UK shale gas - Cuadrilla reports gas to surface
In our view, first shale gas to surface at Preston New Road is encouraging and supports results from the 2011, Preese-Hall 1 vertical well were gas was successfully flowed to surface from the Bowland shale. To date, Cuadrilla has only hydraulically fractured a small section of shale surrounding the first of two horizontal wells; gas flows on completion of the planned multi-frac are expected in early 2019 and should be significantly higher than those from current flow-back.
As discussed in Edison’s probabilistic analysis of UK shale potential, we believe that based on current knowledge, and assuming a supportive political/regulatory framework, there is a 67% chance of commercial success for UK shale (NPV15>0). We note that forward summer and winter average gas prices have risen materially since publication of our UK shale valuation, driven by declining domestic production, absence of long-term storage, rising oil prices and higher gas transportation costs.
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