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VSA Capital Market Movers - Egdon Resources

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Egdon Resources (LON:EDR)

Yesterday the UK Government provided a Written Ministerial Statement on the UK shale gas industry. Despite backing from the Government in its election manifesto, progress has been slow in terms of project development although. However, with a number of key milestones coming up this summer this intervention is a timely and positive step, in our view.

The statement which reiterates the Government’s support for shale gas development and its national importance given rising UK energy imports must now be considered by planning committees when making decisions on applications. In addition the Government will publish revised planning practice guidance on shale development this summer and will launch two consultations; one to consider allowing wells to be drilled under permit rather than a full application and one to consider including shale production projects in the Nationally Significant Infrastructure Projects regime.

Given the complexity and technical nature of oil and gas permitting, the statement also indicates further support for Local Authorities to help them better understand the issues surrounding the development process.

Although the UK Government has previously indicated its support for shale gas development we believe this more direct approach is likely to be more effective and bodes well ahead of a key summer of testing by Cuadrilla, Egdon (LON:EDR) and IGas (LON:IGAS). As one of two companies listed in the UK offering exposure to shale gas development we believe that EDR offers attractive exposure to the industry. Currently trading at around 9p the shares reflect little of the upside potential and have been deeply discounted largely as a result of permitting risk, however, this announcement strongly indicates that the Government intends to support applications.

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