Financial Results:
Production volumes for the period were 8,037 barrels (2008: 18,387 barrels). Delays in the restart of production from Avington resulted in lower than anticipated production levels for the period. Exceptional items for the period included a net gain of GBP0.22 million from the sale of a 10% interest in Keddington oil field and currency gains of GBP0.12 million. No dividend is being recommended.
The company had net current assets as at January 31, 2009 of GBP2.046 million (January 31, 2008: GBP3.3 million) including cash of GBP1.8 million. The company has no debt.
Operations
Near term focus on Production Growth
As defined in Egdon Resources’ strategy, the company continues to focus resources on production and development projects designed to increase near-term revenue and cash flow. At January 31, 2009 the Keddington and Avington oil fields were both in production.
Production from the Keddington oilfield in Lincolnshire continued throughout the period, with total production for the six months to January 31, 2009 of 7,588 barrels (2008: 6,147 barrels) an increase of 24%. During early February 2009 the Keddington-2y well was converted for pumped production for the first time. Early indications are that the well is producing around 20-25 barrels of oil per day (bopd), double that produced prior to pumping. The well will continue to be monitored and the pumping regime fine tuned to optimise production.
Keddington site operations were transferred to a new contractor Onshore Oilfield Services Limited during the period resulting in significant improvements in operational reliability. Egdon Resources remain encouraged by the upside at Keddington and are planning to drill a sidetrack of the Keddington-2y well to increase production and revenues. Reprocessing of the existing 3D seismic data has been instigated to determine the final bottom hole location. It is hoped that a successful sidetrack well could boost production to around 150 bopd.
Egdon Resources is also in discussions to utilize the associated gas production for electricity generation for both site use and for sale and will be progressing discussions in this area during 2009.
On January 23, 2009 the Avington oil field in Hampshire restarted production. The net Egdon Resources contribution for the period from Avington was only 449 barrels (2008: 12,240 barrels). The delay in restart of production is disappointing and was due to the regulatory approval process and this has impacted Egdon Resources’ anticipated production rates and consequently revenues for the period. During March 2009 Egdon Resources increased its interest in Avington from 20% to 36.67% through the acquisition of YCI Resources Ltd as reported under corporate matters below. Production rates have been broadly in line with expectations since production resumed.
During the period Egdon Resources reached agreement with Star Energy to acquire the Kirklington-2 well site in 13th round license PEDL203. The Kirklington oil field is located in Nottinghamshire immediately to the south of the Eakring-Dukes Wood field and has been shut-in since 2004. The comapny has identified the potential to recover additional oil volumes via a sidetrack of the existing Kirklington-2 well and seismic data is currently being reprocessed to confirm a bottom hole target location.
Planning approval is already in place for this well. The site is currently being upgraded and environmental permits being put in place to allow production from the existing well to recommence.
In October 2008 Nottinghamshire county council granted planning permission for the drilling of an exploratory well to progress Egdon Resources evaluation of the rejuvenation potential of the Eakring-Dukes Wood oil field where the company sees low risk opportunities to add production and reserves to the company’s near term asset base. The Dukes Wood-1 well was spudded on November 18, 2008 with the top-hole section of the well drilled and cased to a depth of 47 meters before suspending the well until a larger rig becomes available to complete drilling operations which is anticipated for late summer 2009.
The Dukes Wood-1 well will test the crestal part of the Dukes Wood anticline in an area where Egdon Resources has identified potential for un-drained and re-migrated oil. The PEDL118 license, which contains Eakring-Dukes Wood, has been extended into its second license period expiring on January 31, 2013.
Good progress has also been made during the period at the Kirkleatham gas discovery in license PEDL068, with the outline agreement in January 2009 of terms for gas sales to the Wilton works. A planning application is due to be submitted shortly and Egdon Resources is targeting first gas sales by the end of 2009.
A planning application is in preparation for production of the Nooks Farm gas field in North Staffordshire license PEDL141 where Egdon Resources has a carried interest through the next phase of activity. It is proposed to re-enter the Nooks Farm-1A well and produce gas for on-site electricity generation with export via an underground cable to the National Grid.
As intimated at the AGM in 2008, Egdon Resources did not reach its year end target of 250 barrels of oil per day (bopd) due to delays in the start-up of Avington, rig availability at Dukes Wood and delays in production testing at Waddock Cross. The company does expect to meet its target of 500 barrels of oil equivalent per day by the end of calendar year 2009, achieved with new production, production enhancement and long term production testing planned at Kirklington, Dukes Wood, Waddock Cross, Keddington and Kirkleatham prior to year-end.
Exploration – Positioning the company for future growth:
Egdon Resources’ strategy is to develop its high-potential exploration portfolio as a platform for future growth whilst restricting 2009 exploration expenditure, as Egdon Resources concentrate its near-term resources on further developing production and revenue streams.
As part of this process Egdon Resources continues to evaluate its existing licenses in the UK and France through ongoing technical work and putting in place the necessary landowner and planning consents to enable future drilling. Egdon Resources has an objective of drilling three to four exploration and appraisal wells per year from 2010 onwards. The company is currently working towards the submission of planning applications for exploratory drilling at Winfrith-1 in Dorset, North Somercotes-1 in Lincolnshire and Westerdale-2 in North Yorkshire during 2009. An application is also currently being considered for the Holmwood-1 well in Surrey operated by Europa Oil & Gas.
As reported last year Egdon Resources has identified France as a focus area and “I am pleased to report that we have made good progress in further growing our business in France during the period with the award of the Pontenx permit, the pending award of the Gex permit and a further application for the Navacelle permit which is awaiting determination.
The Pontenx permit was ratified on December 16, 2008 and published in the Official Journal on January 20, 2009. Egdon Resources will operate the permit with a 40% interest through its wholly owned subsidiary Egdon Resources (New Ventures) Ltd.
