REG - Egdon Resources PLC - Interim Results
24/04/2023 07:15
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RNS Number : 1396X Egdon Resources PLC 24 April 2023
24 April 2023
Embargoed for 7.00am
EGDON RESOURCES PLC
("Egdon" or "the Group" or "the Company")
Interim Results for the Six Months Ended 31 January 2023
Egdon Resources plc (AIM: EDR), an established UK focused energy company,
today announces its unaudited results for the six months ended 31 January 2023
("the Interim Period" or "the Period").
Overview and Highlights
Operational and Corporate
· Production for the Period was up by 27% to 46,465 barrels of oil
equivalent ("boe") equating to a rate of 253 boe per day ("boepd"), ahead of
guidance of 225-245 boepd (H1 2022: 36,714 boe and 200 boepd)
· The Wressle oil field continued to be the standout asset for
Egdon, producing at an average rate of 689 barrels of oil per day ("bopd")
during the Period. Total field production from Wressle to 31 January 2023
stood at 357,838 barrels of oil with no water production.
· The North Kelsey Planning appeal documentation was submitted on 8
August 2022. This will be heard via a Public Hearing on 14 June 2023
· During 2022, the moratorium on hydraulic fracturing for shale gas
was lifted (8 September 2022) and then reinstated (27 October 2022)
· A hearing was held on 11 October 2022 in relation to the
Biscathorpe planning appeal and we continue to await the Planning Inspector's
decision
· Licence P2304 was relinquished as planned in November 2022
· In December 2022 Egdon announced the acquisition of Aurora
Production (UK) Limited, a private company with interests in PL090 (Waddock
Cross) and PEDL070 (Avington). The effective date of the transaction is 30
September 2022 and the consideration is the grant of a Net Profit Interest
capped at the cash balance of £0.288 million which provides for outstanding
abandonment liabilities. This transaction completed post period end on 1 March
2023.
Financial Performance
· Unaudited revenue for the Interim Period was up 46% to £3.725
million (H1 2022: £2.551 million)
· Earnings before interest, tax, depreciation, amortisation, asset
impairments, impairment reversals and write-downs were £2.105 million (H1
2022: £1.410 million).
· Overall profit for the Period after a tax charge of £0.741
million (H1 2022: £Nil) was £0.435 million (H1 2022: £1.222 million)
· As at 31 January 2023, the Company had cash and cash equivalents
of £5.524 million (H1 2022: £2.084 million) and net current assets of
£6.593 million (H1 2022: £1.165 million, which includes debt of £1.007
million and £0.417 million deferred consideration for Wressle)
· The Company had no borrowings as at 31 January 2023 (H1 2022:
£1.007 million)
Subsequent Events
· On 6 February 2023 Egdon entered into a Farmout Option Agreement
with York Energy (UK) Holdings Limited relating to Licence PL081 in North
Yorkshire. Under the terms of the Agreement, Egdon has a period of six months
from 3 February 2023 to elect to farm into the Licence which contains the
Weaverthorpe Prospect. Egdon's initial evaluation indicates an estimated Mean
prospective gas resource of 58 billion cubic feet.
· On 1 March 2023 Egdon completed the acquisition of Aurora
Production (UK) Limited which has subsequently been renamed Egdon Resources
(Aurora) Limited. The effective date of this transaction is 30 September
2022.
· On 19 April 2023 Egdon relinquished P1929 which contained the
Resolution gas discovery and which was fully impaired in the 31 July 2022
accounts.
Outlook
· Post-Period end production and revenues have continued to be strong,
despite reduced commodity prices, with February and March unaudited revenues
of £0.632 million and £0.521 million respectively.
· Production guidance for the full financial year is increased to
240-250 boepd, up from 225-245 boepd.
The key operational focus for the remainder of 2023 will be:
· Maintaining and enhancing the impressive production performance at
Wressle whilst progressing both the gas monetisation and further development
drilling as priorities.
· To add reserves, production and revenues through the drill-bit
across our exploration and development/re-development projects.
· To progress the Company's energy transition strategy through
geothermal, energy storage, hydrogen and renewable generation projects.
Online Presentation
The Company will host a live audiocast of the Interim Results Presentation via
the Investor Meet Company at 10:00am on 24 April 2023. Investors can sign up
to Investor Meet Company for free and add to meet Egdon Resources plc via:
https://www.investormeetcompany.com/egdon-resources-plc/register-investor
(https://www.investormeetcompany.com/egdon-resources-plc/register-investor)
Commenting on the results, Philip Stephens, Chairman of Egdon said;
"This has been another period of impressive operational and financial
performance for the Company. Egdon's flagship asset, Wressle, continues to
perform strongly, generating positive cash flow and with plans being
progressed for its further development.
We were pleased to further enhance the business through the acquisition of
Aurora and the addition of an option on a material gas prospect at
Weaverthorpe.
The outlook for the remainder of the year looks positive with expected
continued strong revenue generation from Wressle alongside numerous value
catalysts in the planned work programme.
We look forward to updating on progress through the second half of the year."
For further information please contact:
Egdon Resources plc
Mark Abbott, Martin
Durham
01256 702 292
Buchanan
Ben Romney, Jon
Krinks
020 7466 5000
Nominated Adviser & Joint Broker - WH Ireland Limited
Antonio Bossi, Chris Hardie, James
Bavister
0207 220 1666
Joint Broker & Financial Advisor - VSA Capital Limited
Andrew Monk (Corporate
Broking)
020 3005 5000
Andrew Raca (Corporate Finance)
About Egdon
Egdon Resources plc (LSE: EDR) is an established UK-based energy company
focused on onshore exploration and production in the UK.
Egdon holds interests in 34 licences in the UK and has an active programme of
exploration, appraisal and development within its portfolio of oil and gas
assets. Egdon is an approved operator in the UK. Egdon was formed in 1997
and listed on AIM in December 2004.
Qualified Person Review
In accordance with the AIM Rules - Note for Mining and Oil and Gas Companies,
this release has been reviewed by Mark Abbott, Managing Director of Egdon, who
is a geoscientist with over 30 years' experience and is a member of the
Geoscience Energy Society GB and a Fellow of the Geological Society. Mr
Abbott has consented to the inclusion of the technical information in this
release in the form and context in which it appears.
Evaluation of hydrocarbon volumes has been assessed in accordance with the
2018 Petroleum Resources Management System (PRMS) prepared by the Oil and Gas
Reserves Committee of the Society of Petroleum Engineers (SPE) and reviewed
and jointly sponsored by the World Petroleum Council (WPC), the American
Association of Petroleum Geologists (AAPG), the Society of Petroleum
Evaluation Engineers (SPEE), the Society of Exploration Geophysicists (SEG),
the Society of Petrophysicists and Well Log Analysts (SPWLA) and the European
Association of Geoscientists & Engineers (EAGE).
This announcement contains inside information for the purposes of Article 7 of
the UK version of Regulation (EU) No 596/2014 which is part of UK law by
virtue of the European Union (Withdrawal) Act 2018, as amended ("MAR"). Upon
the publication of this announcement via a Regulatory Information Service,
this inside information is now considered to be in the public domain.
Chairman's Statement
I am pleased to report on the results for the six months ended 31 January 2023
and provide an update on developments within the business.
Notwithstanding the impact of the increase in the Energy Profits Levy to 35%
implemented in November 2022, the Period has seen the continued positive
impact from Wressle combined with strong oil and gas prices which has
translated into a continued strengthening of the Company's financial position.
Strategy
The Company's strategy takes account the challenges and opportunities
presented by the UK's move to Net Zero carbon emissions by 2050 and the UK
Government's Energy Security Strategy. This, taken together with the wider
economic, political and operating environment has seen a renewed focus on
securing indigenous energy supplies.
Our strategy was updated during 2022 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 reputation, 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
Financial and Statutory Information
The Period has seen a significant strengthening of the financial position of
the Company, driven by a 46% increase in oil and gas revenues during the
Period to £3.725 million (H1 2022: £2.551 million) as a result of increased
production and continuing strong commodity prices. The average realised
price per barrel of oil equivalent was 5.6% higher at $83.77/boe (H1 2022:
$79.32/boe).
The overall profit for the Period was £0.435 million (H1 2022: £1.222
million including £0.507 million of write-backs in relation to Ceres). This
was after a tax charge for the Period of £0.741 million (H1 2022: £Nil),
which includes Energy Profits Levy of £0.458 million (H1 2022: £Nil) and
reversal of a deferred tax asset of £0.145 million (H1 2022: £Nil). The
planned programme of capital works in 2023 and 2024 will result in an
investment allowance and enable recovery of part of this tax as a result of
carry back arrangements.
Cash and cash equivalents as at 31 January 2023 were £5.524 million (H1 2022:
£2.084 million and at 31 July 2022: £4.800 million) and Net current assets
stood at £6.593 million (H1 2022: net current asset of £1.165 million, which
included debt of £1.007 million convertible loan and £0.417 million deferred
consideration for Wressle). As at 31 January 2023, the Company had no
borrowings (H1 2022: £1.007 million).
The Group had net assets at 31 January 2023 of £32.150 million (H1 2022:
£28.641 million).
There were no fund-raising activities during the Period (H1 2022: £Nil). A
total of 18,441,000 warrants were exercised during the Period resulting in
cash of £0.461 million being introduced to the Company (H1 2022: £Nil). As
at 31 January 2023 a total of 30,708,000 warrants remained outstanding (H1
2022: 57,614,000)
Post-period end production and revenues have continued to be strong, despite
reducing commodity prices, with February and March revenues of £0.632 million
and £0.521 million respectively
Environment and Social Governance, Climate and Emissions
Egdon aims 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. Egdon has established a
Climate Change Policy and the Board is committed to reducing the emissions
from our operations and to monitoring and reporting performance in this area.
Acquisition of Aurora Production (UK) Limited
During the Period, Egdon reached agreement to acquire Aurora Production (UK)
Limited ("Aurora") from Aurora Petroleum Limited (the "Vendor"). Aurora holds
an 18.75% interest in PL090 which contains the Waddock Cross oil field and an
8.33% interest in PEDL070 which contains the Avington oil field. Egdon
estimates that the transaction covering both licences will add approximately
0.614 million barrels of Best Estimate Contingent and Prospective Resources of
oil to its resource inventory. Aurora has accumulated upstream ring-fenced tax
losses of ca. £90 million that should be available to offset tax on Egdon's
future profits or which could be vended to a third party.
The consideration was the grant of a Net Profit Interest to the Vendor of 10%
on each of the licence interests which will result in the Vendor being
reimbursed a sum of up to £0.288 million from future production. At
completion cash balances of £0.288 million were retained in Aurora,
reflecting the current estimate of Aurora's abandonment liabilities. The
acquisition which had an effective date of 30 September 2022, completed on 1
March 2023 and the company has since been renamed Egdon Resources (Aurora)
Limited.
Oil and Gas
Egdon holds interests in 34 licences in the UK (2022: 36 licences) with
exposure to the full cycle of opportunities from exploration through to
development and production. Egdon's website (www.egdon-resources.com
(../../../../../MarkA/AppData/Local/MarkA/AppData/Local/NRPortbl/DMS_LIVE/MICHAI/www.egdon-resources.com)
) provides further details of the Company's assets and operations.
Highlighted below are key changes to our licence portfolio during the Period
and post-Period end.
Licence Changes
PL090 Increased to 73.75% through the acquisition of Aurora Production (UK) Limited
PEDL070 Increased to 36.33% through the acquisition of Aurora Production (UK) Limited
P2304 Relinquished in October 2022
P1929 Relinquished in April 2023
Production
Production during the Period was 253 boepd (H1 2022: 200 boepd), primarily
from Wressle and Ceres as well as a contribution from Keddington which was
off-line during January 2023 due to wax issues.
The standout asset for Egdon continues to be Wressle (Egdon 30%). Cumulative
oil production to 31 January 2023 was 357,838 barrels and production exceeded
400,000 barrels on 28 March 2023 with no production water seen to date.
Production during the Period averaged 689 bopd. Three microturbines were
connected during January and February and have been fully operational since
late February. So far, these have resulted in a c. 10% increase in oil
production when compared to that possible without the turbines being
operational and further optimisation is ongoing. Production rates averaged 770
bopd during March 2023.
The commissioning of the micro-turbines was the first step in the gas
utilisation scheme. The second stage will be the installation of a separate
gas engine to generate and export electricity into a local private power
network. Detailed feasibility work has confirmed that the local network can
accept c.1.4 MW of electricity and suitable used gas engines are currently
being assessed due to the long lead times for new units.
During the Period Egdon has completed reprocessing of the 3D seismic data and
finalised a new seismic interpretation and mapping exercise across the Wressle
field. This has highlighted a potentially significant increase in resources
from the Ashover Grit at Wressle and a new Competent Person's Report has been
commissioned to consider all oil and gas bearing formations at Wressle and
incorporating the new field interpretation and production performance data.
This new technical report will inform the optimal development of the Ashover
Grit and Penistone Flags reservoirs and we look forward to providing more
details of the forward plan once this work is complete. Planning and
permitting work is currently ongoing for a new well or wells from the existing
Wressle site. The intention will be to drill at the earliest opportunity,
subject to receipt of regulatory approval. Stage two of the gas monetisation
which will focus on gas export will also be included in the planning
application.
The Wressle Community Fund has been operating since early 2022. In August
2022, operation of the fund was transferred to Broughton Community and Sports
Association which will run the fund to meet the needs of local charities and
community groups. The Wressle JV is making £100,000 a year available to the
fund.
The Ceres gas field (Egdon 10%) continues to contribute material revenues and
cash flow. We currently expect production to continue through to at least the
end of 2024 with the gas price eventually dictating the end of production.
Keddington (Egdon 45%) continued to contribute tangible revenues. A viable
drilling location in the east of the field has been identified targeting
around 180,000 barrels of incremental production. Planning is in place for
this and the well is likely to be drilled during H2 2023.
Fiskerton Airfield (Egdon 80%) has remained shut-in during the Period. There
remains the 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 revenue
include Waddock Cross (Egdon 73.75%), where Egdon's interest has increased
with the acquisition of Aurora Production (UK) Limited. Independent
reservoir modelling has shown that a new horizontal well on the field could
yield commercial oil production (500-800 bopd). Given the significant mean
in-place oil volume of c. 57 million barrels, this asset has been high graded
by Egdon for redevelopment. Egdon is actively progressing planning and
permitting to secure consents for drilling with a target of H1 2024.
At the Avington oil field (Egdon 36.33% following Aurora acquisition), the
operator, IGas, has discharged all planning conditions and has now commenced
operations with an expected restart of production during Q2 2023.
At the Kirkleatham gas field (Egdon 68%), we are in advanced discussions
regarding the potential farm-out of a geophysical programme and a side-track
well and remain hopeful of concluding a deal in the near future. A planning
application is in preparation to extend the existing consents for the site.
Exploration/Appraisal
Biscathorpe (Egdon 35.8%) and North Kelsey (Egdon 50%) are volumetrically
significant prospects with each having gross Mean Prospective Resources of
around 6.5 million barrels. Drilling is dependent upon the outcome of the
planning appeals, but with a positive outcome drilling would be expected in H1
2024.
A planning hearing was held for Biscathorpe on 11 October 2022 and we await
the decision from the planning inspectorate. The appeal documentation for
North Kelsey was submitted on 8 August 2022 and a planning hearing is due to
be held on 14 June 2023 with a decision expected during July 2023.
Post-Period end, Egdon entered into a Farmout Option Agreement with York
Energy (UK) Holdings Limited relating to Licence PL081 in North Yorkshire.
Under the terms of the Agreement Egdon has a period of six months from 3
February 2023 to elect to farm into the Licence which contains the
Weaverthorpe Prospect. Weaverthorpe is a shallow Sherwood Sandstone (Triassic)
prospect located immediately up-dip of interpreted gas pay in the Fordon-2
well (drilled by BP in 1974). Egdon's initial evaluation indicates an
estimated Mean prospective gas resource of 58 billion cubic feet.
During the option period Egdon will undertake additional technical and
operational work to de-risk the opportunity, including reprocessing of the
vintage 2D seismic data and integration of this with the existing 3D seismic
data which defines the western part of the prospect. Should Egdon exercise the
Option, the Company will earn a 70% interest in the Licence and assume
operatorship in return for paying 100% of the costs associated with the
planning, drilling, logging, and either short term testing and completion or
plugging and abandonment of a well to test the Weaverthorpe Prospect.
During April 2023, Egdon relinquished the P1929 licence in line with our
previously advised expectation, as we had not been able to acquire the 3D
seismic programme in the narrow acquisition window, following Shell's
withdrawal and the NSTA were not minded to grant any further extension to the
licence obligations.
Shale-gas
The Group's unconventional resources acreage holding in Northern England is
151,742 net acres (614km(2) net), which is a significant strategic position
with estimated Mean volumes of undiscovered Gas in place of 37.6 trillion
cubic feet of gas net to Egdon, independently assessed by ERCE (2019). Egdon's
core area is the Gainsborough Trough of Nottinghamshire, Lincolnshire and
Yorkshire where the Group holds interests in 71,361 net acres (289km(2) net)
and where results from the 2019 Springs Road-1 well (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 lifting and then reintroduction of the
moratorium on hydraulic fracturing for shale-gas. 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. However, despite the clear need
for indigenous sources of gas we see little political support at the present
time.
Energy Storage, Hydrogen and Renewables including Geothermal
In relation to geothermal energy, a programme to plug and abandon the existing
Dukes Wood-1 oil well and recomplete it for geothermal testing has been
approved by the NSTA. It is anticipated the proof of concept workover and
testing of Dukes Wood-1 will now form part of a larger programme of work, due
to commence during H2 2023.
Egdon is also making good progress on a potentially material renewable energy,
green hydrogen and energy storage project and hopes to be able to announce
further details later in 2023.
Outlook
Production guidance for the full financial year 2022-23 is increased to
240-250 boepd from 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 also both the gas monetisation and the further
field development. Secondly, looking to add reserves, production and revenues
through a planned drilling programme across Egdon's key exploration and
development/redevelopment projects. Thirdly, progressing our nascent
geothermal, energy storage, hydrogen and renewable generation opportunities
during the coming Period.
The Company is in a secure financial position and the Board is making progress
in appointing my successor as Chairman. With continuing strong cash flow and
the quality of our near-term exploration, appraisal and development
opportunities, we can look forward with optimism.
Philip Stephens
Chairman
24 April 2023
EGDON RESOURCES PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 31 January 2023
Unaudited Unaudited Audited
Six months
Six months
Year
ended
ended
ended
31-July-22
31-Jan-23 31-Jan-22
£'000
£'000
£'000
Notes
Revenue 3,725 2,551 6,908
Cost of sales - exploration costs written-off and pre-licence costs (89) (19) (152)
Cost of sales - impairments of intangible fixed assets - - (1,802)
Cost of sales - impairment reversals of property, plant and equipment - 507 1,397
Cost of sales - depreciation, excluding impairments (806) (566) (1,521)
Cost of sales - direct production costs (642) (613) (1,257)
Cost of sales - other, including shut-in fields (226) (94) (205)
Total cost of sales (1,763) (785) (3,540)
Gross profit 1,962 1,766 3,368
Administrative expenses (787) (477) (915)
Other operating income 113 52 143
1,288 1,341 2,596
Finance income - net investment in sub-lease 21 23 46
Finance costs - (55) (92)
Finance costs - unwinding of decommissioning discount (85) (33) (37)
Finance costs - lease liability charge (48) (54) (106)
Profit before taxation 1,176 1,222 2,407
Taxation 4 (741) - 890
Profit for the period 435 1,222 3,297
Other comprehensive income for the period - - -
Total comprehensive income for the period attributable to equity holders of 435 1,222 3,297
the parent
Earnings per share - note 3
Basic earnings per share 0.08p 0.24p 0.64p
Diluted earnings per share 0.07p 0.24p 0.57p
EGDON RESOURCES PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 January 2023
Notes Unaudited Unaudited Audited
31-Jan-23
31-Jan-22
£'000
31-Jul-22
£'000
£'000
Non-current assets
Intangible assets 2 19,732 21,240 19,562
Property, plant and equipment 2 9,416 8,932 9,824
Right-of-use asset 448 567 488
Net investment in sub-lease 394 382 393
Deferred tax asset 268 - 268
Total non-current assets 30,258 31,121 30,535
Current assets
Inventory 17 - 17
Trade and other receivables 2,301 1,388 2,685
Cash and cash equivalents 5 5,524 2,084 4,800
Total current assets 7,842 3,472 7,502
Current liabilities
Trade and other payables (1,141) (1,174) (2,494)
Loans and borrowings 6 - (1,007) -
Lease liability within one year (108) (126) (112)
Total current liabilities (1,249) (2,307) (2,606)
Net current assets 6,593 1,165 4,896
Total assets less current liabilities 36,851 32,286 35,431
Non-current liabilities
Lease liability after one year (879) (987) (900)
Provisions (3,822) (2,658) (3,459)
Total non-current liabilities (4,701) (3,645) (4,359)
Net assets 32,150 28,641 31,072
Equity
Share capital 8 17,388 17,118 17,203
Share premium 27,916 27,513 27,640
Share-based payment reserve 326 123 144
Retained earnings (13,480) (16,113) (13,915)
32,150 28,641 31,072
EGDON RESOURCES PLC
CONSOLIDATED STATEMENT OF CASH FLOWS
For the six months ended 31 January 2023
Unaudited Unaudited Audited
Six months
Six months
Year
ended
ended
ended
31-Jan-23
31-Jan-22
31-Jul-22
£'000
£'000
£'000
Cash flows from operating activities
Profit before tax 1,176 1,222 2,407
Adjustments for:
Depreciation and impairments of non-current assets 817 576 3,346
Impairment reversal of non-current assets - (507) (1,397)
Increase in decommissioning provision written off to cost of sales 12 32 49
Foreign exchange (gain)/loss (38) 1 (218)
Increase in inventory - - (17)
Decrease/(increase) in trade and other receivables 179 (356) (832)
(Decrease)/increase in trade and other payables (1,766) (546) 564
Finance costs 133 142 235
Finance income (21) (23) (46)
Discount of decommissioning provision - 101 -
Share based payment expense 182 - 144
Cash generated from operations 674 642 4,235
Tax paid (120) - -
Net cash generated from operating activities 554 642 4,235
Investing activities
Payments for exploration and evaluation assets (53) (175) (216)
Purchase of property, plant and equipment (369) (231) (350)
Net Profit Interest repayment (140) - -
Cash acquired with subsidiary undertaking 288 - -
Net cash flow used in capital expenditure and financial investment (274) (406) (566)
Financing activities
Issue of shares 461 - 212
Interest paid on loan - (56) (100)
Principal paid on lease liabilities (24) (24) (103)
Interest paid on lease liabilities (27) (31) (60)
Loan repayment - - (1,000)
Net cash flow generated from/(used in) financing 410 (111) (1,051)
Net increase in cash and cash equivalents 690 125 2,618
Cash and cash equivalents at the start of the Period 4,796 1,960 1,960
Effects of exchange rate changes on the balance of cash held in foreign 38 (1) 218
currencies
Cash and cash equivalents at the end of the Period 5,524 2,084 4,796
Cash and cash equivalents comprise:
Cash at bank and in band 5,524 2,084 4,800
Bank overdrafts - - (4)
Cash and cash equivalents at the end of the Period 5,524 2,084 4,796
In the period to 31 January 2023, significant non-cash transactions included
the share-based payment charge of £182k. In the year to 31 July 2022
significant non-cash transactions included the recognition of the NPI
provision of £608k which is included in other provisions, the share-based
payment charge of £144k and the recognition of the deferred tax asset of
£1,044k. In the period to 31 January 2022, significant non-cash
transactions included the recognition of the decommissioning provision of
£80,000 and the convertible loan which was subsequently converted to equity.
EGDON RESOURCES PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 31 January 2023
Share capital Share premium Share based payment reserve Retained earnings Total equity
£'000 £'000 £'000 £'000 £'000
Balance as at 31 July 2021 17,118 27,513 123 (17,335) 27,419
Total comprehensive income for the Period - - - 1,222 1,222
Balance as at 31 January 2022 17,118 27,513 123 (16,113) 28,641
Total comprehensive income for the Period - - - 2,075 2,075
Issue of shares - exercise of warrants 85 127 - - 212
Cancellation of share options - - (123) 123 -
Issue of new share options - - 144 - 144
Balance as at 31 July 2022 17,203 27,640 144 (13,915) 31,072
Total comprehensive income for the Period - - - 435 435
Issue of shares - exercise of warrants 185 276 - - 461
Issue of new share options - - 182 - 182
Balance as at 31 January 2023 17,388 27,916 326 (13,480) 32,150
1. General information
Egdon Resources plc ('the Company' and ultimate parent of the Group) is a
public limited company listed on the AIM market of the London Stock Exchange
plc (AIM) and incorporated in England. The registered office is Blackstable
House, Longridge, Sheepscombe, Stroud, Gloucestershire, England, GL6 7QX.
This interim report was authorised for issue by the Directors following close
of markets on 21 April 2023.
Basis of preparation
The financial information set out in this interim report has been prepared in
accordance with UK adopted international accounting standards.
Adoption of new and revised standards
New standards, interpretations and amendments
New standards impacting the Group that have been adopted in the interim
financial statements for the six months ended 31 January 2023, but have not
had a significant effect on the Group are as follows:
· Onerous Contracts - Cost of Fulfilling a Contract (Amendments to
IAS 37);
· Property, Plant and Equipment: Proceeds before Intended Use
(Amendments to IAS 16);
· Annual Improvements to IFRS Standards 2018-2000 (Amendments to
IFRS 1, IFRS 9, IFRS 16 and IAS 41); and
· References to Conceptual Framework (Amendments to IFRS 3)
New standards, interpretations and amendments not yet effective
There are a number of standards, amendments to standards, and interpretations
which have been issued by the IASB that are effective in future accounting
Periods that the Group has decided not to adopt early.
The following amendments are effective for the reporting Period beginning 1
August 2023:
· Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS
Practice Statement 2);
· Definition of Accounting Estimates (Amendments to IAS 8); and
· Deferred Tax Related Assets and Liabilities arising from a Single
Transaction (Amendments to IAS 12).
Non-statutory accounts
The financial information set out in this interim report does not constitute
the Group's statutory financial statements for that Period within the meaning
of Section 434 of the Companies Act 2006. The statutory financial statements
for the year ended 31 July 2022 have been delivered to the Registrar of
Companies. The auditors reported on those financial statements; their report
was unqualified and did not contain a statement under either Section 498 (2)
or Section 498 (3) of the Companies Act 2006. However, in their report on
the statutory financial statements for the year ended 31 July 2022, the
auditors drew attention, by way of emphasis of matter paragraph, to material
uncertainties related to the carrying value of the unconventional assets and
the impact of the moratorium on hydraulic fracturing for shale-gas in England.
The financial information for the six months ended 31 January 2023 and 31
January 2022 is unaudited.
Accounting policies
The condensed financial statements have been prepared under the historical
cost convention, except for the inclusion of certain financial instruments at
fair value.
The same accounting policies, presentation and methods of computation are
followed in these condensed financial statements as were applied in
preparation of the Group's financial statements for the year ended 31 July
2022.
Going concern
The Directors have prepared the financial statements on the going concern
basis, which assumes that the Group and the Company will continue in
operational existence without significant curtailment of its activities for
the foreseeable future, being 12 months from the approval of the interim
financial statements.
Forward cash flows necessarily make assumptions as to the timing and value of
cash flows from production at the Group's producing sites. Whilst there is
currently no evidence that the timing or value of these revenues is
unrealistic, the Directors acknowledge that volatility in both oil and gas
prices, well performance uncertainties and realising of amounts invoiced to
joint venture partners, give some level of uncertainty in respect of the
timing of future cash flows.
The Group also retains options to access additional sources of funding via
debt and/or equity to fund certain future activities. Whilst, after having
made enquiries of our advisors, there is a high expectation on the part of the
Directors that such debt and/or equity will be available in the market if and
when required, a level of uncertainty exists in relation to this.
The Group has flexibility in relation to the timing and quantum of future
expenditures and will continue to look to balance financial exposure and risk
by minimising its exposure to future cash expenditure on existing projects
during the coming Period.
2. Impairments
Current period
During the period no impairment charge or credit has been recognised.
As at period ended 31 January 2022 and 31 July 2022
An impairment credit of £506,903 was recognised in relation to the Ceres Gas
Field as the current high gas price assumptions render Ceres economic until
2025.
As at year ended 31 July 2022
An impairment charge of £1,801,790 was recognised in relation to the licences
P1929 and P2304 due to Shell advising Egdon of its intention to withdraw from
the licenses.
An impairment credit of £127,000 was recognised in relation to the Keddington
Oil Field as it is assumed that there will be increased production in late
2023.
An impairment credit of £133,000 was recognised in relation to Avington Oil
Field as restoration of production is anticipated during 2023.
An impairment credit of £300,000 was recognised in relation to Waddock Cross
Oil Field as production reinstatement is anticipated.
An impairment credit of £330,000 was recognised in relation to Kirkleatham
Gas Field as drilling is expected in late 2023.
3. Earnings per share
Unaudited Unaudited Audited
Six months ended
Six months ended
31-Jan-23
31-Jan-22 Year ended
p
p
31-Jul-22
p
Basic 0.08 0.24 0.64
Diluted 0.07 0.24 0.57
The basic earnings per share has been calculated on the profit on ordinary
activities after taxation of £0.435m (January 2022: £1.222m; July 2022:
£3.297m) divided by the weighted average number of ordinary shares in issue
of 543,683,031 (January 2022: 516,777,031; July 2022: 518,951,908). The
diluted earnings per share has been calculated on the profit on ordinary
activities after taxation of £0.435m (January 2022: £1.222m; July 2022:
£3.297m) divided by the diluted weighted average number of ordinary shares in
issue of 590,639,371 (January 2022: 516,777,031; July 2022: 581,343,086).
In the Period to 31 January 2022, the share options and warrants in issue were
excluded as their inclusion would have been anti-dilutive. At the prior Period
end, the calculated average share price was lower than the exercise price of
the warrants and share options in issue and, therefore these potential
ordinary shares have not been included for the purposes of calculating the
diluted profit per share.
Changes to tax policy have had an impact on the profit after tax. An
alternative earnings per share calculation is presented below using the same
denominators as in the table above and the profit on ordinary activities
before taxation for each Period of £1.176m (January 2022: £1.222m; July
2022: £2.407m).
Unaudited Unaudited Audited
Six months ended
Six months ended
31-Jan-23
31-Jan-22 Year ended
p
p
31-Jul-22
p
Basic 0.22 0.24 0.46
Diluted 0.20 0.24 0.41
4. Taxation
Unaudited Unaudited Audited
31-Jan-23 31-Jan-22 31-Jul-22
£'000 £'000 £'000
Current tax expense
Ring fence profits 138 - 51
Energy profit levy 458 - 103
Total current tax 596 - 154
Deferred tax expense
Reversal of temporary difference - utilisation of losses 145 - -
Origination and reversal of temporary differences - - (1,044)
Total deferred tax 145 - (1,044)
Total tax charge/(credit) for the period 741 - (890)
5. Cash and cash equivalents
Unaudited Unaudited Audited
31-Jan-23 31-Jan-22 31-Jul-22
£'000 £'000 £'000
Cash at bank at floating interest rates 495 494 2,230
Non-interest bearing cash at bank 5,029 1,590 2,570
5,524 2,084 4,800
Cash at bank at floating interest rates consisted of money market deposits
which earn interest at rates set in advance for periods up to three months.
6. Loans and borrowings
Unaudited Unaudited Audited
31-Jan-23 31-Jan-22 31-Jul-22
£'000 £'000 £'000
Current
Other loans - (1,007) -
- (1,007) -
The loan facility held with Union Jack Oil plc is £Nil (H1 2022: £1.0m). The
loan which was drawn down on 25 November 2020 was fully repaid in the prior
period on 25 May 2022. Interest accrued on a daily basis on the outstanding
loan amount at an interest rate of 11% per annum and was payable quarterly
commencing on the earlier of the quarter following first production or on 1
April 2021. The loan was secured against an unencumbered 25% interest in the
Wressle Project (PEDL180, and PEDL182), including the Wressle development
project and associated infrastructure.
7. Dividend
The Directors do not recommend payment of a dividend.
8. Share capital
In the current Period a total of 18,441,000 warrants to subscribe for new
Ordinary 1p shares were exercised for total cash consideration of £461,025 at
an issue price of 2.5p. The nominal value of the shares was £184,410 and the
additional share premium created was £276,615.
In the prior year a total of 8,465,000 warrants to subscribe for new Ordinary
1p shares were exercised for total cash consideration of £211,626 at an issue
price of 2.5p. The nominal value of the shares was £84,650 and the additional
share premium created was £126,976.
9. Business combination
With an effective commercial date of 30 September 2022, the Company acquired
the entire share capital of Aurora Production (UK) Limited ("Aurora
Production") from Aurora Petroleum Limited. Aurora Production is a private
company, which holds an 18.75% interest in the Egdon operated licence PL090
which contains the Waddock Cross oil field and an 8.33% interest in the IGas
operated licence PEDL070 which contains the Avington oil field.
Egdon's interest in the Waddock Cross oil field (PL090) increased to 73.75%
and to 56.04% in the remaining parts of PL090 (excluding the Waddock Cross oil
field). Egdon has increased its holding in the Avington oil field to 36.33%.
The consideration for this acquisition was the grant of a Net Profit Interest
to the Vendor of 10% on each of the licence interests which in the event that
profitable production is established, will result in the Vendor being
reimbursed a sum of up to £0.288 million from future production. Cash
balances of £0.288 million were retained in Aurora reflecting the current
estimate of Aurora's abandonment liabilities.
Aurora Production also has accumulated upstream ringfenced tax losses of ca.
£90 million that should be available to offset tax on future profits.
A review of the fair value of Aurora's assets and liabilities at the
acquisition date is ongoing at the date of this report and will be dealt with
in the Annual Report. Therefore, the assets and liabilities at acquisition
have been recognised at book value and any difference between the
consideration and the fair value of net assets acquired which may lead to
goodwill or bargain gain has not been recognised in these interim financial
statements.
The results of Aurora for the period 1 October 2022 to 31 January 2023 have
been consolidated into the Consolidated Statement of Comprehensive Income.
10. Post-Period Events
On 6 February 2023 Egdon entered into a Farmout Option Agreement with York
Energy (UK) Holdings Limited relating to Licence PL081 in North Yorkshire.
Under the terms of the Agreement Egdon has a Period of six months from 3
February 2023 to elect to farm into the Licence which contains the
Weaverthorpe Prospect. Egdon's initial evaluation indicates an estimated Mean
prospective gas resource of 58 billion cubic feet.
On 1 March 2023 Egdon completed the acquisition of Aurora Production (UK)
Limited which has subsequently been renamed Egdon Resources (Aurora) Limited
(see Note 9 above).
On 19 April 2023 Egdon relinquished P1929 which contained the Resolution gas
discovery and which was fully impaired in the 31 July 2022 accounts (see note
2 above).
11. Publication of the Interim Report
This interim report is available on the Company's website
www.egdon-resources.com (http://www.egdon-resources.com/) .
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