Interim Results
Egdon Resources PLC
03 April 2006
Embargoed for release at 07:00a.m. 3 April 2006
Egdon Resources Plc
('Egdon' or the 'Company')
Interim Results
For the six month period ended 31 January 2006
Egdon Resources Plc (AIM : EDR), the UK-based energy company primarily focused
on the hydrocarbon-producing basins of the onshore UK, is pleased to announce
its Interim Results for the six month period ended 31 January 2006.
The Company's strategy is to maintain a geographical focus on the UK and develop
an exploration and production business through 'drill-bit' success, leading to
growth in reserves, production and cash flow. Egdon currently has exploration
interests in the United Kingdom Continental Shelf ('UKCS') and France. The
Company is also developing a gas storage business in the south of England.
OPERATIONAL HIGHLIGHTS
• Confirmation of gas at Kirkleatham-4 and Westerdale-1
• Enhanced licence position with award of block 15/7 in 23rd Licensing
Round
• Currently hold 20 licences in UK and France
• Waddock Cross-3 appraisal well drilled and tested
• Avington-3 well drilled and preparing to test
• Significant progress made in developing plans for Portland Gas Storage
Project
• Portland-1 confirmatory well preparing to core salt sequence at end of
March 2006
• 2D Seismic acquired in November 2005 over Grenade prospect in SW France
FINANCIAL HIGHLIGHTS
• Loss for period of £238,000 (2005: £296,000) Institutional placing of
5,555,000 ordinary shares completed in December 2005 at a price of 90p per
share, resulting in net proceeds of £4.8 million
+ • Debt free with a strong cash position (Net funds as at 31 January
2006: £6.3 million; 31 January 2005: £3.7 million)
Commenting on the results, Philip Stephens, Chairman of Egdon, said:
'The Company is experiencing operational success in all areas of its
business, and we are particularly pleased with the confirmation of gas in
two of our wells. The Portland Gas Storage Project is progressing, with a
well currently being drilled to confirm the viability of creating salt
caverns for storing gas.
2006 will be another active year, with wells planned in all of our key areas,
including at Grenade in France. We look forward to adding further value for our
shareholders over the coming year.'
For further information please contact:
Egdon Resources Plc 01256 702292
Andrew Hindle, Joint Managing Director
Mark Abbott, Joint Managing Director
Buchanan Communications
Eric Burns 020 7466 5000 (today)
Ben Willey 01943 883 990 (thereafter)
CHAIRMAN'S STATEMENT
'I am pleased to present the Interim Report for Egdon Resources Plc for the
period ended 31 January 2006. This has been a period of significant activity and
progress for your Company both in its conventional oil and gas activities and
also in developing its plans for the Isle of Portland Gas Storage project.
A period of intensive drilling activity commenced in November 2005 with
'back-to-back' operated wells completed at Waddock Cross-3 (oil producer),
Kirkleatham-4 (gas discovery) and Westerdale-1 (gas tested). The rig is
currently drilling the Portland-1 salt confirmation well at the Portland Gas
Limited Upper Osprey site. The non-operated Avington-3 well has also been
drilled, cored and logged and is due to be tested during the second quarter of
2006.
In France, a 2D seismic survey was also completed over the Grenade heavy oil
accumulation during December 2005.
The Company's licence position has been enhanced with the award of a 50%
interest in block 15/7 as part of the 23rd Seaward Licensing Round.
A successful institutional placing was completed during December 2005 raising £5
million before costs. This will enable the Company to progress the Portland Gas
Storage Project beyond the drilling of the confirmation well and the submission
of a planning application without recourse to third party funding.
Financial Overview
Your Company recorded a consolidated loss of £238,000 during the six month
period to 31 January 2006 (six months to 31 January 2005: £296,000).
During December 2005, a placing of 5,555,000 new ordinary shares was completed
at a price of 90p per share, resulting in net proceeds of £4.8 million. The
shares were placed by Seymour Pierce Limited with new and existing institutional
investors. Following the placing, there are currently 57,149,974 ordinary shares
in issue.
The Company is debt free with a strong cash position of £6.3 million at 31
January 2006 (2005: £3.7 million), enabling it to pursue its strategy through an
active programme of appraisal and exploration drilling.
Licence Activity
With the award of a 50% interest in promote block 15/7 in the 23rd seaward round
of licensing your Company now holds interests in 20 licences containing over 50
identified oil and gas prospects. Block 15/7 contains an identified heavy oil
accumulation, the Funnel prospect, which was discovered by Texaco in 1977 and is
mapped by the operator (Nautical Petroleum Plc) to contain 16 million barrels of
oil ('mmbo') net Egdon Best Estimate Prospective Resources.
Operational Overview
The period has been dominated by the realisation of an operated multi-well
drilling programme which has been the culmination of a number of years of
exploration activity for your Company, and progress with feasibility, design and
planning work on the Portland Gas Storage Project.
Portland Gas Limited
The Company continues to progress plans for the Portland Gas Storage Project on
the Isle of Portland, Dorset, operated by Portland Gas Limited, a wholly owned
subsidiary of Egdon.
If successful, gas would be stored under pressure in a series of caverns within
a thick salt sequence more than 2000 metres below ground level. These caverns
would be created by dissolving salt with sea water circulated under controlled
conditions.
As previously reported, the feasibility work on the project has indicated that
ultimately 18 caverns could be constructed from the site, with 6 caverns built
in each of 3 phases. The initial phase would have a working storage volume of
330 million cubic metres ('mcm') (or 11.6 billion cubic feet ('bcf')),
increasing on completion of stages two and three to 660 mcm (23.2 bcf) and 990
mcm (34.8 bcf) respectively. The Portland Gas Storage Project will be designed
as a high deliverability facility with planned gas export capabilities to the
national gas grid increasing from 18 to 54 million standard cubic feet of gas
per day ('mmscfgd') through the 3 phases.
Drilling of the Portland-1 well commenced on 6 March with drilling and coring
operations expected to take around 50 days. Data from this well will enable the
determination of the thickness and suitability of the salt interval to create
caverns at the proposed Portland Gas Storage Project. At the end of March 2006,
drilling had reached 2150 metres and preparations were being made to core the
salt sequence.
Conditional upon satisfactory results from this well your Company will work to
submit a full planning application for the project during the third quarter of
2006.
Drilling Activity
Waddock Cross
The Waddock Cross-3 appraisal well was drilled on the Waddock Cross oil
accumulation in Dorset licence PL090 during November to December 2005. The well
was drilled to a total depth of 1510 metres (661.5 metres true vertical depth)
with a 695 metre horizontal section drilled and completed with pre-drilled
tubing through Cycle 3 of the Bridport Sandstone reservoir. The well was tested
from late December 2005 to January 2006 with flow rates of 270 to 400 barrels of
fluid per day with an average oil cut of 12%. This equates to 32 to 48 barrels
of oil per day. The produced oil has not experienced the significant emulsion
problems encountered with the Waddock Cross-2 well test. The test equipment has
been demobilised from the site whilst data from the test is analysed to enable
the design and procurement of pump and process equipment for future testing and
production operations.
Kirkleatham
The Company was able to confirm the discovery of gas at the Kirkleatham-4
exploration well drilled in North Yorkshire licence PEDL068 during March 2006.
The Kirkleatham-4 well targeted the Kirkleatham prospect which is located
beneath and to the west of the town of Redcar in Cleveland.
The Kirkleatham-4 well reached a total depth of 936 metres within rocks of
Carboniferous age on 7 January 2006. During drilling operations gas shows were
encountered within the target Permian age Zechstein carbonates. Analysis of
geophysical log and pressure data confirmed the presence of an approximately 19
metre gas column within the Cadeby Formation at a depth of 804.3m. Testing of a
6 metre perforated interval at the top of the Cadeby Formation commenced on 6
March 2006 with an initial flow rate of 2.8 mmscfgd. The rate was increased in
steps during the five day test to a final rate of 5 mmscfgd at a flowing well
head pressure of approximately 1000 pounds per square inch gauge pressure
('psig') through a 18/64' choke. The well was shut-in for a long term build-up
on 10 March. Initial analysis indicates that the gas quality is good.
The well has been completed for potential future production and has been
suspended following the testing. Various production options are currently being
reviewed. Seismic acquisition over the Kirkleatham accumulation is to be
undertaken in April to better determine the likely reserves and potential
additional well locations.
Westerdale
Further encouraging exploration results were encountered in the Westerdale-1
well also in PEDL068, which was designed to test an accumulation up-dip and to
the north of the Ralph Cross-1 gas discovery made by Home Oil Limited in 1966.
The Westerdale-1 well reached a total depth of 1304.5 metres within rocks of
Carboniferous age on the 17 February 2006. Potential gas pay has been
interpreted within two intervals - the Permian age Brotherton carbonate and also
in Carboniferous sandstones.
The top of the Brotherton carbonate was encountered deeper than expected at a
measured depth of 905 metres due to a thickened high velocity Triassic section.
The lower interpreted gas column in sandstones of Carboniferous age, which was
penetrated at a measured depth of 1188 metres, was tested by perforating a 3
metre zone at the top of the sequence. Sub-commercial flow rates of gas were
tested with pressure data indicating a low permeability.
A short unstimulated test of the Brotherton carbonate confirmed gas to surface
at rates of up to 130,000 standard cubic feet of gas per day ('scfgpd') in line
with rates in similar wells in this reservoir within the Cleveland Basin.
Operations have now been suspended until 1 October 2006 to comply with planning
conditions. A further test will be undertaken at that time using acid
stimulation to determine if commercial flows are achievable.
Avington
I am pleased to report renewed activity at the Avington oil discovery in Weald
Basin licence PEDL070, operated by Star Energy Plc, following the protracted
sale of the previous operator Pentex which had delayed the project. The
Avington-3 appraisal well has reached total depth and the well has been logged
and a liner set. A well test programme will now be undertaken using the
operator's work-over rig during the second quarter of the year.
Future Planned Drilling Activity
Further progress has been made on appraisal of the Company's international
project, the Grenade heavy oil accumulation in SW France, where seismic
acquisition was undertaken in November 2005. Appraisal drilling and testing is
expected to take place later in 2006.
Egdon has a number of other drill ready prospects on which drilling is planned
during 2006 and 2007 subject to planning consent and rig availability.
In Yorkshire Licence PEDL071, a planning application is being prepared for the
Fraisthorpe Prospect, where seismic was acquired during 2005. It is hoped to
drill this Leman Sandstone prospect late in 2006.
A planning application is also currently being finalised by the operator Europa
Oil and Gas Plc for the Holmwood Prospect in Surrey, Licence PEDL143.
In Dorset, where multiple prospects have been identified within the Sherwood
Sandstone, which is productive at the giant Wytch Farm oilfield located ten
kilometres to the east of the Company's licences, progress is also being made
towards drilling a prospect in the next twelve months.
Rig availability issues mean that the Tees Prospect, in offshore block 42/27
where the Company has a 10% interest, is now likely to be a 2007 well.
Developing Prospects for Future Growth
Elsewhere, your Company is progressing evaluation of its exploration interests
in the Midlands and Weald basins to determine the next tranche of drillable
prospects. At Nooks Farm in Staffordshire, where the Company has a 96% operated
interest, we continue to review development options for gas-to-electricity
generation on a proven gas accumulation.
Outlook
The latest phase of drilling activities has enabled your Company to maintain its
enviable exploration success record. The challenge now is to move the
discoveries that we have made at Waddock Cross, Avington, Grenade and
Kirkleatham into profitable production at the earliest opportunity.
We hope to be coring salt at Portland-1 during April. A successful outcome to
this well will remove the main technical risks on the project and enable us to
move closer to submitting a planning application for this high value project.
We believe that the second half of the year will continue to be exciting from an
exploration perspective with drilling planned on the Fraisthorpe, Grenade,
Holmwood and Tees prospects over the next twelve months.
We thank you for your continued support.
Philip Stephens
Chairman
3 April 2006
CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the six month period ended 31 January 2006
Six months Six months Year
ended ended ended
31-Jan-06 31-Jan-05 31-Jul-05
£'000 £'000 £'000
Turnover 0 203 11
Cost of Sales (2) (199) (10)
Gross (Loss)/Profit (2) 4 1
Administrative expenses (418) (277) (533)
Other Operating Income 118 0 81
Operating Loss (302) (273) (451)
Interest receivable 64 19 73
Interest payable 0 (42) (43)
Loss on ordinary activities before
taxation (238) (296) (421)
Taxation on profit on ordinary activities 0 0 0
Loss on ordinary activities after taxation (238) (296) (421)
Loss for the period retained (238) (296) (421)
Earnings per share (p) (0.45) (0.74) (0.92)
CONSOLIDATED BALANCE SHEET
As at 31 January 2006
31-Jan-06 31-Jan-05 31-Jul-05
£'000 £'000 £'000
Fixed Assets
Intangible assets 3,660 2,002 2,599
Tangible assets 2 3 3
3,662 2,005 2,602
Current Assets
Debtors - amount falling due within one
year 1,137 93 233
Investments 5,082 0 2,045
Cash at bank 1,257 3,708 903
7,476 3,801 3,181
Creditors - amount falling due within one
year (716) (60) (106)
Net Current Assets 6,760 3,741 3,075
Total Assets less current liabilities 10,422 5,746 5,677
Creditors - amounts falling due after more
than one year 0 0 0
Provision for liabilities and charges (263) (37) (93)
10,159 5,709 5,584
Capital and Reserves
Called up share capital 571 516 516
Share premium account 8,626 3,868 3,868
Profit and Loss account 962 1,325 1,200
Equity Shareholders' Funds 10,159 5,709 5,584
CONSOLIDATED CASHFLOW STATEMENT
for the six month period ended 31 January 2006
Six months Six months Year
ended ended ended
31-Jan-06 31-Jan-05 31-Jul-05
£'000 £'000 £'000
Net cash flow from operating activities (425) (263) (477)
Return on Investment and servicing of finance
Interest received 64 19 73
Interest paid 0 (42) (43)
Net cash flow from returns on investments
and servicing of finance 64 (23) 30
Tax Paid 0 0 0
Capital Expenditure and Financial Investment
Payments for intangible fixed assets (1,061) (226) (823)
Purchase of tangible fixed assets 0 0 (2)
Disposal of tangible fixed assets 0 0 0
Net cash flow from capital expenditure and
financial investment (1,061) (226) (825)
Net cash flow before use of liquid
resources and financing (1,422) (512) (1,272)
Management of liquid resources
(increase) in short term deposits (3,037) 0 (2,045)
Financing
Repayment of debentures 0 (350) (350)
Issue of shares 4,999 4,500 4,500
Costs associated with issue of shares (186) (482) (482)
Net cash flow from financing 4,813 3,668 3,668
Increase in cash 354 3,156 351
RECONCILIATION OF OPERATING LOSS TO NET CASHFLOW FROM OPERATING ACTIVITIES
for the six month period ended 31 January 2006
Six months Six month Year
ended ended ended
31-Jan-06 31-Jan-05 31-Jul-05
£'000 £'000 £'000
Loss for period (302) (273) (451)
depreciation 1 1 3
movement in
debtors (904) (22) (162)
movement in
creditors 610 23 68
movement in
provisions 170 8 65
Operational
cash flow (425) (263) (477)
Notes to the Accounts
1) Interim accounts have been approved by the Directors and have been
prepared on the basis of the accounting policies set out in the 2005 Annual
Report and Accounts. The 31 July 2005 figures have been extracted from audited
accounts and the audit report was unqualified. The profit and loss account has
been prepared on the basis that all operations are continuing operations. There
are no recognised gains or losses other than those passing through the profit
and loss account. New accounting standards introduced since the last annual
report was published have had no impact on the accounting treatment adopted in
the preparation of the interim accounts.
2) The results for the interim periods have not been subject to independent
review as defined in the Auditing Practices Board Bulletin 1999/4 and do not
constitute full accounts within the meaning of Section 240 of the Companies Act
1985.
3) Administrative expenses include movements in the provision for National
Insurance costs on the potential exercise of share options in existence at the
period end. The provision at 31 January 2006 was £263,000 (31 July 2005:
£93,000; 31 January 2005: £37,000).
4) Copies of the Interim Report will be posted to shareholders and will be
available from the Company's office at Suite 2, 90-96 High Street, Odiham,
Hampshire RG29 1LP.
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