EDR.L Regulatory News (EDR)

30 Apr 2008 07:01

Egdon Resources PLC30 April 2008 For Immediate Release 30 April 2008 EGDON RESOURCES PLC ("Egdon" or "the Company") Interim Results for the six months ended 31 January 2008 Egdon Resources plc, the UK-based exploration and production company primarilyfocused on the hydrocarbon-producing basins of the onshore UK, today announcesits Interim Results for the six months ended 31 January 2008. The Company is listed on AIM under the code EDR. Overview and Highlights Operational Highlights • First sustained production from the Keddington oil field • Extended well test completed on Avington-3z well with further test production and appraisal planned during 2008 • Acquisition of four licences from Stag Energy Limited including PEDL118 containing the Eakring-Dukes Wood abandoned oil field which is scheduled for rejuvenation • Portfolio of 21 licences in UK and France • New licence applications pending in UK onshore and France • Wells drilled at Burton Agnes-1, Grenade-3 and Tees Prospect during the period Financial and Corporate Highlights • Successful admission of "new" Egdon Resources plc to AIM on 17 January 2008, following demerger of Gas Storage business, Portland Gas plc • First revenues from oil production received in the period totalling £758,000 (2007 - nil) • Loss for period from continuing operations (after demerger expenses of £420,000 and dry-well write-offs of £1,000,000) of £1,494,000 (2007: £247,000) • Loss per share from continuing operations for period of 2.23p (2007: 0.40p) • Completion of an institutional placing during September 2007 to raise £4.8 million net of expenses with £4.0 million for Portland Gas • Net funds as at 31 January 2008 £3.3 million (31 January 2007: £11.8 million) Commenting on the results, Philip Stephens, Chairman of Egdon said "I am pleased to be able to report the successful completion of the demerger andmost importantly our first significant revenue producing period. Egdon has thepotential to build an exciting portfolio in the UK and mainland Europe, which inthe medium term we expect to provide good shareholder returns. We look forwardto the future with confidence." For further information please contact: Egdon Resources plc 01256 702292Mark Abbott Managing Director Buchanan Communications 020 7466 5000Ben Willey, Nick Melson, Miranda Higham Nominated Adviser and Broker - Seymour Pierce 020 7107 8000Jonathan Wright, Sarah Jacobs Chairman's Statement Overview The period covered by these results saw the successful listing on 17 January2008 of Egdon Resources plc as a new focused Exploration and Production businessfollowing the demerger of Portland Gas plc. This demerger provides clear focuson the two distinct business units which had developed within Egdon sincelisting on AIM in December 2004. During this time the Company's strategy addedsignificant shareholder value and we now look forward to developing furthervalue as a stand-alone onshore European E&P business. Although technically the Company was only incorporated on 25 October 2007 andonly received a certificate allowing it to trade on 7 November 2007, itinherited every aspect of the former holding company of the Egdon group exceptthe Gas Storage business, which in turn was inherited by Portland Gas plc. Thisinterim statement has therefore been prepared on the basis that the two parts ofthe business were separate over the reporting period. However caution should beexercised in interpreting comparisons with the previous year. Financial The Company recorded a consolidated loss from continuing operations of£1,494,000 for the six months ended 31 January 2008 (2007: £247,000). Thisfigure includes one-off demerger costs of £420,000 and a write-down of£1,000,000 associated with unsuccessful exploration drilling during the period.This equates to a loss per share for continuing operations for the period of2.23p compared to 0.40p for the six months ended 31 January 2007. During September 2007 the former holding company of the Egdon group (essentiallythe Company when it included Portland Gas plc) placed 2,325,582 shares at aprice of 215p per share to raise £4.8 million net of expenses, £4.0 million ofwhich was to fund Portland Gas. An additional 10,494 shares were issued as partof the acquisition of the onshore assets of Stag Energy Limited during October2007. Upon the demerger of the former holding company of the Egdon group intothe Company and Portland Gas plc, shareholders received one share in each of theCompany and Portland Gas plc for every share they held in the former holdingcompany. Accordingly at demerger 67,801,840 shares in the Company were issuedand as at 31 January 2008 the same number of shares were in issue. The six month period covered by these results also saw the Company's firstsustained oil production. Oil sales from the Keddington oil field during theperiod totalled 6,147 barrels. In addition oil sales over a six month well testof the Avington-3z well totalled 12,240 barrels net to Egdon. Total revenuesfrom oil sales during the period were £758,000 (2007: nil). The Company had net cash of £3.3 million as at 31 January 2008 (31 January 2007:£11.8 million). Operations Progress has been made in a number of areas of Egdon's portfolio during theperiod. Egdon operated Keddington oil field, which was acquired from Roc Oil duringMarch 2007, and is located to the east of Louth in Lincolnshire, was restored toproduction in June 2007 following a workover and re-completion of theKeddington-1z well. This well has produced around 40 barrels of oil per day("bopd") with associated gas during the period. In January 2008 production wasrestarted from the Keddington-2y well. This well is flowed on a three to fiveday cycle and produces 40-45 barrels of oil during vent-down. This has increaseddaily field production at Keddington to around 50 bopd. A full technical evaluation of the field is currently ongoing with the objectiveof identifying opportunities for additional drilling to increase the currentproduction levels and total field recovery. Planning consent is already in placefor additional wells and as such drilling could commence early in 2009. A six month production test was undertaken during the period on the Avington-3zwell, where Egdon holds a 20% interest. Avington-3z was completed as ahorizontal production well in the Great Oolite reservoir, with drillingoperations completed during July 2007. After an initial period of free-flowproduction, which produced 28 degree API oil at rates of up to 470 bopd, thewell was completed with a jet-pump for a prolonged period of pumped testproduction. The Avington-3z well is currently shut-in. Approvals are beingsought by the operator Star Energy Limited to put the Avington-3z and -2z wellsback onto test production through enhanced facilities and also for the drillingof two further appraisal wells. It is anticipated that test production couldre-commence during the summer of 2008. During October 2007, the Company completed the acquisition from Stag EnergyLimited of 100% interests in four licences in the East Midlands. Theconsideration for the acquisition was £100,000 in cash and 10,494 shares. Inaddition Egdon has granted a Gross Overriding Royalty of 5% of future productionfrom the licences. This acquisition adds significant acreage to a core area and has the potentialto add material reserves. One of the licences contains the Eakring-Dukes Woodabandoned oil field which produced from 1940 until 1966. The Company believesthere is potential to rejuvenate the field to take advantage of increased oilprices, improved technology and the recognition of undrilled and undrained partsof the field. The Eakring-Dukes Wood abandoned oil field was discovered in 1939and extensively drilled and produced during the second world war, whenproduction peaked at 1,600 bopd in 1941. Production was from a number of stackedshallow sandstone reservoirs of Carboniferous age. Planning approval is in place for the drilling of the Eakring North prospect andplanning is being sought at an additional site on the main Dukes Wood anticline.The Department for Business, Enterprise and Regulatory Reform ("DBERR") hasgranted an extension to the first term of the licence to enable a well to bedrilled on the prospect during the last quarter of 2008. Progress has been made during the period in negotiations for a gas salesagreement for production from the Kirkleatham gas discovery in the operatedlicence PEDL068 where the Company holds a 20% interest. It is hoped to concludean agreement during the first half of 2008 to enable development to progress. Aspreviously reported Kirkleatham has the potential for conversion into a gasstorage facility. The Westerdale-1 well has been plugged and abandoned and the site restoredduring the period. The Westerdale-1 well proved a separate northern closure tothe Ralph Cross gas accumulation proven by the Ralph Cross-1 well drilled andtested by Home Oil in 1966. A site has been identified for a possibleWesterdale-2 well to test the main part of the Ralph Cross gas accumulation andprogress is being made with a view to submitting a planning application possiblylater this year. The Company has participated in the drilling of three wells during the period,two of which are in the UK and the other in South-West France. The Burton Agnes-1 Exploration well in the Company's operated licence PEDL071,located in East Yorkshire, where Egdon holds a 25% interest, reached 2,290metres measured depth on 17 December 2007. The primary reservoir target, theLeman Sandstone, was water wet and zones of gas shows observed within theZechstein carbonates were not considered worth testing. The well confirmed thepresence of thick, good quality Leman sandstone reservoir and a viable petroleumsystem but showed the area to be more complex than the pre-drill view. TheBurton Agnes-1 well has been suspended to provide the option to sidetrack to amore elevated part of the structure once the ongoing post-well evaluation iscompleted and we remain encouraged by the potential for the area. Egdon's costsin the well were carried by other participants. The Tees Prospect exploration well where the Company holds a 10% interestreached a depth of 3,238m on 31 December 2007. The well, operated by RWE Dea UKLimited, and located approximately 20 kilometres south-east of Flamborough Head,was targeting the Tees Prospect, a Lower Permian Leman Sandstone structuralclosure mapped on proprietary 3D seismic data. The primary Leman Sandstonetarget was penetrated close to prognosis with minor gas shows but the sandsencountered were water bearing. There were also good indications of gas within a25m sandstone in the Carboniferous interval but following log evaluation thesewere not considered worth testing. As such the well has been plugged andabandoned and a write-down of £1,000,000 has been made in respect of thislicence. Post-well analysis is currently ongoing and a decision on theselicences is expected later in the year. The Grenade-3 well in the St Laurent Permit of SW France where the Company holdsa 33.423% operated interest reached a total depth of 2,310 metres on 10 February2008. The target "Vraconian" limestone interval was penetrated 21m up-dip of theGrenade-1 oil discovery well. However, coring and logging indicated that thetarget interval had no effective porosity and was therefore not hydrocarbonbearing. The well has defined the eastern limit of reservoir development withinthe structure with potential still existing to the west and south around theGrenade-1 well and also northwards towards the Maurrin-1 well. The well has beensuspended to retain the option to target other areas of the Grenade prospect viaa sidetrack, pending the outcome of detailed post-well technical and commercialevaluation. Further technical work during the period has enabled the definition of theAudignon Prospect, a multi-TCF Triassic sub-salt gas prospect within the StLaurent Permit. As part of the normal exploration cycle a number of licences have come to theend of their term and been relinquished during the period. Promote licence P1296covering block 15/7 in the outer Moray Firth was surrendered during the period.In the Weald Basin all of PEDL110 and most of PEDL069 have also beenrelinquished. That part of PEDL069 which contains the potential extension of theAvington oil accumulation has been retained. Your Board recognises the need to replenish and widen its opportunity base asnon-prospective licences and areas within its existing portfolio arerelinquished. As such I can report that Egdon has been active in the longawaited UK 13th Landward Licensing Round having made a number of applications inand around our areas of focus. It is anticipated that awards will be announcedby DBERR in the summer and we will provide an update at that time should any ofour applications be successful. Egdon has identified France as an area for potential growth. The Company hasbeen evaluating a number of opportunities and currently has two applicationspending. It is expected that further applications will be made during 2008. Outlook The strategy for the future is to remain focused on oil and gas exploration andproduction in the onshore UK and mainland Europe. The Company currently has operated production and revenues from the Keddingtonoil field where it looks to progress plans for infill drilling. Egdon also awaitfurther test-production from the Avington oil discovery. In addition there is aprogramme of field appraisal and developments planned for 2008 at theKirkleatham gas discovery, the Eakring- Dukes Wood oil field and the WaddockCross oil discovery and during the year decisions will be taken on furtherdrilling at both Burton Agnes and Grenade. Conditional upon planning, exploration wells are planned for the fourth quarterof 2008 at Holmwood and Winfrith. Egdon also awaits the outcome of licenceapplications in the onshore UK and onshore France. Your Board recognises the challenges of developing and growing the oil and gasbusiness to a more material size as an independent entity following thesuccessful demerger of the Gas Storage business, and continues to review variousoptions to achieve this. We look forward to a further year of progress and thank our shareholders fortheir continued support. Philip StephensChairman30 APril 2008 EGDON RESOURCES PLCCONSOLIDATED INCOME STATEMENTFor the six months ended 31 January 2008 Notes Unaudited Unaudited Unaudited Six months Six months Year ended ended ended 31-Jan-08 31-Jan-07 31-Jul-07 £'000 £'000 £'000Continuing operationsRevenue 758 0 41Cost of sales : Write-down ofexploration costs (1,000) 0 0Cost of sales: other (736) 0 (53)Total cost of sales (1,736) 0 (53) Gross (loss) (978) 0 (12) Administrative expenses (780) (345) (635)Other operating income 146 26 59 --------- --------- --------Operating loss (1,612) (319) (588) Financial income 118 72 260 --------- --------- --------Loss before taxation (1,494) (247) (328)Taxation 0 0 0 --------- --------- --------Loss on ordinary activities aftertaxation (1,494) (247) (328) --------- --------- --------Loss from discontinued operations 5 (798) (109) (209) --------- --------- --------Loss for the period retained (2,292) (356) (537) --------- --------- -------- --------- --------- -------- EGDON RESOURCES PLCCONSOLIDATED BALANCE SHEETAs at 31 January 2008 Notes Unaudited Unaudited Unaudited 31-Jan-08 31-Jan-07 31-Jul-07 £'000 £'000 £'000 Non-current assetsIntangible assets 5,553 9,973 14,735Plant and equipment 526 8 147 --------- --------- ---------Total non-current assets 6,079 9,981 14,882 Current assetsInventory 26 0 24Trade and other receivables 2,069 253 640Available for sale financialassets 50 0 0Cash and cash equivalents 6 3,341 11,774 7,900 --------- --------- ---------Total current assets 5,486 12,027 8,564 Current liabilitiesTrade and other payables (2,180) (641) (2,015) --------- --------- ---------Net current assets 3,306 11,386 6,549 --------- --------- ---------Total assets less currentliabilities 9,385 21,367 21,431 Non-current liabilities --------- --------- ---------Decommissioning provision (247) 0 (246) --------- --------- --------- 9,138 21,367 21,185 --------- --------- ---------Shareholders' fundsShare capital 3,7 6,780 655 655Merger reserve 7 0 20,387 20,387Retained earnings 7 2,358 325 143 --------- --------- --------- 9,138 21,367 21,185 --------- --------- --------- EGDON RESOURCES PLCCONSOLIDATED CASHFLOW STATEMENTfor the half year ended 31 January 2008 Notes Unaudited Unaudited Unaudited Six months Six months Year ended ended ended 31-Jan-08 31-Jan-07 31-Jul-07 £'000 £'000 £'000 ------ --------- --------- --------Loss from Operations (2,292) (356) (537) Adjustments for:Depreciation and impairment ofproperty plant and equipment 1,108 1 17(Increase)/decrease in trade andother receivables (1,859) 785 397Increase in inventory (2) 0 (24)Increase in trade payables 1,376 (286) (446)Increase in provisions 1 (412) (167)Interest Income (247) (74) (403) ------ --------- --------- --------Net cash flow from OperatingActivities (1,915) (342) (1,163) Investing Activities Interest received 5 247 74 403Payments for intangible fixedassets 5 (3,882) (1,690) (4,917)Purchase of plant and equipment 5 (59) (6) (161)Purchase of financial assets 5 (100) 0 0Demerger of subsidiary 4 (3,650) 0 0 ------ --------- --------- --------Net cash flow from investingactivities (7,444) (1,622) (4,675) Financing Activities Issue of shares 5,000 12,325 12,325Costs associated with issue ofshares (200) (480) (480) ------ --------- --------- --------Net cash flow from financing 4,800 11,845 11,845 Net (increase)/decrease in cashand cash equivalents (4,559) 9,881 6,007Cash and cash equivalents as at 1August 2007 7,900 1,893 1,893 ------ --------- --------- --------Cash and cash equivalents as at 31January 2008 3,341 11,774 7,900 ------ --------- --------- -------- NOTES TO THE INTERIM RESULTS for the six months ended 31 January 2008 1. General information Egdon Resources plc ('the Company' and ultimate parent of the Group) is a publiclimited company listed on the AIM market of the London Stock Exchange plc (AIM)and incorporated in England. The registered office is Suite 2 90-96 High Street,Odiham, Hampshire, RG29 1LP. This interim report was authorised for issue by the directors on the 30 April2008. Accounting policies The principal accounting policies are summarised below. They have been appliedconsistently throughout the period covered by this interim report. Basis of preparation Egdon Resources plc, an AIM listed entity, adopted International FinancialReporting Standards (IFRS) and IFRIC Interpretations expected to be effective inJuly 2008 as the basis for preparation of its financial statements from the 1August 2007, with a date of transition of 1 August 2006. The financialinformation has been prepared under the historical cost convention as modifiedby the revaluation of certain financial assets, in accordance with applicableAccounting Standards and the Statement of Recommended Practice: Accounting forOil and Gas Development production and Decommissioning Activities published bythe Institute of Petroleum on behalf of the U. K. Oil Industry AccountingCommittee ("the SORP"). The Group has not presented reconciliations of UK GAAPto IFRS as required by IFRS1, 'First time adoption of International FinancialReporting Standards' as there are no material reconciling items. Non-statutory accounts The unaudited results contained in this document do not constitute statutoryaccounts as defined in Section 240 of the Companies Act 1985. Copies of thestatutory accounts of the relevant Group companies, which were prepared under UKGAAP, for the year ended 31 July 2007 have been delivered to the Registrar ofCompanies. The audit reports on those accounts were unqualified, did not includereferences to any matters to which the auditors drew attention by way ofemphasis without qualifying their reports and did not contain a statement underSections 237(2)-237(3) of the Companies Act 1985. The first statutory accountsfor Egdon Resources plc will be in respect of the period ended 31 July 2008. Critical accounting judgements and key sources of estimation uncertainty The preparation of financial statements in conformity with generally acceptedaccounting practice requires management to make estimates and judgements thataffect the reported amounts of assets and liabilities as well as the disclosureof contingent assets and liabilities at the balance sheet date and the reportedamounts of revenues and expenses during the reporting period. Estimates and judgements are continually evaluated and are based on historicalexperience and other factors, including expectations of future events that arebelieved to be reasonable under the circumstances. Basis of consolidation The financial information incorporates the financial information of the Companyand entities controlled by the Company. Control is achieved where the Companyhas power to govern the financial and operating policies of an investee entityso as to obtain benefits from its activities. NOTES TO THE INTERIM RESULTS for the six months ended 31 January 2008 Business combinations and goodwill On acquisition, the assets and liabilities and contingent liabilities ofsubsidiaries are measured at their fair values at the date of acquisition. Anyexcess of cost of acquisition over the fair values of the identifiable netassets acquired is recognised as goodwill. Any deficiency of the cost ofacquisition below the fair values of the identifiable net assets acquired (i.e.discount on acquisition) is credited to the income statement in the period ofacquisition. Goodwill arising on consolidation is recognised as an asset andreviewed for impairment at least annually. Any impairment is recognisedimmediately in the income statement and is not subsequently reversed. With effect from 16 January 2008 a new parent company was introduced to theGroup via a share for share exchange between the new parent company EgdonResources plc and the former parent company Egdon Resources U.K. Limited. The introduction of a new holding company does not result in the addition of anynew businesses to the group, and as such it falls outside of the scope of IFRS3. Therefore, it has been accounted for using merger accounting principles. As aresult, although the group reconstruction did not become effective until January2008, the consolidated financial statements of Egdon Resources plc are presentedas if Egdon Resources plc and its subsidiaries had always been part of the samegroup. Accordingly, the financial information for the current period has beenpresented, and that for the prior periods restated, as if the subsidiaries hadbeen owned by Egdon Resources plc throughout the current and comparativeaccounting periods. The results for the period ended 31 January 2007 and the year ended 31 July 2007incorporate the results of Egdon Resources U.K. Limited and its subsidiaries forthe relevant periods. The results for the period ended 31 January 2008incorporate the results of Egdon Resources U.K. Limited for the six months ended31 January 2008, or the period to the date of disposal as appropriate and theresults of Egdon Resources plc from the 25 October 2007 to 31 January 2008. Revenue Revenue represents amounts receivable for oil sales net of VAT and tradediscounts and is recognised as the goods are provided. Income charged to other companies by the Group, net of VAT, in respect of feesfor acting as Operator is disclosed within Other operating income. Consortium accounting The Group's exploration and development activities are generally conducted asco-licensee in joint operation with other companies. The financial statementsreflect the relevant proportions of capital expenditure and operating costsapplicable to the Group's interest. Oil and gas interests The Group financial statements for oil and gas exploration have been prepared onthe full cost basis as set out in the SORP. Licence acquisition costs, geological and geophysical costs, costs of drillingexploration, appraisal and development wells, and an appropriate share ofoverheads (including appropriate Director's costs) are capitalized andaccumulated in full cost pools within property, plant and equipment on ageographical basis. Costs relating to the exploration and appraisal of oil and gas interests whichthe Directors consider to be unevaluated are initially held outside the costpool as intangible assets. These costs are reassessed at each year end and whenthere are indications of impairment or at the conclusion of an appraisalprogramme the related costs are transferred to the full cost pool withinproperty, plant and equipment. The Group's oil and gas assets, currently shownin intangible assets, would be held in two cost pools, the UK and France. An impairment test is carried out at each balance sheet date to assess whetherthe net book value of the capitalized costs in each pool is covered by theassociated recoverable amount. Impairment losses are recognized in the incomestatement. Depletion is provided on balances held in each pool, plus the expected futurecosts to extract all commercial oil and gas reserves, using the unit ofproduction method. (Commercial oil and gas reserves are proven and probable oiland gas reserves as defined in the SORP). Depletion is not provided on interestsheld outside the cost pool. For material interests, reserve data supplied byoperators is used. Depreciation of plant and equipment Plant and equipment is stated at cost less depreciation. Depreciation isprovided at rates calculated to write off the cost less estimated residualvalues of each asset over its expected useful life, as follows:- Plant and equipment 20% straight lineFixtures and fittings 25% straight lineComputer equipment 33% straight line Decommissioning provision and asset Licensees have an obligation to restore producing fields to a conditionacceptable to the relevant authorities at the end of their commercial lives.Such provisions represent the Group's share of the estimated liability for costswhich will be incurred in removing production facilities at the end ofcommercial production from the field. Where the time value of money is material,the provision made in the financial statements is for the present value of theestimated future costs. A corresponding asset is also created for the amountequal to the provision when it is first made in the financial statements. Thisasset is subsequently depleted as part of oil and gas assets in accordance withthe depreciation and depletion policy applied to such assets. The increase inthe net present value of the future cost is included within finance costs. Foreign currencies Transactions denominated in foreign currencies are translated into sterling atthe rate of exchange ruling at the date of the transaction. Monetary assets andliabilities in foreign currencies are translated into sterling at the rate ofexchange ruling at the end of the financial year. All exchange differences aredealt with in the income statement. Financial instruments Financial assets and financial liabilities are recognised on the balance sheetwhen the Group becomes a party to the contractual provisions of the instrument. Trade and other receivables are measured at initial recognition at fair value,and are subsequently measured at amortised cost using the effective interestmethod. A provision is established when there is objective evidence that theGroup will not be able to collect all amounts due. The amount of any provisionis recognised in the income statement. Cash and cash equivalents comprise cashheld by the Group and short-term bank deposits with an original maturity ofthree months or less. Trade and other payables are initially measured at fair value, and aresubsequently measured at amortised cost, using the effective interest ratemethod. Financial liabilities and equity instruments issued by the Group are classifiedin accordance with the substance of the contractual arrangements entered intoand the definitions of a financial liability and an equity instrument. An equityinstrument is any contract that evidences a residual interest in the assets ofthe Group after deducting all of its liabilities. Equity instruments issued bythe company are recorded at the proceeds received, net of direct issue costs. Interest bearing bank loans, overdrafts and other loans are recorded at theproceeds received, net of direct issue costs. Finance costs are accounted for on an accruals basis in theincome statement using the effective interest method. Available for sale assets are those non-derivative financial assets that aredesignated as available for sale or are not classified as financial assets atfair value through profit and loss, held to maturity investments or loans andreceivables. After initial recognition available for sale financial assets aremeasured at fair value with gains or losses being recognised as a separatecomponent of equity until the investment is derecognised or until the investmentis determined to be impaired at which time the cumulative gain or losspreviously reported in equity is included in the income statement. The fairvalue of investments that are actively traded in organised financial markets isdetermined by reference to quoted market bid prices at the close of business onthe balance sheet date. For investments where there is no active market, fairvalue is determined using appropriate valuation techniques. Taxation Tax expense represents the sum of the tax currently payable and any deferredtax. No tax is currently payable being based upon the taxable result for theyear. The taxable result differs from the net result as reported in the incomestatement because it excludes items of income or expense that are taxable ordeductible in other years and it further excludes items that are never taxableor deductible. The Company's liability for current tax is calculated using taxrates that have been enacted or substantially enacted by the balance sheet date.Deferred tax is the tax expected to be payable or recoverable on differencesbetween the carrying amounts of assets and liabilities in the financialstatements and the corresponding tax bases used in the computation of taxableprofit, and is accounted for using the balance sheet liability method. Deferredtax liabilities are generally recognised for all taxable temporary differencesand deferred tax assets are recognised to the extent that it is probable thattaxable profits will be available against which deductible temporary differencescan be utilised. Such assets and liabilities are not recognised if the temporarydifference arises from goodwill or from the initial recognition (other than in abusiness combination) of other assets and liabilities in a transaction thataffects neither the taxable profit nor the accounting profit. Deferred taxliabilities are recognised for taxable temporary differences arising oninvestments in subsidiaries, except where the Group is able to control thereversal of the temporary difference and it is probable that the temporarydifference will not reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at each balance sheetdate and reduced to the extent that it is no longer probable that sufficienttaxable profits will be available to allow all or part of the asset to berecovered. Deferred tax is calculated at the tax rates that are expected toapply in the period when the liability is settled or the asset realised.Deferred tax is charged or credited to the income statement, except when itrelates to items charged or credited directly to equity, in which case thedeferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when there is a legallyenforceable right to set off current tax assets against current tax liabilitiesand when they relate to income taxes levied by the same taxation authority andthe Group intends to settle its current assets and liabilities on a net basis. Operating leases Rentals under operating leases are charged on a straight line basis over thelease term, even if the payments are not made on such a basis. Inventory Inventory is stated at the lower of cost and net realisable value. 2. Loss per share Six months Six months Year ended 31 ended 31 ended 31 January 2008 January 2007 July 2007 p p p Basic (total) (3.41) (0.58) (0.85)Continuing operations (2.23) (0.40) (0.52) The calculation of basic loss per share is based upon a loss of £2.29 million(January 2007: £0.356million, July 2007: £0.537 million) divided by the weightedaverage number of ordinary shares in issue of 67,089,549 (January 2007:61,262,674, July 2007: 63,392,512). The calculation of loss per share for continuing operations is based upon a lossof £1.49 million (January 2007: £0.247million, July 2007: £0.328 million)divided by the weighted average number of ordinary shares in issue of 67,089,549(January 2007: 61,262,674, July 2007: 63,392,512). In accordance with IAS 33, diluted earnings per share calculations are notpresented as no share options were outstanding during the period. 31 January 31 January 31 July 2008 2007 2007 £ £ £ 3. Called up share capital Authorised 100,000,000 ordinary shares - 1,000,000 1,000,000 of £0.01 each 100,000,000 ordinary shares 10,000,000 - - of 10p each 50,000 redeemable preference 50,000 - - shares of £1 each (classified as liabilities) Allotted, called up and fully paid 65,465,764 ordinary shares - 654,657 654,657 of £0.01 each 67,801,840 ordinary shares 6,780,184 - - of 10p each 50,000, redeemable 50,000 - - preference shares of £1 each (classified as liabilities) On 28 September 2007 the former holding company of the Egdon group placed2,325,582 new 1p ordinary shares with a nominal value of £23,256 for aggregatecash consideration of £5,000,000. Following the Placing, 67,791,346 ordinaryshares were in issue. On 23 October 2007 10,494 1p ordinary shares with a nominal value of £105 and anaggregate market value of £25,000 were issued to Stag Energy Limited in partconsideration for the acquisition of their entire interest in licences PEDL094,PEDL118, PEDL130 and PEDL132. Following the Placing, 67,801,840 ordinary shareswere in issue. At demerger on 16 January 2008, 67,801,840 Ordinary 10p shares in EgdonResources plc were issued to each shareholder who held one share in the formerholding company of the Egdon group 4. Demerger The demerger of Portland Gas and the Gas Storage business in essence resulted ineach shareholder who held one share in the former holding company of the Egdongroup receiving one share in Portland Gas plc, (holding the gas storage assetsand business), and one share in the Company, (holding the balance of the oil andgas exploration and production assets). As a precursor to the demerger, Portland Gas plc was incorporated as NewPortland PLC on the 25 October 2007 with an authorised share capital of 500,000ordinary shares of 10p each. On the 6 November 2007 the authorised share capitalwas increased by the creation of 99,500,000 additional ordinary shares of 10peach and 50,000 redeemable preference shares of £1 each, the latter being heldby the Company. For the purposes of the demerger, it was necessary for the EgdonGroup to be held by a new holding company, the Company (formerly New Egdon PLC)which was also incorporated on 25 October 2007. The Company became the ultimateholding company of the Egdon group pursuant to a Scheme of Arrangement underSection 425 of the Companies Act 1985. Under the Scheme of Arrangementshareholders on the register of the former holding company of the Egdon groupexchanged shares for one share in the Company. The transfer of the Gas Storagebusiness was effected by means of a reduction in capital of the Company,following which the Company transferred Portland Gas A Limited (one holdingcompany of the Gas Storage business) to Portland Gas plc by way of considerationfor such transfer, Egdon shareholders received shares in Portland Gas plc inproportions that mirrored their holdings in Egdon. Portland Gas A Limited was distributed by means of a dividend in specie. Thebook value of the assets and liabilities distributed was £14,579,402. The assetsand liabilities were made up as follows: £ Intangible assets 11,605,687Equipment 54,617Trade and other receivables 430,250Cash and cash equivalents 3,650,735Available for sale assets 50,000Trade and other payables (1,211,887) ---------Net assets on disposal 14,579,402 5. Discontinued Operations Included within the cash flow are the following amounts in relation todiscontinued operations: Investing Activities 31 January 2008 31January 2007 31 July 2007 £'000 £'000 £'000 Interest received 129 2 143 Payments to acquire intangible assets (2,176) (1,357) (3,749)Purchase of equipment (59) 0 (5) Purchase of financial assets (50) 0 0 --------- --------- -------- (2,156) (1,355) (3,611) --------- --------- -------- The results of discontinued operations can be analysed as follows: 31 January 2008 31 January 2007 31 July 2007 £'000 £'000 £'000 Administrative expenses (927) (111) (352) Investment revenues 129 2 143 --------- --------- -------- (798) (109) (209) --------- --------- -------- 6. Cash and Cash Equivalents 31 January 2008 31January 2007 31 July 2007 £'000 £'000 £'000Cash at Bank and in hand 572 962 159 Short term bank deposits 2,769 10,812 7,741 --------- -------- --------- 3,341 11,774 7,900 7. Reconciliation of movement in capital and reserves Share Merger Retained capital reserve earnings Total £'000 £'000 £'000 £'000 --------- --------- -------- --------Balance at 31 July 2006 571 8,626 681 9,878 Issue of ordinary shares 84 11,761 11,845 Loss for the period (356) (356) --------- --------- -------- --------Balance at 31 January2007 655 20,387 325 21,367 Loss for the period (182) (182) --------- --------- -------- --------Balance at 31 July 2007 655 20,387 143 21,185 Issue of ordinary shares 23 4,802 4,825 Effect of sharecancellation (678) 678 Issue of shares followingscheme of arrangement 6,780 (6,780)Cancellation of sharepremium (19,087) 19,087 Distribution of Portlandgroup by means ofdividend in specie (14,580) (14,580)Loss for the period (2,292) (2,292) --------- --------- -------- --------Balance at 31 January2008 6,780 - 2,358 9,138 8. Post balance sheet events The Grenade-3 well reached total depth on 10 February. The well was nothydrocarbon bearing due to a lack of reservoir and has defined the eastern limitof the Grenade oil accumulation. The well has been suspended to retain theoption to target other areas of the Grenade prospect via a sidetrack, pendingthe outcome of detailed post-well technical and commercial evaluation. 9. Publication of the interim report This interim report is available on the Company's websitewww.egdon-resources.com. This information is provided by RNS The company news service from the London Stock Exchange