Egdon Resources plc (AIM:EDR), the exploration and production company with a focus on the onshore UK, is pleased to provide an update on operations following the end of the Company’s 2017-2018 financial year (“FY2018”) which ended on 31 July 2018. The Company’s preliminary results for FY2018 are scheduled to be announced on 30 October 2018.
Mark Abbott, Managing Director of Egdon Resources plc, said:
“The Company has a broad and extensive portfolio of projects and despite operating in what are, at present, challenging conditions for the UK onshore in terms of planning, we continue to make progress with many of our projects.
During FY2018 we have completed the acquisition of the Endeavour gas discovery as a potential add-on to Resolution, increased production rates at Fiskerton Airfield, and successfully farmed out PEDL253 to allow us to proceed with drilling the very prospective Biscathorpe-2 exploration/appraisal well.
The anticipated upgrade to the reserves at Ceres means that the field should produce gas and therefore provide cash flow for the Company for longer than was previously forecast. We remain confident that we will eventually gain planning consent to develop the Wressle oil discovery and have successfully acquired a further 5% interest in this asset. Finally, the Springs Road wellsite is almost complete and we expect the well, which could be a “play opener” in the Gainsborough Trough, to be drilled during the coming period.”
Production
Production in the second half of FY2018 came from Ceres, Keddington and Fiskerton Airfield and totalled 12,691 barrels of oil equivalent (“boe”), an average of 70 boe per day (“boepd”) (H2 2017 21,464 boe, 119 boepd). Average daily production over the full year is therefore 84 boepd against guidance of 100 boepd with the shortfall mainly due to the loss of six weeks’ production at Ceres. This was a result of the summer maintenance shut-down commencing in July, before the end of the financial year and two weeks when the field was shut-in as a result of unplanned downtime.
The outlook for the Ceres field is positive as the operator, Spirit Energy, has recently advised that an increased volume of gas in-place, and hence ultimate recoverable reserves, is indicated by pressure recovery observed while the Ceres well has remained shut-in. Production will resume once a new flowmeter is installed in October 2018, and will provide a significant boost to Egdon’s production. Taking the operator’s forecasts, we expect production from Ceres (primary and back-out gas) net to Egdon to average over 125 boepd in the first half of the 2018-2019 financial year (“FY2019”).
Oil production continues at Fiskerton Airfield (25-27 bopd gross) and Keddington (20-24 bopd gross). Additional intervention is being considered in the Fiskerton Airfield FA-1 well for early 2019 and we continue to review the possibility of further sidetrack drilling at Keddington.
We will provide production guidance for FY2019 with our preliminary results, but initial guidance for the first half of the financial year is c. 160-180 boepd.
Operations
Preparations continue for drilling the potentially play opening exploration well Springs Road-1 in the Gainsborough Trough (PEDL140, Egdon 14.5% carried). The operator, IGas, recently advised that construction works at the wellsite are nearing completion and confirmed that the well will be drilled after their nearby Tinker Lane-1 well where they now expect to commence drilling operations in Q4 2018.
Elsewhere, we note that Cuadrilla Resources have completed the drilling of two horizontal wells at Preston New Road and recently received government approval for hydraulic fracturing and testing. We expect to hear the first results from these multistage tests in late Autumn 2018.
At Biscathorpe (PEDL253) we have successfully farmed-out the drilling of Biscathorpe-2 which will evaluate a 1987 BP conventional oil discovery with Mean Prospective Resources net to Egdon estimated at 5 million barrels of oil. We are updating the tenders for all materials and services including the rig with a view to commencing completion of the site construction during late September 2018 and drilling operations in October/November 2018.
At North Kelsey (PEDL241) we are finalising the application for the Environmental Permit and continue to seek further farminees for North Kelsey-1 which we hope to drill during H1 2019. The North Kelsey prospect has a Mean Prospective Resource net to Egdon estimated at 5.2 million barrels of oil and is considered similar to the Wressle discovery in holding the potential for multiple stacked reservoirs being charged with oil.
In May 2018, Lincolnshire County Council (“LCC”) Planning Committee granted extensions to the existing planning consents to drill conventional resource exploration wells at North Kelsey and Biscathorpe. We have since been notified that LCC has been challenged by local activists as to the legality of their planning decisions. Although at this time we do not expect this to impact the timing of our operations at either well, we will keep this under review as the process unfolds. Separately, the Oil and Gas Authority (“OGA”) has granted extensions for both licences PEDL253 and PEDL241 to 30 June 2020.
The Company has continued to make progress with the nearshore Resolution gas discovery (P1929, 41/18+19) during the period and has completed the acquisition of the adjacent licence P2304 (41/24) containing the Endeavour gas discovery confirmed by three wells drilled between 1969 and 1993 which tested at rates of up to 34 million cubic feet of gas per day with 1,280 barrels per day of condensate. Mapping using newly reprocessed 2D seismic data has yielded estimated Mean Contingent Resources for Endeavour of approximately 20 billion cubic feet (“bcf”) of gas, sufficient to make it a suitable candidate as a satellite development to add value to Resolution where we estimate Mean Contingent Resources of 330bcf. Egdon continues to seek an industry partner and/or investors to share the forward costs and is working with a respected industry contractor to produce an updated reservoir model and CPR. Our forward plan is to acquire a new 3D seismic survey during early 2019 to enable optimisation of an offshore appraisal well for Resolution.
During the period Europa Oil & Gas Limited, the operator at Holmwood (PEDL143), announced the submission of an application to vary the existing planning consent and extend it by three years. They further announced that the OGA has extended the initial term of the licence until 30 September 2020 and that the Environmental Permit for the proposed drilling operations had been issued by the Environment Agency. The Holmwood prospect has an estimated Mean Prospective Resource of 1.14 million barrels of oil net to Egdon and is considered geologically analogous to the nearby Horse Hill-1 discovery.
Turning finally to the Wressle project, in early July 2018 we announced the submission of a new planning application for the development of the oil discovery to North Lincolnshire Council (“NLC”). Egdon strongly believes that this new application comprehensively addresses the reasons for the refusal of the original planning applications and the subsequent appeals as set out in detail in our announcement of 5 July 2018.
Whilst we will maximise our efforts to convince the planning officers and, more importantly, members of the NLC Planning Committee of the clear merits of our new application, our recent experiences with NLC means we have to remain fully prepared to take this new application through another appeal process. As the most recent example of their apparent intransigence, on 1 August 2018 the NLC Planning Committee refused our application to extend the existing consent for the Wressle site despite a recommendation for approval from their own professional planning officers. The reasons cited were conflicts with paragraph 205 of the NPPF and policy M21 of the North Lincolnshire Local Plan even though in his decision of January 2018 the Inspector found in Egdon’s favour on our appeal against the same reasons. We are now in the process of appealing this latest refusal decision and are increasing our lobbying and engagement efforts in respect of the Wressle project.
Notwithstanding, and demonstrating our commitment to and confidence in the Wressle field development, in June 2018 we announced the acquisition of an additional 5% interest in PEDL180 and PEDL182 from Celtique Energie Petroleum Limited for a deferred cash consideration of £0.417m payable on commencement of production.