Egdon Resources has said it is cutting costs because low oil prices following the coronavirus outbreak have hit profitability in its fields.
In a statement to investors yesterday the company said the pandemic had “adversely impacted worldwide oil demand”, contributing to current low prices:
“In common with our peers, our current late field life production is unprofitable at these current prices and we are reducing costs wherever possible.”
Egdon said its production in the six months ending on 31 January 2020 was 178 barrels of oil per day (bopd). This was up slightly on the first half of 2019 (164 bopd).
But revenue for the six months to the end of January 2020 fell to £675,000, more than £500,000 down on the first half of 2019 (£1,200,000). This reflected lower gas prices in the winter of 2019-2020, Egdon said.
The company, which operates the Wressle oil site in north Lincolnshire, said it did not “anticipate any adverse impacts to production operations” from coronavirus restrictions. Oil and gas employees were considered to be “key workers”, it said, and travel to sites was not affected
“The Company is focussed on reducing costs and expenditure and concentrating on progressing key near term cash generative projects such as Wressle.”
Last month, Egdon said the first oil was expected from Wressle in the second half of 2020. It predicted that Wressle production would break even at $17.62 a barrel. At the time of writing, the UK benchmark Brent Crude was priced at $31.12 a barrel.
Planning permission for long-term oil production at Wressle was granted in January 2020 following two public inquiries. Egdon said it was concentrating on discharging planning conditions and finalising designs and tendering and procurement arrangements.
Egdon said its interim results for six months ending 31 January 2020 would be released on 21 April 2020.