Egdon Resources recorded a half-year operating loss of £763,000 against last year's half-year profit of £4.44m, but the UK-focused oil and gas minnow still drove production up by 68 per cent and near-term exploration prospects continue to warrant a 'speculative buy' tag.
Performance was held in check due to technical issues at the Ceres and Kirkleatham gas fields. Egdon's average daily production of 161 barrels of oil equivalent (boe) was significantly up on the comparable 2011 figure, but well below the original guidance of 400 boe. Management is confident that this level of output is within its grasp, particularly as the repairs to the methanol injection system at Ceres are well advanced.
The interim reversal was attributable to a £1m impairment charge that Egdon booked on its 40 per cent stake in Kirkleatham. Disregard this, together with the effect of a £4.34m one-off disposal gain on last year's half-year figures, and operating profits more than doubled to £237,000.
Egdon's proven and probable oil and gas resource is currently around 2m boe, but this could grow substantially over the next 18 months, with an additional 33m boe targeted through a 12-well exploration programme. A proportion of these prospects will be subject to farm-out agreements, as Egdon is intent on maintaining its strong cash position, while another near-term focus is a possible commercial development at the Waddock Cross site.
| EGDON RESOURCES (EDR) | ||||
|---|---|---|---|---|
| ORD PRICE: | 8.5p | MARKET VALUE: | £11m | |
| TOUCH: | 8.25-8.75p | 12-MONTH HIGH: | 21p | Low: 8p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 15p | NET CASH: | £3.26m | |
| Half-year to 31 Jan | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 0.9 | 4.41 | 3.37 | nil |
| 2012 | 1.6 | -0.83 | -0.63 | nil |
| % change | +67 | - | - | - |
*Includes intangible assets of £7.96m, or 6p a share | ||||
