EDR.L Regulatory News (EDR)

3 Apr 2006 07:01

Egdon Resources PLC03 April 2006 Embargoed for release at 07:00a.m. 3 April 2006 Egdon Resources Plc ("Egdon" or the "Company") Interim Results For the six month period ended 31 January 2006 Egdon Resources Plc (AIM : EDR), the UK-based energy company primarily focusedon the hydrocarbon-producing basins of the onshore UK, is pleased to announceits Interim Results for the six month period ended 31 January 2006. The Company's strategy is to maintain a geographical focus on the UK and developan exploration and production business through "drill-bit" success, leading togrowth in reserves, production and cash flow. Egdon currently has explorationinterests in the United Kingdom Continental Shelf ("UKCS") and France. TheCompany is also developing a gas storage business in the south of England. OPERATIONAL HIGHLIGHTS • Confirmation of gas at Kirkleatham-4 and Westerdale-1 • Enhanced licence position with award of block 15/7 in 23rd Licensing Round • Currently hold 20 licences in UK and France • Waddock Cross-3 appraisal well drilled and tested • Avington-3 well drilled and preparing to test • Significant progress made in developing plans for Portland Gas Storage Project • Portland-1 confirmatory well preparing to core salt sequence at end of March 2006 • 2D Seismic acquired in November 2005 over Grenade prospect in SW France FINANCIAL HIGHLIGHTS • Loss for period of £238,000 (2005: £296,000) Institutional placing of 5,555,000 ordinary shares completed in December 2005 at a price of 90p per share, resulting in net proceeds of £4.8 million + • Debt free with a strong cash position (Net funds as at 31 January 2006: £6.3 million; 31 January 2005: £3.7 million) Commenting on the results, Philip Stephens, Chairman of Egdon, said: "The Company is experiencing operational success in all areas of its business, and we are particularly pleased with the confirmation of gas in two of our wells. The Portland Gas Storage Project is progressing, with a well currently being drilled to confirm the viability of creating salt caverns for storing gas. 2006 will be another active year, with wells planned in all of our key areas,including at Grenade in France. We look forward to adding further value for ourshareholders over the coming year." For further information please contact: Egdon Resources Plc 01256 702292Andrew Hindle, Joint Managing DirectorMark Abbott, Joint Managing Director Buchanan CommunicationsEric Burns 020 7466 5000 (today) Ben Willey 01943 883 990 (thereafter) CHAIRMAN'S STATEMENT "I am pleased to present the Interim Report for Egdon Resources Plc for theperiod ended 31 January 2006. This has been a period of significant activity andprogress for your Company both in its conventional oil and gas activities andalso in developing its plans for the Isle of Portland Gas Storage project. A period of intensive drilling activity commenced in November 2005 with"back-to-back" operated wells completed at Waddock Cross-3 (oil producer),Kirkleatham-4 (gas discovery) and Westerdale-1 (gas tested). The rig iscurrently drilling the Portland-1 salt confirmation well at the Portland GasLimited Upper Osprey site. The non-operated Avington-3 well has also beendrilled, cored and logged and is due to be tested during the second quarter of2006. In France, a 2D seismic survey was also completed over the Grenade heavy oilaccumulation during December 2005. The Company's licence position has been enhanced with the award of a 50%interest in block 15/7 as part of the 23rd Seaward Licensing Round. A successful institutional placing was completed during December 2005 raising £5million before costs. This will enable the Company to progress the Portland GasStorage Project beyond the drilling of the confirmation well and the submissionof a planning application without recourse to third party funding. Financial Overview Your Company recorded a consolidated loss of £238,000 during the six monthperiod to 31 January 2006 (six months to 31 January 2005: £296,000). During December 2005, a placing of 5,555,000 new ordinary shares was completedat a price of 90p per share, resulting in net proceeds of £4.8 million. Theshares were placed by Seymour Pierce Limited with new and existing institutionalinvestors. Following the placing, there are currently 57,149,974 ordinary sharesin issue. The Company is debt free with a strong cash position of £6.3 million at 31January 2006 (2005: £3.7 million), enabling it to pursue its strategy through anactive programme of appraisal and exploration drilling. Licence Activity With the award of a 50% interest in promote block 15/7 in the 23rd seaward roundof licensing your Company now holds interests in 20 licences containing over 50identified oil and gas prospects. Block 15/7 contains an identified heavy oilaccumulation, the Funnel prospect, which was discovered by Texaco in 1977 and ismapped by the operator (Nautical Petroleum Plc) to contain 16 million barrels ofoil ("mmbo") net Egdon Best Estimate Prospective Resources. Operational Overview The period has been dominated by the realisation of an operated multi-welldrilling programme which has been the culmination of a number of years ofexploration activity for your Company, and progress with feasibility, design andplanning work on the Portland Gas Storage Project. Portland Gas Limited The Company continues to progress plans for the Portland Gas Storage Project onthe Isle of Portland, Dorset, operated by Portland Gas Limited, a wholly ownedsubsidiary of Egdon. If successful, gas would be stored under pressure in a series of caverns withina thick salt sequence more than 2000 metres below ground level. These cavernswould be created by dissolving salt with sea water circulated under controlledconditions. As previously reported, the feasibility work on the project has indicated thatultimately 18 caverns could be constructed from the site, with 6 caverns builtin each of 3 phases. The initial phase would have a working storage volume of330 million cubic metres ("mcm") (or 11.6 billion cubic feet ("bcf")),increasing on completion of stages two and three to 660 mcm (23.2 bcf) and 990mcm (34.8 bcf) respectively. The Portland Gas Storage Project will be designedas a high deliverability facility with planned gas export capabilities to thenational gas grid increasing from 18 to 54 million standard cubic feet of gasper day ("mmscfgd") through the 3 phases. Drilling of the Portland-1 well commenced on 6 March with drilling and coringoperations expected to take around 50 days. Data from this well will enable thedetermination of the thickness and suitability of the salt interval to createcaverns at the proposed Portland Gas Storage Project. At the end of March 2006,drilling had reached 2150 metres and preparations were being made to core thesalt sequence. Conditional upon satisfactory results from this well your Company will work tosubmit a full planning application for the project during the third quarter of2006. Drilling Activity Waddock Cross The Waddock Cross-3 appraisal well was drilled on the Waddock Cross oilaccumulation in Dorset licence PL090 during November to December 2005. The wellwas drilled to a total depth of 1510 metres (661.5 metres true vertical depth)with a 695 metre horizontal section drilled and completed with pre-drilledtubing through Cycle 3 of the Bridport Sandstone reservoir. The well was testedfrom late December 2005 to January 2006 with flow rates of 270 to 400 barrels offluid per day with an average oil cut of 12%. This equates to 32 to 48 barrelsof oil per day. The produced oil has not experienced the significant emulsionproblems encountered with the Waddock Cross-2 well test. The test equipment hasbeen demobilised from the site whilst data from the test is analysed to enablethe design and procurement of pump and process equipment for future testing andproduction operations. Kirkleatham The Company was able to confirm the discovery of gas at the Kirkleatham-4exploration well drilled in North Yorkshire licence PEDL068 during March 2006.The Kirkleatham-4 well targeted the Kirkleatham prospect which is locatedbeneath and to the west of the town of Redcar in Cleveland. The Kirkleatham-4 well reached a total depth of 936 metres within rocks ofCarboniferous age on 7 January 2006. During drilling operations gas shows wereencountered within the target Permian age Zechstein carbonates. Analysis ofgeophysical log and pressure data confirmed the presence of an approximately 19metre gas column within the Cadeby Formation at a depth of 804.3m. Testing of a6 metre perforated interval at the top of the Cadeby Formation commenced on 6March 2006 with an initial flow rate of 2.8 mmscfgd. The rate was increased insteps during the five day test to a final rate of 5 mmscfgd at a flowing wellhead pressure of approximately 1000 pounds per square inch gauge pressure("psig") through a 18/64" choke. The well was shut-in for a long term build-upon 10 March. Initial analysis indicates that the gas quality is good. The well has been completed for potential future production and has beensuspended following the testing. Various production options are currently beingreviewed. Seismic acquisition over the Kirkleatham accumulation is to beundertaken in April to better determine the likely reserves and potentialadditional well locations. Westerdale Further encouraging exploration results were encountered in the Westerdale-1well also in PEDL068, which was designed to test an accumulation up-dip and tothe north of the Ralph Cross-1 gas discovery made by Home Oil Limited in 1966. The Westerdale-1 well reached a total depth of 1304.5 metres within rocks ofCarboniferous age on the 17 February 2006. Potential gas pay has beeninterpreted within two intervals - the Permian age Brotherton carbonate and alsoin Carboniferous sandstones. The top of the Brotherton carbonate was encountered deeper than expected at ameasured depth of 905 metres due to a thickened high velocity Triassic section.The lower interpreted gas column in sandstones of Carboniferous age, which waspenetrated at a measured depth of 1188 metres, was tested by perforating a 3metre zone at the top of the sequence. Sub-commercial flow rates of gas weretested with pressure data indicating a low permeability. A short unstimulated test of the Brotherton carbonate confirmed gas to surfaceat rates of up to 130,000 standard cubic feet of gas per day ("scfgpd") in linewith rates in similar wells in this reservoir within the Cleveland Basin.Operations have now been suspended until 1 October 2006 to comply with planningconditions. A further test will be undertaken at that time using acidstimulation to determine if commercial flows are achievable. Avington I am pleased to report renewed activity at the Avington oil discovery in WealdBasin licence PEDL070, operated by Star Energy Plc, following the protractedsale of the previous operator Pentex which had delayed the project. TheAvington-3 appraisal well has reached total depth and the well has been loggedand a liner set. A well test programme will now be undertaken using theoperator's work-over rig during the second quarter of the year. Future Planned Drilling Activity Further progress has been made on appraisal of the Company's internationalproject, the Grenade heavy oil accumulation in SW France, where seismicacquisition was undertaken in November 2005. Appraisal drilling and testing isexpected to take place later in 2006. Egdon has a number of other drill ready prospects on which drilling is plannedduring 2006 and 2007 subject to planning consent and rig availability. In Yorkshire Licence PEDL071, a planning application is being prepared for theFraisthorpe Prospect, where seismic was acquired during 2005. It is hoped todrill this Leman Sandstone prospect late in 2006. A planning application is also currently being finalised by the operator EuropaOil and Gas Plc for the Holmwood Prospect in Surrey, Licence PEDL143. In Dorset, where multiple prospects have been identified within the SherwoodSandstone, which is productive at the giant Wytch Farm oilfield located tenkilometres to the east of the Company's licences, progress is also being madetowards drilling a prospect in the next twelve months. Rig availability issues mean that the Tees Prospect, in offshore block 42/27where the Company has a 10% interest, is now likely to be a 2007 well. Developing Prospects for Future Growth Elsewhere, your Company is progressing evaluation of its exploration interestsin the Midlands and Weald basins to determine the next tranche of drillableprospects. At Nooks Farm in Staffordshire, where the Company has a 96% operatedinterest, we continue to review development options for gas-to-electricitygeneration on a proven gas accumulation. Outlook The latest phase of drilling activities has enabled your Company to maintain itsenviable exploration success record. The challenge now is to move thediscoveries that we have made at Waddock Cross, Avington, Grenade andKirkleatham into profitable production at the earliest opportunity. We hope to be coring salt at Portland-1 during April. A successful outcome tothis well will remove the main technical risks on the project and enable us tomove closer to submitting a planning application for this high value project. We believe that the second half of the year will continue to be exciting from anexploration perspective with drilling planned on the Fraisthorpe, Grenade,Holmwood and Tees prospects over the next twelve months. We thank you for your continued support. Philip Stephens Chairman 3 April 2006 CONSOLIDATED PROFIT AND LOSS ACCOUNTFor the six month period ended 31 January 2006 Six months Six months Year ended ended ended 31-Jan-06 31-Jan-05 31-Jul-05 £'000 £'000 £'000 Turnover 0 203 11Cost of Sales (2) (199) (10) Gross (Loss)/Profit (2) 4 1 Administrative expenses (418) (277) (533)Other Operating Income 118 0 81 Operating Loss (302) (273) (451)Interest receivable 64 19 73Interest payable 0 (42) (43) Loss on ordinary activities beforetaxation (238) (296) (421)Taxation on profit on ordinary activities 0 0 0 Loss on ordinary activities after taxation (238) (296) (421) Loss for the period retained (238) (296) (421) Earnings per share (p) (0.45) (0.74) (0.92) CONSOLIDATED BALANCE SHEETAs at 31 January 2006 31-Jan-06 31-Jan-05 31-Jul-05 £'000 £'000 £'000 Fixed AssetsIntangible assets 3,660 2,002 2,599Tangible assets 2 3 3 3,662 2,005 2,602 Current AssetsDebtors - amount falling due within oneyear 1,137 93 233Investments 5,082 0 2,045Cash at bank 1,257 3,708 903 7,476 3,801 3,181 Creditors - amount falling due within oneyear (716) (60) (106) Net Current Assets 6,760 3,741 3,075 Total Assets less current liabilities 10,422 5,746 5,677 Creditors - amounts falling due after morethan one year 0 0 0 Provision for liabilities and charges (263) (37) (93) 10,159 5,709 5,584 Capital and ReservesCalled up share capital 571 516 516Share premium account 8,626 3,868 3,868Profit and Loss account 962 1,325 1,200 Equity Shareholders' Funds 10,159 5,709 5,584 CONSOLIDATED CASHFLOW STATEMENTfor the six month period ended 31 January 2006 Six months Six months Year ended ended ended 31-Jan-06 31-Jan-05 31-Jul-05 £'000 £'000 £'000 Net cash flow from operating activities (425) (263) (477) Return on Investment and servicing of financeInterest received 64 19 73Interest paid 0 (42) (43) Net cash flow from returns on investmentsand servicing of finance 64 (23) 30 Tax Paid 0 0 0 Capital Expenditure and Financial InvestmentPayments for intangible fixed assets (1,061) (226) (823)Purchase of tangible fixed assets 0 0 (2)Disposal of tangible fixed assets 0 0 0Net cash flow from capital expenditure andfinancial investment (1,061) (226) (825) Net cash flow before use of liquidresources and financing (1,422) (512) (1,272) Management of liquid resources(increase) in short term deposits (3,037) 0 (2,045) FinancingRepayment of debentures 0 (350) (350)Issue of shares 4,999 4,500 4,500Costs associated with issue of shares (186) (482) (482) Net cash flow from financing 4,813 3,668 3,668 Increase in cash 354 3,156 351 RECONCILIATION OF OPERATING LOSS TO NET CASHFLOW FROM OPERATING ACTIVITIESfor the six month period ended 31 January 2006 Six months Six month Year ended ended ended 31-Jan-06 31-Jan-05 31-Jul-05 £'000 £'000 £'000 Loss for period (302) (273) (451) depreciation 1 1 3 movement in debtors (904) (22) (162) movement in creditors 610 23 68 movement in provisions 170 8 65 Operational cash flow (425) (263) (477) Notes to the Accounts 1) Interim accounts have been approved by the Directors and have beenprepared on the basis of the accounting policies set out in the 2005 AnnualReport and Accounts. The 31 July 2005 figures have been extracted from auditedaccounts and the audit report was unqualified. The profit and loss account hasbeen prepared on the basis that all operations are continuing operations. Thereare no recognised gains or losses other than those passing through the profitand loss account. New accounting standards introduced since the last annualreport was published have had no impact on the accounting treatment adopted inthe preparation of the interim accounts. 2) The results for the interim periods have not been subject to independentreview as defined in the Auditing Practices Board Bulletin 1999/4 and do notconstitute full accounts within the meaning of Section 240 of the Companies Act1985. 3) Administrative expenses include movements in the provision for NationalInsurance costs on the potential exercise of share options in existence at theperiod end. The provision at 31 January 2006 was £263,000 (31 July 2005:£93,000; 31 January 2005: £37,000). 4) Copies of the Interim Report will be posted to shareholders and will beavailable from the Company's office at Suite 2, 90-96 High Street, Odiham,Hampshire RG29 1LP. This information is provided by RNS The company news service from the London Stock Exchange