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VSA Capital Market Movers - Egdon Resources

Published: 12:36 21 Sep 2021 BST

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VSA Morning Flow Test, 21/09/21

Egdon Resources (LON:EDR)

 

Egdon Resources (LON:EDR) has reported impressive initial production figures from the Wressle well despite planned production constraints. Flow rates have exceeded 884bopd with an incremental 80boepd (480,000cbf) of gas under a restricted choke setting owing to high initial well pressure, making it the second largest UK onshore field. EDR has a 30% interest. The company intends to reduce the choke impact which could lead to stronger near term production rates. With no water so far the testing phase has had a strong start.

As the restrictions are eased EDR and its partners will be able to identify the optimum level of production which could initially be in excess of the target 500boepd (net 150boepd to EDR). In the last month as oil prices have remained supported and gas prices have spiked to record levels, EDR has realised over £300k in revenues highlighting the importance of the well. Although only 25boepd of gas based on the above figures is net to EDR this is likely to be a valuable contributor to EDR’s top line rotating in for Ceres contribution.

EDR has also been working on new revenue opportunities in light of the energy transition and UK energy crisis which as a UK energy producer, the company is well placed to contribute to resolving. At Wressle a permit has been received for a combustion plant to enable gas to electric power generation while a geothermal scheme has been under investigation at Dukes Wood and is ready for submission with planned works starting in Q1 2022 subject to regulatory approval.

A further near term opportunity is at Keddington where planning is in place and production could be increased via a development well to exploit the current resources of 567,000bbl with subsequent exploration opportunities with gross Mean Prospective Resource of 1.2mnbbl in total. Investigative work has also been carried out at Waddock Cross with a final investment decision now due in late 2021 with a new horizontal well potentially able to increase output by 500-800bopd.

The Biscapthorpe planning meeting is now expected during November and represents one of EDR’s largest onshore opportunities with gross Mean Prospective Resources of 3.95mmbbl. Finally offshore, Shell has advised that the planned seismic at Resolution / Endeavour will be delayed from February 2022.

The update overall shows that UK energy sector is highly active. EDR and the UK onshore oil and gas sector clearly have a major ongoing role to play in supplying UK energy and with multiple potential catalysts to come we believe EDR has positioned itself well to benefit.

We reiterate our Buy recommendation and target price of 22.3p/sh.

 

Oliver O'Donnell, CFA, Head of Research & Natural Resources Analyst | T: +44 (0)20 3617 5180 | E: oodonnell@vsacapital.com

Taro Kiley, Energy Analyst | T: +44 (0)20 7096 9581 | E: tkiley@vsacapital.com


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