Egdon has announced results for FY16 and a £3m placing with Heyco International at 13.5p/share. A £2m open offer has also been announced on the same terms as the Heyco placing. Proceeds are to be used to: 1) progress 14th Licensing Round evaluations; 2) progress the ‘A’ prospect to drillable status; 3) invest in producing assets and conventional exploration; and 4) invest in new opportunities. Egdon’s balance sheet strength and growing unconventional gas position (ERCE 48tcf mean undiscovered GIIP net) set it apart from its UK shale peers.
UK shale acreage:an updated ERCE assessment of Egdon’s net GIIP shows a 71% lift in mean undiscovered GIIP from 20tcf to 48tcf (range of 18-86tcf), including additional interests acquired in the 14th Licensing Round. Egdon’s net unconventional acreage is 200,000 acres. Planning application determination for Springs Road-1 is expected on 15 November.Egdon is carried through the exploration phase. Upcoming conventional exploration activity: the 2017 well programme targets 13.2mmbbls of net resource across Biscathorpe, North Kelsey and Holmwood. Egdon is also looking to progress towards drilling of its 50% interest in the ‘A’ prospect (164bcf) and is seeking a farm-out ahead of appraisal.
FY results: production was 177boe/d,up 2% and in line with guidance (Edison estimate189boe/d).FY17 guidance is 165boe/d assuming early 2017 start-up at Wressle. Revenues were £1.6m vs forecast £1.8m and a £2.7m net loss (post write-downs) compared to a forecast £3.1m loss.Valuation: 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 expect cash to be augmented by farmdowns to fund near-term exploration and development activity