Egdon Resources Strong production performance and a strengthened balance sheet

Egdon Resources

Egdon Resources plc (LON:EDR) a UK-based exploration and production company primarily focused on the hydrocarbon-producing basins of onshore UK, has this morning provided the following Financial and Operational Update ahead of its Annual General Meeting. The meeting will be held at the offices of Norton Rose Fulbright, 3 More London Riverside, London, SE1 2AQ at 11.30 am today.

Revenues

·      Unaudited revenue for the three-month period from August to October 2021 was £1.085 million (2020: £0.173 million) 

·      Revenue was primarily from Wressle and Ceres, and was despite Wressle only recommencing flow on 19 August and the Ceres field being shut-in for annual maintenance for 20 days during September 

·      This is expected to translate into a step change in revenues and cash flow for the Company for the current financial year, with full-year revenue from the Company’s 2020/21 financial year (£1.09 million) matched after the first quarter of the current year (August to October)

Wressle PEDL180/182 (Egdon 30%):

·      The Wressle-1 well has continued to exceed our expectations since the successful completion of the proppant squeeze and subsequent coiled tubing operations on the 19 August 2021.

·      Works have been completed to upgrade the gas incineration system

·      Despite being flowed under a highly restricted choke (20/64 inch), whilst upgrade works are ongoing, Wressle produced at an average rate of 666 barrels of oil per day (bopd) (c. 200 bopd net to Egdon) plus 368,000 cubic feet of gas over the last 7 days period (727 barrels of oil equivalent per day) 

·      No formation water has been produced to date 

·      A secondary separator system has been designed and manufactured and is expected to be installed before year end to optimise gas/oil separation

·      Early 2022 will see completion of testing of the full potential of the well

·      Decisions will be made early in 2022 on the plateau production rate, to match with the longer-term operational objectives and prudent reservoir management of this important asset 

·      Downhole pressure data has been acquired and is currently being interpreted to further inform these decisions

·      The focus in 2022 will move to progressing the optimal method of gas monetisation and finalising plans for the development of other hydrocarbon bearing sequences to access the identified contingent resources, with particular focus on the Penistone Flags reservoir

Ceres P1241 (Egdon 10%):

·      The Ceres Gas Field is undergoing a late-life renaissance for the Company

·      Gas realisations averaged 195p/therm in October and November 2021 (an equivalent of $157/boe) 

·      Given the low operating costs, strong gas market fundamentals and forward curve we believe the field could remain profitable for some years to come

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Biscathorpe PEDL253 (Egdon 35.8%):

·      On 1 November 2021, the planning application for a side-track drilling operation, associated testing and long-term oil production at the Biscathorpe site, was refused by Lincolnshire County Council (LCC), despite being recommended for approval by the Council’s planning officers

·      The formal decision notice was issued on 6 December and we are currently reviewing in detail the reasons for refusal with our planning and legal advisors and considering our options which is likely to lead to an appeal

North Kelsey PEDL241 (Egdon 50%):

·      Planning applications were submitted to LCC in early December to extend the existing planning consents by twelve months and amend the proposed bottom hole target location for the planned North Kelsey well

·      The applications have now been validated and the consultation period has begun 

·      Subject to receipt of planning consent this well could be drilled later in 2022

Keddington PEDL005R (Egdon 45%):

·      A detailed sub-surface review of the Keddington oil field and the surrounding licence area has highlighted an opportunity to increase production via a new development side-track well for which planning consent is already in place 

·      Reservoir engineering work has been completed by ERCE and has confirmed a target area in the south-east of the field which would add 85,000 to 120,000 barrels of recoverable oil

·      Well specific reservoir modelling and detailed well planning will be completed in the coming period with a view to being in a position to drill the side-track well during 2022

·      Additional near-field exploration opportunities have been identified at Keddington South, (gross Mean Prospective Resources of 635,000 barrels of oil) and the Louth Prospect (gross Mean Prospective Resources of 600,000 barrels of oil) which could be accessed from the existing production site in due course

Waddock Cross PL090 (Egdon 55%)

·      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) Waddock Cross has been high graded as planning consent and facilities are in place to test this significant opportunity

·      Well design and surface facilities design work has been completed

·      Further detailed design and costings are in preparation to support a potential JV investment decision during 2022 to drill a side-track well and reinstate production

Mark Abbott, Managing Director of Egdon Resources, commented:

“Strong production performance and high oil and gas prices are combining to provide the Company with material operating cashflows which strengthens the balance sheet and will support our planned 2022 investment programme.”

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