EDR.L Regulatory News (EDR)

25 Apr 2005 07:00

Egdon Resources PLC25 April 2005 Immediate release 25 April 2005 Egdon Resources Plc ("Egdon" or "the Company") Interim Results for the six month period ended 31 January 2005 Egdon Resources Plc (AIM:EDR), the independent UK-based oil and gas explorationcompany focused on the hydrocarbon-producing basins of the onshore UK andEurope, today announces its Interim Results for the six month period ended 31January 2005. Operational Highlights • Successful Placing and move to AIM in December 2004. • Participated in oil discoveries at Avington and Waddock Cross, which are currently under appraisal and are anticipated to be brought into production late in 2005. • Awarded seven new licences in the twelfth onshore licensing round. • Holds nineteen exploration licences containing fifty identified oil and gas prospects which cover a broad risk-reward spread. • Farmed-out an interest in the Grenade heavy oil field in SW France to a heavy oil specialist. • Entered the gas storage business, a rapidly emerging growth market within the UK oil and gas industry, via subsidiary Portland Gas Limited. Financial Highlights • Loss for period of £296,000 (2004: £97,000). • Debt free with a strong cash position (Net funds as at 31 January 2005: £3.7 million; 31 January 2004: £559,000). Commenting on the results, Egdon Chairman, Philip Stephens, said: "Egdon has moved into a new phase of its development and is now well capitalisedto continue exploration and appraisal drilling at our key sites in the UK. Thefarming out of the interest in St Laurent will also allow for progress to bemade on developing our French business. "We are pleased that institutions have supported Egdon through its Placing andtransfer from the OFEX market and we look forward to adding value to thebusiness through delivering the strategy outlined when we joined AIM." For further information please contact: Egdon Resources plcAndrew Hindle 020 7466 5000 (today)Mark Abbott 01256 702 292 (thereafter) Buchanan Communications 020 7466 5000Eric BurnsBen Willey Seymour Pierce Ltd 020 7107 8000Jonathan WrightJeremy Porter Chairman's Statement The period covered by these Interim Results was one of significant positivechange for Egdon. The Company converted to a PLC, undertook a successfulinstitutional placing and completed a move from OFEX to AIM. The Company hasconfirmed Waddock Cross as an oil discovery and enhanced its licence andprospect portfolio with success in the twelfth Landward Licensing Round.Subsequent to 31 January 2005, further progress has been made with the farm-outof an interest in the Grenade project in France and entry into the Gas Storagebusiness in Dorset. The Company now holds nineteen licences containing fiftyidentified oil and gas prospects and has an active appraisal and explorationdrilling campaign planned for 2005/2006. Financial Overview The Company recorded a consolidated loss of £296,000 during the six month periodto 31 January 2005 (six months to 31 January 2004: £97,000), having carriedexceptional costs associated with the conversion to a PLC and the move to AIMduring the period.During December 2004, an institutional placing of 16,666,666 ordinary shares wascompleted at a price of 30p per share, resulting in net proceeds of £4 million.The Company's shares began trading on AIM on 21 December 2004. The Company is debt free with a strong cash position of £3.7 million at 31January 2005 (2004: £559,000), enabling it to pursue its strategy through anactive programme of appraisal and exploration drilling as detailed below. Operational Overview UK A key short term priority for the Company is the commercialisation of theWaddock Cross and Avington oil discoveries. Following testing and an independent review during 2004, the Company has beenable to confirm Waddock Cross as an oil discovery and has initiated an activeappraisal programme. A twelve square kilometre 3D seismic survey is currentlybeing acquired and a planning application has been submitted for two horizontalappraisal wells, which, subject to planning consent, are expected to commencedrilling in the fourth quarter of 2005. Laboratory studies have determined thecause of the oil-water emulsion seen during testing and further well testing isbeing considered to test treatments for this problem to assist in the design ofthe production facilities and further enhance the value of the field. Egdon isthe operator of Waddock Cross with a 45% interest. At the Avington oil discovery in Hampshire, where Egdon holds a 20% interest,the ongoing sale process of the operator, Pentex, has further delayed drillingof the Avington-3 well. However, this delay has enabled a 2D seismic survey tobe acquired during early April 2005 to assist in planning future drilling. TheCompany now expects the well to be drilled during the summer. Avington-3 hasbeen designed to provide additional detailed reservoir data to reduce theuncertainties in the size of the accumulation and enable a suitable developmentto be planned. The Company anticipates production from both Avington and Waddock Cross during2005. The Company recognises the opportunities presented by deregulation of the gasand electricity markets and changes in the UK gas market as the UK changes to anet gas importer over the coming years. The Company has identified a number ofquality gas prospects, largely in northern England. The Company is anticipating an active drilling programme during the fourthquarter of 2005 in the North Yorkshire licence PEDL068 where Egdon hold a 20%interest. Planning permission has been granted and wells are planned atKirkleatham and Westerdale. Previous wells on both prospects have encounteredgas. Modern drilling, completion and reservoir management techniques will beapplied in an attempt to realise sustainable commercial gas flows. In PEDL071, a 2D seismic programme is planned for May 2005 to define a possibledrilling location on the Fraisthorpe Prospect. Egdon operates this licence witha 50% interest. In the Company's two offshore blocks, evaluation of 3D seismic data hasconfirmed the presence of the Tees Prospect, a robust structure in licence 42/27. The Company is currently reviewing its options and may look to farm-out partof its 10% interest in this well which is planned for 2006. With seven licence awards, Egdon was one of the big winners in the highlycompetitive twelfth UK Onshore Licensing Round. The Company now holds nineteenlicences in the producing basins of the onshore UK, UKCS and France covering agross area of 4,401 square kilometres. These licences contain fifty identifiedoil and gas prospects covering a broad risk spread, ranging from discoveriesunder appraisal through to higher risk but higher potential prospects. In Southern England, Egdon has identified a number of high potential oil and gasprospects. One such example is the Holmwood Prospect in twelfth round licencePEDL143 located in Surrey. Recognising its potential, the Company quickly movedto increase its interest from 20% to 38.4% by farming-in to the interest ofAltwood Petroleum Limited. Options for a well site are currently being pursuedand subject to planning it is hoped to drill this well in 2006. In Dorset, multiple prospects have been identified within the Sherwood Sandstoneplay which is productive at the giant Wytch Farm oilfield located ten kilometresto the east of the Company's licences. Planning permission will be sought todrill the Winfrith prospect which, being the closest to the Wytch Farm oilfield,is considered to have the lowest risk. The chance of finding oil in the largerprospects to the west, such as Casterbridge, would be significantly increased bysuccess at Winfrith. Egdon holds a 45% interest in these prospects. Elsewhere, the Company is progressing evaluation of its exploration interests inthe Midlands and Weald basins to determine the next tranche of drillableprospects. At Nooks Farm in Staffordshire, where the Company has a 96% operatedinterest, we are reviewing development options for gas-to-electricity generationon a proven gas accumulation. France In France, the Company has decided to progress development of the Grenade heavyoil accumulation by bringing in a partner company with relevant expertise. Aswas announced on 6th April 2005 the Company has farmed-out 22% of its interestin the St Laurent Licence to Masefield Energy Holdings AG, a company withmanagement experience and access to proprietary technology in heavy oiloperations. Masefield has funded work to determine the feasibility of producingand marketing the crude from the potentially significant resource mapped atGrenade. The Company has applied to renew the St Laurent Licence for a furtherthree years and will relinquish the less prospective areas of the block. Oncompletion of the farm-out, Egdon will own a 33.4% operated interest. Gas Storage Whilst the Company will continue to focus its main effort on onshore UKexploration, it will also look to leverage its expertise into other areas wherethe management see value. Following a review of the gas storage market in theUK, the Company has decided to pursue this emerging growth business within theUK oil and gas industry as part of its wider business plan. As announced on 21stApril 2005, the Company, through a wholly owned subsidiary Portland Gas Limited("PGL"), has entered into an agreement for a five hectare 'brownfield' site onthe Isle of Portland in Dorset where the Company has identified a salt sequencesuitable for the creation of cavities to store natural gas. Following an initial 18 month period, PGL has an option to convert to a fifteenyear lease, with further options to extend to a maximum of 90 years. PGL willhave exclusive rights to store natural gas below the land owned by Portland PortLimited. During the initial eighteen month period, a confirmatory well will bedrilled to define the properties of the salt, further detailed geological,engineering and economic modelling will be undertaken, the facilities will bedesigned and permissions and consents obtained for the project. Drilling isexpected to take place in the last quarter of 2005, conditional on planningconsent, whilst acquisition of a seismic line, to confirm the subsurfacelocation of the well, is planned for May 2005. PGL's business model is to buy and store gas during periods of low demand whenprices are lower and then sell it on when demand and prices are higher. Suchprice differentials occur both on seasonal and shorter cycles. With suppliesincreasingly coming from further afield, gas storage facilities look set tobecome a vital resource in the UK gas supply marketplace. It is currentlyanticipated that the initial working volume will be between ten and twentybillion cubic feet and the first cavity on the site could become operational in2008. Outlook The Company has an enviable exploration success record with oil discoveriesbeing made in two out of the three wells it has participated in to date. Thechallenge now is to continue this record of exploration success as we embark onan accelerated phase of exploration drilling and to move the discoveries atWaddock Cross and Avington into profitable production during 2005. We thank you for your continued support and look forward with confidence andanticipation to the coming months. Philip StephensChairman 25 April 2005 Consolidated Profit and Loss AccountFor the six month period ended 31 January 2005 Six months Six months Year ended ended ended 31 January 31 January 31 July 2005 2004 2004 £000 £000 £000 ------------------------ ---------- ---------- ---------- Turnover 203 61 33 Cost of sales (199) (10) (37) ---------- ---------- ----------Gross profit 4 51 (4) Other operating income 0 0 36Administrative expenses (277) (138) (252) ---------- ---------- ---------- Operating loss (273) (87) (220)Interest payable (42) (14) (35)Interest receivable 19 4 9 ---------- ---------- ----------Loss on ordinary activities beforetaxation (296) (97) (246)Taxation on profit on ordinary activities 0 0 0 ---------- ---------- ----------Loss on ordinary activities after taxation (296) (97) (246) ---------- ---------- ----------Loss for the period retained (296) (97) (246) ---------- ---------- ---------- ---------- ---------- ----------Earnings per share (p) (0.74) (0.29) (0.72) ---------- ---------- ---------- Consolidated Balance SheetAs at 31 January 2005 31 January 31 January 31 July 2004 2004 2004 £000 £000 £000 ------------------------ ---------- ---------- ---------- Fixed assetsIntangible assets 2,002 1581 1,776Tangible assets 3 5 4 ---------- ---------- ---------- 2,005 1586 1,780 ---------- ---------- ----------Current assetsDebtors: Amount falling due within oneyear 93 177 71 ---------- ---------- ---------- Cash at bank and in hand 3,708 559 552 ---------- ---------- ---------- 3,801 736 623 Creditors: amounts falling due withinone year ---------- ---------- ---------- (60) (778) (387) ---------- ---------- ---------- Net current assets 3,741 (42) 236 ---------- ---------- ---------- Total assets less current liabilities 5,746 1544 2,016 Creditors: amounts falling due after morethan one year 0 0 0 Provision for liabilities and charges (37) (35) (29) ---------- ---------- ---------- 5,709 1509 1,987 ---------- ---------- ---------- Capital and reservesCalled up share capital 516 330 366Share premium account 3,868 1951 2,543Profit and loss account 1,325 (772) (922) ---------- ---------- ----------Equity shareholders' funds 5,709 1509 1,987 ---------- ---------- ---------- Consolidated Cashflow Statementfor the six month period ended 31 January 2005 Six Six Year months months ended ended ended 31 31 31 January January July 2005 2004 2004 £000 £000 £000 ------------------------ ---------- ---------- ---------- Net cash outflow from operating activities (263) 204 (218) ---------- ---------- ---------- Returns on investments and servicing of financeInterest paid (42) (14) (35)Interest received 19 4 9 ---------- ---------- ----------Net cash outflow from returns oninvestmentsand servicing of finance (23) (10) (26) ---------- ---------- ---------- Tax paid 0 0 0 ---------- ---------- ---------- Capital expenditure and financialinvestmentPurchase of intangible fixed assets (226) (312) (508)Purchase of tangible fixed assets 0 0 (1)Disposal of tangible fixed assets 0 0 0 Net cash outflow from capital expenditureand financial investment ---------- ---------- ---------- (226) (312) (509) ---------- ---------- ---------- FinancingRepayment of borrowings (350) 0 0Issue of shares, net of costs 4,018 15 643 ---------- ---------- ----------Net cash inflow from financing 3,668 15 643 ---------- ---------- ---------- ---------- ---------- ----------Increase/(decrease) in cash 3,156 (103) (110) ---------- ---------- ---------- Reconciliation of Operating Loss to Net Cashflow from Operating Activities for the six month period ended 31 January 2005 Six months Six months Year ended ended ended 31 January 31 January 31 July 2005 2004 2004 £000 £000 £000 ------------------------ ---------- ---------- ---------- Loss for Period (273) (87) (220)Depreciation 1 2 4Movement in Debtors (22) (82) 24Movement in Creditors 23 371 (20)Movement in Provisions 8 0 (6) ---------- ---------- ----------Operational Cashflow (263) 204 (218) ---------- ---------- ---------- Notes to Accounts: 1. Interim accounts have been prepared on the basis of the accountingpolicies set out in the 2004 Annual Report and Accounts. The 31 July 2004figures have been extracted from audited accounts and the audit report wasunqualified. 2. The results for the interim periods have not been subject toindependent review as defined in the Auditing Practices Board Bulletin 1999/4and do not constitute full accounts within the meaning of Section 240 of theCompanies Act 1985. 3. During the six months to 31 January 2005 the group successfully appliedto have its share premium account cancelled in favour of its Profit and LossAccount as follows; £'000 Profit and Loss account at 31 July 2004 (922)Cancellation of share premium 2,543Loss for six months to 31 January 2005 (296)Profit and Loss account at 31 January 2005 1,325 4. The creditor figures at 31 January 2004 and 31 July 2004 includeconvertible debt of £ 350,000. 5. Copies of the Interim Results will be posted to shareholders and willbe available from the Company's office at Suite 2, 90-96 High Street, Odiham,Hampshire, RG29 1LP, UK. This information is provided by RNS The company news service from the London Stock Exchange