Two companies are banking on the approval of consent for oil production at the Wressle well in Lincolnshire and that it brings in expected revenues.
Egdon Resources PLC, which released accounts yesterday for the year to 31 July, predicted the Wressle well, near Scunthorpe, would produce 125 barrels of oil equivalent per day (boepd) for the company. This compares with its total UK production of 177 boepd for 2015-2016.
According to the accounts, Egdon’s oil and gas revenues were down 23.3% at £1.59m compared with £2.07m for the previous 12 months. The company made a loss of £2.69m but this was smaller than the £4.47m for previous year.
Another partner in the Wressle project, Celtique Energie, which also recently published annual accounts, said its cash flow forecasts assumed revenues from production from the Wressle oil field and disposal of the exploration licence based on proven and probable reserves.
Celtique , which said it currently had no revenue-generating activities, has a 33% share in the exploration licence area where the Wressle well was drilled in 2014. Egdon, the licence operator, holds 25%, Europa 33.3% and Union Jack Oil 8.3%.
According to accounts for Celtique Energie Holdings Ltd, the partners have approved finance to bring the Wressle well to production.
But Celtique warned:
“As this is one of the last remaining licences held by the Group, if there are delays in the development, the development is unsuccessful or production is less than forecast, the Group and/or Company may not have sufficient funds to repay shareholder loans or settle their liabilities as they fall due.
“The Group may also not be able to achieve the expected disposal of the licence”.
“These conditions indicate the existence of a material uncertainty that may cast significant doubt about the Group’s and the company’s ability to continue as a going concern.”
The accounts continued that the directors believed there would be sufficient cash to meet liabilities in the next year. But the ability of the company to operate as a going concern depended on “subsidiaries being able to secure sufficiently profitable income stream from remaining prospects to a revenue-generating stage and being able to raise any shortfall in funds from sale of one or more exploration licences and/or securing further funds from investors”.
For Egdon, the Wressle production project is one of its main areas of operation for the next year. It predicted that in the second half “Wressle is expected to impact positively on production and revenues”.
To fund the project and other initiatives, Egdon yesterday raised £3m from a share offer to an existing investor, HEYCO International, and launched an open offer to raise another £2.1m.
The company applied in June for planning permission for long-term production at the Wressle site. The application is still being considered by planning officers at North Lincolnshire Council. The next meeting of the council’s planning committee when Wressle could be decided is Wednesday 16 November.
According to Egdon’s accounts, the Wressle well is forecast to produce 500 boepd for all the partners. If permissions were granted, the company said it would begin installing permanent production facilities and recomplete the well early in 2017. It said operations may include the use of mud acid and/or a proppant squeeze but not fracking. Production was expected to begin during 2018.
Egdon accounts (year ended 31 July 2016)
Production: 64,604 barrels of oil equivalent (boe) or 177 boe per day from Ceres, Keddington and Avington wells. Up 2% on the previous 12 months
Oil and gas revenues: £1.59m (down 23.3% on £2.07m for previous 12 months)
Loss: £2.69m (down 40% on £4.47m for previous 12 months)
Cost of sales £3.2m (£5.6m for previous 12 months)
Cash at bank: £2.68m (£5.18m for previous 12 months)
Net current assets: £4.18m (£7.18m for previous 12 months)
Net assets £29.43m (£32.05m for previous 12 months)
Total acreage 200,000 acres (up 43% on the 140,000 acres for previous 12 months)
Egdon’s estimate of prospective and contingent oil resources: 631million boe (459million boe for previous 12 months)
Egdon’s estimated shale gas resources: 20 trillion cubic feet (tcf) of undiscovered gas initially in place (GIIP). Added to the existing 28 tcf assessed in 2014, this represents an increase of 71% to a total of 48tcf.
- Laughton-1 (PEDL209) in first quarter of 2016 to 1,700m but plugged, abandoned and the site restored
- Keddington-5 sidetrack “did not add the expected increment in oil production and a full review of operations to increase field production is currently underway”
Egdon said the group remains debt free.
At year end Egdon held 32 UK licences having relinquishing PEDL237. After the year end, Egdon gained interests in nine 14th round licences. They include:
15% interest in PEDL273, PDL305 and PEDL316 in a consortium operated by IGas (35%) and Total (50%)
30% interest in PEDL306 in joint venture with Petrichor (20%), Hutton Energy Ltd (25%) and Coronation Oil and Gas Ltd (25%).
60% operated interest in PEDL334 in partnership with Petrichor
75% operating interest in PEDL339 in partnership with Teraine Energy (15%) and Nautical Petroleum (10%). This contains an extension of the Louth Prospect. Egdon will transfer 10% interest to Union Jack Oil, (subject to OGA), which will carry a further 10% for the cost of an exploration well to test the Louth prospect. Estimated at 1.4million barrels.
49.99% interest in PEDL259, operated by Third Energy (50.01%). This PEDL surrounds part of PEDL068 in Teesside, which contains the Kirkleatham conventional gas field in which Egdon has a 68% interest. Planning consent was extended for Kirkleatham during the year and allows for drilling and production of a further two wells at the site.
17.5% interest in PEDL343, operated by Third Energy (20%) in partnership with Europa (22.5%), Shale Petroleum UK Ltd (22.5%), Petrichor (12.5%) and Arenite Petroleum Ltd (5%). This contains the Cloughton tight gas discovery 10km north of Scarborough.
Nottinghamshire A decision on the IGas application for up to two shale gas wells at Springs Road site, at Misson is expected on 15 November. If permission is granted, drilling could begin in 2017. Egdon has a 14.5% share in the IGas-operated PEDL139 and PEDL140.
Surrey Planning conditions are being negotiated for the Holmwood site (also called Bury Hill Wood) near Dorking (PEDL143). Egdon has a 18.4% interest in the project. The operator Europa Oil & Gas intends to drill the well in 2017. The licence terms were extended for two years until October 2018.
Lincolnshire Planning permission has been approved for proposed wells at Biscathorpe (PEDL253) and North Kelsey (PEDL241). The licence terms were extended to the end of June 2017. Egdon said it was looking for a further funding partner to enable drilling at these wells in the first half of 2017.
“We have confidence that the investment case for unconventional resources exploration in the UK remains strong”. Philip Stephens, Chairman
“The timeline for gaining consents remains one of the main challenges and risks in relation to the development of our unconventional resources.” Mark Abbott, Managing Director
Celtique Energie accounts (year ended 31 December 2015)
Operating loss £8,556,002 (2014: £6,035,611)
Operating expenses: £961,227 (2014: £912,695)
Total assets: £17.518m (2014: (£19.866m)
Exceptional impairment charge: £7,591,095 (2014: (£5,122,916)
Cash at bank and held in joint venture accounts: £2.859m (2014: £1.337m)
Number of employees: 6 (2014: 11)
Staff costs and directors pay: £966,278 (2014: £1,443,275)
Highest paid director paid £202,655 (2014: £307,497)
Remaining PEDL licences where Celtique Energie has a non-operational interest: 180, 181, 182, 201.