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Following Prime Minister Liz Truss’s decision to lift the fracking ban, I’m looking at the UK’s share of potential benefits.
Fracking involves shooting high-pressure water, sand and other chemicals underground to fracture rocks and release trapped gas and oil.
The technique has been used in the US since 1947 to produce 600trn cubic feet of natural gas. In the year It was banned in November 2019 due to fears it could trigger an earthquake in the UK.
Dig into the details
Already well-positioned UK oil and gas companies have seen their share prices rocket. AIM– Detailed search company Egdon I have experienced a 30% jump in share price in the last month.
Another hydrocarbon explorer in the UK, IGAS EnergyIn the year Since the start of 2022, the stock has seen a 460 percent rally.
Both of these companies are likely to continue to enjoy market-beating stock price growth in the coming months and years.
However, I wouldn’t buy either. Their impressive 2022 earnings upside suggests to me that they are already priced in.
Instead, I was looking for a less obvious UK share that could benefit from a Truss Freak reboot.
Location, location, location
The North West of England, or more specifically Lancashire, is home to the UK’s only shale gas wells.
These were built by Australian-owned UK energy company Cuadrilla. AJ Lucas teamIn the year Before it was banned in 2019.
Oil and gas exploration companies may begin exploring the UK for more potential drilling sites.
History suggests that the North West of England is fertile ground for such applications. Previous frac requests have been made to local authorities in Cheshire, Manchester and Warrington.
The so-called ‘Carboniferous Bowland-Hodder area’ in north-west England is one of four areas in the UK where shale gas reserves can be brought to market.
Make a flash
Enter United Utilities Group (LSE:UU) owns 114,000 hectares of land in the North West of England, primarily used for storage.
In the year In 2013, the United Utilities team negotiated with Cuadrilla to explore the damaged areas on its land. Such talks may resume in the coming months or years. However, United Utilities’ stock price fell 10 percent last month.
I don’t think investors have yet cottoned on to the potential windfall of this watershed. Of course, before investing in my hard-earned captain, I need to consider United Utilities’ core business.
United Utilities’ net debt load of £7.7bn is 25 times greater than the company’s free cash flow.
United Utilities also reported a 4% decline in earnings per share in 2021/22 as higher inflation pushed up payments on large and index-linked debt.
In a rising interest rate environment, I would stay away from United Utilities Group shares due to its heavy debt load.
However, I wouldn’t be surprised to see the company enjoy a pop in its share price if they re-bid on the onshore drilling deal in the next year or two.