Star Energy half-year results 2026: net cash returns as growth hunt gathers pace

Star Energy Group PLC has entered the second half of 2026 in a much stronger financial position, following an equity fundraising and the agreed disposal of its Croatian geothermal business.

Revenue and adjusted EBITDA improved in the first six months, while the balance sheet moved from net debt to net cash. That gives management more room to pursue producing oil and gas assets, although no acquisition has yet met its return requirements.

The less flattering part of the story is that hedging limited Star Energy's exposure to higher oil prices, while production slipped slightly and the Singleton gas-to-wire project was delayed.

Star Energy's key half-year figures

Metric	H1 2026	H1 2025	Change
Revenue	£23.2 million	£18.3 million	Up 26.9%
Adjusted EBITDA	£5.6 million	£4.9 million	Up 14.3%
Operating cash flow before working capital	£6.0 million	£4.8 million	Up 25.0%
Continuing profit after tax	£2.7 million	£3.9 million loss	Improved
Average net production	1,866 boepd	1,894 boepd	Down 1.5%
Cash at period end	£15.7 million	£4.3 million	Up £11.4 million

Adjusted EBITDA means earnings before interest, tax, depreciation and amortisation, with further adjustments for certain exceptional and non-cash items.

The revenue improvement was primarily driven by stronger oil prices. Brent averaged $92.6 per barrel during H1 2026, compared with $71.7 per barrel a year earlier.

However, the full benefit did not reach the income statement. Lower sales volumes, a weaker US dollar and losses on commodity hedges reduced the upside.

The original company announcement provides the complete interim financial statements.

The balance sheet is the biggest change

Star Energy ended June with £15.7 million of cash and net cash of £4.6 million. That compares with £7.6 million of cash and £4.3 million of net debt at the end of 2025.

The £9.1 million gross fundraising completed in May generated £8.5 million after costs. Management intends to use that capital to increase profitable production through acquisitions and investment in existing fields.

The agreed Croatian geothermal disposal could provide another liquidity boost when it completes, which is expected by the end of October 2026.

Star Energy expects to receive €1.3 million, or £1.1 million, as its share of the immediate consideration. The transaction should also release €5.2 million, or £4.5 million, of restricted cash supporting performance bonds.

Potential earn-outs of €0.5 million, or £0.4 million, per licence could follow if geothermal power plants reach commercial operation. Their timing and receipt are not guaranteed.

Crucially, the disposal also removes future Croatian licence commitments and ongoing costs. This allows management to focus on UK oil and gas production and a more capital-light UK geothermal strategy.

Higher oil prices came with a £5 million hedging loss

Hedging is designed to protect cash flow against falling commodity prices, but it can also cap the benefit when prices rise sharply.

Star Energy had hedged around 54% of production at the beginning of 2026. Management said this reflected expectations of an oversupplied oil market and commodity price forecasts of $50 to $60 per barrel before the Iran conflict drove prices higher.

The group recognised a £5.0 million loss on its oil hedges during H1, including a £3.8 million realised loss and a £1.2 million fair-value loss.

This is the clearest drag in the results. Revenue increased substantially, but adjusted EBITDA rose by a more modest £0.7 million because part of the commodity-price benefit was surrendered through hedging.

There is a reasonable strategic explanation. Star Energy's finance facility requires hedging, while downside protection matters for a relatively small producer with mature assets and significant decommissioning obligations. Even so, investors should continue watching hedge coverage because it can materially affect cash generation.

Production was broadly stable, but delivery still matters

Average net production was 1,866 barrels of oil equivalent per day, or boepd, compared with 1,894 boepd in H1 2025.

Temporary operational and reliability issues affected output, alongside natural decline from mature fields. The delayed grid connection for the Singleton gas-to-wire project was another headwind.

Management said July and August production was materially above the first-half average after several issues were resolved and optimisation work was completed. Full-year guidance is now 1,900 to 1,950 boepd.

Singleton is expected to contribute around 74 boepd of incremental production while materially reducing routine gas flaring. First production is currently expected in early October 2026, subject to the final grid connection and commissioning.

Star Energy invested £3.2 million across its oil and gas assets during the half, including Singleton, the conversion of a Stockbridge well into a water injector and smaller optimisation projects. Expected net cash capital expenditure for 2026 is £6.6 million.

The near-term test is straightforward: production needs to remain above the first-half level, Singleton needs to start operating, and spending needs to translate into dependable cash flow.

Acquisition discipline is sensible, but investors need results

Star Energy is evaluating operated and non-operated oil and gas portfolios producing up to approximately 2,500 boepd. It has reviewed several potential transactions, including opportunities in the North Sea and elsewhere.

No deal has yet passed management's tests for asset quality, risk, valuation and shareholder returns.

That restraint is positive. Raising money does not create an obligation to spend it quickly, and a poor acquisition could undo much of the recent balance-sheet progress.

The other side of the argument is that shareholders supported the fundraising specifically to finance growth. Cash sitting on the balance sheet provides security, but the investment case increasingly depends on management finding a value-accretive use for it.

Organic projects provide an alternative. Glentworth, Star Energy's main near-field oil development opportunity, has a base-case estimate of around 162 barrels of oil per day, with a range of 125 to 225 barrels per day. It could develop approximately 1.0 million barrels of 2P undeveloped reserves, although the investment decision and timing are not disclosed.

UK geothermal shifts towards a capital-light model

Following the Croatian sale, Star Energy's geothermal activity is focused on the UK projects in Manchester and Southampton.

Applications have been submitted to the Green Heat Network Fund for both projects. Management wants government support and third-party infrastructure capital to reduce Star Energy's direct funding exposure.

That approach limits speculative spending while preserving exposure to future project development. However, progress depends on the grant applications and suitable partners, so commercial outcomes remain uncertain.

What investors should watch in the second half

There are several clear positives in these results. Revenue, adjusted EBITDA and operating cash generation improved, while the fundraising transformed the balance sheet. Completion of the Croatian disposal should release further cash and remove future commitments.

The risks are equally visible. Production remains tied to mature fields, the hedging programme reduced the benefit of higher oil prices, and the growth strategy has yet to produce an acquisition. The £65.1 million decommissioning provision also remains an important long-term liability.

The next milestones are Singleton's expected October start-up, completion of the Croatian disposal, delivery of full-year production guidance and evidence that Star Energy can deploy its enlarged cash position without compromising its stated return discipline.

Star Energy has improved its financial flexibility. The challenge now is turning that flexibility into profitable, sustainable production growth.