Industry

Egdon’s late life oil fields “unprofitable” at current prices

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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

Egdon said:

“The Company is focussed on reducing costs and expenditure and concentrating on progressing key near term cash generative projects such as Wressle.”

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Egdon Resources’ Wressle well site in North Lincolnshire, subject of a public inquiry in November 2019. Photo: Used with the owner’s consent

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.

8 replies »

  1. So, they cut back on costs, and next week or whenever, those same assets will be profitable. Late life assets may be closed a little earlier than planned. Good job Egdon have plenty of new ones to introduce.

    Meanwhile, the public will benefit from cheaper energy prices although few can gorge themselves upon them. Careful balance being attempted by the big powers as to how long to maintain low oil and gas prices to assist the global pandemic recovery without some causing longer term damage to others.

  2. Careful balance being attempted by the big powers ……actually means Saudi and Russia boosting supplies to drive prices down and cripple the US fracking industry which is already proven to be a money loser at much higher prices.

    Good time to string investors along and keep their money flowing into directors bank accounts.

  3. Really, jP??!!

    Why would it achieve that? USA just places a tariff on imported oil/gas and supports its own oil and gas, and then imposes other sanctions upon Saudi and Russia, if it feels so inclined.

    For a while it only means USA may be constrained on the export market, but that is not an issue. Such can be tied up within security agreements.

    The losers are Saudi and Russia, although one may do better than the other. The economy of Texas is larger than that of the whole of Russia, so only one winner. Would not be long until another failed Russian harvest.

    So, what it actually means is something quite different to what you suggest. But, it usually is. You have a tendency to post what you desire rather than the reality.

  4. No money invested, No money lost?, So why the interest in who invested in what?, Don’t criticise progress…, if at first you don’t succeed, try, try and try again…. Renewables in a low oil price environment is a major looser, just why would you?

  5. “Money flowing into director’s bank accounts”. If that is your worry, not a good road to tread.

    You mean like Mr. Musk?? (Except a lot less.)

    Or those directors of farming estates, and other land owners, making £150k net profit per wind turbine per year whether the electricity generated was needed, or not?

    The “alternative” sector is a terrible example of excess. Remember “cash for ash” as well? Then there are those who have made a lot of money by selling non existent tree planting schemes to off set for the gullible. And some poor house owners who find they are unable to sell their homes as they are saddled after signing up to solar power schemes.

    A gravy train that keeps on giving. No wonder the antis are so keen to promote it.

  6. ‘For a while it only means USA may be constrained on the export market, but that is not an issue’

    It is for the top 100

    ‘At current prices, not one of the 100 largest fracking operations in the country can turn a profit’

    ‘The industry as a whole will see $133 billion in debt come due between now and 2026’

    That’s a long ‘while’ to be haemorrhaging billions and is clearly an issue.

    https://qz.com/1830456/how-the-coronavirus-is-disrupting-the-us-fracking-industry/

    • So, USA will financially support its oil and gas! But, allow for some to cut back for a while, until demand recovers. Can just redirect some income from tariffs to do so, or apply some larger fines to VW!

      The “alternative” is for USA to go back to being prepared for sons and daughters to defend oil and gas supplies from overseas. You will find they have no desire to do that when they can produce their own and leave such tasks to others who are dependent upon it. Coffins draped with the Stars and Stripes returning to the USA is a vote loser.

      It will probably have to do the same for its airlines, and its automobile industry-and MANY other sectors. Quite simply, by so doing, it will have strong industries for when the current pandemic is over. Other countries may not be so well off.

      Why do you post such nonsense, jP?? Are readers supposed to be that gullible? Again, what you wish for. Not what will happen.

      For someone who tried to predict the price of gas previously, and found the Beast from the East turned up a couple of days later, you are now trying to predict the oil and gas price out to 2026! Yet, you have no idea what will happen to the price if the Saudis and Russians kiss and make up within a few days! So, $133 billion, over 5 years. Why would that figure be a problem? Think you might find a lot of businesses will get some leeway on repayment of debt, anyway. Hadn’t you heard, holidays on debt already available and being requested?! Suspect Mr. Musk is “banking” on it.

  7. Indeed, a consolidation of US frack oil is on the way.

    Plus the low oil price may well pull forwards the abandonment of a numerous borderline N.Sea assets ( good for decommissioning business, maybe rig to reef as well ).

    But looks like the rest are OK at $30 / $ 40bbl for a while, but no juicy tax take at those prices ( other than at the pump ).

    https://www.offshore-technology.com/comment/north-sea-oil-production-grow-8-3-percent-2020-average-2-5-million-barrels-per-day/

    Re US oil fracking, if reduced there may be a silver lining for pure gas frackers due to less associated gas.

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