Revenues fall, losses widen in tough year for Egdon Resources

UK-based exploration and production company Egdon Resources reported a 56% fall in gross oil and gas revenues in its preliminary results on Wednesday, to £0.96m.

The AIM-traded firm said its loss for the year ended 31 July totalled £4.75m after write-downs, pre-licence costs and impairments of £3.03m, widening from a loss of £1.72m after write-downs, pre-licence costs and impairments of £0.45 million in the 2019 financial year.

Its basic losses per share totalled 1.53p for the year, compared to 0.64p a year earlier, while cash at bank stood at £0.85m at year-end, down from £1.62m.

Egdon noted that a placing in April raised gross proceeds of £0.5m at a price of 2p per share, and said its net current liabilities as at 31 July were £0.33m, swinging from net current assets of £1.91m 12 months prior.

Net assets at the end of the period were £26.67m, falling from £30.99m.

On the operational front, the company’s production during the year was 145 barrels of oil equivalent per day, down from 182 barrels per day in 2019, but ahead of its guidance for between 130 and 140 barrels per day.

Planning permission was granted for the Wressle development on appeal on 17 January, following a public inquiry in November 2019.

Full costs were awarded against North Lincolnshire Council, and had since been received, with the board reporting that field development operations were progressing well, with first oil targeted during January, which would add 150 barrels of oil per day to Egdon's production.

During March, the firm announced the results of an in-depth assessment of the Biscathorpe project, or PEDL253, which identified technically and commercially attractive target areas accessible via a side-track of the suspended Biscathorpe-2 well.

A planning application was in the process of being prepared for submission to enable that.

The farm-out of the Resolution and Endeavour gas discoveries, P1929 and P2304, to Shell Oil UK, and agreed licence extensions and new work programme obligations with the Oil and Gas Authority (OGA), took place during the year.

During September 2019, the “encouraging” gas-in-place results for Springs Road-1 were announced, indicating the presence of a “potentially world-class” resource in the Gainsborough Shales area of the Gainsborough Trough, where Egdon holds 71,361 net acres or 289 square kilometres.

In early November 2019, the UK government announced the introduction of a moratorium on high-volume hydraulic fracturing for shale gas, that would remain in place until new evidence was provided.

Along with its industry peers, Egdon said it was continuing to work with the OGA and other regulators on the matter.

On 18 June, a confidential settlement was reached with Humber Oil and Gas over the PEDL253 litigation, with monies received on 25 August.

Looking ahead, Egdon said it would continue to “carefully” manage costs and cash through the current challenging operating environment, as it finalised the development of the Wressle oil field for production start-up this month.

It would also progress the planning application for a Biscathorpe-2 side-track well to be drilled in 2021, and where it could look to secure a partial farm-out, as it also progressed a farm-out of North Kelsey-1 for drilling in 2021.

The company said it would also progress the acquisition of the 3D seismic survey over the Resolution and Endeavour gas discoveries in February 2022.

Its board said it was “streamlining” its portfolio to concentrate on a smaller number of key assets, while maintaining its position in core unconventional assets.

Subject to lifting of the current moratorium on hydraulic fracturing operations for shale gas, it was also set to progress the planning and permitting for the drilling and subsequent testing of the Springs Road-2 well.

Finally, Egdon said it would review the ‘energy transition’ opportunities within its current portfolio, including the repurposing of existing wells for geothermal energy.

“Despite the unprecedented challenges experienced during the year, the fundamentals of the business are robust with the company having a range of high potential assets in both the conventional hydrocarbon resource and nascent shale-gas sectors,” said chairman Philip Stephens.

“The company is focused on reducing costs and expenditure and on progressing key near term cash generative projects such as Wressle.

“We will continue to keep activity under review in light of the current circumstances and position the company for growth once normality returns.”

At 0959 GMT, shares in Egdon Resources were down 9.08% at 1.5p.