Egdon Resources PLC (LON:EDR) still has a strong case as it pursues planning approval for the Wressle project, according to stockbroker VSA Capital.
Earlier this month, the UK planning inspectorate rejected Egdon’s appeals, which followed an unsuccessful planning application to North Lincolnshire County Council, and, subsequently the company said it would prepare and submit a new planning application for the proposed oil field.
READ: UK set for ‘significant’ shale gas activity – Egdon Resources
The new application will be made before the expiry of the current planning consent for Wressle (the deadline is April 28), though it also intends to make a new application to extend the current consent period to allow the council sufficient time to consider the new application.
VSA Capital has repeated a ‘buy’ recommendation with a price target of 48.5p, which compares to Egdon’s current share price of 6.86p.
“We had assumed a positive result from the appeal and incorporated the benefits into our FY 2019F estimates,” VSA analyst Oliver O'Donnell said in a note.
“These have now been pushed back to H2 FY 2019 while a higher risk factor is incorporated into our target price for Wressle. We continue to believe that EDR has a strong case and will be able to gain consent for Wressle’s development.
“We highlight that EDR remains debt free, with a strong cash position and its exploration programme is otherwise unaffected, as a result.”
O'Donnell added: “Wressle represents only one of a number of key catalysts which we expect to drive a rerating in 2018.
“Wressle contributes just 0.9p to our target price demonstrating the significant value in the wider portfolio. Indeed, drilling at Biscapthorpe, Springs Road and Holmwood and North Kelsey is due in 2018.”