Europa Oil & Gas, one of the main investors in oil production plans at Wressle, announced today it had cut salaries and cancelled non-core contracts because of the coronavirus outbreak and oil price falls.
The company, which has a 30% stake in the Wressle licences in north Lincolnshire, said in a statement to investors:
“Following a comprehensive review and cost-reduction programme existing cash reserves are expected to be sufficient to finance current and upcoming activity, including the Wressle Field Development Project, ongoing farmout activities and reduced work programmes offshore Ireland and Morocco, without the need for additional external funding.”
Europa said it had reduced corporate costs, including salaries. What it called non-core contracts had also been cancelled.
The company said it may relinquish licences in Ireland and write off intangible assets to avoid “unnecessary licence costs”.
Simon Oddie, the interim chief executive and chairman, said:
“These are challenging times for the oil and gas exploration and production industry with the combination of market turbulence and depressed oil prices. We have responded by making appropriate cost savings and adjustments in the business whilst maintaining the integrity of our core strategy. Further economies will be made if conditions do not improve in the medium term.”
Europa’s most recent accounts said the company’s future depended on production this year from Wressle. Without it, Europa said it risked failing to meet commitments unless it issued shares or sold assets.
According to the accounts, Europa produced 91 barrels of oil per day (bopd). The company has estimated that Wressle oil would more than double its total UK production to over 200 bopd.
Planning permission was granted in January 2020 for 15 years of oil production at Wressle. Before production can go ahead, the operator, Egdon Resources, has to reconfigure the site, install new equipment and facilities and comply with conditions of the consent. These include new groundwater monitoring boreholes, tests on the stability of the site, a construction quality assurance plan, and controls on noise, lighting and dust.
Earlier this month, Egdon said it would break even on oil production at Wressle at a price of US$17.62 per barrel. Today, at the time of writing, the UK benchmark oil price, Brent Crude, was $22.70 a barrel. It has fallen by around 64% since the start of 2020.
In the UK, as well as the Wressle licences (PEDL180 and 182), Europa has a 50% stake in the neighbouring PEDL181. It holds 100% of the old licences DL1 and DL3, also in Lincolnshire, and has a 50% stake in new licences PEDL299 in Derbyshire and PEDL343 in North Yorkshire.