I have been watching Egdon Resources for a while, and think they may prove to be worth an investment.

I like the idea of a British company finding oil and gas on UK soil, and as Egdon have a site at Waddock X, fairly close to where I live, I have decided to follow their progress.


Egdon has interests in 19 licences in the hydrocarbon producing basins of the UK and France, containing two oil discoveries and a further 48 prospects.

The Company's shares are traded on the Alternative Investment Market of the London Stock Exchange.




OIL AND GAS ASSETS

Egdon holds 19 licences, all of which lie within proven oil and gas producing basins and contain a mix of oil and gas prospectivity. The assets and technical management of the Company are divided into four geographically defined business areas; Southern England, Northern England (and adjacent offshore areas), East Midlands and France.





Company website : http://www.egdon-resources.com

queen1,

a nice write up at oilbarrel.


Egdon Resources Share Price Perks Up On The Back Of A Multi-Well Drilling Programme

Shares in AIM-listed Egdon Resources, which is primarily a UK onshore oil and gas explorer and putative gas storage group, moved strongly ahead of the results announcement recently.

It was not anything in the results for the year ending July 31 which caused the stir however, but some announcements which accompanied the results. Losses for the period were 420,617 (2004: 246,350). These reflected the costs of graduating from the small Ofex market to the more liquid AIM.

Egdon now has 20 licences with 50 drillable prospects. The excitement in the share price was caused by three announcements.

First, the company was able to announce confirmation of an oil discovery at Waddock Cross, the third of its wells and the second successful one. The oil in place estimate at Waddock Cross has increased to 42 million barrels up from 20 million barrels.

Second, the company has announced an 11 well back-to-back drilling programme starting next month and beginning with Waddock Cross-3.

Third, the company has increased the target for its Portland Gas storage project to store up to 35 billion cubic feet of gas against 20 billion cubic feet originally. Also there is expected to be drilling on Avington, Egdons original discovery, after much delay due to a change of operator.

The company has added a major new area of business to its oil and gas operations through the entry into the UK gas storage market via the Portland Gas Storage Project. Gas would be stored under pressure in a series of caverns within a thick salt sequence approximately 2,000 metres below ground level. These caverns would be created by dissolving sale with seawater, circulated under controlled conditions. It is anticipated that 18 caverns would be created, with six caverns built in three phases.

The next stage in the process is to drill a well to confirm the thickness and properties of the salt sequence.

Returning to the companys conventional oil and gas activities, the Waddock Cross-1 well, onshore southern England was drilled over a year ago. This encountered a 24-metre column in the Jurassic Bridport Sandstone. The well pumped 31 barrels per day in August 2004. There were various delays. A 12 sq km seismic survey has been acquired and planning permission has been obtained for two horizontal wells: Waddock Cross-3, in which Egdon has a 45 per cent interest will be an appraisal of the Bridport Sandstone oil discovery; well number five in the programme will be Waddock Cross-4, which will test production in December. Equipment is constrained to 500 bpd of which the company expects 150 bpd to be oil.

Between now and then, Egdon is going to be involved in Westerdale-1 on PEDL068 in which it has a 20 per cent interest, as well number 3 in its programme. This is an exploration well looking at a gas prospect in the North Moors National Park. The well is a 35 metres updip, 3.7 metres step out from Ralph Cross-1 well drilled in 1966 which flowed at 6 million cubic feet of gas per day from fractured limestone (Brotherton). The potential net to Egdon if it assumes a 5 per cent option to increase its equity to 25 per cent is put at 8.8 bcf.

Well number 2 in the programme will be Kirleatham-4 on PEDL068 where Egdon again has a 20 per cent interest of which 10 per cent is carried. This is a gas prospect to the east of the Wilton petrochemical works. Drilling will be updip of 1940s wells, which found gas.

Well number 4 is the Portland-1 well, which is subject to planning permission being granted and is expected to start towards the end of 2005.

Thereafter stretching into 2006 a further 6 wells are planned on various licences including Grenade in southern France and Avington, which is near Winchester in southern England. Grenade is a heavy oil prospect and Egdon has farmed out a 22 per cent interest in the field to Masefield Energy Holdings, a company with proprietary technology in heavy oil operations. This leaves Egdon with a 33.4 per cent stake.

Avington on PEDL070, in which Egdon has a 20 per cent stake, is a Greater Oolite play. Avington-2 was drilled in August 2003. The well flowed at 700 barrels per day. There was thought to be 100 million barrels of oil in place, of which 10 million barrels could be recoverable. Further appraisal has been much delayed because of the protracted sale of Pentex the operator. This has now been resolved. The new operator, Star Energy, hopes to drill the Avington-3 appraisal well early in 2006.

As things stand Egdon has no debt and a net cash position of 2.95 million. It has 1 million barrels of proved and probable reserves, 6.8 million boe of estimated contingent reserves and 104 million boe of prospective resources (unrisked). The company is looking forward to first production and thus cash flow from Waddock Cross later this year.

Then there is the Portland Gas Project to look forward to. It will take three years at least to come onstream if all goes well but as the UK runs out of gas, storage is expected to be big business.

The companys reasoning is as follows. The UK is the worlds third largest gas consumer and with North Sea output in decline, is expected to become a net importer in 2006. Despite this, at present the countrys gas storage facilities are equivalent to just 4 per cent of annual demand, a figure which compares with 25 per cent in France and 21 per cent in Germany.

Gas consumption is significantly higher in winter than in summer and storage facilities can provide swing capacity to help meet peak demand. In the last week of last April gas for this winter was trading at a price approximately 26p/therm higher than then current prices. It is by exploiting such differentials that income can be generated.

Before Egdon upgraded its storage possibility to 35 bcf, broker Seymour Pierce made some estimates on the project. It assumed the first cavities are operational by 2009 and the facility is fully commissioned by 2011. It also assumed it is filled and depleted twice a year and uses inflation rates varying between 2 and 10 per cent. On that basis the broker said if a gas price differential of just 10p a therm could be achieved, such a development could be worth 43 million, or more than twice the companys market capitalisation.

Andy - thanks, a splendid article. A lot of good stuff in there but I guess 2 things jump out from an initial reading. Firstly, EDR has no debt which is unusual and extremely healthy. And secondly the final paragraph gives a tantalising glimpse of EDR's long-term potential. If you can afford to squirrel these away they could make a small fortune in the not-too-distant future.

Another cracking day for EDR. Saw the headline on the front of the Mail today that screamed, "Gas prices to triple over the winter." Not good for those of us who use gas to heat our homes but potentially lucrative for those that deal in gas and its supply going forward.

queen1,

That was the Express, and they always sensationalise their headlines.

I think that a 300% rise in the price of gas would create a crisis, and result in many deaths, and politically would not be acceptable.

It would cause severe political problems IMO.

Mail/Express, whatever. My point is not that I belive the headline and expect the 300% rise, more that the environment at present, and the way it will inevitably head over time, seems to be conducive to success for EDR.

Storming ahead this morning, NICE.

cheers GF.

I wonder if the market is waking up to the potential of EDR...Let's hope so!

What a really rather splendid day! 1 reached. Where to now I wonder?

Not sure why the retreat today. The clamour for gas, resources etc seems to get louder by the day, plus there was a small positive note in Shares today.

More selling than buying maybe.
Cheers

How very insightful porky. Pure genius.

This seems broadly positive:

Egdon Resources Plc ('Egdon' or 'the Company') is pleased to provide an update
on drilling and testing operations on its UK operated licences.

The BDF28 drilling rig has completed drilling and logging operations at
Kirkleatham-4 on licence PEDL068. The Kirkleatham-4 well reached a TD of 936m
within rocks of Carboniferous age on the 7th January 2006. During drilling gas
shows were encountered within the target Permian age Zechstein carbonates.
Logging operations have now been completed and confirmed the presence of a c.
19m gas column within the Cadeby Formation. The top of the Cadeby Formation was
penetrated at 804.3m where a drilling break and high gas readings were observed.
Evaluation of wireline log data indicates high gas saturations and good
porosity development within the gas bearing interval. The Kirkleatham-4 well
will be completed with 7' casing and the BDF28 rig released. Testing operations
will be undertaken using a work-over rig. Further activity at Kirkleatham will
be assessed once test results have been evaluated.

On completion of operations at Kirkleatham-4 the drilling rig will mobilise to
the Westerdale-1 well site in North Yorkshire where drilling operations are
expected to commence during the week of 16th January 2006. Westerdale-1 is
designed to test an accumulation 50.5 m up-dip and 3.7 km to the north of the
Ralph Cross-1 gas discovery made by Home Oil Limited in 1966. Ralph Cross-1
tested gas at flow rates of up to 6 million cubic feet of gas per day from a
20.5 m gas column in fractured Zechstein carbonates. Additional reservoir
objectives are present in the Westerdale-1 well both within the Zechstein and in
the underlying Carboniferous sequences. Westerdale-1 will be directionally
drilled to a total depth of around 1250 m and will take around 21 days to drill.

On completion of operations at Westerdale-1 the rig will move to Dorset to drill
the Portland-1 well which is designed to test the thickness and suitability of a
salt sequence for the creation of caverns for gas storage. Site construction
has commenced at the Portland-1 well site.

The Company can also report that at Waddock Cross-3, testing operations are
ongoing in the horizontal section drilled in the Cycle 3 of the Bridport
Sandstone. Initial results indicate pump constrained flow rates of 270 to 400
barrels of fluid per day with an average 12% oil cut. This equates to 32 to 48
barrels of oil per day. The produced oil has not experienced the emulsion
problems encountered with the Waddock Cross-2 well test. Downhole pressure
gauges will be recovered during the next week and the data analysed to determine
options for the future testing and development of the Waddock Cross
accumulation.

13.01.2006

Egdon Finds Gas In Yorkshire And Oil In Dorset But Further Testing Is Required
Egdon Resources, which has seen its share price increase four-fold on Londons Alternative Investment Market over the past year, has announced initial results from its multi-well onshore UK drilling campaign.

Testing operations on the Waddock Cross-3 horizontal well in the Wessex Basin of southern England have pumped between 32 and 48 barrels of per day of oil from the Cycle 3 sandstones. The overall flow rate was between 270 and 400 barrels per day (there was a 12 per cent oil water cut). The well was designed to probe an elevated part of the Waddock Cross oil accumulation and is a follow-up to the 2004 Waddock Cross-2 well, which flowed around 30 bpd and confirmed a 20 million barrel oil discovery.

The oil flow numbers from Waddock Cross-3 appear to be a disappointment: reservoir modelling by RPS Troy Ikoda had predicted that a horizontal well through the Cycle 2 and 3 sandstones could produce at an average rate of in excess of 200 barrels per day. However, the produced oil has not experienced the emulsion problems encountered at Waddock Cross-2 and the rate was constrained by the pumping equipment. Testing operations are still ongoing and further analysis work is planned to determine the economic options for a possible development at Waddock Cross.

There was also news from Egdons exploration campaign in the gas-prone Cleveland Basin of North Yorkshire. The Kirkleatham prospect was tested in the 1940s by two wells which at the time produced sub-commercial gas-flows. The onshore specialist, which has also branched out into gas storage, reckons modern drilling and completion techniques deployed updip will tap into a workable gas reservoir.

Early results would appear to confirm that prediction. Drilling and logging operations on the Kirkleatham-4 well have been completed, having encountered gas shows in the Zechstein carbonates. The well has confirmed the presence of a 19 metre gas column in the Cadeby formation, where wireline logs indicated high gas saturations and good porosity. The well was not tested, however: this procedure, which will be key to determining the commercial future of the deposit, will be undertaken using a workover rig.

The drilling rig is now set to move to the Westerdale-1 well site, also in North Yorkshire. This well is due to spud next week and will test an accumulation 3.7 km north of the Ralph Cross-1 gas discovery which flowed at rates of up to 6 million cubic feet per day fo gas from a 20.5 metre gas column in the fractured Zechstein carbonates. Egdon plans to test this reservoir in Westerdale-1 as well as targeting the underlying Carboniferous formation. This should take about 21 days to drill.

After this operation, the rig - the much traveled BDF 28 - will move down south to drill the Portland-1 well. This hole is not prospecting for oil and gas but checking on the suitability of the salt sequence here for a below-ground gas storage business. Egdon entered the gas storage market in April and hopes to have this, its first operation, up and running by 2008.

This is a timely move and given recent events in Russia - which has flexed its muscle as a regional energy power, causing jitters across the European gas supply chain - could prove very astute in the longer term. Imported gas is expected to meet half of UK demand by 2010 and storage capacity is expected to play a key role in the countrys ability to ensure supply security and swing capability to meet winter peaks in energy demand. At present, the UKs gas storage capacity is currently about 4 per cent of annual consumption, compared with 25 per cent in France and 21 per cent in Germany.

With supplies increasingly coming from further afield, gas storage facilities look set to become a vital resource in the gas supply marketplace, said joint MD Andrew Hindle at the launch of Egdons new business venture. Egdon has used its extensive knowledge of the geology of the UK onshore to identify the potential site at Portland to participate in this emerging growth business within the UK oil and gas industry. It is currently anticipated that the initial working volume will be between 10 and 20 billion cubic feet and the first cavity on the site should become operational in 2008.

Oilbarrel.

Bud day at the office for EDR today. Anyone have any ideas why?

queen1,

No, I'm surprised by the drop.

Me too Andy and a little concerned. To be fair the sp has been fantastic over the last 12 months and all along the way there has been one step back followed by 2 forwards so I'm hoping this is the step back and two steps forward are on their way!

A stunning break-out day for the EDR sp today. Perhaps this is the first of the two steps forward!

Further test results published today look good. And we should have a clearer understanding of the potential of Portland in May. Exciting times.

new to the thread, after buying into EDR, wish I got in earlier though!!!

A very warm welcome to you vistauk. I hope you enjoy the EDR ride as much as I have so far.

On another point I see that Seymour Pierce put out a buy recommendation on EDR today.