all coming to an end. Elon Musk is against them, but Jeff Bezos is investing heavily in them. Hydrogen Fuel Cells will turn the battery market upside down and we've discovered a tiny company that is going to make it happen...

Sign up to receive your free report. After signing up, you'll begin receiving the Energy and Capital e-letter daily.