Egdon has announced it has signed an exclusivity agreement with a large internationally recognised E&P company for UK offshore licences P1929 and P2304. The licences sit in the Southern North Sea and contain the Resolution and Endeavour gas discoveries. Resolution has been independently assessed by Schlumberger to hold mean contingent gas resources of 231bcf. Egdon has also responded to the government announcement that it will introduce a temporary moratorium on hydraulic fracturing for shale gas. The company’s unconventional acreage holds the Springs Road-1 well, which contains 640bcf of gas per square mile.
The exclusivity agreement is subject to a farm-out agreement being entered into by 19 January 2020 and completed by 19 April 2020. Resolution was originally discovered by Total in 1966 with the 41/18-2 well and is assessed to contain 231bcf mean contingent gas resources. We value Resolution at 7.1p/share out of a RENAV of 11.5p/share, although significant uncertainty remains regarding commerciality. A successful farm-out would allow Egdon to fund a 3D seismic survey and appraisal well to progress the project.
Egdon’s unconventional acreage position sits in the Gainsborough Trough in Eastern England, where the basin is characterised by its simple structure and limited faulting. Data from the Springs Road-1 well have demonstrated that the Bowland Shale here meets the key shale attributes for commercial development. The company mentioned it is committed to working closely with the Oil and Gas Authority to show it can operate safely and in an environmentally responsible manner. Egdon’s shale position is not included in our RENAV valuation. We will be revisiting our indicative shale valuation in light of latest events.