TIDMEDR
RNS Number : 2969E
Egdon Resources PLC
03 November 2015
3 November 2015
EGDON RESOURCES PLC
("Egdon" or "the Group" or "the Company")
Final Results for the Year Ended 31 July 2015
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 audited results for the
year ended 31 July 2015.
Overview and Highlights
Operational and Corporate Highlights
-- Production of 63,149 barrels of oil equivalent (2014: 86,870 barrels of oil equivalent)
-- Successful drilling and testing of the Wressle-1 oil and gas
discovery in Lincolnshire where a Field Development Plan is in
preparation
-- Strong project pipeline developed including planning
permission secured for conventional wells at North Kelsey and
Biscathorpe
-- Ongoing development of licence portfolio with unconventional
and conventional resource potential via acquisition of Yorkshire
Exploration Limited (PEDL068); exercise of option with Scottish
Power to farm-in to PL161 and PL162 and acquisition of additional
interest in PEDL241
-- Farm-out interests in Licence PEDL143 Licence PEDL005(R)
-- Disposal of non-core licences in Southern England and France
Financial Highlights
-- Oil and gas revenues during the period of GBP2.07 million (2014: GBP2.96 million)
-- Loss for the period of GBP4.47 million for the year ended 31
July 2015 after net write-downs, impairments and pre-licence costs
of GBP3.62 million, of which pre licence costs are GBP0.45 million
(2014: loss of GBP0.46 million; after impairment of GBP0.54 million
and exceptional profit of GBP1.08 million on farm-outs)
-- Basic loss per share of 2.02p (31 July 2014: basic loss per share of 0.30p)
-- Cash at bank GBP5.18 million as at 31 July 2015 (31 July 2014: GBP9.67 million)
-- Net current assets as at 31 July 2015 of GBP7.18 million (31 July 2014 GBP10.80 million)
-- Net assets as at 31 July 2015 of GBP32.05 million (31 July 2014: GBP36.41 million)
Post Balance Sheet Events
-- Egdon will be offered seven blocks in 14th Round first tranche announcement
-- Positive planning appeal outcome and further consents
received for Holmwood exploration well in PEDL143
-- Submission of Springs Road-1 exploration well planning application by IGas
Commenting on the results, Philip Stephens, Chairman of Egdon
said;
" In a year in which we have seen a dramatic decline in the
price of oil we have performed well against our strategic aims. The
Company has made a significant discovery at Wressle and has been
offered a number of important licences in the first phase of
the14th Round.
We have managed our cash resources to enable us to continue to
finance our conventional resources drilling programme and we look
forward to the first exploration well being drilled in our
unconventional licenses subject to receipt of the required
consents."
For further information please contact:
Egdon Resources plc
Mark Abbott, Jerry Field 01256 702 292
Buchanan
Richard Darby, Anna Michniewicz 020 7466 5000
Nominated Adviser and Broker - Cantor Fitzgerald
Europe
David Porter, Sarah Wharry (Corporate Finance) 020 7894 7000
Richard Redmayne (Corporate Broking)
Joint Broker - VSA Capital Limited
Andrew Monk (Corporate Broking) 020 3005 5000
Andrew Raca (Corporate Finance)
Notes to Editors:
Egdon Resources plc (AIM: EDR) is an established UK-based
exploration and production company primarily focused on onshore
exploration and production in the hydrocarbon-producing basins of
the UK and France.
Egdon currently holds interests in thirty six licences in the UK
and France and has an active programme of exploration, appraisal
and development within its balanced portfolio of oil and gas
assets. Egdon is an approved operator in both the UK and
France.
Egdon was formed in 1997 and listed on AIM in December 2004.
In accordance with the AIM Rules - Note for Mining and Oil and
Gas Companies, the information contained in this announcement has
been reviewed and signed off by the Managing Director of Egdon
Resources plc Mark Abbott, a Geoscientist with over 27 years'
experience.
Evaluation of hydrocarbon reserves, prospective and contingent
resources and undiscovered gas initially in place have been
assessed in accordance with 2007 Petroleum Resources Management
System 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) and the Society of
Petroleum Evaluation Engineers (SPEE).
Chairman's Statement
Against a challenging macro-economic backdrop for the oil and
gas sector, characterised by a significant reduction in oil price
and reduced investment across the sector, which has impacted
company valuations, I am pleased to be able to report on a year of
further progress for the Company.
Our strategy remains the same as we continue to focus on three
key near-term strategic objectives to drive shareholder value;
-- UK Unconventional Resources: We continue to develop our
Northern England unconventional resources portfolio during the
period, with the exercise of our option on PL161 and PL162, ongoing
detailed assessment of the acreage acquired from Alkane Energy and,
post-year end, the announcement that Egdon will be offered seven
blocks or part-blocks in the first tranche of awards in the UK 14th
Landward Oil and Gas Licensing Round ("14(th) Round"), and the
submission by IGas of the planning application for the Springs
Road-1 well in the Gainsborough Trough.
-- Conventional Resources Exploration and Appraisal: During the
year we completed the drilling and initial testing of the Wressle-1
oil and gas discovery in Lincolnshire and are highly encouraged by
the results to date which have demonstrated the presence of
producible hydrocarbons in three separate reservoirs. We are now
working towards early commercialisation of the discovery.
-- Production: Production during the year was 173 barrels of oil
equivalent per day ("boepd"); (2014: 238 boepd) against a revised
target of 180 boepd. Production was from Ceres, Keddington and
Avington with the Waddock Cross field being shut-in during the year
due to the lower oil price and lower than anticipated
production.
We have continued actively to manage our portfolio within the
year, having achieved a number of acquisitions, disposals and
farm-outs resulting in the Company retaining an interest in 36
licences at year end. We have reduced our exposure to France during
the period with the objective of providing further focus on our UK
assets.
Financial and Statutory Information
Revenue from oil and gas production during the year was GBP2.07
million (2014: GBP2.96 million) on production of 63,149 barrels of
oil equivalent ("boe") (2014: 86,870 boe).
The Group recorded a loss of GBP4.47 million for the year ended
31 July 2015 after net write downs, impairments and pre-licence
costs of GBP3.62 million, of which pre-licence costs were GBP0.45
million (2014: loss of GBP0.46 million; after impairment of GBP0.54
million and exceptional profit of GBP1.08 million on
farm-outs).
The Group has maintained a focus on managing our cash resources
and at year end had net current assets of GBP7.18 million (2014:
GBP10.8 million) of which GBP5.18 million was cash and cash
equivalents (2014: GBP9.67 million).
In line with last year, the Directors do not recommend the
payment of a dividend.
UK Regulation and Politics
The UK government passed The Infrastructure Act in March 2015,
removing considerable regulatory uncertainty regarding sub-surface
access for directional and horizontal drilling and enhancing an
already strong and workable regulatory regime. The reduction in the
supplementary tax charge from 30% to 20% in the recent budget is
also welcome given the difficult oil and gas price environment.
The election of a majority Conservative government unambiguously
committed to shale exploration is a positive development. They have
acted quickly to ensure that local planning committees adhere to
the 16 week planning decision window.
UK Unconventional Resources
Egdon was an active participant in the 14(th) Round which closed
in October 2014 and after the year end we were advised that we will
be offered interests in seven blocks or part blocks in the first
tranche of awards. These offers build on the Company's
unconventional resource exploration acreage in Northern England
where Egdon has developed a strong licence position particularly in
the Gainsborough Trough, an area identifed by the British
Geological Survey ("BGS") as holding high potential for
unconventional resources. A second tranche of awards is expected in
late 2015. In line with our stated strategy, we will look to
introduce a funding partner or partners into our Northern England
licensed acreage at the appropriate time. We have confidence that
the investment case for unconventional resource exploration in the
UK remains strong. This view is supported by the high level of
industry interest in the 14th Round and INEOS's farm-in to a
proportion of IGas's acreage earlier this year.
Conventional Resources Exploration and Appraisal
(MORE TO FOLLOW) Dow Jones Newswires
November 03, 2015 02:00 ET (07:00 GMT)
There is significant potential for growth via an active
exploration and appraisal drilling programme within our existing
exploration portfolio. The lower capital and operating costs
associated with onshore UK developments mean that these projects
remain commercially attractive even during a period of lower
commodity prices. Exploration drilling activity will again be
focused in Northern England during the coming period with wells
planned at Laughton, Biscathorpe and North Kelsey. The Company will
also focus on gaining planning consent and farming out the "A"
Prospect in UK offshore licence P.1929. Subject to consents it is
hoped to be in a position to drill this onshore-to-offshore well
late in 2016. In Southern England, plans for potential wells in
Dorset and at Holmwood, where a succesful planning appeal was
announced in August 2015, are being progressed.
France
The political and regulatory situation in France shows no
significant signs of improving for our industry. As such we have
reduced our exposure to France during the period to provide clearer
focus on our UK assets. During the period we have withdrawn our
application for the Donzacq Permit and have written down the value
of the Grenade-3 and Huiron-1 wells. This has resulted in a
non-cash write-down of GBP2.93 million. In addition, after the year
end, we completed the abandonment of the Grenade-3 well and will,
therefore, withdraw our renewal application for the St Laurent
permit. It is worthy of note that Egdon's involvement in France,
which goes back to 1998, can still be viewed overall as a
commercial success to date, as the sale of Egdon Resources (New
Ventures) Limited to eCORP in 2010 yielded a cash consideration of
GBP4.5 million.
Outlook
Subject to consents, 2016 should see several shale-gas
exploration wells drilled and tested in the UK which will, if
successful, focus investor attention on the few listed companies
active in the UK. We also look forward to further licence offers
when the second tranche of 14(th) Round awards are announced,
hopefully towards the end of 2015.
A key well for the Company will be the first unconventional
resource exploration well in the Gainsborough Trough - Springs
Road-1. This carried well will provide important information
towards de-risking and evaluating the unconventional resource
potential of our acreage. Subject to planning and permitting, this
well would be drilled in the summer of 2016.
Another prime focus during the coming year will be
commercialisation of the Wressle-1 discovery and we hope to
replicate this exploration success in our planned drilling activity
during 2015-16. As a result of various planning restrictions and
rig availability, drilling is now expected to commence in December
2015 at Laughton, to be followed by an appraisal/development well
at Keddington in the first quarter of 2016, which should result in
increased production from this late life field.
The Company will continue to focus on fewer higher potential
projects over the coming period and, as always, will continue to
review opportunities to develop further shareholder value in the
Company.
Despite the current low oil price and the uncertain future
level, we believe that the fundamentals of the business remain
strong with the Company holding a range of assets with excellent
potential for both conventional and unconventional resources and a
cash position which allows us to deliver on our strategy.
Finally, and as ever, I would like thank our shareholders for
their continued support and acknowledge the continuing efforts of
our hardworking and professional team.
Philip Stephens
Chairman
2 November 2015
Managing Director's Operating review
I am pleased to update shareholders with a strategic review of
our assets, operations and plans with a focus on key priorities and
potential growth drivers.
Drilling
Egdon participated in the drilling of three exploration wells
during the period, which resulted in the Wressle-1 oil and gas
discovery and unsuccessful wells at Burton on the Wolds-1 and Kiln
Lane-1.
The Wressle-1 well (PEDL180: Egdon 25%) reached a total depth of
2,240 metres measured depth (MD) (1,814 metres true vertical depth
below OS datum) on 23 August 2014. Petrophysical evaluation of the
log data indicated the presence of hydrocarbon pay in three main
intervals; the Penistone Flags (15.9 metres vertical thickness),
the Wingfield Flags (5.1 metres vertical thickness) and the Ashover
Grit (5.8 metres vertical thickness). Subsequent test operations
confirmed the presence of producible hydrocarbons in all three
zones with combined flow rates of over 700 boepd.
The initial test of the Ashover Grit interval recorded flow
rates of 80 barrels of oil per day ("bopd") and 47 thousand cubic
feet of gas per day ("mscfg/d"). Evaluation of the test data
indicated that the zone was impaired by a high "skin" effect (local
formation damage) and so these results were not representative of
potential cleaned-up productivity. An analysis indicates that
initial production rates in excess of 500 bopd could be anticipated
if the effects of the "Skin" can be successfully countered and
operations to achieve this will form the initial workover programme
to prepare the well for long-term production. The Wingfield Flags
test yielded flow rates of up to 182 bopd, along with up to 456
mscfg/d. The oil from both zones is of good quality with a gravity
of 39-40deg API.
The test of the upper part of the Penistone Flags produced gas
at facilities-restricted flow rates of up to 1.7 million cubic feet
of gas per day ("mmscfg/d") with associated oil of up to 12 bopd. A
deeper set of perforations in the Penistone Flags (Zone 3a) tested
at a rate of approximately 77 bopd of oil with a gravity of 33deg
API. During a subsequent extended well test (EWT), Zone 3a was
initially produced by pump and then allowed to free flow to
surface. Maximum rates achieved were 131 bopd and 465 mscfg/d with
no formation water, indicating that the oil water contact is deeper
than previously considered.
Production at Wressle will initially focus on development of the
Ashover Grit oil reservoir and a Field Development Plan ("FDP") is
being prepared with a target for submission to the Oil and Gas
Authority ("OGA") early in 2016. The 3D seismic data has been
reprocessed and this will assist in updating the resource estimates
for Wressle. In addition, planning and permitting applications will
also be required to be submitted to North Lincolnshire Council and
the Environment Agency and we are now focused on delivering the
required consents to enable us to commence commercial oil
production from the Ashover Grit in the second half of 2016.
The Burton on the Wolds-1 well (PEDL201: Egdon 32.5%) reached a
total depth of 1,086 metres on 28 October 2014. The well penetrated
only thin sands in the primary reservoir objective while the deeper
secondary objective was encountered as non-reservoir rock. The well
has been plugged and the site restored to agricultural use. As a
result of previously announced farm-outs, Egdon's net share of the
Burton on the Wolds-1 well cost was 15%.
The Kiln Lane-1 well (PEDL181: Egdon 25%), operated by Europa
Oil and Gas Limited ("Europa"), reached a total depth of 2,291
metres on 19 March 2015, but was plugged and the site restored
after the well encountered only minor oil and gas shows in
Westphalian and Namurian sandstones. This was the first well in a
large (540 km(2) ) licence and the remaining potential of the area
is being assessed.
Portfolio Management
UK
The Company has continued to execute its strategy of managing
financial exposure and risk, and of focusing on fewer but higher
potential projects by means of disposals, relinquishments, or
farm-outs as appropriate. We have also continued to develop our
portfolio of unconventional resources acreage especially in the
Gainsborough Trough area, as evidenced by exercising our option to
farm-in to Scottish Power's licences PL161 and PL162. During the
period we sold our minority non-operated interests in licences
P.1916 and PEDL126 to UK Oil and Gas Investments plc ("UKOG")
receiving nominal consideration but reducing our exposure to the
potential future abandonment of Markwells Wood-1. At year end Egdon
held interests in 33 UK licences (2014: 33).
UKOG also farmed-in to PEDL143, which contains the Holmwood
Prospect and will pay a 40% share of the Holmwood-1 drilling costs,
capped at GBP1.2 million, to acquire a 20% interest from Egdon.
Egdon's interest in the licence on completion will be 18.4%. We
were pleased to have been advised In August 2015 of the successful
planning appeal for the Holmwood-1 exploration well and in
September 2015 received the final planning approval from Surrey
County Council for the directional well path.
In PEDL005 (Remainder) farm-outs were agreed with Terrain Energy
Limited ("Terrain") and Union Jack Oil plc ("Union Jack"). The
licence, located in Lincolnshire, contains the Keddington producing
oil field, part of the Louth oil prospect, and the North Somercotes
gas prospect. Terrain will earn an additional 20% interest in the
Keddington oil field in return for paying 40% of the cost of a new
appraisal/development well expected to be drilled early in 2016 as
a side-track to the Keddington-4 well. Planning Consent for such a
well is already in place. Union Jack will earn a 10% interest in
Licence PEDL005(R), in return for paying 20% of the cost of this
well and 20% of the cost of an exploration well on the Louth
prospect. In addition Union Jack would also earn a 10% interest
from Egdon in a new licence containing part of the mapped Louth
Prospect which might be awarded to the existing PEDL005(R) Joint
Venture in the 14(th) Round.
(MORE TO FOLLOW) Dow Jones Newswires
November 03, 2015 02:00 ET (07:00 GMT)
Egdon also completed a farm-out of a further 1.2% interest in
PEDL253 to Union Jack following their original farm-in of March
2013. Planning Consent was awarded for the Biscathorpe-2 well in
March 2015 and Egdon's share of the well costs will now be 45.6% as
a result of Union Jack carrying in total 7.2% of Egdon's costs.
Biscathorpe is estimated by Egdon as having potential gross mean
Prospective Resources of 14 million barrels of oil ("mmbo") with a
stratigraphically trapped upside of 41 mmbo.
Egdon acquired an additional 40% interest in PEDL241 from
Celtique Energie Petroleum Ltd. ("Celtique") increasing the
Company's interest in the licence to 80% in return for a nominal
consideration. PEDL241 contains the North Kelsey Prospect which is
located approximately 10 kilometres to the south of the Wressle-1
discovery and is estimated by Egdon to contain gross mean
Prospective Resources of 6.0 mmbo. Planning Consent was received
for the North Kelsey-1 well in December 2014 and the well is
expected to be drilled in the first half of 2016.
In November 2014, Egdon acquired Yorkshire Exploration Limited
("YEL") for aconsideration of GBP75,000 in Egdon shares and
assumption of debt of GBP58,058. YEL's sole asset is an 8% interest
in PEDL068 where Egdon now holds a 48% interest. Licence PEDL068
contains the shut-in Kirkleatham gas field and the Westerdale/Ralph
Cross gas discovery. The acquisition adds approximately 0.70bcf of
Best Estimate Contingent and Prospective Conventional
Resources.
We have also made partial relinquishments in a number of
licences to reflect the areas of identified prospectivity and
reduce ongoing licence rental costs.
France
At year end Egdon held interests in 3 French Permits or Permits
pending renewal or award (2014: 4).
Post year-end we have completed the final abandonment of the
Grenade-3 well, which was partially plugged back following drilling
in 2008, and this is being followed by restoration of the site to
its original agricultural state. On completion of this work we will
withdraw our application for an exceptional extension to the St
Laurent licence term having already withdrawn the Donzacq permit
application. Along with writing down the value of the Huiron-1 well
in the Mairy Permit, this has resulted in a non-cash write-down of
GBP2.93 million and a reduction of 151 mmboe in the Company's Best
Estimate Contingent and Prospective Resources, largely as a result
of relinquishing the large but high risk gas prospect at Audignon
and the heavy oil discovery at Grenade. This reduction in our
exposure to France is driven by the current operating conditions
and a desire to focus resources on our UK assets. We will continue
to keep our remaining French assets under review over the coming
period as we await the formal approval of the Pontenx permit
renewal.
14(th) Round
Egdon applied for a number of blocks in the 14(th) Round which
closed in October 2014. We were advised in August 2015 of the offer
of seven blocks or part blocks in the first tranche of offers under
the round totalling 20,000 acres. The offered blocks are located in
the East Midlands Petroleum Province and provide a mix of new
conventional and unconventional (shale-gas/tight-oil) resources
opportunities within an existing core area. Given the high level of
industry interest and competition in the 14(th) Round we are
pleased to have been offered a high percentage of the blocks
applied for in this initial tranche.
In the Gainsborough Trough, the Company is to be offered a 15%
interest in Blocks SE41e, SK49, SK89e, SK88b and SK87c. These
blocks will be in a joint venture with IGas (35% and operator) and
Total E&P UK Limited (50%), building on the Company's existing
relationships and strong licence position within this area.
In the Widmerpool Basin, Egdon will be offered an 18.75%
operated interest in Blocks SK52a and SK53 in a joint venture with
Hutton Energy Limited (25%), Coronation (Oil and Gas) Limited
(25%), Celtique Energie Petroleum Limited (18.75%) and Petrichor
Energy UK Limited (12.5%).
Egdon has also applied for a number of additional blocks in the
round and anticipates that a second tranche of 14(th) Round offers
will be made around the turn of the year after the conclusion of a
consultation under the Conservation of Habitats and Species
Regulations 2010.
UK Conventional Resources
Production
Production during the year from Ceres, Keddington and Avington,
with a small contribution from Wressle testing, was 173 boepd
against our revised target of 180 boepd. The Ceres field has
continued to produce at rates above the expected profile, although
it is expected to end continuous production during 2016. On
conclusion of field production we will continue to benefit from
recovery of "back-out" gas from the Neptune and Mercury gas fields
for a number of years. As previously announced, Waddock Cross was
shut-in during the year in response to low oil price and an
impairment of GBP0.479 million was made during the year. However,
Waddock Cross is considered to hold a large volume of oil in-place
(estimated at over 30 mmbo) and we are developing a new plan for
commercial production at the site.
Our late life producing oil fields are marginally economic in
the current oil price environment due to fixed operating costs
becoming a higher percentage of total operating costs. As such we
will continue to maintain a strong focus on reducing costs and
increasing production rates at existing sites. In this regard we
are planning to drill a sidetrack appraisal/development well,
Keddington-5, at the Keddington Field early in the first quarter of
2016. To reduce our technical risk and financial exposure to this
well we have concluded two farm-outs which combined will bring our
net share of the well cost down to 15%. Bringing the Wressle-1
discovery into commercial production will also be a key focus for
the coming period although we do not expect a contribution to our
production and revenues from Wressle until early in the next
financial year.
Exploration
Owing to the lower capital and operating costs associated with
onshore UK developments, exploration prospects remain commercially
attractive even under lower commodity price assumptions. As such we
continue to progress our conventional resources exploration
programme in the UK.
We have been successful in gaining Planning Consents for the
drilling and subsequent testing of operated exploration wells at
Laughton, North Kelsey and Biscathorpe, all of which are expected
to be drilled in the next year.
The first programme of drilling is expected to commence in
December 2015 with the Laughton-1 in PEDL209. This well will target
a structural trap with multiple conventional Carboniferous
sandstone reservoir targets which have been productive at the
Corringham Oil Field located five kilometres to the South East.
Egdon currently estimate the combined gross Best Estimate
Prospective Resources to be around 1.3 million barrels of oil for
the Laughton Prospect. The second well to be drilled will be the
Keddington-5 sidetrack described above.
A key focus for the Company during the coming period will be the
"A" Prospect in UK offshore licence P.1929, located adjacent to the
North Yorkshire coast. Egdon's current evaluation of this 1966 gas
discovery indicates the potential for the prospect to contain Best
Estimate Contingent Resources of 160 billion cubic feet ("BCF") of
gas. We are progressing plans to drill a well from an onshore
location to appraise the discovery and expect to submit a planning
application following the second tranche of 14(th) Round
offers.
We will continue to manage risk within our exploration portfolio
through farm-outs and will look to introduce further partners into
Biscathorpe, North Kelsey and the "A" Prospect prior to
drilling.
Following the positive outcome of the long-running process to
gain planning consent for the Holmwood-1 exploration well, the
operator, Europa, has advised that the well, on which Egdon will be
carried by UKOG, is likely to be drilled late in 2016 or 2017.
Elsewhere we are progressing our evaluations with a view to a
potential exploration well in our Wessex Basin licences and look
forward to evaluating the conventional resources potential of new
blocks to be offered to Egdon in the first and second tranches of
14(th) Round awards.
UK Unconventional Resources
Growing the Company's exposure to unconventional resources
exploration opportunities in Northern England is a key part of
Egdon's strategy and we have confidence that the investment case
remains strong for UK shale-gas. There have been important
developments during the period with the Infrastructure Act 2015
providing clarity on sub-surface access rights and clarifications
in relation to planning decision timetables. Against this we have
seen the refusal of the Cuadrilla planning applications and
continuing activist led opposition to shale-gas. We strongly
believe that the UK has the regulatory regime in place to enable
the many benefits of indigenous gas (security of supply, jobs,
taxation, etc.) to be realised safely and with minimum
environmental impact and that, as an industry, we need to continue
to make our case at a local and national level.
(MORE TO FOLLOW) Dow Jones Newswires
November 03, 2015 02:00 ET (07:00 GMT)
In November 2014, Egdon reported assessed prospective
unconventional resource acreage totalling 140,000 net acres with
estimated mean undiscovered gas initially in place ("GIIP") of
approximately 28 trillion cubic feet ("TCF") of gas. We have made
further progress during the period in relation to building on our
position with the exercise of an option with Scottish Power in
December 2014 to farm-in to licences PL161 and PL162 located
adjacent to PEDL139/140 and PEDL209. We have identified a lead with
conventional resource potential within PL161/PL162 which, if
confirmed by a planned new infill 2D seismic programme, will
probably form the target for our farm-in well. In addition, and as
detailed above, during August 2015 we were informed that Egdon will
be offered interests in seven blocks in the Gainsborough Trough and
Widmerpool Basin in the 14(th) Round. These new offers will
increase our unconventional resource acreage to 160,000 net acres
and we will update our resource assessment after the second tranche
of awards expected in late 2015.
The Gainsborough Trough is a key focus area for Egdon's
unconventional resources exploration. IGas, joint venture partner
and operator of PEDL139/140, has recently submitted a planning
application for the drilling of the first deep exploration well in
the basin at Springs Road. Subject to receipt of planning and
permits it is hoped to drill this well in the summer of 2016. Total
will carry Egdon's costs on the well under the terms of their
farm-in to the licences originally announced in January 2014. The
initial well will be vertical to enable the acquisition of core and
modern log data from the key shale intervals. It will not be
hydraulically fractured and tested during this initial
programme.
We plan to introduce a funding partner or partners into our
Northern England shale-gas acreage at the appropriate time and
continue to review the best timing for this. In the meantime we
look forward to the announcement of the second tranche of 14(th)
Round offers and to the outcome of the Springs Road planning
process.
Forward Plan
The next year will see us focus on commercialisation of the
Wressle-1 discovery with an expectation of production starting
early in the second half of 2016. We are also planning the drilling
of the Keddington-5 sidetrack in the first quarter of 2016. We
therefore expect Group production for the coming year to be 180
boepd.
We hope to replicate the success of Wressle-1 in the planned
conventional exploration wells at Laughton-1, Biscathorpe-2 and
North Kelsey-1, drilling of which is expected to commence during
December 2015 once the rig becomes available. This programme will
expose the Company to mean prospective resources potential of 13
mmboe with the wells having a chance of success ranging from 25% to
40%.
We will continue to look to improve the quality of our portfolio
of assets, as we await the announcement of the second tranche of
offers in the 14(th) Round and beyond, and to introduce further
farm-in partners into certain of our assets.
The coming period could be important for the development of UK
shale-gas with, subject to the outcomes of planning applications
and appeals, a deep well at Springs Road in the Gainsborough Trough
and drilling and testing operations by others in Lancashire and
Yorkshire.
Mark Abbott
Managing Director
2 November 2015
EGDON RESOURCES PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 JULY 2015
2015 2014
Notes GBP GBP
----------------------------------------------------- ----- ----------- -----------
Continuing operations
Revenue 2,067,702 2,957,064
Cost of sales - exploration costs written
off, impairments and pre-licence costs 6 (3,618,324) (868,992)
Cost of sales - depreciation and other (1,964,647) (2,852,710)
----------------------------------------------------- ----- ----------- -----------
Total cost of sales (5,582,971) (3,721,702)
----------------------------------------------------- ----- ----------- -----------
Gross loss (3,515,269) (764,638)
Administrative expenses (1,153,969) (832,270)
Other operating income 130,687 141,649
Exceptional item - profit from licence transactions 7 1,082,595
Exceptional item - negative goodwill arising
on acquisition 8 71,880 -
(4,466,671) (372,664)
Finance income 20,845 1,152
Finance costs (22,442) (84,893)
----------------------------------------------------- ----- ----------- -----------
Loss before taxation (4,468,268) (456,405)
Taxation 2 - -
----------------------------------------------------- ----- ----------- -----------
Loss for the year (4,468,268) (456,405)
Other comprehensive income for the year - -
----------------------------------------------------- ----- ----------- -----------
Total comprehensive income for the year attributable
to equity holders of the parent (4,468,268) (456,405)
----------------------------------------------------- ----- ----------- -----------
Basic loss per share 3 (2.02)p (0.30)p
Diluted loss per share (2.02)p (0.30)p
----------------------------------------------------- ----- ----------- -----------
EGDON RESOURCES PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 JULY 2015
Notes 2015 2014
GBP GBP
-------------------------------------- ----- ----------- -----------
Non-current assets
Intangible assets 17,864,269 18,399,479
Property, plant and equipment 8,838,286 8,494,861
-------------------------------------- ----- ----------- -----------
Total non-current assets 26,702,555 26,894,340
-------------------------------------- ----- ----------- -----------
Current assets
Trade and other receivables 2,889,466 5,452,920
Available for sale financial assets 50,000 50,000
Cash and cash equivalents 5,180,333 9,666,885
-------------------------------------- ----- ----------- -----------
Total current assets 8,119,799 15,169,805
-------------------------------------- ----- ----------- -----------
Current liabilities
Trade and other payables (940,761) (4,365,249)
Net current assets 7,179,038 10,804,556
-------------------------------------- ----- ----------- -----------
Total assets less current liabilities 33,881,593 37,698,896
Non-current liabilities
Provisions 5 (1,827,288) (1,288,254)
-------------------------------------- ----- ----------- -----------
Net assets 32,054,305 36,410,642
-------------------------------------- ----- ----------- -----------
Equity
Share capital 4 14,164,337 14,158,872
Share premium 20,619,616 20,550,081
Share based payment reserve 160,430 123,499
Retained earnings (2,890,078) 1,578,190
-------------------------------------- ----- ----------- -----------
32,054,305 36,410,642
-------------------------------------- ----- ----------- -----------
EGDON RESOURCES PLC
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 JULY 2015
2015 2014
GBP GBP
-------------------------------------------------- ------------- -------------
Cash flows from operating activities
Loss before tax (4,468,268) (456,405)
Adjustments for:
Depreciation and impairment of fixed
assets 451,819 1,739,345
Exploration costs written off 3,673,780 285,824
Foreign exchange (gains)/losses (93,060) 54,734
Negative goodwill (71,880) -
Revaluation of accrued income 292,729 -
Loss/(profit) on disposal of licence
interest 128,164 (164,581)
Profit on sale of licence option - (918,014)
Decrease/(increase) in trade and other
receivables 2,230,130 (2,858,014)
(Decrease)/increase in trade payables
and other payables (3,605,969) 2,797,146
Movement in provisions (13,400) (7,807)
Finance costs 22,442 84,893
Finance income (20,845) (1,152)
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Share based remuneration charge 36,931 15,819
-------------------------------------------------- ------------- -------------
Cash (used in)/generated from operations (1,437,427) 571,788
Interest paid (6) (41,403)
Taxation paid - -
-------------------------------------------------- ------------- -------------
Net cash flow (used in)/generated from
operating activities (1,437,433) 530,385
-------------------------------------------------- ------------- -------------
Investing activities
Finance income 20,845 1,152
Payments for exploration and evaluation
assets (3,234,775) (2,802,932)
Purchase of property, plant and equipment (20,300) (29,631)
Revenue from oil well appraisal 13,824 -
Sale of property, plant and equipment - 180,482
Sale of licence option - 918,014
Sale of intangible fixed assets 78,227 366,282
-------------------------------------------------- ------------- -------------
Net cash used in capital expenditure
and investing activities (3,142,179) (1,366,633)
-------------------------------------------------- ------------- -------------
Financing activities
Issue of shares - 10,107,790
Costs associated with issue of shares - (556,292)
Repayments of short-term borrowings - (1,000,000)
-------------------------------------------------- ------------- -------------
Net cash flow generated from financing - 8,551,498
-------------------------------------------------- ------------- -------------
Net (decrease)/increase in cash and
cash equivalents (4,579,612) 7,715,250
Cash and cash equivalents as at 31
July 2014 9,666,885 2,006,369
Effects of exchange rate changes on
the balance of cash held in foreign
currencies 93,060 (54,734)
-------------------------------------------------- ------------- -------------
Cash and cash equivalents as at 31
July 2015 5,180,333 9,666,885
-------------------------------------------------- ------------- -------------
In 2015 significant non cash transactions comprised the issue of
equity share capital with a market value of GBP75,000 as consideration
for the acquisition of Yorkshire Exploration Limited
In 2014 significant non-cash transactions comprised the issue of
equity share capital with a market value of GBP10,500,000 as consideration
for the acquisition of certain licences from Alkane Energy plc.
EGDON RESOURCES PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 JULY 2015
Group Share based
Share Share payment Retained Total
capital premium reserve earnings equity
GBP GBP GBP GBP GBP
----------------------------------- ---------- ---------- ----------- ----------- -----------
Balance at 1 August 2013 13,278,754 1,378,701 134,732 2,007,543 16,799,730
----------------------------------- ---------- ---------- ----------- ----------- -----------
Loss for the year - - - (456,405) (456,405)
----------------------------------- ---------- ---------- ----------- ----------- -----------
Total comprehensive income
for the year - - - (456,405) (456,405)
Transfer of share option charge
on forfeit - - (152) 152 -
Transfer of share option charge
on exercise - - (26,900) 26,900 -
Issue of ordinary shares (February
2014) 120,000 2,705,000 - - 2,825,000
Issue of ordinary shares (March
2014) 8,283 77,797 - - 86,080
Issue of ordinary shares (May
2014) 1,500 13,500 - - 15,000
Issue of ordinary shares (June
2014) 750,335 16,375,083 - - 17,125,418
Share option charge - - 15,819 - 15,819
----------------------------------- ---------- ---------- ----------- ----------- -----------
Balance at 31 July 2014 14,158,872 20,550,081 123,499 1,578,190 36,410,642
----------------------------------- ---------- ---------- ----------- ----------- -----------
Loss for the year - - - (4,468,268) (4,468,268)
----------------------------------- ---------- ---------- ----------- ----------- -----------
Total comprehensive income
for the year - - - (4,468,268) (4,468,268)
Issue of ordinary shares 5,465 69,535 - - 75,000
Share option charge - - 36,931 - 36,931
----------------------------------- ---------- ---------- ----------- ----------- -----------
Balance at 31 July 2015 14,164,337 20,619,616 160,430 (2,890,078) 32,054,305
----------------------------------- ---------- ---------- ----------- ----------- -----------
EGDON RESOURCES PLC
Notes to the Financial Statements
FOR THE YEAR ENDED 31 JULY 2015
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 2015 or 31 July 2014. The financial information has been
extracted from the statutory accounts of the Group for the years
ended 31 July 2015 and 31 July 2014.
The Directors have prepared the accounts on the going concern
basis which assumes that the Group will continue in operational
existence without significant curtailment of its activities for the
foreseeable future.
The auditor, Nexia Smith & Williamson, has reported on the
statutory accounts for the years ended 31 July 2015 and 2014; the
audit reports were unqualified and did not contain statements under
either section 498(2) or 498(3) of the Companies Act 2006.
The statutory accounts for the year ended 31 July 2014 have been
delivered to the Registrar of Companies; those for the year ended
31 July 2015 were approved by the Board on 2 November 2015 and will
be delivered to the Registrar of Companies following the Annual
General Meeting.
The Annual Report for the year ended 31 July 2015, including the
auditor's report, will be posted to shareholders during the week
commencing 6 November 2015 and will be available from the same date
both to be downloaded from the Company's website at
www.egdon-resources.com and in hard copy from Egdon Resources plc,
The Wheat House, 98 High Street, Odiham, Hampshire, RG29 1LP.
There were no changes to the Group's accounting policies for the
year ended 31 July 2015 as compared to those published in the
statutory financial statements for the year ended 31 July 2014.
This preliminary announcement was approved by the Board on 2
November 2015.
2. Income tax
The major components of income tax expense for the years ended 31
July 2015 and 2014 are:
2015 2014
GBP GBP
------------------------------------------------------- ----------- ---------
a) Consolidated statement of comprehensive income
Current income tax charge - -
b) A reconciliation between tax expense and the product
of the accounting result and the standard
rate of tax in the UK for the years ended 31 July
2015 and 2014 is as follows:
Accounting loss before tax from continuing operations (4,468,268) (456,405)
------------------------------------------------------- ----------- ---------
Loss on ordinary activities multiplied by the standard
rate of tax of 20.66% (2014: 22.33%) (923,144) (101,915)
Expenses not permitted for tax purposes 14,818 10,723
Movement in unrecognised deferred tax assets 908,326 91,192
------------------------------------------------------- ----------- ---------
Income tax expense recognised in the current year - -
relating to continuing operations
------------------------------------------------------- ----------- ---------
c) Factors that may affect the future tax charge
The Group has trading losses of GBP37,704,083 (2014:
GBP31,235,026) which may reduce future tax charges. Future tax
charges may also be reduced by capital allowances on cumulative
capital expenditure, supplementary allowances on ring-fenced
exploration expenditure and the extent to which any profits are
generated by any ring-fenced activities, which attract a higher
rate of tax.
d) Deferred taxation
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The Group has an unrecognised deferred taxation asset of
GBP5,471,891 (2014: GBP2,901,880) at the year end, calculated at a
rate of 20% which is the applicable rate at the time the net tax
losses are expected to reverse (2014: 20%). This is represented by
accumulated tax losses of GBP37,704,083 (2014: GBP31,235,026)
offset by accelerated capital allowances of GBP10,344,626 (2014:
GBP16,725,627).
3. Loss per share
Basic loss per share
2015 2014
GBP GBP
------------------------------------------ ------------- -------------
Loss for the financial year (4,468,268) (456,405)
Basic weighted average ordinary shares in
issue during the year 221,072,587 149,911,338
------------------------------------------ ------------- -------------
Pence Pence
--------------------- ------ ------
Basic loss per share (2.02) (0.30)
--------------------- ------ ------
Diluted loss per share
2015 2014
GBP GBP
------------------------------------------ ------------ -----------
Loss for the financial year (4,468,268) (456,405)
Diluted weighted average ordinary shares
in issue during the year 221,072,587 149,911,338
------------------------------------------ ------------ -----------
Pence Pence
----------------------- ------ ------
Diluted loss per share (2.02) (0.30)
----------------------- ------ ------
For 2015 and 2014, the share options are not dilutive as a loss
was incurred.
4. Share Capital and redeemable preference shares
10p Ordinary Shares 1p Ordinary Shares 1p Deferred Shares
Allotted, called up Allotted, called up Allotted, called up
and fully paid and fully paid and fully paid Total
Number GBP Number GBP Number GBP GBP
------------------- ------------- ------------ ------------ --------- ------------- ---------- ----------
At 31 July
2013 132,787,543 13,278,754 - - - - 13,278,754
Share sub-division (132,787,543) (13,278,754) 132,787,543 1,327,875 1,195,087,887 11,950,879 -
Issue of new
GBP0.01 ordinary
shares - - 88,011,820 880,118 - - 880,118
------------------- ------------- ------------ ------------ --------- ------------- ---------- ----------
At 31 July
2014 - - 220,799,363 2,207,993 1,195,087,887 11,950,879 14,158,872
------------------- ------------- ------------ ------------ --------- ------------- ---------- ----------
Issue of new
GBP0.01 ordinary
shares - - 546,448 5,465 - - 5,465
------------------- ------------- ------------ ------------ --------- ------------- ---------- ----------
At 31 July
2015 - - 221,345,811 2,213,458 1,195,087,887 11,950,879 14,164,337
Allotted, called up
and partly paid
Number GBP
At 31 July 2014
------------------------------------------------------------------------- ------------------------- ----------
- Redeemable preference shares of GBP1 each
(classified as a liability) 50,000 12,500
------------------------------------------------------------------------- ------------------------- ----------
At 31 July 2015
------------------------------------------------------------------------- ------------------------- ----------
- Redeemable preference shares of GBP1 each
(classified as a liability) 50,000 12,500
------------------------------------------------------------------------- ------------------------- ----------
On 5 December 2013, following approval at the Company's AGM, the
existing Ordinary shares of 10p each were sub-divided into one New
Ordinary Share of 1p each and 9 Deferred Shares of 1p each. The
Deferred Shares do not carry any rights to vote or any dividend
rights. The Deferred Shares will not be admitted to AIM and holders
will only be entitled to a payment on return of capital or winding
up of the Company after each of the holders of Ordinary Shares has
received a payment of GBP10,000,000 on each such share.
On 8 December 2014 the Company issued 546,448 Ordinary 1p shares
as consideration for the acquisition of Yorkshire Exploration
Limited. The nominal value of the shares was GBP5,465. The fair
value of the shares issued was GBP75,000.
On 11 February 2014, the Company issued 12,000,000 New Ordinary
1p shares for consideration of GBP3 million. The nominal value of
the shares was GBP120,000.
During March 2014, 828,271 New Ordinary 1p Shares with a nominal
value of GBP8,283 were issued to staff under the Company's
Enterprise Management Incentive Scheme for total cash consideration
of GBP86,080.
During May 2014, 150,000 New Ordinary 1p shares with a nominal
value of GBP1,500 were issued to staff under the Company's
Enterprise Management Incentive Scheme for total cash consideration
of GBP15,000.
On 12 June 2014, the Company issued 35,033,549 New Ordinary 1p
Shares for total cash consideration of GBP7,006,710. The nominal
value of the shares was GBP350,335.
On the same date, as consideration for the acquisition of
certain licence interests from Alkane Energy plc, the Company
issued 40,000,000 New Ordinary 1p Shares at a premium of 25.25p.
The nominal value of the shares issued was GBP400,000.
On 6 November 2007, 50,000 redeemable preference shares of GBP1
each were issued and are now held by InfraStrata plc. One quarter
of the nominal value of these shares is paid up and the shares are
entitled to an annual dividend out of distributable profits of
0.00001% per annum on the amount for the time being paid up on each
such share and do not carry any voting rights. The Company may
redeem the shares at any time by giving preference shareholders one
week's notice. Preference shareholders may require the Company to
redeem their shares at any time by giving six months' notice. In
each case, any redemption is at par and is subject to the
provisions of the Companies Act. The preference shares are treated
as short term liabilities and included within trade payables.
5. Provision for liabilities
Other Decommissioning Reinstatement
provisions provision provision Total
Group GBP GBP GBP GBP
----------------------------- ---------- ---------------- ------------- -----------
At 1 August 2013 38,568 763,914 309,174 1,111,656
Provision created during
the year - 12,555 144,662 157,217
Paid during the year (7,807) - - (7,807)
Transfer of provision on
reclassification to D&P - 114,058 (114,058) -
Assets
Unwinding of discount - 27,188 - 27,188
----------------------------- ---------- ---------------- ------------- -----------
At 1 August 2014 30,761 917,715 339,778 1,288,254
Provision created during
the year - 645,648 150,037 795,685
Utilisation of provision
during the year - - (225,283) (225,283)
Disposals - - (43,532) (43,532)
Paid during the year (10,236) - - (10,236)
Unwinding of discount - 22,400 - 22,400
----------------------------- ---------- ---------------- ------------- -----------
At 31 July 2015 20,525 1,585,763 221,000 1,827,288
----------------------------- ---------- ---------------- ------------- -----------
At 31 July 2015 provision has been made for decommissioning
costs on the productive fields at Keddington, Kirkleatham, Ceres,
Avington, Dukes Wood/Kirklington and Waddock Cross. Provision has
also been made for reinstatement costs relating to exploration and
evaluation assets where work performed to date gives rise to an
obligation, principally for site restoration. Assumptions, based on
the current economic environment, have been made which management
believe are a reasonable basis upon which to estimate the future
liability. This estimate will be reviewed regularly to take into
account any material change to assumptions. Actual costs will
depend on future market prices, any variation in the extent of
decommissioning and reinstatement to be performed, whether the
works can be performed as part of a multi-well programme or in
isolation and progress in the relevant technologies.
Decommissioning and reinstatement costs are expected to arise
between 2016 and 2021.
During the year an increase of GBP602,801 was recorded in
respect of the provision for the decommissioning of the Ceres Gas
Field.
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