How UK’s political turmoil cost a small Qld company $150 million
The political turmoil in the UK that led to the demise of Boris Johnson and Liz Truss and finally the rise of Rushi Sunak as Prime Minister in the space of a few months has cost a Queensland resources company $157 million.
The political demise of Liz Truss had a devastating impact on AJ Lucas (AP Photo/Kirsty Wigglesworth)
Queensland drilling company AJ Lucas, which had operations in the UK, said it had been forced to write down the value of its gas exploration assets in the UK following the government’s backflip on fracking policy.
The problems started when Liz Truss was elected to take over from Boris Johnson. Two weeks after her rise to Downing Street, Truss lifted a moratorium on fracking and noted that her government would review shale gas policy as part of a broader strategy to support industry.
As was drolly noted by the UK tabloids, Truss’s term as PM didn’t last longer than the shelf life of a lettuce.
“Following the lifting of the moratorium, (AJ Lucas) undertook a share placement to institutional, sophisticated and professional investors at a price of 11 cents a share (and) raised $18.4 million net of fees,” AJ Lucas said in its December half profit results.
Within days of Sunak’s appointment as PM “despite having declared his conditional support for lifting the moratorium whilst running for PM, Mr Sunak reimposed the moratorium on hydraulic fracturing”.
AJ Lucas shares have also fallen sharply and on Tuesday were trading under 3 cents a share.
After reviewing the “volatile environment” AJ Lucas made the decision to write down the carrying value with a non-cash impairment of $157.3 million, but chief executive Brett Tredinnick said the company was not giving up.
“In the UK, we will continue to pursue strategies to encourage the removal of the moratorium on shale gas exploration and thus allow the opportunity to develop our licences,” he said.
“We remain resolute in our view that shale gas has an important role to play as a potential transition fuel as the UK moves towards its net zero target by 2050.”
Excluding the write down, AJ Lucas’ revenue was up 36 per cent to $82 million and pre-tax profit was up 61 per cent to $11.39 million.
The performance was based on the strong revenue growth in coal.
“Our drilling business continues to go from strength to strength with the first half results reflecting the operation’s ability to grow revenue and earnings when we have the opportunity to do so,” Tredennick said.
“We are moving into the second half with a high level of confidence what we have the underlying performance and cash flows to resolve a range of legacy issues including our high debt and the future of our UK assets.”
