The AIM-listed oil and gas business doubled production in the six months to December to 164 barrels equivalent per day with output rising again to 240 barrels per day between January and March.
Egdon expects output this year to average an overall 170-180 barrels equivalent daily as production will ease back as the Ceres gas field goes offline for maintenance.
These are not large amounts of gas, but for a company of Egdon’s size extra barrels at the margin can mean a substantial boost to the financial numbers.
House broker VSA, for example, sees production rising to more than 300 barrels per day on average in 2020, at which point annual revenues rise to around £5mln and Egdon makes a profit of about £1.1mln at current oil prices.
Getting to that point, though, is likely to need some beneficial movement on the UK political background for oil and gas and shale in particular.
Egdon’s acreage in the UK contains substantial amounts of shale gas, where fracking might possibly be needed to extract anything commercially.
Shale and fracking are highly sensitive issues in Britain currently though attitudes on allowing oil and gas exploration and development vary council by council, says Mark Abbott, Egdon’s managing director.
Wressle heads to inquiry
At Wressle in North Lincolnshire, development plans have become stuck in the planning process.
A public inquiry later this year is the next stage to help move things forward.
That will be chaired by a planning inspector, which Abbott hopes will take the politics out of any decision.
Egdon has a 30% stake in Wressle, a conventional oil play, and Abbott says it can add 150 barrels per day to its production.
It is oil as well, which balances the gas currently being produced.
“In theory, it should be very straightforward, “ he says, but the process has reached an impasse with the council.
A QC will be used to present Egdon’s case at the inquiry and Abbot remains hopeful that if not at council level, the government will eventually give the go-ahead for the project.
Ahead of the Wressle inquiry, there are two other significant milestones.
Egdon has a 14.5% carried stake in the Springs Road prospect in the Gainsborough Trough in Nottinghamshire, a sub-basin of the wider Bowland Shale structure.
Operator Igas recently completed drilling of the Springs Road-1 well and analysis of the core should start to come through in May with the full results available by July.
Abbot is looking forward to the full set of information, which he says is the first time modern well techniques have been used to test the prospect.
“What we have seen so far is very encouraging, but we have to wait until all of the core data is available.”
At that point, Igas and Egdon will determine the location of a horizontal well, Springs Road-2, and if fracking is required.
Egdon has licences covering about 160,000 acres in the Bowland region with the Gainsborough Trough the centre of its activity.
Abbott says if its acreage was priced in line with other similar prospects that have change hands recently that would value the business at ten times the current 5.6p per share.
Egdon has also just received an independent valuation of its Resolution field offshore in the Southern North Sea.
Schlumberger estimated contingent gas resources on a mean average (2P) basis at 206bcf, which equates to about 34mln barrels of oil.
Next steps are to shoot 3D seismic in the Autumn to assess the best place for an exploration well to be drilled in 2020.
Egdon owns 100% of Resolution and is looking for a partner to fund the 3D programme.
Broker forecasts suggest portfolio substantially undervalued
There have been disappointments. A second well at its Biscathorpe licence east of Lincoln for example, though Egdon is considering a sidetrack well to test what Abbott says is a very large structure.
Even so, broker estimates of the value of the portfolio range from 20p to 45.2p, while some suggest that in a best-case scenario the shale interests alone might be worth 100p per share.
Political risks clearly will have a major bearing on those numbers, but that is an unusually large disconnect between potential in the ground and the market value.
Cantor adds that Springs Road could be the play-opening well for the East Midlands in terms of the Bowland, while VSA suggests the full results from Springs Road will represent a major near-term catalyst for the whole UK shale industry.
At 5.6p, Egdon is valued at £14.6mln.