Nottinghamshire County Council’s deferral of its decision on the Springs Road planning application (PEDL140, in which Egdon has a 14.5% carried interest) was a minor setback. Nevertheless, this was more than offset, from a sentiment perspective, by news that Cuadrilla has received approval to drill and frack at Preston New Road, Lancashire. While it is likely that this decision will be subject to appeals from anti-fracking campaigners, it cements the Conservative view that shale gas has potential to be of significant benefit to the UK economy from a financial, employment and security perspective. Energy price inflation post Brexit has helped emphasise this viewpoint.
Springs Road: Egdon remains carried by Total for the initial exploration wells for its 14.5% interest alongside operator IGas. After a late legal challenge, Nottinghamshire County Council has deferred its planning decision, with a meeting expected to reconvene on 15 November 2016. Kirby Misperton-8: Third Energy’s KM-8 received planning approval earlier this year, but this decision is facing judicial review on 22/23 November after a Friends of the Earth legal challenge. Preston New Road: The secretary of state (SOS) agreed with the planning inspector’s conclusions, deciding to allow the appeal and grant approval for Cuadrilla to drill and frack up to four horizontal wells. Drilling is expected in 2Q17 with two wells drilled and fracked ready for flow test by Q118. Roseacre Wood: The SOS has given Cuadrilla the opportunity to provide further evidence on highway safety issues before reaching a decision on the planning appeal.
Egdon has a material 204,292 net acres of UK shale, a c.44% increase on acreage prior to the 14th licensing round. Our update note, published 16 May 2016, provides a breakdown of both conventional and unconventional assets.
Our last published standalone 22p/share (RENAV) valuation of Egdon’s conventional business sits higher than the current share price. We use a tentative $/acre valuation for net unconventional acreage at 22p/share. We believe Egdon retains financing flexibility, holding more than £5m cash and no debt as of January 2016, and we expect further farm-downs to fund near-term exploration. We will review our forecasts after Egdon’s preliminary results in November.