TIDMEDR
RNS Number : 1342R
Egdon Resources PLC
03 November 2021
3 November 2021
Embargoed for 7.00am
EGDON RESOURCES PLC
("Egdon" or "the Group" or "the Company")
Preliminary Results for the Year Ended 31 July 2021
Egdon Resources plc (AIM: EDR), a UK-based exploration and
production company primarily focused on the hydrocarbon-producing
basins of onshore UK, today announces its preliminary results for
the year ended 31 July 2021.
Operational and Corporate Highlights
-- Completion of site reconfiguration, facilities installation
and well recompletion at the Wressle oil field, with test
production ongoing since late January 2021 and the proppant squeeze
operation successfully completed in July 2021
-- Production during the period was 90 barrels of oil equivalent
per day ("boepd") (2020: 145 boepd) against guidance of 110-130
boepd due to delays in undertaking the proppant squeeze at
Wressle
-- Planning application submitted for a side-track drilling
operation, associated testing and long-term oil production at the
Biscathorpe-2 well site
-- Entered a memorandum of understanding with Creative
Geothermal Solutions Limited ("CGS") in respect of geothermal
projects with an initial focus on Egdon's Dukes Wood-1 and
Kirklington-3Z wells
-- Completion of the farm-outs for the Resolution and Endeavour
gas discoveries (P1929 and P2304) to Shell Oil U.K. Limited
-- Continued refocussing and streamlining of the licence portfolio
Financial Performance
-- Gross oil and gas revenues during the year increased by 13.4%
to GBP1.09 million (2020: GBP0.96 million).
-- Loss for the year ended 31 July 2021 of GBP1.68 million after
write-downs, pre-licence costs and impairments of GBP0.48 million
(2020: loss of GBP4.75 million after write-downs, pre-licence costs
and impairments of GBP3.03 million)
-- Basic loss per share of 0.51p (2020: 1.53p)
-- Cash at bank GBP1.96 million as at 31 July 2021 (2020: GBP0.85 million)
-- Net assets as at 31 July 2021 of GBP27.42 million (2020: GBP26.67 million)
-- Refinancing of the business via a GBP1 million loan facility,
the issue of GBP1.05 million convertible loan notes following
shareholder approval at a General Meeting held on 22 January 2021,
and an equity placing of GBP1.44 million gross in July 2021
Subsequent Events
-- At Wressle, a coiled tubing operation, a follow-up to the
proppant squeeze operation, was completed in August 2021, with test
production recommencing and flow rates exceeding pre-operational
expectations. During September, we reported facility constrained
instantaneous flow rates of up to 884 barrels of oil per day
("bopd") along with 480,000 cubic feet of gas (c. 80 barrels of oil
equivalent per day). Wressle is already having a positive impact on
the Group's revenues.
-- In September 2021 we were advised by Shell that the planned
3-D seismic survey across UK offshore licences P1929 and P2304
(Resolution and Endeavour gas discoveries respectively (Egdon 30%))
would not proceed on the originally expected timeframe of February
2022. Subject to regulatory and Shell approval, we now anticipate
that this could go ahead in February 2023.
-- On 1 November 2021 planning permission was refused for the
Biscathorpe project. The Company will await the formal decision
notice before taking advice and considering our options including
an appeal.
Outlook
-- Initial production guidance for 2021-22 is 240 boepd, with
Wressle being the significant contributor.
-- With the material cash flow expected from Wressle and Ceres
in a significantly improved commodity price environment, and the
breadth and quality of the opportunities within the portfolio, we
look forward with confidence.
Audiocast
An audiocast of the Results Presentation will be available to
view via the following link from 09.30:
http://webcasting.buchanan.uk.com/broadcast/61767494df7b150b81e93816
Commenting on the Results Egdon's Chairman, Philip Stephens
said;
"During what has been a challenging period as we continue to
navigate the COVID pandemic and its macro-economic impacts, I can
report that we have continued to make progress against our revised
strategy and the business is in a significantly stronger place than
a year ago. We have strengthened our financial position and are now
operating in a higher commodity price environment as worldwide
demand recovers.
Operationally the highlight is undoubtedly Wressle, where
production has significantly exceeded our expectations and the
material revenues from this asset will transform the cash flow for
the business in the current period and beyond, providing
optionality for near-term growth opportunities in line with our
stated strategy."
For further information please contact:
Egdon Resources plc
Mark Abbott, Martin Durham 01256 702 292
Buchanan
Ben Romney, Jon Krinks 020 7466 5000
Nominated Adviser & Joint Broker - WH Ireland Limited
Chris Hardie, Megan Liddell 020 7220 1666
Joint Broker & Financial Advisors - VSA Capital Limited
Andrew Monk (Corporate Broking) 020 3005 5000
Andrew Raca (Corporate Finance)
Qualified Person Review
In accordance with the AIM Rules - Note for Mining and Oil and
Gas Companies, this release has been reviewed by Mark Abbott,
Managing Director of Egdon, who is a geoscientist with over 30
years' experience and is a member of the Petroleum Exploration
Society of Great Britain and a Fellow of the Geological Society. Mr
Abbott has consented to the inclusion of the technical information
in this release in the form and context in which it appears.
Evaluation of hydrocarbon volumes has been assessed in
accordance with the 2018 Petroleum Resources Management System
(PRMS) prepared by the Oil and Gas Reserves Committee of the
Society of Petroleum Engineers (SPE) and reviewed and jointly
sponsored by the World Petroleum Council (WPC), the American
Association of Petroleum Geologists (AAPG), the Society of
Petroleum Evaluation Engineers (SPEE), the Society of Exploration
Geophysicists (SEG), the Society of Petrophysicists and Well Log
Analysts (SPWLA) and the European Association of Geoscientists
& Engineers (EAGE).
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulations (EU) No. 596/2014 ("MAR"). Upon the
publication of this announcement via Regulatory Information Service
("RIS"), this inside information is now considered to be in the
public domain.
Chairman's Statement
Our primary concern during the last year has been the health and
safety of our employees, contractors, and other stakeholders as we
have navigated the COVID pandemic. Egdon's office-based employees
have continued to work from home and our production and site
operations have thankfully remained unaffected.
As worldwide economic activity levels have increased, we have
seen a strong rebound in commodity prices. In particular, UK gas
prices have reached historic highs due to increasing worldwide
demand, supply issues and competition for LNG. This is clearly
positive for our business and reinforces the need for the UK to
maintain secure indigenous supplies of oil and gas as we transition
to "Net Zero" by 2050.
Key Events
Key events during the period were;
-- Production during the period was 90 boepd (2020: 145 boepd)
against guidance of 110-130 boepd. Production was from the Ceres
gas field, the Keddington and Fiskerton Airfield oil fields and
since 30 January 2021, the Wressle oil field extended well test
operations. Guidance was missed due largely to the delay in
undertaking the proppant squeeze operation at Wressle
-- Development of the Ashover Grit reservoir at Wressle oil
field has been completed with the proppant squeeze operation being
undertaken during late July 2021. The initial production rates of
up to 884 barrels of oil per day (bopd) have exceeded the Company's
expectations
-- A planning application supported by a comprehensive
environmental statement was submitted in February for the drilling
of a side-track well, well-testing and long-term production at
Biscathorpe. The planning decision rejecting Egdon's application
was made by the planning committee post-period end on 1 November
2021
-- Egdon entered into a memorandum of understanding with
Creative Geothermal Solutions Limited ("CGS") in respect of
geothermal projects with an initial focus on Egdon's Dukes Wood-1
and Kirklington-3Z wells
-- Refinancing of the business via a GBP1 million loan facility,
the issue of GBP1.05 million convertible loan notes, which have
subsequently been converted, and an equity placing of GBP1.44
million
Financial and Statutory Information
I am pleased to be able to report on a strengthening of the
Group's financial position over the period.
Revenue from oil and gas production during the year was GBP1.09
million (2020: GBP0.96 million). The revenues are driven by an
increase in commodity prices resulting in an 84% increase in
realised price per boe (2021: $33.35/boe against 2020: $18.08/boe),
which have mitigated a fall in overall production at existing sites
of 38.5% (2021: 32,686 barrels of oil equivalent against 2020:
53,070 boe).
The Group recorded a net loss of GBP1.68 million for the year,
(2020: loss of GBP4.75 million). This included write-downs,
pre-licence costs and impairments totaling GBP0.48 million (2020:
GBP3.03 million).
The operating loss, calculated as gross loss less admin
expenses, plus other operating income, before impairments was
GBP1.11 million (2020: GBP1.79 million).
The Group continues to focus on managing its cash resources and
at the end of the year had cash and cash equivalents of GBP1.96
million (2020: GBP0.85 million) and net current assets of GBP0.14
million (2020: net current liabilities of GBP0.33 million).
In November 2020, Egdon secured a GBP1.00 million loan facility.
The loan has a term of 18 months with an interest rate of 11% per
annum and is secured against a 25% interest in the Wressle project.
In January 2021, Egdon issued GBP1.05 million convertible loan
notes with a concert party of Petrichor Holdings BV. These notes
were exercised in July 2021 for the issue of 73,233,406 shares. An
equity placing of GBP1.44 million gross was completed in July
2021.
The loss per share for the year was 0.51p (2020: loss of
1.53p).
In line with last year, the Directors do not recommend the
payment of a dividend.
Strategy
The Board has updated the Company's strategy to take account the
opportunities and challenges presented by the wider economic and
political environment and the UK's move to Net Zero carbon
emissions by 2050. We have updated the Company's strategy as
follows;
1) Maintain geographical focus on the UK
2) Focus on growth in production and revenue through
conventional production, appraisal and exploration projects
3) A near term focus on developing low carbon energy transition
projects utilising Egdon's existing assets, knowledge of the UK's
onshore geology and core technical skills and operating
experience
4) Maintain our significant portfolio of unconventional
resources assets whilst working to address the moratorium
We have already made progress in respect of the revised strategy
with the signing of an MoU with Creative Geothermal Solutions
Limited ("CGS") to progress geothermal energy opportunities as
discussed below.
Political and Regulatory
The UK is committed by law to reaching Net Zero carbon emissions
by 2050. The popular narrative around this tends to be the
demonisation of oil and gas, with renewables fully displacing the
use of fossil fuels. However, in its December 2020 report, the
Climate Change Committee ("CCC"), again highlighted the need for an
energy mix in the UK. It is a fact that in the period to 2050 the
UK cannot rely on renewables alone for all its energy needs and
that there will be a continuing need for oil and gas. This has been
starkly brought into focus by the historically high gas prices,
which have resulted in the failure of a number of small energy
suppliers, the shut-down of fertiliser manufacturing and fears for
its impact on other energy intensive industries. These situations
have been driven by increased worldwide demand, supply limitations
- particularly from Russia, increased deliveries of LNG to the Far
East and the coincidence of low output of wind and solar power in
the UK.
Egdon was adversely impacted in November 2019 by the
Government's imposition of a moratorium on high volume hydraulic
fracturing for shale-gas. Each geological basin and site is
different and we are encouraged that the Gainsborough Trough, where
Egdon holds its core licences, is characterised by its simple
structure and limited subsurface faulting. Egdon continues to work
to demonstrate that we can operate safely and in an environmentally
responsible manner. The results of various independent studies
conclude that UK sourced shale-gas would have significantly lower
(up to 75% lower) pre-combustion carbon emissions than gas imported
via Liquified Natural Gas ("LNG") or long-distance pipelines.
Indigenous UK shale-gas could be an important part of the energy
transition for the UK in its move towards a Net Zero economy.
The Government has now published its hydrogen strategy which
highlights the importance of blue hydrogen (natural gas derived
hydrogen coupled with carbon capture, utilisation and storage) in
the energy transition.
The national and local benefits of indigenous oil and gas
supplies are clear and even more compelling in the context of a
post-COVID-19 recovery, with a positive impact on emissions, energy
security, balance of payments, tax, business rates and employment.
Without indigenous oil and gas, the UK will simply 'offshore' its
emissions, employment, and fiscal benefits.
Asset Portfolio
Following relinquishment or expiration of non-core,
non-prospective or operationally challenging licences during the
period, Egdon held interests in 38 licences (2020: 42 licences) in
the UK at the period end with exposure to the full cycle of
opportunities from exploration through to development and
production. The Company will maintain its current focus on the
highest potential projects whilst divesting certain non-core assets
to provide more focus to the portfolio.
Production
Production during the period was 90 boepd, (2020: 145 boepd)
from Ceres, Keddington and Fiskerton Airfield, with Wressle
contributing on test production since 30 January 2021.
Test production commenced in January 2021 from the Ashover Grit
at the Wressle oil field (PEDL180/PEDL182: Egdon 30%). A proppant
squeeze and follow up coiled tubing operation was completed in
August 2021, with test production recommencing and flow rates
exceeding pre-operational expectations. During September, we
reported facility constrained instantaneous flow rates of up to 884
barrels of oil per day ("bopd") along with 480,000 cubic feet of
gas (c. 80 barrels of oil equivalent per day). Wressle is already
having a highly positive impact on our revenues.
A number of additional projects to boost production and revenues
are under active consideration, and include Keddington and Waddock
Cross.
A detailed sub-surface review of the Keddington oil field and
the surrounding licence area (PEDL005 (Remainder): Egdon 45%) has
highlighted that material volumes remain to be produced presenting
an opportunity to increase production during 2022 via a development
side-track for which planning consent is already in place.
The shut-in Waddock Cross oil field (PL090: Egdon 55%) has
potential for commercial production (> 500 bopd) from a new
horizontal well. Given the large in place oil volume (Mean STOIIP:
ca. 57 mmbls), this has been high graded by the Company as planning
consent and facilities are in place to test this significant
opportunity.
Exploration/Appraisal
Our portfolio of conventional assets provides potential for
growth via exploration and appraisal drilling and the Company
continues to progress those opportunities that offer maximum
near-term impact. Key projects for the coming period are summarised
below.
Evaluation of the results of the Biscathorpe-2 well (PEDL253:
Egdon 35.8%), has identified a possible material and commercially
viable hydrocarbon resource which remains to be tested. A planning
application was submitted during February 2021 for side-track
drilling, testing and long-term production. The proposed side-track
would target gross Mean Prospective Resources of 6.50 million
barrels of oil (mmbo) as estimated by Egdon. The planning decision
rejecting Egdon's application was made by the Planning Committee on
1 November 2021, despite having a recommendation for approval from
the planning officers. The North Kelsey Prospect (PEDL241: Egdon
50%) is considered an analogue to the Wressle field and has Mean
Prospective Resources of 6.47 million barrels in multiple
reservoirs. Planning consent was extended to 31 December 2021 and
an application is in preparation to extend this further.
Conditional upon the eventual receipt of the required planning
consents, and in part dependent upon securing farm-outs on PEDL253
and PEDL241, Egdon hopes to drill a side-track at Biscathorpe and a
new well on the North Kelsey prospect.
Egdon completed the farm-out Agreement with Shell U.K. Limited
("Shell") in relation to UK offshore licences P1929 and P2304 which
contain the Resolution and Endeavour gas discoveries respectively
(Egdon 30%). In September we were advised by Shell that the planned
3-D seismic survey across both discoveries would not proceed on the
original expected timeframe of February 2022.
Unconventional Resources
The Group holds a significant unconventional resources portfolio
of licences located in Northern England, totalling 151,742net acres
(614km(2) net) with estimated Mean volumes of undiscovered GIIP of
37.6 TCF (independently assessed by ERCE in 2016). Our primary
focus is the Gainsborough Trough, where the results from the 2019
Springs Road-1 well (Egdon 14.5%) highlighted a potentially world
class resource in the Gainsborough Shale. However, activity is
currently paused with all licences being held on a care and
maintenance basis due to the moratorium on hydraulic fracturing for
shale-gas imposed in November 2019.
Energy Transition Opportunities
Egdon has focused on energy transition opportunities which
utilise the Company's core skills, knowledge, and operating
experience. These include geothermal energy, hydrogen production
and energy storage opportunities.
An initial review of the geothermal potential within our
existing wells and fields has shown that a number of these have
merit. The review highlighted anomalously high sub-surface
temperatures at our shut-in wells at the Dukes Wood and Kirklington
oil fields, making these wells candidates for repurposing for
geothermal heat production.
To facilitate progress in relation to geothermal energy
opportunities we have signed a memorandum of understanding with
Creative Geothermal Solutions Limited (CGS). CGS are a team of
highly experienced engineers and service providers who will work
jointly with Egdon and our partners to progress these projects.
A programme to plug and abandon the existing Dukes Wood-1 oil
well and recomplete it for geothermal heat production has been
developed for Egdon by CGS and has been submitted to the regulator.
It is anticipated that subject to regulatory approval, this work
will commence during Q1 2022.
Outlook
Production guidance for 2021-22 is 240 boepd, with Wressle being
a significant contributor to this and being subject to review as
further production data becomes available.
Operationally, in the short-term we will continue to focus on
key highlighted projects within our conventional portfolio whilst
maintaining our substantial acreage position in the nascent
shale-gas play. In parallel, we aim to demonstrate to the
regulators that we can operate safely to deliver lower emission,
indigenous UK shale-gas to support the energy transition.
Our key activities and focus for the coming year will be:
-- Managing our operation to ensure the continued safety of
employees, contractors and other stakeholders in respect of
COVID-19
-- Optimise oil and gas production from the Ashover Grit reservoir at Wressle
-- Progress the monetisation of associated gas production from the Ashover Grit at Wressle
-- Finalise plans for development of the Contingent Resources at Wressle
-- Securing planning consent for the Biscathrope-2Z side-track,
testing and long-term production
-- Securing an extension to North Kelsey planning consent beyond end 2021
-- Progressing drilling plans to target incremental oil
production / near field exploration opportunities at the Keddington
oil field and field redevelopment at Waddock Cross
-- Geothermal repurposing of the Dukes Wood-1 well during 2022
-- Subject to Shell's approval, progressing the 3-D seismic
survey over the Resolution and Endeavour gas discoveries
-- Further developing the Company's energy transition opportunities
I am also pleased to report that we have made the move to
electronic communication with shareholders. This should produce a
significant saving in paper and postage, at the same time as
allowing proxies and other shareholder matters to become easier and
more efficient for all concerned. Shareholders remain entitled to
receive all shareholder communications in paper form at no cost,
but we are encouraging those who can, to agree to receive
everything in electronic form.
With the material cash flow expected from Wressle and Ceres in a
significantly improved commodity price environment, and the breadth
and quality of the opportunities within the portfolio, we can look
forward with confidence.
As always, I would like to thank our shareholders for their
continued patience and support and the unwavering effort of the
Egdon team through the recent highly challenging period.
Philip Stephens
Chairman
2 November 2021
OPERATING REVIEW
I am pleased to provide shareholders with a more detailed review
of the group's assets, operations and plans with a focus on
progress against objectives, key priorities, risks, and potential
growth drivers. Egdon's website ( www.egdon-resources.com )
provides further details of the group's assets and operations.
Health, Safety & Environment
Egdon is fully committed to high standards of Health, Safety and
Environmental ("HSE") management, protection and performance with
all operational activity performed under the umbrella of the
Group's HSE Management System ("HSEMS"). In line with our approach
of continual improvement, the HSEMS is subject to continuing review
and revision to ensure it remains fit for purpose. During the
reporting period there were no reportable health and safety
incidents, and the Company was compliant with all of its
environmental permits and planning consents.
Operating Environment & COVID-19
We have kept our employees, contractors, and other stakeholders
safe by adopting home working and social distancing measures and
continue to take all precautions to ensure risks are minimised.
Communications
Egdon maintains a website ( www.egdon-resources.com ) which
provides stakeholders with up-to-date information on the Company
and its operations. Egdon also has a community facing website (
www.egdon-community.com ) which provides a portal for information
related to Egdon's operational sites. Summaries of press releases,
non-price-sensitive information and other relevant updates are also
shared via the Company's Twitter account (@EgdonResources).
To improve the efficiency of sharing corporate information with
shareholders Egdon is now able to provide the option for electronic
communication.
Progress against objectives
As part of our preliminary results reporting (January 2021) and
Interim Results (April 2021) we set out several objectives against
which I can report on progress
Objective Set Progress Against Objective
----------------------------------------------------- -------------------------------------------------------------
1) Managing our operations to
ensure the continued safety * Successfully implemented COVID secure procedures and
of employees, contractors and systems
other stakeholders in response
to the evolving COVID-19 situation
* No adverse direct impacts
----------------------------------------------------- -------------------------------------------------------------
2) Continuing to carefully manage
costs and cash through the current * Improved cash position through recapitalisation of
challenging operating and macro-economic the business by securing loans and issue of new
environment and ensuring the equity
business is capitalised for
the future
* Temporary salary reductions in place throughout
period
----------------------------------------------------- -------------------------------------------------------------
3) Finalising the development
of the Wressle oil field for * Recompletion finalised in January 2021 and test
production start-up in January production commenced
2021 and progressing the proppant
squeeze at the Wressle oil field
to attain target production * Proppant squeeze successfully undertaken in July 2021
of 150 bopd net to Egdon with coiled tubing completed in August 2021
* Instantaneous flow test production of 884 bopd
(facilities constrained) achieved, exceeding
expectation
----------------------------------------------------- -------------------------------------------------------------
4) Securing planning consent
for the Biscathrope-2Z side-track, * Planning application submitted in February 2021
testing and long-term production
* Application rejected on 1 November 2021
* Options including an appeal to be considered
----------------------------------------------------- -------------------------------------------------------------
5) Progressing a farm-out of
North Kelsey-1 and Biscathorpe-2Z * Data room opened for these opportunities
with a view to drilling during
2022
* Process ongoing
----------------------------------------------------- -------------------------------------------------------------
6) Streamlining the conventional
resource portfolio to concentrate * Non-core and low prospectivity assets relinquished or
on a smaller number of key assets licences lapsed
whilst maintaining our position
in core unconventional resource
assets * Ongoing review of all assets
----------------------------------------------------- -------------------------------------------------------------
7) Progressing the acquisition -- Shell has advised that the
of the 3-D seismic survey over 3D seismic survey over the Resolution
the Resolution and Endeavour and Endeavour gas discoveries
gas discoveries in February has been delayed beyond February
2022 2022.
----------------------------------------------------- -------------------------------------------------------------
8) Subject to lifting of the
current moratorium on hydraulic * Work ongoing to address the moratorium
fracturing operations for shale-gas,
progressing the planning and
permitting for the drilling * Planning has been refused to retain the site and the
and subsequent testing of the operator has advised it will restore the site
Springs Road-2 well
* A new more optimal location will be required to
progress the next phase of work (subject to lifting
of the moratorium)
----------------------------------------------------- -------------------------------------------------------------
9) Reviewing the Energy Transition
opportunities within the current * Geothermal repurposing opportunities identified
portfolio, including repurposing
of existing wells for geothermal
energy * MoU signed with Creative Geothermal Solutions (CGS)
* Plans to repurpose Dukes Wood-1 developed for Q1 2022
activity
----------------------------------------------------- -------------------------------------------------------------
10) Progressing drilling plans
to target incremental oil production * Detailed engineering work ongoing to finalise plans
/ near field exploration opportunities for 2022 activity at both sites
at the Keddington oil field
and field redevelopment at Waddock
Cross
Assets & Operations
Egdon held interests in 38 licences in the UK at year end with
exposure to the full cycle of opportunities from exploration
through to development and production.
Licensing
Highlighted below are key changes to our licence portfolio
during and post-period.
Licence Changes
------------------ --------------------------------------------------------------
PEDL143 Licence relinquished during September 2020
------------------ --------------------------------------------------------------
PEDL343 Licence extended to November 2021.Discussing longer extension
and associated work programme
------------------ --------------------------------------------------------------
PEDL339, PEDL258, These licences have lapsed at the end of their Initial
PEDL259 Terms as prospectivity was considered low
------------------ --------------------------------------------------------------
PEDL209 Egdon increased interest to 100% due to withdrawal of
other JV parties
------------------ --------------------------------------------------------------
PL161/PL162 Farm-in Agreement with Scottish Power has lapsed and Egdon
no longer has an interest in the licences
------------------ --------------------------------------------------------------
PEDL202 Interest in licence relinquished during August 2021
Production and Development Assets
Production during the period was 90 boepd, (2020: 145 boepd)
from Ceres, Keddington and Fiskerton Airfield, with Wressle
contributing on test production since late January 2021.
Wressle (PEDL180/182: Egdon 30%)
The Wressle Field has been independently audited (2016 Competent
Person's Report ("CPR" ERCE) with gross 2P Reserves of 0.62 million
barrels of oil ("mmbo") and 2C Resources of 1.53 mmbo.
Significant progress has been made at Wressle since it was
granted planning consent in January 2020. The initial phase of work
culminated in commencement of oil flows at the end of January 2021,
following installation of surface facilities and a safe and
successful recompletion and reperforation of the Ashover Grit
reservoir. This has resulted in the Ashover Grit reservoir
achieving instantaneous flow rates in excess of 884 barrels of oil
per day ("bopd") along with 480,000 cubic feet of gas (c. 80
barrels of oil equivalent per day) on a significantly restricted
choke setting (30.5/64ths) and with a high flowing wellhead
pressure. Thus far, no formation water has been seen. The full flow
potential of the well has yet to be fully tested due to constraints
being experienced with the gas handling equipment.
Our focus for the coming period will be to remove the
constraints to production and optimise oil and gas production from
the Ashover Grit reservoir and then move to finalise plans for the
development of other hydrocarbon bearing reservoirs to access the
contingent resources with particular focus on the Penistone Flags
reservoir.
Consent has also now been received to install a combustion plant
to facilitate gas to electricity generation, which will add a new
potential revenue stream to the Wressle field development.
Environmental monitoring throughout the operations has shown no
measurable impact on water quality, no seismicity and that noise
levels have been within the permitted levels.
Ceres (P1241: Egdon 10%)
Ceres gas production during the period has declined to 58 boepd
plus 4 boepd of condensate net to Egdon (2020: 118 boepd plus 4
boepd of condensate). The recent strong gas prices make the asset
highly economic, and production is now expected to cease in 2023-25
dependent upon economic life with abandonment to follow.
Keddington (PEDL005R: Egdon 45%)
Keddington continues to produce at a net rate of 8 bopd (2020: 8
bopd) from one well. Some down-time was experienced during the
Period due to wax management issues which have subsequently been
resolved. A subsurface review of the Keddington field and the
surrounding licence area has been completed, which indicates that
gross Mean Contingent Resources of 559,000 barrels remain to be
produced. With planning consent already in place, this presents an
opportunity to increase production via a development side-track
from one of the existing wells. Detailed reservoir engineering work
is currently being finalised by ERCE to support the final target
selection for such a well, which could be drilled in 2022.
In addition, a near-field exploration opportunity exists at
Keddington South, which has a gross Mean Prospective Resource
Volume of 635,000 barrels of oil and the Louth Prospect, with a
gross Mean Prospective Resource of 600,000 barrels of oil. It is
intended that the Louth prospect would now be accessed from the
existing Keddington site and as such licence PEDL339 has been
allowed to lapse at the end of its initial term.
Fiskerton Airfield (EXL294: Egdon 80%)
Fiskerton Airfield produces at a net rate of 12 bopd during the
period (2019: 13 bopd). Our focus at Fiskerton Airfield remains on
maximising production from the existing wells and managing costs.
Longer term potential for the site is to use it to manage produced
water from other Egdon sites through the existing water injection
well on site and for potential geothermal repurposing as well.
Waddock Cross (PL090: Egdon 55%)
Waddock Cross is currently shut-in. Independent reservoir
modelling has shown that a new horizontal well on the field could
yield commercial oil production (500-800 bopd). Given the large in-
place oil volume (Mean oil in place of c. 57 million barrels of
oil) this asset has been high graded by the Company as planning
consent and facilities are in place to test this significant
opportunity.
Third party work is currently ongoing to finalise the well
design, facilities specification, and commercial modelling for the
phased redevelopment of the shut-in Waddock Cross oil field in
Wessex Basin licence PL090. This will involve managing the expected
high water cut. A final investment decision is expected to be made
by the end of 2021 which could lead to further drilling activity
during 2022.
Kirkleatham (PEDL068: Egdon 68%)
The Kirkleatham gas field remains shut in. Potential exists for
a side-track to access a volume of gas in the attic of the
structure. Furthermore, additional upside may exist for a tight gas
resource in the underlying Carboniferous. The production facilities
remain in place and can easily be reinstated.
Avington (PEDL070: Egdon 28%)
Avington remains shut-in. Planning consent was refused by the
South Downs National Park Authority for continuing production at
the site and the joint venture have appealed this decision with the
outcome still awaited.
Conventional Exploration and Appraisal Assets
The Company continues to progress those conventional resource
opportunities that offer maximum impact via the drill-bit. The pace
of exploration drilling activity is in part dependent upon securing
successful farm-outs as the Company carefully looks to balance
financial exposure and technical risk in line with our
long-standing business model. Key projects are:
Biscathorpe (PEDL253: Egdon 35.8%)
Evaluation of the results of the Biscathorpe-2 well, together
with the reprocessing of 264 square kilometres of 3-D seismic data
identified a possible material and commercially viable hydrocarbon
resource remaining to be tested. A planning application supported
by a comprehensive environmental statement was submitted during
February 2021 for side-track drilling, testing and long-term
production. Following extensive consultation, the application
received a recommendation for approval, but was rejected by the
planning committee at a meeting on 1 November 2021. We will await
the formal decision notice before taking advice and considering our
options with the joint venture partnership including an appeal.
Subject to eventual receipt of planning consent, the side-track
would target the Dinantian Carbonate, where a 68-metre oil column
was discovered in Biscathorpe-2. The Dinantian Carbonate has been
assessed by Egdon to have a gross Mean Prospective Resource volume
of 2.55 million barrels of oil (mmbo). The overlying Basal
Westphalian Sandstone has the potential to add gross Mean
Prospective Resources of 3.95 mmbo. Commercial screening conducted
by Egdon indicates break-even full cycle economics to be US$18.07
per barrel with an NPV (10) valuation of GBP55.60 million.
Results of an independent Carbon Intensity Study, conducted by
Gaffney, Cline & Associates, concluded that the Biscathorpe
project has an AA rating. This is significantly lower than the
current UK average. Once in production, GaffneyCline estimates the
Biscathorpe project to have a Carbon Intensity of just 3.06 grams
of Carbon Dioxide equivalent per mega joule (gCO(2) Eq/MJ).
North Kelsey (PEDL241: Egdon 50%)
The North Kelsey Prospect has been mapped from 3-D seismic data
and has potential for oil in up to four stacked conventional
Carboniferous reservoir targets: the Chatsworth Grit, Beacon Hill
Flags, Raventhorpe Sandstone and Santon Sandstone. North Kelsey is
geologically analogous to the Wressle field. Egdon has calculated
the gross Prospective Resources to range from 4.66 million barrels
up to 8.47 million barrels, with a Mean Resource volume of 6.47
million barrels.
Plans to construct the well site during 2021 were again impacted
by COVID-19 restrictions brought about by the second wave of
infections. Egdon is in the process of submitting a further
application to extend the existing consent beyond 31 December 2021.
Egdon and Union Jack Oil plc completed the alignment of equity on a
50:50 basis with Egdon receiving a cash consideration of
GBP100,000.
Resolution and Endeavour (P1929 & P2304: Egdon 30%)
In September 2021 Egdon was advised by licence operator, Shell
U.K. Limited, that the 3D seismic survey planned for February 2022,
over the Resolution and Endeavour gas discoveries, will not proceed
on the original expected timeline. Subject to Regulatory and Shell
approvals we anticipate that the survey could proceed in February
2023.
A Competent Person's Report (Schlumberger Oilfield UK PLC)
reported Mean Contingent Gas Resources of 231 billion cubic feet of
gas ("bcf") attributable to the Resolution gas discovery (P1929).
In addition, Egdon estimates that the Endeavour gas discovery
(P2304) contains Mean Contingent Resources of 18 bcf, with a P90 to
P10 range of 10 to 28 bcf.
Unconventional Resources
Following a number of changes to our licence interests as
detailed above, the Group's unconventional resources acreage
position in Northern England is 151,742 net acres (614km(2) net)
(2020: 164,280 net acres (664km(2) net)). This remains a
significant and potentially highly valuable position with estimated
Mean volumes of undiscovered GIIP of 37.6 TCF net to Egdon,
independently assessed by ERCE (2019: 47.6 TCF).
Egdon's core area is the Gainsborough Trough of Nottinghamshire,
Lincolnshire and Yorkshire where the Group holds interests in
71,361 net acres (2020: 71,361 net acres).
The results from the 2019 Springs Road-1 well ("SR-01" - Egdon
14.5%) compare favourably with some of the best US commercial shale
operations and highlight a potentially world class resource in the
Gainsborough Shale. Activity in the basin is currently on pause due
to the moratorium on hydraulic fracturing of shale-gas imposed in
November 2019. Egdon remains optimistic of being able to
demonstrate that hydraulic fracturing for shale- gas in the basins
where we operate, can be undertaken in a safe and environmentally
responsible manner and will justify a lifting of the hydraulic
fracturing moratorium.
Egdon also retains interests in the Widmerpool Basin and Humber
Basins of the East Midlands, the Cleveland Basin of NE England and
the Blacon Basin of NW England. Future activity levels on all these
licences will be on a care and maintenance basis during the coming
period.
Energy Transition Opportunities
The energy transition will present a number of challenges and
opportunities for Egdon. The Company recognises the potential for
repurposing of its fields, sites and wells for renewable purposes
as well as with additional new stand-alone projects in the
geothermal, hydrogen and energy storage space. During the coming
period we will be developing our strategy and plans in respect of
these new business areas.
Dukes Wood Geothermal
Egdon's initial focus has been on geothermal opportunities
within our existing well stock. A detailed review has highlighted
an anomalously high geothermal gradient local to our shut-in wells
at the Dukes Wood and Kirklington oil fields.
Working with Creative Geothermal Solutions Limited (CGS) we have
developed and a submitted to the regulator a programme to plug and
abandon the existing Dukes Wood-1 oil well and recomplete it for
geothermal heat production. It is anticipated that subject to
regulatory approval, work on this proof-of-concept project will
commence during Q1 2022.
Outlook and Priorities
Initial production guidance for the 2021/2022 financial year is
240 boepd from Wressle, Ceres, Keddington and Fiskerton
Airfield.
Operationally, in the short-term we will continue to focus on
key highlighted projects within our conventional portfolio. Longer
term we will maintain our substantial acreage position in the
nascent shale-gas play and continue to work to demonstrate to the
regulatory authorities, that we can operate safely to deliver lower
emission indigenous UK shale-gas to support the energy
transition.
The key priorities for the Company during the coming year are
summarised in the Chairman's Statement above and demonstrate the
breadth and depth of the asset base.
Mark Abbott
Managing Director
2 November 2021
EGDON RESOURCES PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31 JULY 2021
2021 2020
Notes GBP GBP
------------------------------------------------------------------------------------- ----- ----------- -----------
Continuing operations
Revenue - continuing 1,092,735 963,620
Cost of sales - exploration costs written-off and pre-licence costs (206,156) (193,953)
Cost of sales - Impairments of intangible fixed assets 2 (276,362) (1,171,591)
Cost of sales - Impairments of property, plant and equipment 3 - (1,663,473)
Cost of sales - depreciation (183,711) (162,646)
Cost of sales - direct production costs (918,689) (1,215,968)
Cost of sales - other, including shut-in fields (190,573) (187,783)
Cost of sales - release of Ceres contract asset - (99,704)
------------------------------------------------------------------------------------- ----- ----------- -----------
Total cost of sales (1,775,491) (4,695,118)
------------------------------------------------------------------------------------- ----- ----------- -----------
Gross loss (682,756) (3,731,498)
Administrative expenses (862,060) (956,289)
Other operating income 156,616 61,204
(1,388,200) (4,626,583)
Finance income 50,616 48,212
Finance costs (344,051) (169,830)
------------------------------------------------------------------------------------- ----- ----------- -----------
Loss before taxation (1,681,635) (4,748,201)
Taxation - -
------------------------------------------------------------------------------------- ----- ----------- -----------
Loss for the year (1,681,635) (4,748,201)
Other comprehensive income for the year - -
------------------------------------------------------------------------------------- ----- ----------- -----------
Total comprehensive income for the year attributable to equity holders of the parent (1,681,635) (4,748,201)
------------------------------------------------------------------------------------- ----- ----------- -----------
Basic loss per share 4 (0.51)p (1.53)p
Diluted loss per share 4 (0.51)p (1.53)p
------------------------------------------------------------------------------------- ----- ----------- -----------
EGDON RESOURCES PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 JULY 2021
Notes 2020 2020
GBP GBP
-------------------------------------- ------ ------------ ------------
Non-current assets
Intangible assets 21,241,378 21,451,306
Property, plant and equipment 8,719,310 7,986,094
Right-of-use asset 617,808 709,192
Trade and other receivables 384,831 403,486
---------------------------------------------- ------------ ------------
Total non-current assets 30,963,327 30,550,078
---------------------------------------------- ------------ ------------
Current assets
Inventory - 5,466
Trade and other receivables 1,084,992 1,831,859
Cash and cash equivalents 1,959,728 847,224
---------------------------------------------- ------------ ------------
Total current assets 3,044,720 2,684,549
---------------------------------------------- ------------ ------------
Current liabilities
Trade and other payables (1,772,284) (2,870,526)
Other financial liabilities (1,135,804) (148,849)
Net current assets/(liabilities) 136,632 (334,826)
---------------------------------------------- ------------ ------------
Total assets less current liabilities 31,099,959 30,215,252
Non-current liabilities
Lease liabilities (1,012,553) (1,067,844)
Provisions (2,669,107) (2,477,503)
---------------------------------------------- ------------ ------------
Net assets 27,418,299 26,669,905
---------------------------------------------- ------------ ------------
Equity
Share capital 17,118,649 15,234,035
Share premium 27,513,071 26,967,656
Share based payment reserve 122,254 122,254
Convertible debt option reserve - -
Retained earnings (17,335,675) (15,654,040)
---------------------------------------------- ------------ ------------
27,418,299 26,669,905
--------------------------------------------- ------------ ------------
EGDON RESOURCES PLC
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARED 31 JULY 2021
2021 2020
GBP GBP
------------------------------------------------------------ --------------------- ---------------------------------
Cash flows from operating activities
Loss before tax (1,681,635) (4,748,201)
Adjustments for:
Depreciation and impairments of non-current assets 594,131 3,017,334
Increase in decommissioning provision - written off to cost
of sales 28,908 1,996
Gain on disposal of fixed assets - (5,058)
Foreign exchange loss 4,525 12,594
Decrease/(increase) in inventory 5,466 (5,466)
Decrease/(increase) in trade and other receivables 696,675 (102,840)
(Decrease)/increase in trade and other payables (1,057,412) 1,491,576
Finance costs 344,051 169,830
Finance income (50,616) (48,212)
Share based remuneration charge - 8,968
Net cash flow used in operating activities (1,115,907) (207,479)
------------------------------------------------------------ --------------------- ---------------------------------
Cash flows from investing activities
Finance income - 755
Payments for exploration and evaluation assets (384,827) (842,320)
Purchase of property, plant and equipment (719,288) (58,713)
Sale of property, plant and equipment 209,872 31,376
Redemption of redeemable preference shares 50,000 -
------------------------------------------------------------ --------------------- ---------------------------------
Net cash used in capital expenditure and investing
activities (844,243) (868,902)
------------------------------------------------------------ --------------------- ---------------------------------
Cash flows from financing activities
Issue of convertible loan notes 1,051,035 -
Costs associated with issue of convertible loan notes (67,236) -
Issue of shares 1,440,350 500,000
Costs associated with issue of shares (78,203) (25,000)
Redemption of redeemable preference shares (50,000) -
Principal paid on lease liabilities (77,071) (91,481)
Interest paid on lease liabilities (74,748) (65,230)
Interest paid - (15)
Loan drawdown 1,000,000 -
Partial repayment of loan principal (66,948) -
------------------------------------------------------------ --------------------- ---------------------------------
Net cash flow generated from financing 3,077,179 318,274
------------------------------------------------------------ --------------------- ---------------------------------
Net increase/(decrease) in cash and cash equivalents 1,117,029 (758,107)
Cash and cash equivalents as at 31 July 2020 847,224 1,617,925
Effects of exchange rate changes on the balance of cash held
in foreign currencies (4,525) (12,594)
------------------------------------------------------------ --------------------- ---------------------------------
Cash and cash equivalents as at 31 July 2021 1,959,728 847,224
------------------------------------------------------------ --------------------- ---------------------------------
In 2021 significant non-cash transactions included the recognition of the decommissioning
provision of GBP80,000 and the convertible loan which was subsequently converted to equity.
In 2020 significant non-cash transactions included the recognition of a right of use asset
and a lease liability on implementation of IFRS 16 as disclosed in Note 2.
EGDON RESOURCES PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 JULY 2021
Group Share based Convertible
Share Share payment debt option Retained Total
capital premium reserve reserve earnings equity
GBP GBP GBP GBP GBP GBP
-------------- --------------------- --------------------- ---------------------- ----------- --------------------- ---------------------
Balance at 1
August 2019 14,984,035 26,742,656 113,537 - (10,845,740) 30,994,488
--------------
Impact of
adoption of
IFRS 16 - - - - (60,350) (60,350)
--------------
1 August 2019
as restated 14,984,035 26,742,656 113,537 - (10,906,090) 30,934,138
-------------- --------------------- --------------------- ---------------------- ----------- --------------------- ---------------------
Loss for the
year - - - - (4,748,201) (4,748,201)
--------------
Total
comprehensive
income for
the year - - - - (4,748,201) (4,748,201)
Issue of
shares 250,000 250,000 - - - 500,000
Share issue
costs - (25,000) - - - (25,000)
Share based
payment - - 8,968 - - 8,968
Transfer on
lapse of
options - - (251) - 251 -
-------------- --------------------- --------------------- ---------------------- ----------- --------------------- ---------------------
Balance at 31
July 2020 15,234,035 26,967,656 122,254 - (15,654,040) 26,669,905
--------------------- --------------------- ---------------------- ----------- --------------------- ---------------------
Loss for the
year - - - - (1,681,635) (1,681,635)
Total
comprehensive
income for
the year - - - - (1,681,635) (1,681,635)
Issue of
shares 1,152,280 288,070 - - - 1,440,350
Share issue
costs - (78,203) - - - (78,203)
Issue of
convertible
loan notes - - - 28,406 - -
Issue costs of
convertible
loan notes - - - (1,817) - -
Transfer on
conversion of
loan notes to
equity - debt
element 732,334 374,378 - - - 1,106,712
Issue costs of
convertible
loan notes - (65,419) - - - (65,419)
Transfer on
conversion of
loan notes to
equity -
equity
element - 26,589 - (26,589) - -
Balance at 31
July 2021 17,118,649 27,513,071 122,254 - (17,335,675) 27,418,299
-------------- --------------------- --------------------- ---------------------- ----------- --------------------- ---------------------
EGDON RESOURCES PLC
Notes to the Financial Statements
FOR THE YEARED 31 JULY 2021
1. Basis of Accounting and Presentation of Financial
Information
The financial information set out in this announcement does not
constitute the statutory accounts of the Group for the years ended
31 July 2021 or 31 July 2020. The financial information has been
extracted from the statutory accounts of the Group for the years
ended 31 July 2021 and 31 July 2020.
The auditor, Nexia Smith & Williamson, has reported on the
statutory accounts for the years ended 31 July 2021 and 2020; the
audit reports were unqualified and did not contain statements under
either section 498(2) or 498(3) of the Companies Act 2006. However,
in their report on the statutory accounts for the year ended 31
July 2021, the auditor drew attention, by means of an emphasis of
matter, [add comment on going concern here], and to the potential
effect on the carrying value of unconventional assets of the
Government moratorium on hydraulic fracturing.
The statutory accounts for the year ended 31 July 2020 have been
delivered to the Registrar of Companies; those for the year ended
31 July 2021 were approved by the Board on 2 November 2021 and will
be delivered to the Registrar of Companies following the Annual
General Meeting. T he Annual Report for the year ended 31 July
2021, including the auditor's report, will be posted to
shareholders who have requested a hard copy during the week
commencing x November 2021 and will be available to be downloaded
from the Company's website at www.egdon-resources.com for
shareholders who have accepted electronic communications from the
same date. Hard copies can be requested from Egdon Resources plc,
The Wheat House, 98 High Street, Odiham, Hampshire, RG29 1LP.
This preliminary announcement was approved by the Board on 2
November 2021.
Basis of preparation and statement of compliance with IFRS
The Group's and Company's financial statements have been
prepared in accordance with International Financial Reporting
Standards (IFRS) and with those parts of the Companies Act 2006
applicable to companies reporting under IFRS. IFRS comprises the
Standards issued by the International Accounting Standards Board
(IASB) and Interpretations issued by the International Financial
Reporting Interpretations Committee (IFRIC) in conformity with the
requirements of the Companies Act 2006.
Going concern
The Directors have prepared the financial statements on the
going concern basis, which assumes that the Group and the Company
will continue in operational existence without significant
curtailment of its activities for the foreseeable future.
2020-21 has seen improving operating and macro-economic
conditions for the oil and gas industry and the Group has seen a
commensurate improvement in trading and future expected cash-flow
coming from Wressle and increased profitability from Ceres.
Forward cash flows necessarily include assumptions as to the
timing and value of production from the Group's assets. Whilst
there is currently no evidence that the timing or value of these
revenues is unrealistic, the Directors acknowledge that disruptions
to production, along with changes in both oil and gas prices give
some level of uncertainty in respect of the timing of future cash
flows. The Directors have undertaken stress testing of the forward
commodity price assumptions with particular focus on oil price and
determined that these assumptions remain valid notwithstanding a
possible moderate reduction in forecast 2022 realised oil price
from $68.44 per barrel, without impacting planned expenditure. The
Group also has flexibility in relation to the timing and quantum of
future expenditures and by deferring certain costs, the forecast
remains valid under circumstances where a fall in realised oil
prices in excess of 30% in 2022 could be accommodated. In addition,
although not assumed in the going concern forecasts, the Group also
has options to access additional sources of funding if required via
farm-out, sales, new lending or the issue of new equity.
After preparing cash flow forecasts and considering the results
of stress tests to certain assumptions, and having made enquiries,
the Directors have a reasonable expectation that the Group and the
Company will have access to adequate resources to continue in
operational existence for the foreseeable future and have prepared
the financial statements on that basis.
Going concern - Implications of COVID-19 pandemic
The coronavirus pandemic represents a significant ongoing
national and international public health emergency. The primary
concern and focus for the Company has been the health and safety of
our employees, contractors and other stakeholders. In this regard,
Egdon's office-based employees have worked from home throughout the
Period and we have established procedures and plans to ensure
continued safe operations at our sites. We will continue to monitor
the situation and act within Government guidelines, but do not
anticipate any adverse impacts to our production operations.
Predicted future cash flows are dependent upon continuing
operations at our producing sites which should operating conditions
deteriorate significantly could be negatively impacted. However, at
the present time with the roll-out of vaccines and the opening up
of society, we have a reasonable expectation that there will be no
significant adverse impact on these assets due to the pandemic
.
EGDON RESOURCES PLC
Notes to the Financial Statements (CONTINUED)
FOR THE YEARED 31 JULY 2021
Our plans for drilling at North Kelsey (PEDL241: Egdon 50%) have
again been adversely impacted by COVID-19 and we will be applying
for a further extension to the current planning beyond 31 December
2021 to enable works to be undertaken during 2022. We do not
anticipate that this delay will have a significant negative impact
on the cash flow position of the Group, and therefore on its
ability to continue to operate as a going concern.
Impact of new international reporting standards, amendments and
interpretations
New standards, interpretations and amendments
New standards impacting the Group that have been adopted in the
financial statements for the year ended 31 July 2021, but have not
had a significant effect on the Group are as follows:
-- IAS 1 Presentation of Financial Statements and IAS 8
Accounting Policies, Changes in Accounting Estimates and Errors
(Amendment - Disclosure Initiative - Definition of Material);
and
-- Revisions to the Conceptual Framework for Financial Reporting.
-- Definition of a Business (Amendments to IFRS 3); and
-- COVID-19-Related Rent Concessions (Amendments to IFRS 16).
New standards, interpretations and amendments not yet
effective
There are a number of standards, amendments to standards, and
interpretations which have been issued by the IASB that are
effective in future accounting periods that the Group has decided
not to adopt early. The following amendments are effective for the
period beginning 1 July 2022:
-- Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37);
-- Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16);
-- Interest Rate Benchmark Reform - IBOR 'phase 2' (Amendments
to IFRS 9, IAS 39 and IFRS 7); and Annual Improvements to IFRS
Standards 2018-2020 (Amendments to IFRS 1, IFRS 9, IFRS 16 and IAS
41); and
-- References to Conceptual Framework (Amendments to IFRS 3).
2. Impairments - Exploration and evaluation costs
Current year
The Directors have considered the potential impact of the
moratorium on hydraulic fracturing for shale-gas on the Group's
non-core unconventional asset portfolio following the impairment of
certain less prospective and non-core assets in the prior year. No
further impairments of non-core licences are considered necessary
as a consequence of the moratorium in 2021.
The Directors have also considered the potential impact of the
moratorium on the Group's assets in its core area of the
Gainsborough Trough. Activity in the basin is currently on pause.
The Directors remain optimistic that it will be possible to
demonstrate that hydraulic fracturing for shale-gas in this core
basin can be undertaken in a safe and environmentally responsible
manner and that this will result in the lifting of the hydraulic
fracturing moratorium. As at 31 July 2021, the book value of the
Group's unconventional assets was GBP16.3 million (2020 - GBP15.15
million). This increase is due to costs relating to repurposing of
a site, not additional costs incurred on assets.
An impairment charge of GBP276,362 has been recognised in
relation to licences PL161 and PL162. The impairment arises as
these licences are no longer deemed to have value following the
lapse of the related farm-out.
Exploration write offs totalling GBP112,554 have been recognised
in relation to licences PEDL339, PEDL258, PEDL259 and PEDL202.
These licences were relinquished during the year.
During the year the Company recognised disposals of GBP109,872
and GBP100,000 in relation to the farm out of licence interests.
The disposal of GBP109872 has been recognised following the farm
out agreement with Shell U.K. Limited for 70% of the UK offshore
licence interest held on P1929 and P2304 which contain the
Resolution and Endeavour as discoveries respectively. The disposal
of GBP100,000 relates to the agreement to align the equity interest
in PEDL241 on a 50:50 basis between the Company and its partner
Union Jack
Oil plc.
EGDON RESOURCES PLC
Notes to the Financial Statements (CONTINUED)
FOR THE YEAR ENDED 31 JULY 2021
2. Impairments - Exploration and evaluation costs (continued)
Prior year
The Directors considered the potential impact of the moratorium
on hydraulic fracturing for shale-gas. In light of the moratorium
and updated technical information the Directors reviewed the
portfolio of unconventional assets and believed it prudent and
appropriate to impair certain less prospective and/or non-core
licences at that time. These comprised licences in the so-called
Welbeck Low in the East Midlands and in NW England and include
PEDLs 001, 039, 130, 202 and EXL253. These impairments totalled
GBP0.53 million.
However, the Directors also considered the potential impact of
the moratorium on the Group's assets in its core area of the
Gainsborough Trough. Activity in the basin is currently on pause.
The Directors were optimistic that it would be possible to
demonstrate that hydraulic fracturing for shale-gas in this core
basin could be undertaken in a safe and environmentally responsible
manner and that this could result in the lifting of the hydraulic
fracturing moratorium. As at 31 July 2020, the book value of the
Group's unconventional assets was GBP15.15 million.
The Directors have agreed upon an impairment for the PEDL 143
licence on the basis that the new operator was unable to identify a
suitable drilling location in the Holmwood area and had
relinquished the licence. This impairment was for the full value of
the asset (GBP0.65 million). The total value of impairments was
therefore GBP1.17 million.
3. Impairments - Property, Plant and Equipment
Current year
No impairment charges have been recognised in the current
year.
Prior year
An impairment charge of GBP506,903 has been recognised in
relation to the Ceres Gas Field. The impairment arises as a
consequence of the current gas price forecast and operating pattern
which has caused the Ceres production to become uneconomical. Based
on the impairment reviews, the pre-tax value in use of the Ceres
Gas Field as at 31 July 2020 is GBPNil and the asset has been fully
impaired to reflect this.
An impairment charge of GBP1,156,570 has been recognised in
relation to the Dukes Wood and Kirklington oil fields. The
impairment arises as a consequence of the level of investment
required in order for the fields to operate economically and the
challenging outlook for the E&P farm-out space. Based on the
impairment reviews, the pre-tax value in use of Dukes Wood and
Kirklington oil fields as at 31 July 2020 is GBPNil and the assets
have been fully impaired to reflect this.
4. Loss per share
Basic loss per share
2021 2020
GBP GBP
------------------------------------------ ---------------------------------- --------------------------
Loss for the financial year (1,681,635) (4,748,201)
Basic weighted average ordinary shares in
issue during the year 331,615,357 309,822,474
------------------------------------------ ---------------------------------- --------------------------
Pence Pence
--------------------- --------------------------------------------- -----------------------------
Basic loss per share (0.51) (1.53)
--------------------- --------------------------------------------- -----------------------------
The Group's share options are not dilutive in 2021 or 2020, as a
loss was incurred and therefore diluted earnings per share is the
same as basic earnings per share.
EGDON RESOURCES PLC
Notes to the Financial Statements (CONTINUED)
FOR THE YEAR ENDED 31 JULY 2021
5. Share Capital
On 20 July 2021, following an open offer, the Company issued
115,228,000 New Ordinary 1p shares for total cash consideration of
GBP1,440,350. The nominal value of the shares was GBP1,152,280 and
the additional share premium created totalled GBP288,070. In
addition, each subscription share was granted a right to subscribe
for 0.5 of a new Ordinary Share at a price of 2.5p per share,
exercisable at any time until the date of the second anniversary of
their issue.
On 20 July 2021, the convertible loan notes were converted to
73,233,406 New Ordinary 1p shares at an issue price of 1.55p. The
nominal value of the shares was GBP732,334 and the additional share
premium created was GBP402,784 with issue costs of GBP67,236.
On 28 July 2021, Infrastrata plc fully paid the previously
part-paid GBP1 Redeemable Preference Shares held by it in Egdon
Resources plc. These shares were then redeemed. On the same day
Egdon Resources U.K. Limited fully paid the previously part-paid
GBP1 Redeemable Preference Shares held by it in Infrastrata plc.
These shares were then redeemed. As a result, these reciprocal
cross-holdings, which date from the division of the original
company in 2007, have been eliminated at no net cost to the
Group.
6. Subsequent Events
At Wressle, a coiled tubing operation, a follow-up to the
proppant squeeze operation, was completed in August 2021, with test
production recommencing and flow rates exceeding pre-operational
expectations. During September, we reported facility constrained
instantaneous flow rates of up to 884 barrels of oil per day
("bopd") along with 480,000 cubic feet of gas (c. 80 barrels of oil
equivalent per day). Wressle is already having a positive impact on
the Group's revenues.
In September 2021 we were advised by Shell that the planned 3-D
seismic survey across UK offshore licences P1929 and P2304
(Resolution and Endeavour gas discoveries respectively (Egdon 30%))
would not proceed on the original expected timeframe of February
2022. Subject to regulatory and Shell approval, we now anticipate
that this could go ahead in February 2023.
On 1 November 2021 planning permission was refused for the
Biscathorpe project. The Company will await the formal decision
notice before taking advice and considering our options including
an appeal.
7. Annual General Meeting
The Annual General Meeting will be held at the offices of Norton
Rose Fulbright, 3 More London Riverside, London, SE1 2AQ at 11.30
hours on Thursday 16 December 2021. Further details of the
arrangements for the meeting will be contained in the Notice of the
AGM and Chairman's Letter which will be available in due
course.
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END
FR UPGMCGUPGPUP
(END) Dow Jones Newswires
November 03, 2021 03:00 ET (07:00 GMT)
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