Corporate Governance Statement

The Directors recognise the importance of sound corporate governance and are committed to maintaining the highest standards of corporate governance. As a company whose shares are traded on AIM, the Board has concluded that it will seek to comply with the Quoted Companies Alliance’s Corporate Governance Code (“the QCA Code”). In addition, the Directors have adopted a code of conduct for dealings in the shares of the Company by Directors and employees. Philip Stephens, in his capacity as non-executive Chairman, has assumed responsibility for ensuring that the Company has appropriate corporate governance standards in place and that these requirements are followed and applied. The corporate governance arrangements that the Board have adopted are designed to ensure that the Company delivers long-term value to its shareholders and that shareholders have the opportunity to express their views and expectations for the Company in a manner that encourages open dialogue with the Board. The Board recognises that its decisions regarding strategy and risk will affect the corporate culture of the Company as a whole and in turn the performance of the Company. The Board is very aware that the tone and culture set by the Board will determine the nature of the Company as a whole and the way that employees behave. A large part of the Company’s activities is centred upon what needs to be an open and respectful dialogue with investors, whether they be individuals or corporate. Therefore, the importance of sound ethical values and behaviours is crucial to the ability of the Company to achieve its corporate objectives. The Board places great importance on this aspect of corporate life and seeks to ensure that this flows through all that the Company does.

The Board currently consists of 6 Directors, of whom 2 are executive and 4 are non‑executive. The Board believes that the shareholdings of non-executives are not large enough to render them not independent and that therefore, apart from Andrew Lodge who represents a large shareholder, the non-executive directors are independent. The Board continues to consider whether it would be appropriate to seek to appoint additional non-executive and/or executive Directors but currently believes that appropriate oversight of the Company is provided. This view will continue to be reviewed by the Board. The Board has appointed me, Philip Stephens, as Chairman recognising my wide experience of corporate governance gained from a long career in UK Corporate Finance and having served as a non-executive director and chairman of many disparate companies over the last 25 years. The Board believes that the presence of other senior non-executive Directors means that the roles of Chairman and senior independent Director are adequately separated.

The Board has taken the view that as there are currently only six Directors on the Company Board it would not be appropriate to create a Nominations Committee to address the issues arising from ensuring a managed and successful succession planning process, either for executive or non-executive Directors.

Yours faithfully

Philip Stephens

Corporate Governance Report

The QCA Code sets out 10 principles which should be applied. These are listed below together with a short explanation of how the Company applies each of the principles:

Deliver Growth

QCA Code Principle What Egdon does and why
 1.      Establish a strategy and business model which promote long-term value for shareholders  
 

Egdon’s strategy will be explained fully within the Strategic Report section of the Report and Financial Statements for the year ended 31 July 2018 due to be announced 30 October 2018.

Our strategy is focused around three key near term objectives: ; a) Production -A continued focus on maximising production rates, revenues and profitability from existing producing assets through targeted investment, b) UK unconventional resources – Growing the Company’s exposure to exploration opportunities in Northern England and c) Conventional resources exploration and appraisal – Adding additional reserves/revenues through an active conventional resources drilling programme whilst managing risk and financial exposure through farm-outs.

The key challenges to the business and how these are mitigated will be explained fully within the Report and Financial Statements for the year ended 31 July 2018 due to be announced 30 October 2018..

 2.      Seek to understand and meet shareholder needs and expectations  
 

The Board is committed to investing all resources in the Company and accordingly intends to defer payment of any dividends until such time as the portfolio of assets is self-sustaining.

 Egdon encourages two-way communication with both its institutional and private investors and responds quickly to all queries received. The Chairman, Managing Director and senior managers talk regularly with the Company’s major shareholders and analysts and invite them to presentations immediately following publication of both the interim and final results. They then ensure that investors’ views are communicated fully to the Board.

 The Company commissions research by Edison Investment Research Limited to ensure that a non-introspective viewpoint is also available to private and institutional investors alike.

 The Board recognises the AGM as an important opportunity to meet private shareholders. The Chairman has a record of allowing wide ranging discussion at the AGM even when not germane to the resolution being discussed.

The AGM invariably includes a presentation by the Managing Director and others on developments which have occurred since the Annual Report went to press.

 Where voting decisions are not in line with the Company’s expectations the Board will engage with those shareholders to understand and address any issues. The Chairman is the main point of contact for such matters.

The largest shareholder (Petrichor Holdings Coöperatief, U.A.) has indicated that it does not wish to have a seat on the Board for the time being. The second largest shareholder (Premier Oil PLC ) is currently represented on the Board by Andrew Lodge.

 3.      Take into account wider stakeholder and social responsibilities and their implications for long-term success  
 

Egdon is fully committed to safe and environmentally sensitive working in all aspects of its business and all communities in which it operates. This is evidenced and underpinned by the detailed work done with HSE on all operations and the pride with which the Board was again able to record no reportable health, safety or environmental incidents during the year to 31 July 2018.

Egdon encourages feedback at the AGM and at other times from investors and the public at large. We utilise social media such as Twitter® to communicate Egdon and UK onshore industry news and we closely monitor responses on this and bulletin boards. We may seek to use Facebook® to increase engagement with stakeholders in the coming year.

 4.      Embed effective risk management, considering both opportunities and threats, throughout the organisation  
 

Risk Management will be explained fully in the Report and Financial Statements for the year ended 31 July 2018 due to be announced 30 October 2018. This details risks to the business, how these are mitigated and the change in the identified risk over the last reporting period.

The Board formally reviews, re‑classifies and tabulates the principal risks to the business at least annually. Whenever a change to the business environment is identified the Board considers whether this affects any particular risk or mitigation strategy.

Maintain A Dynamic Management Framework

QCA Code Principle What Egdon does and why
 5.      Maintain the board as a well‑functioning, balanced team led by the chair.  
 

The Company is controlled by the Board of Directors. Philip Stephens, the non-executive Chairman, is responsible for the running of the Board and Mark Abbott, the Managing Director, has executive responsibility for running the Company’s business and implementing strategy.

 

All Directors receive regular and timely information on the Company’s operational and financial performance. Board Papers are circulated to all Directors in advance of meetings, together with other relevant information. In addition, minutes of the meetings of the Directors are circulated to the Directors for review and correction before being tabled for signature by the Chairman at the next meeting. All Directors have direct access to the advice and services of the Company Secretary and are able to take independent professional advice in the furtherance of their duties, if necessary, at the Company’s expense.

 

The Board comprises two Executive Directors and four Non-Executive Directors. The Board considers that all Non‑executive Directors bring an independent judgement to bear and that their various backgrounds foster consideration of many viewpoints.

 

The Board meets at least eight times per annum. It has established an Audit Committee and a Remuneration Committee, particulars of which appear hereafter. The Board agreed that appointments to the Board are made by the Board as a whole and so has not created a Nominations Committee.

The Non‑executive Directors are contracted to provide more time to the Company than in practice has been needed and no significant lack of availability has been identified.

 6.      Ensure that between them the directors have the necessary up-to-date experience, skills and capabilities  
 

The Board carries out an evaluation of its performance annually, taking into account the Financial Reporting Council’s Guidance on Board Effectiveness.

The Board believes that between the Directors there should be a complete range of current relevant experience. It also believes that its members should have as full a variety as possible of personal attributes and experience. The extent to which any prospective Director adds to this is an essential part of the appointment process.

 7.      Evaluate board performance based on clear and relevant objectives, seeking continuous improvement  
 

The Board carries out an evaluation of its performance annually, taking into account the Financial Reporting Council’s Guidance on Board Effectiveness.

All Directors undergo a performance evaluation before being proposed for re‑election to ensure that their performance is and continues to be effective, that where appropriate they maintain their independence and that they are demonstrating continued commitment to the role.

Appraisals of all Directors are carried out each year.

All continuing Directors stand for re-election at least every three years.

 8.      Promote a corporate culture that is based on ethical values and behaviours  
 

The Board recognises that its decisions regarding ethics, strategy and risk will determine the whole corporate culture of the Company and that this will in turn determine the long-term performance of the Company. The Company’s success relies on establishing and maintaining a relationship of trust and respect with Government and its various national and local agencies, the HSE, local people in its areas of operations and its industry partners and contractors. The Board is therefore resolved to ensure that sound ethical values and behaviour are core to the culture of the Company.

The Company has adopted, with effect from the date on which its shares were first admitted to AIM, a code for Directors’ and employees’ dealings in securities which is appropriate for a company whose securities are traded on AIM, and is in accordance with rule 21 of the AIM rules. The Chairman and the Company Secretary are responsible for administering the code and have always adopted a conservative approach in doing so.

 9.      Maintain governance structures and processes that are fit for purpose and support good decision- making by the board  
  This Corporate Governance Statement details the Company’s governance structures and why they are appropriate and suitable for the Company.
 10.  Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders.  
 

Egdon encourages two-way communication with both its institutional and private investors and endeavours to respond quickly to all queries received. The Chairman and the Managing Director talk regularly with the Company’s major shareholders and invite them to presentations immediately following publication of both the interim and final results. They then ensure that investors’ views are communicated fully to the Board.

 The Company commissions research by Edison Investment Research Limited to ensure that a non-introspective viewpoint is also available to private and institutional investors alike.

 The Board recognises the AGM as an important forum to meet private shareholders. The Chairman has a record of allowing wide ranging discussion at the AGM even when not germane to the resolution being discussed.

The AGM invariably includes a presentation by the Managing Director and others on developments which have occurred since the Annual Report went to press.

Investors also have access to current information on the Company through its website, www.egdon-resources.com, and via Mark Abbott (Managing Director) and James Elston (Director of Egdon Resources U.K. Limited) who are available to answer investor relations enquiries.