We have re-visited our conventional valuation of Egdon post the company’s interim results (to end January 2019) and the recent resource assessment for Resolution. We also factor in a decrease in our short-term gas price expectations, lower than previously forecast production for FY19 and the removal of the risked value for Biscathorpe-2 exploration. As a result, our RENAV is reduced by 1.2p/share to 11.5p/share. These reductions are partly offset by an increase in our valuation for Resolution (from 3.2p/share to 7.1p/share), driven by Schlumberger’s 2019 resource assessment and our revised economic model. We continue to believe that significant uncertainty remains regarding the commerciality of Resolution ahead of further appraisal, but we believe recent industry interest in SNS Zechstein gas appraisal increases the likelihood of a farm-out.
