14 Aug 2017 07:00
14 August 2017
EGDON RESOURCES PLC
("Egdon" or "the Company")
Operational Update
Egdon Resources plc (AIM:EDR) the UK-based exploration and production company with a focus on the hydrocarbon-producing basins of the onshore UK is pleased to provide shareholders with an update on the Company's licence portfolio and operations.
The Company has a broad and extensive portfolio of projects and the last quarter has seen progress on a number of our strategic objectives. Of note are;
• Acquisition of a 50% interest in PEDL278 containing the Kirk Smeaton tight gas discovery and further unconventional resources potential
• Acquisition of an additional 20% interest in PEDL209 (deep) and signature of a new option agreement with Total with, when exercised, a carried work programme valued at up to £4.85 million to Egdon
• Progress with the consents for the Springs Road wells with drilling now expected later in 2017
• Acquisition of the Fiskerton Airfield (EXL294) producing oil field in the East Midlands which adds production from the effective date of 1st January 2017
• Issue of the Wressle Environmental Permit variations and submission of the appeals against the January and July planning refusals which have been co-joined and will be considered at an appeal hearing expected in November 2017
• Completion of the Company's exit from France with the relinquishment of the Pontenx permit and withdrawal from the Mairy permit.
Commenting on the update and outlook, Mark Abbott, Managing Director of Egdon Resources plc, said:
"We are pleased to provide shareholders with this operational update ahead of a potentially transformational period for the Company and the onshore UK E&P business with significant news flow expected in both conventional and unconventional resources exploration.
The fundamentals of the business remain robust with the Company being debt free, holding a range of assets with excellent potential for both conventional and unconventional resources in a jurisdiction which remains commercially attractive even with current commodity prices, and with a strong balance sheet allowing us to deliver on our strategy.
We remain committed to, and optimistic about, obtaining planning consent for the development of the Wressle oil discovery and look forward to the planning appeal in early November and the decision, which is likely early in 2018.
In the meantime we plan to workover the newly acquired Fiskerton Airfield wells to increase production and expect the Holmwood-1 well to be drilled in the Weald with potential exposure to the Kimmeridge Limestone play which is due to be tested at the nearby Brockham oilfield and Horse Hill and Broadford Bridge discoveries.
We look forward to commencement of operations at Springs Road-1, the potentially play opening Gainsborough Trough exploration well where Egdon's costs are carried, later in 2017. This well along with the Tinker Lane well to the south and other UK drilling and testing activity will potentially provide the data required to de-risk our core area for unconventional resources."
Unconventional Resources
Over the past three years Egdon has successfully increased its unconventional resources acreage position in Northern England by 360% to c. 201,000 net acres (814 net km2) through a series of targeted acquisitions, farm-ins and success in the 14th Round.
The second half of 2017 is expected to see significant activity in this sector of our business with the planned drilling, hydraulic fracturing and testing of two horizontal wells at Preston New Road by Cuadrilla, hydraulic fracturing and testing operations by Third Energy at Kirby Misperton-8 ("KM-8") and 3D seismic acquisition by INEOS in the East Midlands including over parts of Egdon's PEDL001 and PEDL130 licences. In relation to our own licence activity, the operator IGas has advised that it intends to drill the potentially play opening Gainsborough Trough exploration well Springs Road-1 (PEDL140, Egdon 14.5% carried) later in 2017. This is a key well for Egdon as it is located in our core area for unconventional resources. The well will drill a thick Lower Carboniferous tight sand and shale sequence and will be extensively logged and cored to provide a full suite of modern data with which to evaluate the play properly.
We have made considerable progress on our operated and non-operated 14th Round licences since award. Work to date has included extensive cuttings sampling and analysis and integration with petrophysical models, the acquisition and interpretation of new gravity data, and the reprocessing and interpretation of existing seismic data. These studies will support the planning for additional seismic acquisition on several licences expected during 2018 and in planning exploration wells in future years.
There is currently significant interest in the Carboniferous tight gas sandstone plays of the Cleveland Basin and Southern North Sea with a well at present being drilled offshore by BP at Ravenspurn North. Later in 2017, Third Energy will test KM-8 onshore with potential read through to the neighbouring Cloughton gas discovery (Egdon 17.5%) and Resolution Prospect (Egdon 100%).
Elsewhere, we note that IGas has applied for planning permission to test gas shows in the Pentre Chert in the 2014 Ellesmere Port-1 exploration well. This well is located very close to PEDL191 (Egdon 100%). This possibly extensively naturally fractured chert is a newly identified potential gas play.
Conventional Resources Exploration and Appraisal:
Egdon's next drilling activity is likely to be the Holmwood-1 conventional exploration well in Weald Basin licence PEDL143 (Egdon 18.4%) where the operator, Europa Oil and Gas ("Europa"), has advised that they expect to commence operations later in 2017 once all final approvals are in place. In addition to targets in the Portland and Corallian sandstones, where the operator has estimated mean prospective resources of 5.6 mmbls of oil ("mmbo") (net Egdon 1.03 mmbo), the well will also test the highly prospective Kimmeridge Limestone play. The Horse Hill-1 well (UK Oil and Gas Investments plc ("UKOG")) is located some 8 kilometres to the east of Holmwood in a similar structural position and tested 323 barrels of oil per day ("bopd") from the Portland Sandstone and 1,365 bopd in total from two intervals in the Kimmeridge Limestone. Egdon is largely carried on the Holmwood-1 well by UKOG. Over the next few months extended well tests at Horse Hill and Brockham (Angus Energy plc) and testing at Broadford Bridge (UKOG) will provide further insights into the commerciality of the Kimmeridge Limestone play and its potential at Holmwood.
The Oil and Gas Authority ("OGA") has granted Egdon licence extensions for both PEDL253 (Biscathorpe) and PEDL241 (North Kelsey) to 30 June 2018. In July Egdon announced the issue of the environmental permits required for the operated Biscathorpe-2 exploration well in Lincolnshire licence PEDL253. The Biscathorpe Prospect is estimated by Egdon to hold mean prospective resources of 14.0 mmbo (Egdon 7.4 mmbo) but could be significantly larger if a stratigraphic trapping mechanism enhances the prospect's westerly closure. Drilling operations at Biscathorpe-2 are expected to commence early in 2018.
We also continue to pursue partnership opportunities for the North Kelsey Prospect in Lincolnshire licence PEDL241 where we estimate mean prospective resources of 6.5 mmbo (Egdon 5.2 mmbo) in stacked reservoir targets, and hope to drill the well by mid-2018.
Egdon has made continued progress with the Resolution Prospect (160bcf, Egdon 100%) in UK offshore licence P.1929. Following the interpretation of reprocessed seismic data, we now plan to acquire a new 3D seismic survey during 2018 to confirm the potential resource volumes and enable optimisation of the planning for an offshore appraisal well. Egdon is seeking an industry partner and/or investors to share the forward costs. The 3D survey will also assist in understanding the Carboniferous potential within and around the Resolution Prospect where unconventional resource prospectivity in tight gas sands, a play currently being tested by BP offshore and Third Energy onshore, may be significant on this large regional structure.
The Company completed its withdrawal from France during the past quarter with withdrawal from the renewal process for both the Pontenx and Mairy permits. The Company's attention and resources are now focussed solely on the UK.
Producing Assets
The Ceres gas field has been shut-in since October 2016 with attributable production derived from "back-out" gas produced from the Mercury and Neptune gas fields. Installation of a new flow meter at Ceres, expected in 2018 will facilitate simultaneous production of the Ceres gas field with the other fields in the system. The various production facilities were shut down for annual maintenance during early July with production recommencing in early August. The relative timing of the 2016 (September-October) and 2017 (July) maintenance shut-downs has resulted in only 9 months of production contribution from Ceres during the 2016-17 financial year. Despite this, mean daily production for the full year is expected to be in-line with our latest guidance of 100-110 boepd.
The Keddington oil field continues to produce in line with forecasts from the K-3Z well at c. 24 bopd (net to Egdon 12 bopd) and we now expect to take a decision on further drilling on the field in the autumn of 2017. Avington also continues to produce in line with expectations.
In July 2017 Egdon announced the acquisition of 100% of the producing Fiskerton Airfield oil field in Lincolnshire licence EXL294 for $0.75 million. The field has suffered from a lack of investment over recent years and we plan to undertake simple, low-cost workovers to enhance production and profitability in the short-term, adding valuable near-term cash-flow to Egdon's portfolio. In the longer term, we will investigate the potential to enhance productivity through in-fill drilling. Completion of this acquisition is expected later in August with an effective date of 1st January 2017 meaning that production from then of c. 17-18 bopd will be allocated to Egdon.
A significant focus during the period has been to progress our Wressle oilfield development, where planning was refused by the North Lincolnshire District Council Planning Committee at meetings in January and July 2017 despite recommendations to approve from the council's planning officers on each occasion. We have co-joined appeals against both of these decisions and expect the planning inquiry to be heard in early November 2017. The inquiry will be heard by an independent planning inspector who will consider the applications in the context of their planning merits. A successful outcome would see the commencement of operations to establish long term production which would be expected to add 125 bopd to Egdon's production.
Egdon has interests in a number of currently shut in fields where we continue to seek innovative ways of bringing them back into profitable production. For example, we have initiated discussions with third parties on potential further investment in, and the restarting of production from, the shut-in Dukes Wood (PEDL118) and Kirklington (PEDL203) oil fields. If an agreement were to be reached we would expect operations to commence in late 2017.
We also continue to evaluate the shut-in Waddock Cross oil field (PL090) where we have nearly completed reprocessing 3D seismic data, and the Kirkleatham gas field (PEDL068) where we have completed specialist processing of key seismic lines to confirm the remaining unproduced gas resources and have identified additional gas potential within the underlying Carboniferous sandstones.
For further information please contact:
Egdon Resources plc
Mark Abbott 01256 702 292
Buchanan
Richard Darby, Anna Michniewicz 020 7466 5000
Nominated Adviser and Broker - Cantor Fitzgerald Europe
Sarah Wharry (Corporate Finance) 020 7894 7000
Mark Westcott (Sales)
Joint Broker - VSA Capital Limited
Andrew Monk (Corporate Broking) 020 3005 5000
Andrew Raca (Corporate Finance)
Notes to Editors:
Egdon Resources plc (LSE: EDR) is an established UK-based exploration and production company now fully focused on onshore exploration and production in the hydrocarbon-producing basins of the UK.
Egdon holds interests in 44 licences in the UK and has an active programme of exploration, appraisal and development within its balanced portfolio of oil and gas assets. Egdon is an approved operator.
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 26 years' experience.
Evaluation of hydrocarbon volumes has 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).
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.