Egdon Resources#: FY 2021 Results
FY 2021 Results
Egdon Resources (Egdon Resources PLC (AIM:EDR)) has reported its preliminary results for the 12 month period ended 31st July 2021. Lower YoY production of 90boepd was not unexpected given the delays at Wressle and revenue of £1.1m came in marginally below our £1.4m forecast for the year. As a result, the net loss of £1.8m was lower than our estimate of £1.6m broadly by the difference in top line estimates. Net cash used in operations was £1.12k for the period and net cash at 31st July 2021 was £1.96m.
Wressle & Ceres Drive Earnings Uplift
Having weathered a tough FY 2021 the very strong flow tests at Wressle reaching 265boepd net (vs a target of 150boepd sustained production) put the company in a strong position to grow earnings. EDR recently reported revenue in excess of £300k from the early weeks of Wressle’s production. Ceres contributed 62boepd of gas and condensates in FY 2021 and the company therefore retains strong exposure to gas particularly as the improved economics mean the asset life will likely be extended. The combination underpins our FY 2022 revenue outlook of £4.7m, up threefold YoY.
Outlook for FY 2022
Production guidance for FY 2022 is 240boepd, with Wressle expected to be the main contributor, up 166% YoY. Given the success of Wressle, EDR hopes to drill a new well on the North Kelsey prospect (WI 50%) during 2022, targeting net 3.2mnbbl Pmean Prospective Resources, which is geologically analogous to the Wressle field. EDR has submitted to the regulator a programme developed by Creative Geothermal Solutions (CGS) to plug and abandon the existing Dukes Wood-1 oil well and recomplete it for geothermal heat production. The work could commence during calendar Q1 2022.
Recommendation and Target Price
With both prices and production now moving higher, EDR’s earnings outlook has strengthened opening up opportunities to advance the broader portfolio and play a significant role in providing UK energy which is not reflected in the current valuation.
We reiterate our Buy recommendation target price of 21p/sh
Oliver O'Donnell, CFA, Natural Resources | 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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