Government Moratorium on Hydraulic Fracturing for shale-gas
Egdon Resources plc (AIM:EDR) notes the announcement by government that it will introduce a temporary moratorium on hydraulic fracturing for shale gas.Over the last 6 years Egdon has built a significant acreage position in UK unconventional resources focused on the Gainsborough Trough in Eastern England. The results from the Springs Road-1 well drilled earlier this year, have shown the potential for a world class gas resource in this basin, with analysis indicating gas in place of 640 billion cubic feet of gas per square mile. Each basin and site is different and the Gainsborough Trough is characterised by its simple structure and limited faulting.We note the comment made by Oil and Gas Authority (OGA) Director of Regulation Tom Wheeler who stated that “the OGA believes that further detailed geomechanical analysis would be needed before we could evaluate with confidence whether hydraulic fracturing could resume in the Fylde, or elsewhere, consistent with the Government’s policy aims”. Egdon along with the rest of the industry is fully committed to working closely with the OGA and other regulators to demonstrate that we can operate safely and in an environmentally responsible manner, and we are confident of doing so.We also reiterate the comments of Ken Cronin, Chief Executive of UK Onshore Oil and Gas, the industry body in his response to the announcement; “Since shale gas exploration commenced in England we have confirmed a world-class resource. Flow testing and core sampling across Lancashire and North Nottinghamshire show that our high-quality indigenous gas can reach the surface, leaving the UK with no excuse to continue importing overseas gas that generates double the emissions and provides British workers, businesses and communities with no economic benefit.“As the Committee on Climate Change has stated, there will be a significant need for natural gas in 2050, approximately 70% of our current consumption, to meet our future demand for hydrogen.“The Committee also reiterated in their Net Zero report something any climate change conscious Government should pay heed to: it is essential that we do not simply offshore our emissions – and environmental responsibilities – to other countries.”Mark Abbott, Managing Director of Egdon said;Whilst growth of our unconventional resources asset base has formed an important and successful part of Egdon’s strategy over recent years, it should be remembered that Egdon also has a broad range of conventional oil and gas assets within its diverse portfolio. We expect numerous catalysts across the conventional portfolio in the coming months, including further positive developments relating to today’s announcement of entering an exclusivity agreement with respect to a farmout of the offshore Resolution and Endeavour gas discoveries with a large internationally recognised exploration and production company. We will now take some time to review the detail of the OGA report and the government announcement of a temporary moratorium and its implications for our business before reporting to shareholders in due course. My immediate focus is on presenting our case to the Planning Inspector at the Public Inquiry for the Wressle oil field development which commences tomorrow (5 November 2019) in Scunthorpe and is scheduled to last up to six days.
P1929 and P2304 Farm-out Exclusivity Agreement
Egdon Resources plc (AIM:EDR) is pleased to provide an update on the farm-out process in relation to the Resolution and Endeavour gas discoveries in UK offshore licences P1929 and P2304 respectively. Egdon subsidiary, Egdon Resources U.K. Limited (‘ERUK’), is the operator and currently holds a 100% interest in both licences.Following an extensive farm-out process, the Company can announce that ERUK has signed an exclusivity agreement (the “Agreement”) in respect of Licence P1929 and P2304 with a large internationally recognised exploration and production company (the “Counterparty”). Exclusivity has been granted to the Counterparty subject to a definitive farm out agreement or other definitive legal agreement(s) being entered into by 19 January 2020 and completion occurring by 19 April 2020.Given the exclusivity arrangement, discussions and negotiations with other parties have been suspended and the data room closed while the Agreement is in place.In April 2019 we announced the results of a Competent Person’s Report (“CPR”) prepared by Schlumberger Oilfield UK PLC in relation to the Resolution gas discovery. Schlumberger has made independent estimates of mean Contingent Gas Resources of 231 billion cubic feet of gas (“bcf”) with a P90 to P10 range of 100 to 389 bcf, that can be attributed to the Zechstein reservoir in the 1966 gas discovery made by Total in well 41/18-2 (UK)Egdon has previously submitted a request to the Oil and Gas Authority (“OGA”) for an extension to P1929 and P2304 both of which otherwise expire at the end of November 2019 and are hopeful of receiving confirmation from the OGA in respect of these extensions in the near future.Despite entry into the Agreement, no assurance can be provided that a commercial transaction will ultimately be concluded with the Counterparty. The Company will provide further updates in respect of these matters in due course.Commenting, Mark Abbott, Managing Director of Egdon Resources plc, said:“We are delighted to have agreed exclusivity with a large internationally recognised exploration and production company as our preferred partner for Resolution and Endeavour. In our view, the calibre of the proposed partner reflects the upside potential associated with these assets and validates our strategy to add them to our portfolio. This represents a major step forward for these projects and results from the significant work undertaken by the team over a prolonged period. We look forward to working closely with the Counterparty to progress negotiations and due diligence and will of course update shareholders on progress in due course.”
Operations Update
Egdon Resources plc (AIM:EDR) is pleased to provide an update on production and operations following the end of the Company’s 2018-2019 financial (“FY2019”) on 31 July 2019. The Company’s preliminary results are scheduled to be announced on 19 November 2019.ProductionEgdon’s net production from the Ceres gas field and the Keddington and Fiskerton Airfield oil fields during FY2019 period was 66,364 barrels of oil equivalent (“boe”), at an average of 182 boe per day (“boepd”) (FY2018 12,691 boe, 70 boepd), in line with previously stated guidance. Production recommenced from the Ceres well in late October 2018 following installation of a new flow meter driving a significant increase in production over the previous financial year.Egdon will provide production guidance for the financial year ending 31 July 2020 (“FY2020”) with the preliminary results, but initial guidance for the first half of the financial year is c. 170-180 boepd with Mercury gas backout volumes receivable by Ceres partners ceasing at the end of December 2019.OperationsLicence extensionsEarlier this year Egdon applied for and received a number of onshore licence extensions from the Oil and Gas Authority as follows:
- Continuation of the Second Term of PEDL180 and PEDL182 to August 2021.
- Initial Terms were extended for PEDL143 (to September 2022), PEDL306 (to July 2024), PEDL334 (to July 2024).
- Retention Area licence durations were extended for PEDL191 (to June 2023), PEDL201 (to June 2024) PEDL202 (to June 2023) and PEDL209 (to June 2023).
- PEDL181 was converted to 14th Round terms and passed into the production period.
Springs Road-1On 12 September 2019, Egdon announced the results of the core analysis with combined Bowland shale gas in place of 640 bcf/square mile (“the resource density”). This is more than three times Egdon’s previous external estimates of the mean resource density for the entire Bowland Shale section in PEDL139/140 as reported by ERCE in 2014.The results from this extensive modern dataset demonstrate that the Bowland Shale of the Gainsborough Trough, where Egdon currently holds 82,000 net acres (128 square miles), compares favourably with some of the best US commercial shale plays and is potentially world class.The company looks forward to sharing further data on the well as it becomes available, particularly on the secondary target, the tight gas sands of the Millstone Grit.BiscathorpeFurther detailed technical analysis of the data from the Biscathorpe-2 well reported in July 2019 has upgraded the well results. The results of a revised petrophysical analysis and detailed geochemical analysis of drill cutting samples undertaken by Applied Petroleum Technology (UK) Limited (“APT”) confirmed the likely presence of a 35 metre column, of good quality oil, within the Dinantian interval. This, along with the elevated gas readings and oil shows over an extended interval in the well, are indicative of proximity to an effective petroleum system and validate the potential that exists within the PEDL253 licence area.Subsequent to our last update substantial progress has been made, including the reprocessing of 85 square kilometres of the existing 3D seismic data. The results of the interpretation of these data will be reported on in due course and will inform the next steps for the project which could include a side track of the suspended Biscathorpe-2 well that would target reservoirs in the Westphalian and Dinantian. Any future drilling would require additional consents including planning permission.WressleThe Wressle oil development has the potential to add 150 bopd to the Company’s production. Egdon’s extensively revised development proposals for the Wressle oil discovery were refused planning consent in November 2018, with that refusal appealed in February 2019.The public inquiry in respect of Egdon’s appeal against this refusal will be held between 5 and 13 November 2019. Egdon’s case will be presented by a QC supported by expert witnesses. The timing of the public inquiry has resulted in the company delaying its preliminary results announcement to 19 November 2019.As advised in July 2019, North Lincolnshire Council will no longer present evidence at the public inquiry having withdrawn its case in respect of this appeal following agreement of acceptable planning conditions during August 2019. A decision is expected around the turn of the year. Should approval be forthcoming Egdon will need to discharge all conditions prior to commencing operations and would hope to have first production some six months after a decision.
Springs Road Update – Resource Density in Bowland Shales
Egdon Resources plc is pleased to note the announcement made this morning by IGas Energy plc (“IGas”) of its First Half 2019 Results and associated presentation which provides further details of results from the analysis of whole core from the Springs Road-1 (“SR 01”) well on licence PEDL140, in which Egdon holds a 14.5% interest.The IGas release states;“ We mobilised the equipment to our Springs Road development in North Nottinghamshire in early January 2019 and spudded the well on 22 January 2019. In mid-February 2019, we encountered shales on prognosis, at c.2,200 metres depth and drilled through a significant hydrocarbon bearing shale sequence, including the upper and lower Bowland Shale.The well sought to assess three target zones: the Bowland Shale; the Millstone Grit and the Arundian Shale. All three targets were encountered, with 429 metres of hydrocarbon bearing shales encountered within the primary target, the Bowland Shale.IGas acquired 147 metres of core within the Bowland Shale, the first extensive core sample from this basin, which has subsequently been analysed by Stratum Reservoir (formerly Weatherford Labs) in their laboratories in both the UK and the USA.The results from the core analysis are extremely positive and confirm that a significant hydrocarbon resource is present in the Gainsborough Trough. Following further detailed analysis, the core results are as follows:SR-01 Upper BowlandSR-01 Lower BowlandOrganic content3.2% (0-8.4%)2.5% (0-6.6%)Maturity (Ro)c. 1.17%c.1.29%Shale thickness179m305mApprox. depth2,109-2,288m2,288-2,593mClay content43%22%Matrix porosity4.8% (1-11%)3.0% (1-9%)Natural fracturingYesYesEstimated GIIP bcf/Sq mile* (Adsorbed and free)*231409*volumetric estimates based on SR-01 data only, no regional data has been incorporated and as such does not account for thickness variations and reservoir heterogeneity within the basin. Secondary (Millstone Grit) and tertiary (Arundian shale) targets excluded.”A presentation including slides on Springs Road -1 core data analysis will be available later today at IGas’ website http://www.igasplc.com/Commenting on these results, Mark Abbott, Managing Director of Egdon Resources plc, said:“We continue to be encouraged by the results from Springs Road-1, particularly the combined Bowland shale gas in place of 640 bcf/square mile (“the resource density”). This is more than three times Egdon’s previous external estimates of the mean resource density for the entire Bowland Shale section in PEDL139/140 as reported by ERCE in 2014.The results from this extensive modern dataset demonstrate that the Bowland Shale of the Gainsborough Trough, where Egdon currently holds 82,000 net acres (128 square miles), compares favourably with some of the best US commercial shale plays and is potentially world class. We look forward to sharing further data on the well as it become available, particularly on the secondary target, the tight gas sands of the Millstone Grit”
PEDL143 Update
Egdon Resources plc notes the announcement made this morning by UK Oil & Gas PLC (“UKOG”) concerning a two year extension of PEDL143 in the Weald Basin where Egdon has an 18.4% interest:The UKOG release stated;“UK Oil & Gas PLC (London AIM: UKOG) is pleased to announce that the Oil and Gas Authority (“OGA”) has granted a two-year extension to the initial term of the Company’s operated PEDL143 licence (UKOG 67.5%, northern Weald, “A24” prospect). The initial term will now end on 30 September 2022.PEDL143 “A24” ProspectThe licence lies immediately to the west of the Company’s Horse Hill licences (UKOG 85.635%) and contains the significant “A24” Portland and Kimmeridge oil prospect, a direct geological look-alike to the Company’s Horse Hill oil field, situated on-trend some 8km to the east. Several smaller prospects of similar size to the nearby Brockham Portland oil field have also been identified. Multiple potential new drilling sites outside the nearby Area of Outstanding Natural Beauty are under evaluation and drilling is now scheduled to follow directly after the completion of the Company’s 9-well 2019/2020 drilling programme, subject to the grant of necessary regulatory approvals.”
Wressle Planning Appeal Update
Egdon Resources plc (AIM: EDR) notes the movement in its share price and the speculation surrounding the Wressle Oil Field. As notified on 29 April 2019, the planning inquiry to hear the Company's appeal against the refusal of planning consent for the development of the Wressle Oil Field by North Lincolnshire Council's Planning Committee is scheduled to commence on 5 November 2019.The Company has been advised that following a closed meeting held by North Lincolnshire Council (“NLC”) on 17 July 2019, a decision has been made that NLC will not be presenting evidence at the Public Inquiry and will withdraw its case in respect of this appeal subject to the agreement of acceptable planning conditions.While the Company considers this to be a very positive development, we still need to obtain planning permission via appeal and the Company remains focused on presenting its case for the Wressle development to the independent professional Planning Inspector in November.
Results of Open Offer
Egdon Resources plc (AIM:EDR), announces the results of its underwritten Open Offer of 43,330,803 Shares, which was announced on 15 May 2019 and closed for acceptances, in accordance with its terms, at 11.00 a.m. on 31 May 2019.The Company announces that it has received valid acceptances and excess applications from Qualifying Shareholders for a total of 31,200,612 Open Offer Shares, amounting to 72.01 per cent., pursuant to the terms of the Open Offer.The valid acceptances included the irrevocable commitment to take up (or procure the taking up) of Open Offer Shares from Petrichor Holdings Coöperatief U.A., (“Petrichor”) and Premier Oil plc (“Premier”) (respectively the “Petrichor Committed Shares” and the “Premier Committed Shares” and together the “Excluded Shares”).Pursuant to the Underwriting Agreement, Petrichor has agreed to subscribe for the remaining 12,130,191 Open Offer Shares (the “Underwritten Shares”), being the total number of Open Offer Shares less the Excluded Shares and Open Offer Shares taken up by Qualifying Shareholders, on a fully underwritten basis in exchange for the payment of an underwriting commission of an amount equal to 4 per cent. of the total Issue Price of 23,801,611 Underwritten Shares.Details of the interest of Petrichor, following the Open Offer, in the ordinary share capital of the Company are set out in the table below:As at date of the circularOn AdmissionName Number of Existing Ordinary Shares held% interest of Existing Issued Share CapitalNumber of Open Offer Shares taken up by Petrichor pursuant to the Underwriting Agreement and the UndertakingNumber of Ordinary Shares held% interest in the Enlarged Issued Share CapitalPetrichor77,969,44829.9925,125,098103,094,54633.99At the General Meeting held on 3 June 2019 Shareholders voted to approve the waiver granted by the Panel on Takeovers and Mergers of any requirement under Rule 9 of The City Code on Takeovers and Mergers for Petrichor to make a general offer to shareholders of the Company as a result of the issue of Ordinary Shares to Petrichor pursuant to the Open Offer and Underwriting Agreement, as more fully described in the Circular, sent to Shareholders on 15 May 2019.The net proceeds from the Open Offer (being approximately £1.982 million, after costs of approximately £0.185 million) will be used in the Company’s exploration and appraisal work programme as follows:
- progress the Gainsborough Trough Shale-Gas assets;
- progress the Resolution Gas Discovery; and
- for general working capital purposes.
Directors' Participations in the Open Offer Following the admission of the Open Offer Shares to trading on AIM ("Admission"), the holdings of the Directors in the enlarged issued share capital of the Company will be as follows:RoleNumber of Ordinary Shares currently heldNumber of Open Offer Shares subscribed forHolding following AdmissionPercentage holding of Enlarged Share CapitalPhilip StephensNon-Executive Chairman112,88918,814131,7030.04Mark AbbottManaging Director8,089,3871,303,2309,392,6173.10Martin DurhamTechnical Director----Tim DaviesNon-Executive Director----Ken RatcliffNon-Executive Director169,74327,989197,7320.07Walter RobertsNon-Executive Director and Company Secretary974,12997,3751,071,5040.35Admission to Trading on AIM and Total Voting RightsApplication has been made for the 43,330,803 Open Offer Shares, which will rank pari passu with the Company's issued Ordinary Shares, to be admitted to trading on AIM. It is expected that Admission will become effective and that dealings in the Open Offer Shares will commence at 8.00 a.m. on 6 June 2019.Following the issue of the Open Offer Shares, the Company will have 303,315,625 Ordinary Shares in issue. No Ordinary Shares are held in treasury. The figure of 303,315,625 Ordinary Shares may be used by the Company's shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, the Company under the Financial Conduct Authority's Disclosure Guidance and Transparency Rules.Capitalised terms used but not otherwise defined in this announcement bear the meanings ascribed to them in the circular of the Company dated 15 May 2019.Mark Abbott, Managing Director of Egdon, commented:“We are pleased to have received such a positive response from our existing shareholders to the Open Offer and are encouraged by the participation of Premier and grateful for the continued support of Petrichor as a long-term major shareholder. Having raised gross proceeds of £2.17 million from the Open Offer, Egdon is now capitalised to deliver on our strategy with a near-term focus on the Company’s exploration and appraisal work programme in the Gainsborough Trough, the Resolution Gas Discovery and in progressing the planning appeal for the Wressle Development later in 2019.”
Springs Road-1 SR-01 Shale Exploration Well Results
Egdon Resources plc is pleased to note the announcement made this morning by IGas Energy plc (“IGas”) which summarises the results from the analysis of whole core from the Springs Road-1 (“SR‑01”) well on licence PEDL140, in which Egdon holds a 14.5% interest.The IGas release states;“IGas is delighted to announce highly encouraging core analysis results from its SR-01 exploration well at Springs Road in North Nottinghamshire. The well is a significant step forward in the development of shale gas in the East Midlands. The Springs Road well was drilled as a vertical, cored exploration well in PEDL140 in North Nottinghamshire in the centre of the Gainsborough Trough basin. The well sought to assess three target zones: the Bowland Shale; the Millstone Grit and the Arundian Shale. All three targets were encountered, with 429m of hydrocarbon bearing shales encountered within the primary target, the Bowland Shale. IGas acquired 147 metres of core within the Bowland Shale, the first extensive core sample from this basin, which has subsequently been analysed by Stratum Reservoir (formerly Weatherford Labs) in their laboratories in both the UK and the USA. The results from core analysis are extremely positive and confirm that a significant hydrocarbon resource is present in the Gainsborough Trough.
- Total Organic Carbon (TOC): 2 – 7 %, average of c. 3 %
- Thermal maturity (Tmax): Average of 464°C (wet gas to dry gas window)
- Total Porosity: 2 – 9 %, average of 4 %
- Gas Content: 24 – 131 scf/ton, average of 71 scf/ton
- Average Clay Content: c.30 wt.%
The key characteristics of the Bowland Shale in SR-01 compare favourably to commercial shale operations observed in North America such as the Permian and the Marcellus. The core results indicate a mature, organic rich source rock with good porosity confirming favourable gas resource density. In particular, the low clay content is encouraging and an indication that hydraulic fracturing of the rock should be effective.The analysis conducted will help delineate the resource potential and help refine the subsequent appraisal programme. IGas, working with its joint venture partners, will now consider the attributes of the data set in order to commence planning for both the appraisal programme and pilot development within the Gainsborough Trough, including redefining the basin model. We intend to make a further announcement and full technical presentation of the results, including comparison with analogous US shale plays in the third quarter of 2019.Commenting IGas CEO, Stephen Bowler, said “This positive dataset is highly promising and materially advances our understanding of the hydrocarbon resources contained within the shales in the Gainsborough trough where IGas holds a large acreage position. We were particularly pleased with operational performance during drilling leading to the well costs coming in c.20% under budget.The independent Committee on Climate Change recently reported that by 2050 we will still require some 70% of the gas we currently consume but unless we develop our domestic resources, we will need to import 86% of that gas from overseas. These results demonstrate that within the East Midlands we potentially have the resources to produce gas, creating jobs and tax revenues whilst reducing our greenhouse gas emissions.”Commenting on these results, Mark Abbott, Managing Director of Egdon Resources plc, said:“The results from this extensive modern core dataset demonstrate that the Bowland Shale of the Gainsborough Trough, where Egdon holds 82,000 net acres, compares favourably with some of the best US commercial shale operations and is potentially world class. We echo IGas’ satisfaction at the speed and cost of drilling which bodes well for future operations. We look forward to providing investors with a more detailed update during the third quarter of 2019 once these results have been fully assessed and integrated. ”