UK Shale Gas Driller Mulling Sale Due to Fracing Challenges
Investors backing closely-held Cuadrilla Resources, which pioneered UK shale gas drilling before becoming mired in red tape, are exploring options including an outright sale of the company.
Shareholders including private equity firm Riverstone Holdings LLC, which has a direct 45% holding, and Kerogen Capital, which holds an indirect stake, have hired the Royal Bank of Canada to study ways to cash out of their investment, said people familiar with the matter, asking not to be named because the information is private.
The bank has been working with the investors for months, they said. No final decision has been made and the deliberations may not lead to a transaction.
Cuadrilla has struggled to produce and sell any natural gas due to widespread opposition to its hydraulic-fracturing technology, also known as fracing. Investors have been waiting for it to finish work on a well in northwest England, which is currently suspended after causing an earthquake registering 2.9 on the Richter scale last month.
Cuadrilla declined to comment. Riverstone and RBC didn’t return requests seeking comment, while an external spokesman for Kerogen wasn’t immediately able to comment.
Kerogen owns 53% of Australian energy-service company AJ Lucas Group Ltd., which holds 48% of Cuadrilla, according to data compiled by Bloomberg and Cuadrilla’s website. Kerogen’s stake in AJ Lucas, built up since late 2011, is now valued at about A$58 million ($40 million). The value of AJ Lucas’s shares has fallen almost 90% over that period.
AJ Lucas, based in Australia, didn’t respond to a request seeking comment outside of business hours.
Cuadrilla has been trying for more than a decade to prove Britain has commercially viable quantities of shale gas. If it does, the country could partly replicate an energy boom seen in the U.S., which reversed its status as a major net fuel importer. However, local opposition in the UK and different regulations governing fracing have made it almost impossible for Cuadrilla to appraise the country’s gas reserves.