Egdon Resources plc (LON:EDR), a UK-based exploration and production company primarily focused on the hydrocarbon-producing basins of onshore UK, has announced its preliminary results for the year ended 31 July 2022.
Operational and Corporate Highlights
· Egdon net production during the period increased by 160% to 84,894 barrels of oil equivalent (“boe”) equating to 233 boe per day (“boepd”) (2021: 32,686 boe, 90 boepd).
· Wressle production has significantly exceeded forecast expectations with average gross production during the period of 656 barrels of oil per day (“bopd”) at rates constrained by the EA Permit limits for gas disposal and with zero water production to date.
· The Ceres gas field is providing a late life renaissance due to the high gas price and low operating costs.
· Following the refusal of planning permission in November 2021 for the drilling of a side-track well, testing and long-term production at the Biscathorpe project, an appeal was submitted in April 2022.
· On 8 March 2022 a revised incentive package was put in place for all employees through the issue of new share options and the cancellation of all historical share options.
· On 14 March 2022, planning permission was refused to extend the existing consents to drill the North Kelsey-1 exploration well and an appeal was submitted in April 2022.
· On 5 April 2022, the Government announced that it had commissioned the British Geological Survey to advise on the latest scientific evidence around shale-gas extraction. Report delivered to BEIS on 5 July 2022.
· During April 2022, Shell advised Egdon of its intention to withdraw from licences P1929 and P2304, containing the Resolution and Endeavour gas discoveries. Egdon applied to the NSTA for an extension of time to complete the 3D seismic programme.
· Egdon has assumed the operatorship of PEDL343, increased its equity to 40% and agreed an extension to 20 March 2024. PEDL343 contains the Cloughton gas discovery.
· Licences PEDL202 and PEDL130 were relinquished during the period.
· Oil and gas revenues increased by over 530% during the period to £6.91 million (2021: £1.09 million) as a result of significantly increased production and strengthening commodity prices.
· Earnings before interest, tax, depreciation, amortisation, asset impairments, impairment reversals and write-downs were £4.67 million (2021: loss of £0.72 million).
· Post tax profit for the period of £3.30 million including £1.40 million of impairment reversals, £1.80 million of impairments and £0.15 million of write-downs and pre-licence costs (2021: loss of £1.68 million including £0.48 million of write-downs, pre-licence costs and impairments).
· Basic earnings per share of 0.64p (2021: loss per share of 0.51p). Diluted earnings per share of 0.57p (2021: loss per share of 0.51p).
· Net current assets of £4.90 million (31 July 2021: £0.14) of which cash and cash equivalents were £4.80 million (31 July 2021: £1.96 million).
· The Company has no borrowings following the repayment of a £1 million loan during May 2022.
· On 8 August 2022 the North Kelsey Planning appeal documentation was submitted.
· On 8 September 2022 the Government announced the lifting of the moratorium on hydraulic fracturing for shale-gas.
· Egdon was advised in October 2022 that the NSTA had consented to Egdon’s request for a twelve-month extension to the P1929 licence obligation to acquire the 3D seismic. Egdon will now engage with the NSTA to confirm the detailed expectation in relation to this and subsequent timelines. Should the 3D survey not be acquired by April 2023, P1929 will determine in May 2023. Licence P2304 will be relinquished.
· A hearing was held on 11 October 2022 in relation to the Biscathorpe planning appeal and we now await the Planning Inspector’s decision.
· On 27 October 2022 the Government reintroduced the moratorium on hydraulic fracturing for shale-gas.
· Coincident with the release of its Preliminary Results, the Company has updated its corporate identity and released a new website (https://www.egdon-resources.com/).
· Post-period-end production and revenues have continued to be strong with unaudited August to October 2022 revenues of £2.07 million.
The key operational focus for the coming period will be:
· Maintaining and enhancing the strong production performance at Wressle whilst progressing both the gas monetisation and Penistone Flags development as priorities.
· To add reserves, production and revenues through the drill-bit in both our exploration and development/re-development projects.
· To progress energy storage, hydrogen and renewable generation projects.
Commenting on the Results Egdon’s Chairman, Philip Stephens said;
“Egdon has been transformed over the past year through growing revenues and with a significantly improved outlook and operating environment.
The highlight has been the outstanding performance of the Wressle oil field which along with production from our existing fields and high oil and gas prices has resulted in a strong financial performance.
Despite the reintroduction of the moratorium on shale-gas by the Sunak led government, we will continue to make the case for the strategic importance that shale-gas could make to the UK’s economy and security of supply.
In the meantime, Egdon will focus on progressing its conventional oil and gas business and nascent energy transition projects to continue delivering long term value to its shareholders.”
I am delighted that your Company has been transformed over the past year through growing revenues and with a significantly improved outlook and operating environment.
The highlight of the year has clearly been the outstanding production and financial performance of the Wressle oil field. The year has seen the positive impact of Wressle combined with high oil and gas prices which along with production from our existing fields has translated into a robust financial performance for the Company
The tragic events in Ukraine and the weaponization of energy by Russia, have seen gas prices in Europe reach unprecedented levels, leading to a renaissance of our Ceres gas field and heralding a renewed focus by governments worldwide on energy security and cost of supply.
The UK Government’s Energy Security Strategy has belatedly recognised the importance of UK oil and gas production. The national and local benefits of indigenous oil and gas supplies are clear and even more compelling in the context of the current energy crisis. Without indigenous oil and gas, the UK will simply ‘offshore’ its emissions, employment, and fiscal benefits and be at the mercy of international energy markets. This culminated in the lifting of the moratorium on hydraulic fracturing for shale-gas by the Government on 8 September 2022. Unfortunately, this was reversed by the incoming Government on 27 October 2022.
Egdon remains well positioned to be at the forefront of any development of shale-gas given its enviable acreage position in the Gainsborough Trough and other shale-gas basins (151,742 net acres (614 km2) and 37.6 TCF gas in place). We will continue to make the scientific, environmental and commercial case that shale-gas should be part of the long-term solution to the UK’s energy needs and that this can be done in a safe and environmentally sustainable manner.
The UK is committed by law to reaching Net Zero carbon emissions by 2050 and Egdon has put in place a Climate Change Policy to guide and measure Egdon’s progress in this critical area. Whilst oil and gas are currently the Company’s core focus, we are always looking to the future and are reviewing and progressing a number of opportunities in energy storage, hydrogen and renewable energy spaces and expect to make further progress on these in the coming period.
With these positive developments the Company believes the time is right for the rebranding of Egdon as a modern, forward-looking, energy business and we are pleased to present our new corporate identity and website (https://www.egdon-resources.com ).
Financial and Statutory Information
The period has seen a significant strengthening of the financial position of the Company. This has been driven by over a 530% increase in oil and gas revenues during the period to £6.91 million (2021: £1.09 million) as a result of significantly increased production and strengthening commodity prices. The average realised price per barrel of oil equivalent was 144% higher at $81.40/boe (2021: $33.35/boe).
Earnings before interest, tax, depreciation, amortisation, asset impairments, impairment reversals and write-downs were £4.67 million (2021: loss of £0.72 million).
The overall profit for the period was £3.30 million including £1.40 million of impairment reversals in relation to Ceres, Keddington, Avington, Waddock Cross and Kirkleatham, as well as, impairments of £1.80 million in relation to the write down of P1929 and P2304 and write-downs and pre-licence costs of £0.15 million (2021: loss of £1.68 million including £0.48 million of write-downs, pre-licence costs and impairments).
Cash and cash equivalents as at 31 July 2022 were £4.80 million (2021: £1.96 million) and net current assets stood at £4.90 million (31 July 2021: £0.14 million).
The Group has no borrowings (2021: £1.01 million) having repaid a £1 million loan.
Whilst there were no fund-raising activities during the year (2021: £3.35 million), a total of 8,465,000 warrants were exercised during the period resulting in cash of £0.21 million being introduced to the Company. Warrant exercises have continued post year end at an accelerated rate.
Post-period end production and revenues have continued to be strong with August to October 2022 revenues of £2.07 million.
The Company’s strategy takes account of the challenges and opportunities presented by the UK’s move to Net Zero carbon emissions by 2050. This, taken together with the wider economic, political and operating environment which has seen a renewed focus on indigenous energy supplies.
Our strategy has been updated to reflect these realities as follows:
1. Maintain geographical focus on the UK.
2. Focus on growth in production and revenue through conventional production, appraisal and exploration projects.
3. Develop energy storage, hydrogen and renewable energy projects utilising Egdon’s existing assets, knowledge of the UK’s onshore geology and core technical skills and operating experience.
4. Maintain our significant portfolio of shale-gas assets.
Environment and Social Governance, Climate and Emissions
Egdon wishes to build value through developing sustainable long-term relationships with partners and the community and is committed to the highest standards of health, safety and environmental protection. The Company is committed to its operations being Net Zero by 2050. These factors command equal prominence with other business considerations. Egdon has established a Climate Change Policy as detailed in the Corporate Governance Statement. The Board is committed to reducing our emissions from our operations and to monitoring and reporting performance in this area.
Oil and Gas
Egdon holds interests in 36 licences in the UK (2021: 38 licences) with exposure to the full cycle of opportunities from exploration through to development and production.
Production during the period was 233 boepd (2021: 90 boepd), being primarily from Wressle and Ceres as well as contributions from Keddington and Fiskerton Airfield. This production was achieved despite Wressle only recommencing flow on 19 August 2021 and the Ceres field being shut-in for annual maintenance for 20 days during September 2021 and for all of July 2022.
The standout asset for Egdon during the year has been Wressle (Egdon 30%) where production has significantly exceeded our expectations following the proppant squeeze operation. Production is currently constrained by the Environmental Permit to between 700-725 bopd (210-218 bopd net). We have continued to make progress on both the gas monetisation and planning for the development of the Penistone Flags reservoir which are discussed in more detail in the Operating Review.
The Ceres gas field (Egdon 10%) is undergoing a late-life renaissance for the Company, contributing material revenues and cash flow. A reassessment of the life of field economics has led to the reversal of a previous impairment of £0.507 million during the period and we now expect production to continue through at least to 2024.
Keddington (Egdon 45%) has continued to contribute tangible revenues during this time of high oil prices. A viable drilling location in the east of the field has been identified targeting up to 183,000 barrels of incremental production and this is likely to be drilled during H2 2023.
At Fiskerton Airfield (Egdon 80%) our focus remains on maximising production from the existing wells and managing costs. In the medium term, there is potential for the site to be used to manage any produced water from other Egdon sites through the existing water injection well.
Other key near-term projects identified to increase production and revenues include Waddock Cross (Egdon 55%) and Avington (28%).
At Kirkleatham gas field (Egdon 68%) we are in advanced discussions regarding a potential farm-out of a geophysical programme and a side-track well and remain hopeful of concluding a deal in the near future.
The improving operational and financial outlook for our producing assets has resulted in a reversal of a total of £1.40 million of prior impairments.
Exploration/Appraisal drilling in 2023 is conditional on the outcome of the ongoing planning appeals at Biscathorpe and North Kelsey. A planning hearing was held for Biscathorpe on 11 October 2022 and the appeal documentation for North Kelsey was submitted on 8 August 2022. Decisions for both appeals could be expected around the turn of the year. Biscathorpe and North Kelsey are volumetrically significant with each project having gross Mean Prospective Resources of 6.5 million barrels.
Following the decision by Shell in April 2022 to withdraw from P1929 and P2304, which hold the Resolution and Endeavour gas discoveries, Egdon quickly put in place a plan to acquire a modified 3D survey in the first quarter of 2023 and requested an extension to the obligations on the licence. The NSTA initially rejected this request and following further representations, has belatedly, in October 2022, consented to Egdon’s request for a twelve-month extension to the P1929 licence obligation to acquire the 3D seismic. Should the 3D survey not be acquired by April 2023, which is now more than highly challenging, P1929 will determine in May 2023. An impairment of £1.80 million has been made as a result of this expectation of both licences lapsing in the coming period.
During the year Egdon has assumed the operatorship of PEDL343, increasing its interest to 40% and securing an extension to the initial term of the licence to 20 March 2024. The licence contains the Cloughton tight gas discovery, which flowed gas from a number of different reservoirs when flow tested in 1984.
Energy storage, Hydrogen and Renewables including Geothermal
Egdon has focused on energy transition opportunities which utilise the Company’s core skills, knowledge, and operating experience.
Our initial focus has been on the geothermal potential within our existing wells and fields. A programme to plug and abandon the existing Dukes Wood-1 oil well and recomplete it for geothermal heat production has been developed and submitted to the NSTA. It is anticipated that subject to regulatory approval, this work, which is a proof of concept, will now form part of a larger programme of work and commence during 2023. Egdon is working with Creative Geothermal Solutions Limited (CGSL) on this and other geothermal opportunities.
In parallel, Egdon is also reviewing a number of opportunities for energy storage, hydrogen and renewable generation and hopes to make material progress in relation to these in the coming period. Like the rest of the Egdon portfolio, these projects have been selected to contribute tangible additional value to the Company.
Production guidance for the full financial year 2022-23 is 225-245 boepd.
Operationally, our priorities for the coming year are three-fold. Firstly, a focus on maintaining and enhancing the strong production performance at Wressle whilst progressing both the gas monetisation and development of the Penistone Flags. Secondly, looking to add reserves, production and revenues through the drill-bit in Egdon’s exploration and development/redevelopment projects. Thirdly, progressing our nascent energy storage, hydrogen and renewable generation opportunities during the coming year.
With both Wressle and Ceres contributing significant cash flow and the quality of our near-term exploration, appraisal and development opportunities, we can look forward with renewed confidence to the future.
As always, I would like to thank our shareholders for their continued support and the unwavering effort of the Egdon team on behalf of all stakeholders.
Finally, I wish to announce that after seventeen years as your Chairman, I have informed the Board of my wish to retire. A process is in train to recruit my replacement, and this is expected to be completed during the first quarter of 2023. It has been an immense privilege and pleasure to serve on the Board of Egdon and I am pleased that my proposed retirement has coincided with your Company occupying a financially strong, secure and sustainable position. With its projects spanning the energy transition spectrum, I believe shareholders can look forward to Egdon delivering further growth in the years to come.
7 November 2022
I am pleased to provide shareholders with a more detailed review of the Company’s assets, operations and plans with a focus on progress against objectives, key priorities, risks, and potential growth drivers.
Health, Safety & Environment
Egdon is fully committed to high standards of Health, Safety and Environmental (“HSE”) management, protection and performance with all operational activity performed under the umbrella of the Group’s HSE Management System (“HSEMS”). In line with our approach of continual improvement, the HSEMS is subject to continuing review and revision to ensure it remains fit for purpose. During the reporting period there was one reportable health and safety incident (2021: Nil). This was a hand tool related injury which did not lead to any lasting health issues.
The Company was compliant with all of its environmental permits and planning consents.
Egdon has today released an updated website (www.egdon-resources.com) which provides stakeholders with up-to-date information on the Company and its operations. Egdon also has a community facing website (www.egdon-community.com) which provides a portal for information related to Egdon’s operational sites. Summaries of press releases, non-price-sensitive information and other relevant updates are also shared via the Company’s Twitter account (@EgdonResources).
To improve the efficiency of sharing corporate information with shareholders, Egdon is now able to provide the option for electronic communication.
Progress against objectives
As part of our preliminary results reporting (November 2021) and Interim Results (April 2022) we set out objectives against which I can report on progress.
|Objective Set||Progress Against Objective|
|1) Managing our operations to ensure the continued safety of employees, contractors and other stakeholders in response to the evolving COVID-19 situation||· Successfully implemented COVID secure procedures and systems with no adverse direct impacts|
|2) Continuing to carefully manage costs and cash through the current challenging operating and macro-economic environment and ensuring the business is capitalised for the future||· Cost saving measures (including salary reductions) introduced during 2021 have been reversed as business outlook has improved· Positive cash flow established through Wressle, Ceres and other production significantly improving financial status of the Company· Company continues to focus on cost-control|
|3) Finalising the development of the Wressle oil field for production start-up in January 2021 and progressing the proppant squeeze at the Wressle oil field to attain target production of 150 bopd net to Egdon||· Production start-up achieved in January 2021· Proppant squeeze successfully undertaken in July 2021 with coiled tubing completed in August 2021· Production continues above expectation|
|4) Continuing to optimise oil and gas production from the Ashover Grit reservoir at Wressle, building on the strong performance to date||· Facilities upgraded on site including new gas incineration unit· Production constrained by Environmental Permit limits on gas incineration· No water produced to date|
|5) Progressing gas monetisation at Wressle||· Site micro-turbine to be installed for site power· Up to 1.75 MW of electricity export to private local grid to be progressed|
|6) Finalising plans for development of the material Contingent Resources in the Penistone Flags at Wressle||· Reservoir modelling completed and outline development defined including well types· Final well locations to be defined on reprocessed 3D seismic volume before commencing planning application process|
|7) Securing planning consent via appeal for the Biscathorpe and North Kelsey projects||· Planning Appeal for Biscathorpe submitted in April 2022 and a Planning Hearing was held on 11 October 2022. Outcome awaited· Planning Appeal for North Kelsey submitted in August 2022. Outcome awaited|
|8) Progressing a farm-out of North Kelsey-1 and Biscathorpe-2Z with a view to drilling during 2022||· On hold pending planning appeal outcomes|
|9) Streamlining the conventional resource portfolio to concentrate on a smaller number of key assets whilst maintaining our position in core unconventional resource assets||· Non-core and low prospectivity assets relinquished or licences lapsed· Ongoing review of all assets|
|10) Progressing the acquisition of the 3D seismic survey over the Resolution and Endeavour gas discoveries in February 2022||· During April 2022, Shell advised Egdon of its intention to withdraw from licences P1929 and P2304· Egdon was advised in October 2022 that the NSTA had consented to Egdon’s request for a twelve-month extension to the P1929 licence obligation to acquire the 3D seismic. Egdon will now engage with the NSTA to confirm the detailed expectation in relation to this and subsequent timelines. Should the 3D survey not be acquired by April 2023, P1929 will determine in May 2023. Licence P2304 will be relinquished|
|11) Subject to lifting of the current moratorium on hydraulic fracturing operations for shale-gas, progressing the planning and permitting for the drilling and subsequent testing of the Springs Road-2 well||· Moratorium lifted in September 2022 and then reinstated in October 2022|
|12) Further developing the Company’s energy transition opportunities including repurposing of the Dukes Wood-1 well for geothermal heat||· A programme to recomplete Dukes Wood-1 for geothermal heat production has been developed and submitted to the NSTA· Planned activity in 2023 as part of wider programme of works|
|13) Progressing drilling plans to target incremental oil production / near field exploration opportunities at the Keddington oil field and field redevelopment at Waddock Cross||· Reprocessing of the Keddington 3D survey undertaken and ahead of finalising well target· Progress made with extending site lease and submission of revised Field Development Plan for Waddock Cross|
Assets & Operations
Egdon held interests in 36 licences in the UK at year end (2021: 38) with exposure to the full cycle of opportunities from exploration through to development and production.
Highlighted below are key changes to our licence portfolio during and post-period.
|PEDL343||Licence extended to 20 March 2024, Egdon assumed operatorship and increased equity interest to 40%|
|PEDL209||Egdon is in the process of increasing its interest to 100% due to withdrawal of other JV parties|
|PEDL202||Interest in licence relinquished during August 2021|
|PEDL130||Interest on licence relinquished during July 2022|
|P1929||To determine in May 2023 if 3D seismic cannot be acquired by April 2023 subject to NSTA discussions|
|P2304||To be relinquished in Q4 2022|
Production and Development Assets
Production during the period was 233 boepd, (2021: 90 boepd) from Wressle, Ceres, Keddington and Fiskerton Airfield.
Wressle (PEDL180/182: Egdon 30% interest)
The Wressle Field has been independently audited (2016 Competent Person’s Report (“CPR” ERCE) with gross 2P Reserves of 0.62 million barrels of oil (“mmbo”) and 2C Resources of 1.53 mmbo.
A proppant squeeze operation on the Ashover Grit reservoir was successfully completed in late July 2021 and the well resumed production on the 19 August 2021. Oil production has significantly exceeded Egdon’s expectation. Since production commenced at Wressle-1 in January 2021, the cumulative gross production through to 31 July 2022 has exceeded 225,000 barrels of oil with no formation water produced to date.
Environmental monitoring throughout the proppant squeeze and subsequent production operations has shown no measurable impact on water quality, no associated seismicity and that noise levels have been within the permitted levels.
Over the last twelve months a series of improvements and upgrades to the Wressle site production facilities have been successfully undertaken. The implementation of a two-stage gas utilisation scheme is currently being progressed, which will enable the oil production limit to be lifted. For the first stage, we intend to utilise the Ashover Grit gas for electricity generation and export, for which planning is already in place. This will be undertaken in two steps. Initially we will replace the site diesel generator with a gas micro-turbine for site electrical power, and secondly, we will install a separate gas engine to generate and export up to 1.75 MW of electricity into a local private power network.
We expect installation of the microturbine to be completed by year end. In parallel we are expediting the sourcing of a gas engine and equipment for step two and will update on timing once confirmed. The additional revenue from monetisation of the Ashover Grit gas, together with increased oil production rates will have a positive impact on the value of the Wressle field development.
Stage two of the gas monetisation will focus on gas export from the Penistone Flags reservoir.
We are finalising the reprocessing of the Wressle 3D seismic data and interpretation of this will inform the final location of new development wells that will target the Penistone Flags (Gross 1.53 mmbo plus 2 billion cubic feet 2C Resources (CPR, 2016)). Drilling of the Penistone Flags will be progressed at the earliest opportunity, subject to receipt of regulatory and planning consents as we look to build on the successes that have been achieved to date. In addition to the Penistone Flags, any new well will also appraise other reservoirs that were proven hydrocarbon bearing in the Wressle-1 discovery well.
A new CPR will be commissioned to provide updated reserve and resource volumes for the Wressle field.
Ceres (P1241: Egdon 10%)
Ceres gas production during the period has declined to 38 boepd plus 2 boepd of condensate net to Egdon (2021: 58 boepd plus 4 boepd of condensate). The recent strong gas prices make the asset highly economic, and production is now expected to continue through to at least 2024 with abandonment to follow.
Keddington (PEDL005R: Egdon 45%)
Keddington continues to produce at a net rate to Egdon of 15 bopd (2021: 8 bopd) from one well. A technical review of the Keddington field and the surrounding licence area was completed towards the end 2021. The results of this work confirmed that there remains an undrained oil resource located on the eastern side of the Keddington field. Planning consent for further drilling is already in place, and this presents an opportunity to increase production via a development side-track from one of the existing wells. To facilitate confirmation of the target definition and well design planning, Egdon has completed the re-processing of its legacy 3D seismic data. Modelling indicates that a horizontal side-track has the potential to increase the Keddington oil production from between 113,000 barrels and 183,000 barrels. Subject to finalising the sub-surface location, it is planned to drill the well during 2023.
In addition, a near-field exploration opportunity exists at Keddington South, which has a gross Mean Prospective Resource Volume of 635,000 barrels of oil and at the Louth Prospect, with a gross Mean Prospective Resource of 600,000 barrels of oil. It is intended that the Louth prospect would now be accessed from the existing Keddington site.
Fiskerton Airfield (EXL294: Egdon 80%)
Fiskerton Airfield is currently shut-in whilst it awaits a workover programme to reinstate production. Our focus at Fiskerton Airfield remains on maximising production from the existing wells and managing costs. Longer term potential for the site is to use it to manage produced water from other sites through the existing water injection well on site and also for potential geothermal repurposing.
Waddock Cross (PL090: Egdon 55%)
Waddock Cross is currently shut-in. Independent reservoir modelling has shown that a new horizontal well on the field could yield commercial oil production (500-800 bopd). Given the large in- place oil volume (Mean oil in place of c. 57 million barrels of oil) this asset has been high graded by the Company as planning consent and facilities are in place to test this significant opportunity.
Kirkleatham (PEDL068: Egdon 68%)
The Kirkleatham gas field remains shut in. Potential exists for a side-track to access a volume of gas in the attic of the structure. Furthermore, additional upside may exist for a tight gas resource in the underlying Carboniferous. The Company is engaged with a Third Party who has expressed an interest in farming into PEDL068 by undertaking a small geophysical work programme and the drilling of a side-track up dip of the Kirkleatham-4 well. Egdon would be carried through these operations.
Avington (PEDL070: Egdon 28%)
The Avington field remains shut-in. In December 2021, the field operator was advised that planning consent had been awarded on appeal. The forward plan is to undertake a phased scope of works to redevelop the field which includes establishing on site water handling facilities.
Conventional Exploration and Appraisal Assets
The Company continues to progress those conventional resource opportunities that offer maximum impact via the drill-bit.
Key projects are:
Biscathorpe (PEDL253: Egdon 35.8%)
Evaluation of the results of the Biscathorpe-2 well, together with the reprocessing of 264 square kilometres of 3D seismic data identified a possible material and commercially viable hydrocarbon resource remaining to be appraised. The planned side-track would target the Dinantian Carbonate, where a 68-metre oil column was discovered in Biscathorpe-2. The Dinantian Carbonate has been assessed by Egdon to have a gross Mean Prospective Resource volume of 2.55 mmbo. The overlying Basal Westphalian Sandstone has the potential to add gross Mean Prospective Resources of 3.95 mmbo. Commercial screening conducted by Egdon indicates break-even full cycle economics to be US$18.07 per barrel.
In November 2021, Egdon’s planning application to undertake side-track drilling, well testing and long-term oil production was rejected by Lincolnshire County Council (LCC). In April 2022, Egdon submitted an appeal against LCC’s decision which was heard by the Planning Inspectorate on the 11 October. We would expect to hear the outcome of the Appeal around the turn of the year.
North Kelsey (PEDL241: Egdon 50%)
The North Kelsey Prospect has been mapped from 3D seismic data and has potential for oil in up to four stacked conventional Carboniferous reservoir targets: the Chatsworth Grit, Beacon Hill Flags, Raventhorpe Sandstone and Santon Sandstone. North Kelsey is geologically analogous to the Wressle field. Egdon has calculated the gross Prospective Resources to range from 4.66 mmbo up to 8.47 mmbo, with a Mean Resource volume of 6.47 mmbo.
Egdon’s application to extend the planning consent to drill the North Kelsey prospect was rejected by LCC in April 2022. In August of this year, Egdon submitted an appeal to the Planning Inspectorate with a decision expected early in 2023.
Resolution and Endeavour (P1929 & P2304: Egdon 30%)
In April of 2022, licence operator Shell advised Egdon and the NSTA that it had decided to withdraw from P1929 and P2304, which cover the Resolution and Endeavour gas discoveries. Shell’s technical assessment of the Resolution discovery concluded that it has Gross Mean Contingent Gas Resource volume is in excess of 500 bcf; this is 250 bcf more than the Resolution CPR (2019). Given its considerable size, Resolution has the potential to make a material contribution to the UK’s future gas supply. Egdon submitted a request to the NSTA that the licence obligations be extended and responsibility for the commitment work programme over P1929 be transferred from Shell. Unfortunately, the NSTA initially rejected this request, but following further representations has belatedly in October 2022, consented to Egdon’s request for a twelve-month extension to the P1929 licence obligation to acquire the 3D seismic. Should the 3D survey not be acquired by April 2023, which is now more than highly challenging, P1929 will determine in May 2023. An impairment of £1.80 million has been made as a result of the expectation of both licences lapsing in the coming period.
Cloughton (PEDL343: Egdon 40%)
Egdon has assumed the operatorship of PEDL343 from Third Energy and has also increased its equity in the Licence to 40%. We have agreed a Retained Area Work Programme with the NSTA that includes an assessment of the conventional and unconventional resource potential. Work is underway to model the risks attached to induced seismicity across the licence area. Cloughton-1, a discovery drilled in 1984 confirmed the presence of gas in a number of low porosity Carboniferous aged sandstone reservoirs.
The Group’s unconventional resources acreage position in Northern England is 151,742 net acres (614km2 net) (2020: 164,280 net acres (664km² net)). This remains a significant and potentially highly valuable position with estimated Mean volumes of undiscovered GIIP of 37.6 TCF net to Egdon, independently assessed by ERCE (2019: 47.6 TCF).
Egdon’s core area is the Gainsborough Trough of Nottinghamshire, Lincolnshire and Yorkshire where the Group holds interests in 71,361 net acres (2021: 71,361 net acres).
The results from the 2019 Springs Road-1 well (“SR-01” – Egdon 14.5%), compare favourably with some of the best US commercial shale-gas operations and highlight a potentially world class resource in the Gainsborough Shale. Activity remains paused following the chaotic lifting and then reintroduction of the moratorium on hydraulic fracturing for shale-gas.
Egdon also retains interests in the Widmerpool Basin and Humber Basins of the East Midlands, the Cleveland Basin of NE England and the Blacon Basin of NW England.
Energy Transition Opportunities
The energy transition will present a number of challenges and opportunities for Egdon. The Company recognises the potential for repurposing of its fields, sites and wells for renewable purposes as well as with additional new stand-alone projects in geothermal, hydrogen, energy storage and renewables.
Egdon is also reviewing and progressing a number of opportunities for energy storage, hydrogen and renewable generation and hopes to make material progress in relation to these in the coming period.
Dukes Wood Geothermal
Egdon’s initial focus has been on geothermal opportunities within our existing well stock. A detailed review has highlighted an anomalously high geothermal gradient local to our shut-in wells at the Dukes Wood and Kirklington oil fields.
Working with Creative Geothermal Solutions Limited (CGSL) we have developed and submitted to the regulators (NSTA and HSE) a programme of works to plug and abandon the existing Dukes Wood-1 oil well and recomplete it for a test programme measuring its geothermal heat production. It is anticipated that work on this proof of concept project will commence during 2023 as part of a wider programme of well interventions.
Outlook and Priorities
Initial production guidance for the 2022/2023 financial year is 225-245 boepd from Wressle, Ceres, Keddington and Fiskerton Airfield.
The key operational priorities for the Company during the coming year are:
· Maintaining and enhancing the strong production performance at Wressle whilst progressing both the gas monetisation and Penistone Flags development
· Add reserves, production and revenues through the drill-bit in both our exploration and development/re-development projects
· Progress energy storage, hydrogen and renewable generation projects.
Managing Director, Egdon Resources
7 November 2022