EDR.L Regulatory News (EDR)

30 Apr 2007 07:02

Egdon Resources PLC30 April 2007 For immediate release 30 April 2007 Egdon Resources Plc ("Egdon" or " the Company") Interim Results Egdon Resources Plc, the UK-based energy company primarily focused on thehydrocarbon-producing basins of the onshore UK, today announces its InterimResults for the six months ended 31 January 2007. The Company is listed on AIM under the code EDR. Operational Highlights Gas Storage • Planning applications and pipeline construction authorisation application submitted for Isle of Portland Gas Storage Project on 29 March 2007 • Project parameters confirmed as 1,000 million cubic metres capacity facility with injection/ withdrawal rates of 20 million cubic metres per day • Appointment of Penspen Limited as project managers for Front End Engineering Design and tendering of construction contracts • Planned demerger of gas storage business Oil & Gas Exploration • Acquisition of PEDL005 (Remainder) containing the shut-in Keddington Oil Field with work over and resumption of production planned for May 2007 • Anticipated production and/or testing of Kirkleatham, Avington and Waddock Cross during 2007 • Planning approval received for Burton Agnes-1 exploration well, anticipated summer 2007 spud • Further drilling activity anticipated at Avington, Grenade, Holmwood and Tees during 2007 • Currently hold 20 licences in UK and France Financial Highlights • Loss for period of £356,000 (2006: £238,000) • Loss per share for period of 0.58p (2006: 0.45p) • Completion of an institutional placing and exercise of Directors' options during October 2006 raising £11.85 million net of expenses • Debt free with strong cash position (Net funds as at 31 January 2007 £11.8 million; 31 January 2006: £6.3 million) Commenting on the results, Philip Stephens, Chairman of Egdon said: "I am pleased to report further progress in all areas of the business. A keyproject milestone has been achieved for the Isle of Portland gas storage projectwith the submission of the planning applications. With the recent acquisition ofthe Keddington Oil Field and plans for production at a number of our otherdiscoveries the Company is on track to see first production and revenues during2007. The planned demerger of the two underlying businesses of the Group willenable shareholders to benefit from the value creation of the oil and gasexploration planned for the coming months, in addition to allowing the storagebusiness to be financially independent, as its requirements for capitalincreases." "We look forward to another exciting period ahead." For further information please contact: Egdon Resources 01256 702292Andrew Hindle, Managing DirectorMark Abbott, Managing Director Seymour Pierce 020 7107 8000Jeremy Porter Buchanan Communications 020 7466 5000Ben WilleyAlastair Watson Chairman's Statement Overview The Company recorded a consolidated loss of £356,000 for the six months ended 31January 2007 (2006: £238,000). This equates to a loss per share for the periodof 0.58p compared to 0.45p for the six months ended 31 January 2006. The Company had net cash of £11.8 million as at 31 January 2007 (31 January2006: £6.3 million). During October 2006, your Company raised £11.85 millionafter expenses through a share placing of 6,315,790 new ordinary shares of 1peach at 190p and exercise of Directors' options, in order to fund the continuingcosts of our gas storage project and drilling and development activity withinthe oil and gas business. Proposed Demerger During the period your Company has continued to develop two distinct businesses:an oil and gas exploration and production business, focused on the UK onshore,and a gas storage business, initially focused on developing a salt cavern gasstorage facility in Dorset through the wholly-owned subsidiary Portland GasLimited. As previously reported your Board proposes to demerge these two distinctivebusinesses into two separate publicly-traded companies. The demerged companieswill provide a focused use of capital and management resources to maximiseshareholder value. I am able provide an update on progress with the demerger which will beundertaken via a scheme of arrangement under section 425 of the Companies Act1985. HMRC has given clearance under section 707 of the Income & Corporation Taxes Act 1988, and sections 138 and 139of the Taxation of Capital Gains Act 1992. Whilst the taxation aspects of thedemerger mechanism meet with approval, HMRC have confirmed a "return of value"would arise in relation to investors who subscribed under the terms of theEnterprise Investment Scheme in December 2004. To avoid adverse taxconsequences for this body of shareholders, it will not be practicable tocomplete the demerger before 21 December 2007, being the date falling threeyears after the Company's admission to AIM. The Directors currently intend tocomplete the demerger as soon as practicable on or after that date. Gas Storage I am pleased to report that a key project milestone has been achieved for theIsle of Portland gas storage project with the submission on 29 March 2007 of aseries of planning applications to Dorset County Council for the facilities anda pipeline construction authorisation application to the Department of Trade andIndustry. These submissions are the culmination of two years of effort by adedicated group of advisors and consultants. I am also pleased to report that anew Portland Gas website has been developed to provide further details of theproject for shareholders and other interested parties and to support theplanning consultation process. The website can be found at www.portland-gas.com. To ensure continued momentum with the project Portland Gas entered into aproject management contract with Penspen Limited ('Penspen') during December2006 to manage the Front End Engineering Design ('FEED') and tendering for theEngineering, Procurement and Construction ('EPC') of the proposed project. Themanagement team also includes representatives from other organisations who havebeen instrumental in developing the project design over the past 2 year, such asDEEP. Underground Engineering GmbH of Germany. N M Rothschild & Sons, thefinancial advisors to Portland Gas Limited, have continued to make progress inrespect to securing the project financing for the project. This ongoing activity and expenditure is being undertaken so that, assumingplanning consent is granted during the second half of 2007, construction couldcommence in the fourth quarter of 2007, first gas delivered from storage to theUK market in the winter of 2010 with full capacity being achieved during 2013. Oil and Gas Exploration I am also pleased to report continued progress in development of our oil and gasexploration and production business. The acquisition of the Keddington Oil Field in East Midlands will see yourCompany's first oil production this May following a planned work over of theKeddington-1z well. Further enhancements to the field are planned to maximiserevenues from the field over the coming years. The acquisition of Keddington is an indication of our current focus for the oiland gas business which is to develop a sustainable revenue stream. Progress hasbeen made on the development of the exploration successes made by the Companyduring recent drilling campaigns. Evaluation and feasibility studies have beencompleted on the Kirkleatham gas discovery with a view to producing first gasduring the winter of 2007. New seismic data has been acquired over the Avingtonoil discovery to define the path of the Avington-3 sidetrack which isanticipated to be drilled during 2007. Studies have also been completed on theWaddock Cross oil accumulation with a view to further production testing. At our French operations a rig has been secured to drill the Grenade-3 well inSW France towards the end of 2007. Grenade-3 and a subsequent contingenthorizontal sidetrack will appraise the Grenade heavy oil accumulation. I can also report that planning consent has been granted for the Burton Agnes-1exploration well in North Yorkshire. This well which will target a prospect withpotential for up to 56 billion cubic feet of gas ("Bcf") in place is nowexpected to be drilled during the summer of 2007. Egdon has a 25% carriedinterest in this well having farmed-out part of its interest during 2006. We await the outcome of the planning application for the Holmwood-1 explorationwell in licence PEDL143 located in Surrey, where Egdon holds a 38.4% interest ina well defined prospect located between known gas and oil accumulations. We alsoanticipate the drilling of our first offshore well on the Tees Prospect in RWEDea operated block 42/27. Outlook The outcome of the Isle of Portland planning applications during the second halfof 2007 will be a pivotal point in the development of the Company. Meanwhile weare continuing to progress the project in the coming months in anticipation thatfull planning permission will be granted, so that when that point is reached wecan start the construction phase of the project immediately. Our key focus in our oil and gas business is to move into production and revenueas soon as possible. This milestone will be achieved at Keddington shortly, andis expected to be followed by production at Kirkleatham towards the end of theyear. The coming year may also see the relinquishment of a number of non-prospectivelicences or part-licences in the UK as part of the normal exploration cycle. Assuch your Company will further look to strengthen its licence position through asignificant new-ventures focus designed to increase the exploration opportunitybase of the Company. By the end of 2007, we hope to have achieved the demerger into the two separateAIM listed companies with two viable businesses independent of each other. Weremain optimistic that our goals will be met and we thank you, our shareholdersfor your continuing support Philip Stephens Chairman 30 April 2007 Operations Review - Gas Storage Portland Gas Limited ('Portland Gas'), a wholly owned subsidiary of EgdonResources Plc, has reached a key project milestone with submission of planningfor the Isle of Portland gas storage project during March 2007. The project ison track, subject to a successful outcome to the planning applications, tobecome a significant part of the UK's gas infrastructure in the coming years. Portland Gas The distinctive nature of the gas storage business has been recognised and it isproposed to demerge Portland Gas in late 2007. The demerged gas storagebusiness, to be called Portland Gas Plc, will exploit opportunities for UK andinternational growth in addition to the construction of the Portland gas storagefacility. In advance of the demerger, a new board is currently being constructedfor Portland Gas Limited ('Portland Gas') with the skills to develop businessopportunities currently identified by the team in the gas storage andinfrastructure arena. The Isle of Portland Gas Storage Project Portland Gas Storage Limited, a wholly owned subsidiary within the Portland Gasgroup of companies, is seeking permission to build a natural gas storagefacility on Portland. The application also includes the infrastructure necessaryto take gas in and out of the National Grid. The project will comprise 14 caverns created within Triassic salt capable ofstoring 1,000 million cubic metres (35 billion cubic feet) of natural gas. Thefacility is being designed to enable the injection or withdrawal of gas at arate of 20 million cubic metres per day (0.7 billion cubic feet per day). Atthese rates the entire storage volume could be filled or emptied in 50 days andhave the capability when fully developed to provide up to 5% of the UK nationalgas demand on a winter's day. Portland Gas will be constructing a 37 kilometre,36 inches in diameter, pipeline connecting the Isle of Portland to the NationalGrid. The caverns will be operated under a constant pressure with gas in the cavernsbeing replaced by brine (saltwater) when it is withdrawn. The brine will bestored east of Dorchester, at Stafford Farm within a deep sandstone saltwateraquifer. An 18 kilometere plastic brine pipeline, 30 inches in diameter, will belaid within the gas pipeline trench for the southerly section of the route totransport the brine to and from the brine storage site. There will be a 9kilometre section across Weymouth Bay and the remainder of the pipeline routewill be trenched below farmland. Directional drilling will be used to place thepipeline deep below the ground under the most environmentally sensitive sites(for example below the Heritage Coast on the north side of Weymouth Bay). There are very few areas in the UK with suitable geology to develop a gasstorage facility. The site at Upper Osprey within Portland Port is wellpositioned to reach a thick salt layer shown to be suitable for the creation ofcaverns following the drilling of a borehole from the site in 2006. The site isbrownfield and not overlooked by any residential property on the Isle ofPortland. N M Rothschild & Sons as financial advisors to Portland are advising PortlandGas with the financing of the project. This will include securing storageoff-take agreements with customers (such as the major utilities, gas producers,financial institutions and traders). Portland Gas has secured a gas shipperlicence from Ofgem, the gas regulator, and is developing the in-house structuresand building the skills necessary to operate a gas storage facility safely andefficiently. Operations Review - Oil and Gas Egdon holds interests in twenty licences (ten operated) in the UK and France,located within proven oil and gas producing areas, containing a balance of oiland gas prospectivity. The Company has an active exploration, appraisal andfield development programme planned for the coming year. A key focus will be thedevelopment of a revenue stream via production from our recently acquired oilfield at Keddington and existing discoveries at Kirkleatham and elsewhere. Acquisition of the Keddington Oil Field The Company has completed the acquisition from Roc Oil (GB) Limited of LicencePEDL005 (Remainder), which incorporates the currently shut-in Keddington OilField, for consideration of £250,000 in cash. Production at Keddington is from a sandstone reservoir of Westphalian(Carboniferous) age at a depth of around 2,180 metres. The field has twoproduction wells, Keddington-1z, which is a pumped well which was producingaround 20 to 35 barrels of oil per day ("bopd") with 50- 60% water cut, andKeddington-2y which was free-flowing oil at 10-15 bopd along with up to 110,000cubic feet of gas per day. The field has produced a total of 173,000 barrels ofoil to date which represents only a small percentage of the mapped oil in place. A workover of the Keddington-1z well is due to commence in May 2007 to installnew tubing, rods and a deeper set pump to optimise pumped production from thiswell. At the same time Egdon will restore free-flowing production from theKeddington-2y well. Planned Drilling Activity during 2007 Burton Agnes-1 The Company has received planning consent for the drilling of the Burton Agnes-1well in its operated North Yorkshire Licence PEDL071. The well will target theFraisthorpe Prospect, a Permian Leman Sandstone prospect at a depth of around1800 metres located some 7 kilometres to the south of the Caythorpe gas field.The prospect is mapped as having potential for up to 56 billion cubic feet("Bcf") of gas in place. Egdon holds a 25% carried interest in the well which isanticipated to be drilled during the summer of 2007. Grenade-3 The Company, through its wholly owned subsidiary Egdon Resources (New Ventures)Ltd., has a 33.423% interest and operatorship of the St Laurent Permit in SWFrance. Here, a rig has been secured and detailed permitting is ongoing for thedrilling of the Grenade-3 well. This will comprise a pilot hole and a subsequenthorizontal sidetrack for production testing. This drilling activity, which isplanned for the fourth quarter of 2007, will appraise a heavy oil accumulation,discovered by Elf in 1975 when the Grenade-sur-Adour-1 well found a 97 metrecolumn of 10o API oil. Between 1976 and 1985 around 8,000 barrels of oil wererecovered from intermittent tests, the well being finally plugged and abandonedduring a period of low oil prices in 1985 Integration of proprietary 2D and 3D seismic data, acquired during 2005, withthe results of a study of core data, has enabled the definition of a largethree-way up-dip pinch-out of the reservoir on a low energy carbonate platform.Significant in place oil resources (independently reported at between 68 and 485 millions of barrels) have been mapped for Grenade. Avington-3z Egdon has a 20% interest in licence PEDL070 which contains the Avington oildiscovery. It is anticipated that the Avington-3 well, drilled during 2006, willbe side-tracked as a potential production well during the summer of 2007. Thefinal well location will be defined by interpretation of a 2D seismic surveyacquired over parts of the Avington prospect during 2006. Holmwood-1 Egdon holds a 38.4% interest in licence PEDL143 in the county of Surrey, whichholds the Holmwood Prospect. Holmwood is a robust anticlinal structure locatedbetween known gas and oil accumulations. Egdon Best Estimate ContingentResources of 16.6 Bcf have been independently reported. A planning applicationfor the well supported by an Environmental Impact Assessment and EnvironmentalStatement has now been submitted. Subject to a successful outcome to planning itis hoped that the Holmwood-1 well will be drilled during late 2007. Tees Prospect Egdon has a 10% non-operated interest in offshore block 42/27 which contains theTees Prospect. The Tees Prospect is a robust Leman Sandstone structural prospectidentified on proprietary 3D seismic data and mapped to contain Net Egdon BestEstimate Prospective Resources of 6 Bcf. A rig slot has been secured and thewell is planned to be drilled during the autumn of 2007. CONSOLIDATED PROFIT AND LOSS ACCOUNTFor the six months ended 31 January 2007 Six Six months months Year ended ended ended 31-Jan-07 31-Jan-06 31-Jul-06 £'000 £'000 £'000 Turnover 0 0 14Cost of sales 0 (2) (14) Gross profit 0 (2) 0 Administrative expenses (456) (418) (932)Other operating income 26 118 248 Operating loss (430) (302) (684)Interest receivable 74 64 165Interest payable 0 0 0 Loss on ordinary activities before taxation (356) (238) (519)Taxation on profit on ordinary activities 0 0 0 Loss on ordinary activities after taxation (356) (238) (519) Loss for the period retained (356) (238) (519) Earnings per share (p) (0.58) (0.45) (0.94) CONSOLIDATED BALANCE SHEETAs at 31 January 2007 31-Jan-07 31-Jan-06 31-Jul-06 £'000 £'000 £'000 Fixed assetsIntangible assets 9,973 3,660 8,284Tangible assets 8 2 3 9,981 3,662 8,287 Current assetsDebtors - amount falling due within one 253 1,137 1,038yearInvestments 10,812 5,082 1,506Cash at bank 962 1,257 387 12,027 7,476 2,931 Creditors - amount falling due within one (641) (716) (928)year Net current assets 11,386 6,760 2,003 Total assets less current liabilities 21,367 10,422 10,290 Creditors - amounts falling due after more 0 0 0than one year Provision for liabilities 0 (263) (412) 21,367 10,159 9,878 Capital and reservesCalled up share capital 655 571 571Share premium account 20,387 8,626 8,626Profit and loss account 325 962 681 Equity shareholders' funds 21,367 10,159 9,878 CONSOLIDATED CASHFLOW STATEMENTfor the six months ended 31 January 2007 Six Six Year months months ended ended ended 31-Jan-07 31-Jan-06 31-Jul-06 £'000 £'000 £'000 Net cash flow from operating activities (342) (425) (706) Return on investment and servicing of finance Interest received 74 64 165Interest paid 0 0 0 Net cash flow from returns on investments and 74 64 165servicing of finance Tax paid 0 0 0 Capital expenditure and financial investmentPayments for intangible fixed assets (1,689) (1,061) (5,326)Purchase of tangible fixed assets (6) 0 (2)Disposal of tangible fixed assets 0 0 0Net cash flow from capital expenditure and financial (1,695) (1,061) (5,328)investment Net cash flow before use of liquid resources and (1,963) (1,422) (5,869)financing Management of liquid resources(increase)/decrease in short term deposits (9,306) (3,037) 539 FinancingRepayment of debentures 0 0 0Issue of shares 12,325 4,999 4,999Costs associated with issue of shares (480) (186) (186) Net cash flow from financing 11,845 4,813 4,813 Increase/(decrease) in cash 576 354 (517) RECONCILIATION OF OPERATING LOSS TO NET CASHFLOW FROM OPERATING ACTIVITIESfor the six months ended 31 January 2007 Six months Six months Year ended ended ended 31-Jan-07 31-Jan-06 31-Jul-06 £'000 £'000 £'000 Loss for period (430) (302) (684) depreciation 1 1 2 amortisation 0 0 41 movement in debtors 785 (904) (805) movement in creditors (286) 610 422 movement in provisions (412) 170 318 Operational cash flow (342) (425) (706) NOTES TO THE ACCOUNTS 1. Interim accounts have been approved by the Directors' and have been prepared on the basis of the accounting policies set out in the 2006 Annual Report and Accounts. The 31 July 2006 figures have been extracted from audited accounts and the audit report was unqualified. The profit and loss account has been prepared on the basis that all operations are continuing operations. There are no recognised gains or losses other than those passing through the profit and loss account. New accounting standards introduced since the last annual report was published have had no impact on the accounting treatment adopted in the preparation of the interim accounts. 2. The results for the interim periods have not been subject to independent review as defined in the Auditing Practices Board Bulletin 1999/4 and do not constitute full accounts within the meaning of section 240 of the Companies Act 1985. 3. Administrative expenses include movements in the provision for National Insurance costs on the potential exercise of share options in existence at each period end. Following the exercise of options in October 2006 there were no options outstanding at 31 January 2007. The provision at 31 July 2006 and 31 January 2006 was £412,000 and £263,000 respectively. This information is provided by RNS The company news service from the London Stock Exchange