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IGas buys Dart Energy to create UK’s biggest shale player

The deal is expected to close in September, creating the largest shale gas exploration company in the UK

IGas announced on 9 May it would buy Australia’s Dart Energy for A$211.5 million ($198m), creating the largest shale gas exploration company in the UK.

The deal, which is expected to close in September, will see Dart shareholders take a 30.5% stake in the enlarged company. The merger is subject to approval from regulators and IGas and Dart Energy shareholders.

Igas shares rose by 1.5% during the morning of 9 May, to £131.50 ($221.90). Dart shares fell in Australia by around 1%. Both companies said the merger would create “a UK national energy champion”, with combined UK licence areas amounting to more than 1m net acres across major UK shale basins. The larger company will have a stake in several onshore shale licences funded by GDF Suez and France’s Total.

In January, Total become the first major energy company to enter the UK's shale-gas sector, buying a 40% stake in two exploration licences in central England. The licences, PEDL139 and PEDL140, which cover around 240 square kms, lie in the Gainsborough Trough area of Lincolnshire, in the East Midlands region of England. They will be developed by GP Energy, a subsidiary of Dart Energy Europe, which has a 17.5% stake, Egdon Resources (14.5%), IGas (14.5%) and eCorp Oil & Gas UK (13.5%).

In October 2013, GDF Suez bought a 25% share in 13 of Dart Energy's UK onshore licences in Cheshire, in northwest England, and the East Midlands. The licences are also centred on the Bowland Shale, which the British Geological Survey said could hold up to 2,281 trillion cubic feet (cf) of shale gas. The GDF Suez deal follows one in June 2013 in which Centrica bought a 25% stake in Cuadrilla Resources’s Bowland acreage.

Dart said its larger shareholders, which have voting rights over 337,662,293 shares in the firm, have indicated their support for the takeover. These include a subsidiary of New Hope Corporation Limited, which holds 16.3% of the total Dart shares. These larger shareholders represent 30.5% of Dart’s total voting rights, it said.

John McGoldrick, Dart's chief executive, said the deal heralds a new era for the UK’s nascent shale gas industry, which “will be one of the defining energy market stories of this century".

IGas operates across 26 licence areas in northwest England, the East Midlands, the Weald Basin in southern England and Northern Scotland. IGas produces around 3,000 barrels of oil equivalent per day, most of which is oil, from its license areas. The company operates the UK’s only coal-bed methane (CBM) pilot site at Warrington, northwest England, and is appraising and exploring its acreage in northwest England and the East Midlands to assess its shale and CBM reserves.

In June last year the UK independent said it had studied the Lower Carboniferous shales in its licence areas, which cover around 300 square miles between Liverpool and Manchester, and estimated they could hold resources of up to 172.3 trillion cf of shale gas.

Australian independent Dart has 24 licences in the UK, which are thought to hold shale gas and CBM reserves.  Dart has farm-out deals with GDF Suez and Total to fund and carry out shale gas and CBM exploration work programmes on some of these UK licences over the next three years.

Dart said its CBM project in Scotland, at PEDL 133, is ready for development, but still needs planning approval. If the project reaches the development stage it could begin first commercial gas sales in 2016, Dart said.

Dart also holds licences in Australia, Germany, Belgium, Indonesia and India. However, the company said these are not considered core to its current strategy.

IGas intends to sell all of Dart’s non-UK assets to focus on investing in and developing UK unconventional oil and gas.

Last year, UK fossil fuel production reached record lows, causing energy imports to reach their highest levels in three decades. UK gas production fell to 1.5 trillion cf - its lowest level since 1984.

A recent report from the House of Lords, the UK’s upper house, urged the government to speed up shale gas exploration by simplifying the regulatory process.

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