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Research: Oil & Gas
Production from Egdon Resources’ Wressle-1 well continues to exceed forecast expectations, delivering an average gross rate of 656bopd (197bopd net) in the year ending July 2022. This high rate, combined with high commodity prices, has driven a 530% increase in revenues to £6.91m for the period, up from £1.09m in 2021. With cash of £4.8m, Egdon says it is funded for near-term committed activities. It will now look to increase Wressle production further. Onshore drilling projects have been held up by planning permission refusals, while the UK government’s stance on shale gas extraction has created uncertainty. Progress offshore has been affected by Shell’s withdrawal from the licences holding the Resolution and Endeavour gas discoveries and Egdon must carry out a 3D seismic survey across the P1929 licence by April 2023 to maintain its licence.
Egdon Resources |
Year-end revenue up by more than 530%
Oil and gas |
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10 November 2022 |
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Egdon Resources is a client of Edison Investment Research Limited |
Production from Egdon Resources’ Wressle-1 well continues to exceed forecast expectations, delivering an average gross rate of 656bopd (197bopd net) in the year ending July 2022. This high rate, combined with high commodity prices, has driven a 530% increase in revenues to £6.91m for the period, up from £1.09m in 2021. With cash of £4.8m, Egdon says it is funded for near-term committed activities. It will now look to increase Wressle production further. Onshore drilling projects have been held up by planning permission refusals, while the UK government’s stance on shale gas extraction has created uncertainty. Progress offshore has been affected by Shell’s withdrawal from the licences holding the Resolution and Endeavour gas discoveries and Egdon must carry out a 3D seismic survey across the P1929 licence by April 2023 to maintain its licence.
Removal of gas constraints to boost Wressle further
Production from Wressle is constrained by gas handling equipment, with pressure tests indicating that flow rates of 1,200–1,500bopd could be achieved. Egdon‘s gas monetisation plan has commenced, with all consents in place for the Ashover Grit gas to generate electricity for onsite use by the end of 2022. Procurement is underway to expedite the export of up to 1.75MW of electricity. The company also plans to produce from the Penistone Flags reservoir, which has been audited to hold mid-case contingent oil and gas resources of 1.53mmbbl and 2bcf.
Focus on conventional oil and gas
Planning consent is in place for a sidetrack at Keddington (45% WI), which could deliver 183,000bbl of incremental production. 3D seismic reprocessing is being finalised and will determine the final sub-surface location for the drilling, planned for 2023. Planning permissions for a drilling at Biscathorpe and North Kelsey were both refused and have been appealed. The Biscathorpe hearing took place on 11 October and a decision is awaited. At Resolution, the deadline to carry out a 3D seismic survey has been extended to April 2023, so the company may seek to extend this further. The nearby Shell/Deltic Pensacola well is due to commence drilling shortly.
Shale gas moratorium reimposed
A moratorium on shale gas was briefly lifted by the UK government in September 2022, only to be reinstated by Rishi Sunak in November. A lifting would be transformational for Egdon, which holds independently estimated net mean volumes of gas initially in place of 37.6tcf in the Gainsborough Trough.
Historical figures
Source: Egdon Resources. Note: *Reported. |
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Research: Metals & Mining
Endeavour’s Q322 results released this morning put it solidly on track to meet the top end of its guidance for the year of 1,315–1,400koz of production at an all-in sustaining cost (AISC) of US$880–930/oz. Production in the quarter was 9.2% above our prior expectation, at 342.7koz (1,370.8koz annualised), while AISC was 8.5% below it, at US$960/oz (US$920/oz year to date), driven by continued strong performances at Endeavour’s Ity and Houndé flagships, in particular, and despite the typical impact of the rainy season. Cash costs (including royalties) amounted to US$839/oz (cf our estimate of US$836/oz).
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