Planning complications at Wressle are a setback for Egdon, affecting short-term production expectations. We expect Egdon to return with revised planning documentation to address local council planning concerns over the next couple of months; nevertheless, we expect Wressle first oil to be pushed back by up to 12 months. Our production expectation for FY17 has been reduced from 165boe/d to 110boe/d as a result. Our updated core 2P NAV (including cash and net of G&A) falls from 3.7p/share to 3.1p/share. However, our contingent resource and risked exploration valuation is little changed at 17.8p/share (from 18.5p/share). We include an indicative value per acre-based 25.7p/share valuation for shale acreage.
On 11 January 2017, the North Lincolnshire County Council planning committee refused planning consent for the development of the Wressle oil field, North Lincolnshire, despite a positive recommendation from the planning officer. Egdon expects to reapply for planning permission after making adjustments to the proposal. This is likely to include results from the company’s ongoing water monitoring programme – a regulatory requirement ahead of well activity. The process for reapplication and planning committee review can be protracted and as such in our updated forecasts we do not expect first oil from Wressle until CY18.
Across Egdon’s conventional asset base, the company expects to drill wells at both Biscathorpe and Holmwood in 2017. Biscathorphe (53% Egdon) targets the downdip appraisal of a historical BP exploration well that discovered a thin sand section with oil shows. Holmwood (18.4% Egdon, fully carried) neighbours the Horse-Hill oil discovery and producing oil field at Brockham. Exploration activity there targets Portland and Corallian sands that have been found to be productive at both Horse Hill and Brockham, as well as Kimmeridge Micrite upside.
We estimate Egdon had c £6m cash and zero debt at the end of January 2017. Deferment of production has a limited impact on NAV (conventional RENAV now 20.9p/share from 22.3p/share), as capex and positive cash flows are deferred, with production benefiting from a higher forecast realised oil price in CY18.