Interim Results

Egdon Resources PLC 25 April 2005 Immediate release 25 April 2005 Egdon Resources Plc ('Egdon' or 'the Company') Interim Results for the six month period ended 31 January 2005 Egdon Resources Plc (AIM:EDR), the independent UK-based oil and gas exploration company focused on the hydrocarbon-producing basins of the onshore UK and Europe, today announces its Interim Results for the six month period ended 31 January 2005. Operational Highlights • Successful Placing and move to AIM in December 2004. • Participated in oil discoveries at Avington and Waddock Cross, which are currently under appraisal and are anticipated to be brought into production late in 2005. • Awarded seven new licences in the twelfth onshore licensing round. • Holds nineteen exploration licences containing fifty identified oil and gas prospects which cover a broad risk-reward spread. • Farmed-out an interest in the Grenade heavy oil field in SW France to a heavy oil specialist. • Entered the gas storage business, a rapidly emerging growth market within the UK oil and gas industry, via subsidiary Portland Gas Limited. Financial Highlights • Loss for period of £296,000 (2004: £97,000). • Debt free with a strong cash position (Net funds as at 31 January 2005: £3.7 million; 31 January 2004: £559,000). Commenting on the results, Egdon Chairman, Philip Stephens, said: 'Egdon has moved into a new phase of its development and is now well capitalised to continue exploration and appraisal drilling at our key sites in the UK. The farming out of the interest in St Laurent will also allow for progress to be made on developing our French business. 'We are pleased that institutions have supported Egdon through its Placing and transfer from the OFEX market and we look forward to adding value to the business through delivering the strategy outlined when we joined AIM.' For further information please contact: Egdon Resources plc Andrew Hindle 020 7466 5000 (today) Mark Abbott 01256 702 292 (thereafter) Buchanan Communications 020 7466 5000 Eric Burns Ben Willey Seymour Pierce Ltd 020 7107 8000 Jonathan Wright Jeremy Porter Chairman's Statement The period covered by these Interim Results was one of significant positive change for Egdon. The Company converted to a PLC, undertook a successful institutional placing and completed a move from OFEX to AIM. The Company has confirmed Waddock Cross as an oil discovery and enhanced its licence and prospect portfolio with success in the twelfth Landward Licensing Round. Subsequent to 31 January 2005, further progress has been made with the farm-out of an interest in the Grenade project in France and entry into the Gas Storage business in Dorset. The Company now holds nineteen licences containing fifty identified oil and gas prospects and has an active appraisal and exploration drilling campaign planned for 2005/2006. Financial Overview The Company recorded a consolidated loss of £296,000 during the six month period to 31 January 2005 (six months to 31 January 2004: £97,000), having carried exceptional costs associated with the conversion to a PLC and the move to AIM during the period. During December 2004, an institutional placing of 16,666,666 ordinary shares was completed at a price of 30p per share, resulting in net proceeds of £4 million. The Company's shares began trading on AIM on 21 December 2004. The Company is debt free with a strong cash position of £3.7 million at 31 January 2005 (2004: £559,000), enabling it to pursue its strategy through an active programme of appraisal and exploration drilling as detailed below. Operational Overview UK A key short term priority for the Company is the commercialisation of the Waddock Cross and Avington oil discoveries. Following testing and an independent review during 2004, the Company has been able to confirm Waddock Cross as an oil discovery and has initiated an active appraisal programme. A twelve square kilometre 3D seismic survey is currently being acquired and a planning application has been submitted for two horizontal appraisal wells, which, subject to planning consent, are expected to commence drilling in the fourth quarter of 2005. Laboratory studies have determined the cause of the oil-water emulsion seen during testing and further well testing is being considered to test treatments for this problem to assist in the design of the production facilities and further enhance the value of the field. Egdon is the operator of Waddock Cross with a 45% interest. At the Avington oil discovery in Hampshire, where Egdon holds a 20% interest, the ongoing sale process of the operator, Pentex, has further delayed drilling of the Avington-3 well. However, this delay has enabled a 2D seismic survey to be acquired during early April 2005 to assist in planning future drilling. The Company now expects the well to be drilled during the summer. Avington-3 has been designed to provide additional detailed reservoir data to reduce the uncertainties in the size of the accumulation and enable a suitable development to be planned. The Company anticipates production from both Avington and Waddock Cross during 2005. The Company recognises the opportunities presented by deregulation of the gas and electricity markets and changes in the UK gas market as the UK changes to a net gas importer over the coming years. The Company has identified a number of quality gas prospects, largely in northern England. The Company is anticipating an active drilling programme during the fourth quarter of 2005 in the North Yorkshire licence PEDL068 where Egdon hold a 20% interest. Planning permission has been granted and wells are planned at Kirkleatham and Westerdale. Previous wells on both prospects have encountered gas. Modern drilling, completion and reservoir management techniques will be applied in an attempt to realise sustainable commercial gas flows. In PEDL071, a 2D seismic programme is planned for May 2005 to define a possible drilling location on the Fraisthorpe Prospect. Egdon operates this licence with a 50% interest. In the Company's two offshore blocks, evaluation of 3D seismic data has confirmed the presence of the Tees Prospect, a robust structure in licence 42/ 27. The Company is currently reviewing its options and may look to farm-out part of its 10% interest in this well which is planned for 2006. With seven licence awards, Egdon was one of the big winners in the highly competitive twelfth UK Onshore Licensing Round. The Company now holds nineteen licences in the producing basins of the onshore UK, UKCS and France covering a gross area of 4,401 square kilometres. These licences contain fifty identified oil and gas prospects covering a broad risk spread, ranging from discoveries under appraisal through to higher risk but higher potential prospects. In Southern England, Egdon has identified a number of high potential oil and gas prospects. One such example is the Holmwood Prospect in twelfth round licence PEDL143 located in Surrey. Recognising its potential, the Company quickly moved to increase its interest from 20% to 38.4% by farming-in to the interest of Altwood Petroleum Limited. Options for a well site are currently being pursued and subject to planning it is hoped to drill this well in 2006. In Dorset, multiple prospects have been identified within the Sherwood Sandstone play which is productive at the giant Wytch Farm oilfield located ten kilometres to the east of the Company's licences. Planning permission will be sought to drill the Winfrith prospect which, being the closest to the Wytch Farm oilfield, is considered to have the lowest risk. The chance of finding oil in the larger prospects to the west, such as Casterbridge, would be significantly increased by success at Winfrith. Egdon holds a 45% interest in these prospects. Elsewhere, the Company is progressing evaluation of its exploration interests in the Midlands and Weald basins to determine the next tranche of drillable prospects. At Nooks Farm in Staffordshire, where the Company has a 96% operated interest, we are reviewing development options for gas-to-electricity generation on a proven gas accumulation. France In France, the Company has decided to progress development of the Grenade heavy oil accumulation by bringing in a partner company with relevant expertise. As was announced on 6th April 2005 the Company has farmed-out 22% of its interest in the St Laurent Licence to Masefield Energy Holdings AG, a company with management experience and access to proprietary technology in heavy oil operations. Masefield has funded work to determine the feasibility of producing and marketing the crude from the potentially significant resource mapped at Grenade. The Company has applied to renew the St Laurent Licence for a further three years and will relinquish the less prospective areas of the block. On completion of the farm-out, Egdon will own a 33.4% operated interest. Gas Storage Whilst the Company will continue to focus its main effort on onshore UK exploration, it will also look to leverage its expertise into other areas where the management see value. Following a review of the gas storage market in the UK, the Company has decided to pursue this emerging growth business within the UK oil and gas industry as part of its wider business plan. As announced on 21st April 2005, the Company, through a wholly owned subsidiary Portland Gas Limited ('PGL'), has entered into an agreement for a five hectare 'brownfield' site on the Isle of Portland in Dorset where the Company has identified a salt sequence suitable for the creation of cavities to store natural gas. Following an initial 18 month period, PGL has an option to convert to a fifteen year lease, with further options to extend to a maximum of 90 years. PGL will have exclusive rights to store natural gas below the land owned by Portland Port Limited. During the initial eighteen month period, a confirmatory well will be drilled to define the properties of the salt, further detailed geological, engineering and economic modelling will be undertaken, the facilities will be designed and permissions and consents obtained for the project. Drilling is expected to take place in the last quarter of 2005, conditional on planning consent, whilst acquisition of a seismic line, to confirm the subsurface location of the well, is planned for May 2005. PGL's business model is to buy and store gas during periods of low demand when prices are lower and then sell it on when demand and prices are higher. Such price differentials occur both on seasonal and shorter cycles. With supplies increasingly coming from further afield, gas storage facilities look set to become a vital resource in the UK gas supply marketplace. It is currently anticipated that the initial working volume will be between ten and twenty billion cubic feet and the first cavity on the site could become operational in 2008. Outlook The Company has an enviable exploration success record with oil discoveries being made in two out of the three wells it has participated in to date. The challenge now is to continue this record of exploration success as we embark on an accelerated phase of exploration drilling and to move the discoveries at Waddock Cross and Avington into profitable production during 2005. We thank you for your continued support and look forward with confidence and anticipation to the coming months. Philip Stephens Chairman 25 April 2005 Consolidated Profit and Loss Account For the six month period ended 31 January 2005 Six months Six months Year ended ended ended 31 January 31 January 31 July 2005 2004 2004 £000 £000 £000 ------------------------ ---------- ---------- ---------- Turnover 203 61 33 Cost of sales (199) (10) (37) ---------- ---------- ---------- Gross profit 4 51 (4) Other operating income 0 0 36 Administrative expenses (277) (138) (252) ---------- ---------- ---------- Operating loss (273) (87) (220) Interest payable (42) (14) (35) Interest receivable 19 4 9 ---------- ---------- ---------- Loss on ordinary activities before taxation (296) (97) (246) Taxation on profit on ordinary activities 0 0 0 ---------- ---------- ---------- Loss on ordinary activities after taxation (296) (97) (246) ---------- ---------- ---------- Loss for the period retained (296) (97) (246) ---------- ---------- ---------- ---------- ---------- ---------- Earnings per share (p) (0.74) (0.29) (0.72) ---------- ---------- ---------- Consolidated Balance Sheet As at 31 January 2005 31 January 31 January 31 July 2004 2004 2004 £000 £000 £000 ------------------------ ---------- ---------- ---------- Fixed assets Intangible assets 2,002 1581 1,776 Tangible assets 3 5 4 ---------- ---------- ---------- 2,005 1586 1,780 ---------- ---------- ---------- Current assets Debtors: Amount falling due within one year 93 177 71 ---------- ---------- ---------- Cash at bank and in hand 3,708 559 552 ---------- ---------- ---------- 3,801 736 623 Creditors: amounts falling due within one year ---------- ---------- ---------- (60) (778) (387) ---------- ---------- ---------- Net current assets 3,741 (42) 236 ---------- ---------- ---------- Total assets less current liabilities 5,746 1544 2,016 Creditors: amounts falling due after more than one year 0 0 0 Provision for liabilities and charges (37) (35) (29) ---------- ---------- ---------- 5,709 1509 1,987 ---------- ---------- ---------- Capital and reserves Called up share capital 516 330 366 Share premium account 3,868 1951 2,543 Profit and loss account 1,325 (772) (922) ---------- ---------- ---------- Equity shareholders' funds 5,709 1509 1,987 ---------- ---------- ---------- Consolidated Cashflow Statement for the six month period ended 31 January 2005 Six Six Year months months ended ended ended 31 31 31 January January July 2005 2004 2004 £000 £000 £000 ------------------------ ---------- ---------- ---------- Net cash outflow from operating activities (263) 204 (218) ---------- ---------- ---------- Returns on investments and servicing of finance Interest paid (42) (14) (35) Interest received 19 4 9 ---------- ---------- ---------- Net cash outflow from returns on investments and servicing of finance (23) (10) (26) ---------- ---------- ---------- Tax paid 0 0 0 ---------- ---------- ---------- Capital expenditure and financial investment Purchase of intangible fixed assets (226) (312) (508) Purchase of tangible fixed assets 0 0 (1) Disposal of tangible fixed assets 0 0 0 Net cash outflow from capital expenditure and financial investment ---------- ---------- ---------- (226) (312) (509) ---------- ---------- ---------- Financing Repayment of borrowings (350) 0 0 Issue of shares, net of costs 4,018 15 643 ---------- ---------- ---------- Net cash inflow from financing 3,668 15 643 ---------- ---------- ---------- ---------- ---------- ---------- Increase/(decrease) in cash 3,156 (103) (110) ---------- ---------- ---------- Reconciliation of Operating Loss to Net Cashflow from Operating Activities for the six month period ended 31 January 2005 Six months Six months Year ended ended ended 31 January 31 January 31 July 2005 2004 2004 £000 £000 £000 ------------------------ ---------- ---------- ---------- Loss for Period (273) (87) (220) Depreciation 1 2 4 Movement in Debtors (22) (82) 24 Movement in Creditors 23 371 (20) Movement in Provisions 8 0 (6) ---------- ---------- ---------- Operational Cashflow (263) 204 (218) ---------- ---------- ---------- Notes to Accounts: 1. Interim accounts have been prepared on the basis of the accounting policies set out in the 2004 Annual Report and Accounts. The 31 July 2004 figures have been extracted from audited accounts and the audit report was unqualified. 2. The results for the interim periods have not been subject to independent review as defined in the Auditing Practices Board Bulletin 1999/4 and do not constitute full accounts within the meaning of Section 240 of the Companies Act 1985. 3. During the six months to 31 January 2005 the group successfully applied to have its share premium account cancelled in favour of its Profit and Loss Account as follows; £'000 Profit and Loss account at 31 July 2004 (922) Cancellation of share premium 2,543 Loss for six months to 31 January 2005 (296) Profit and Loss account at 31 January 2005 1,325 4. The creditor figures at 31 January 2004 and 31 July 2004 include convertible debt of £ 350,000. 5. Copies of the Interim Results will be posted to shareholders and will be available from the Company's office at Suite 2, 90-96 High Street, Odiham, Hampshire, RG29 1LP, UK. This information is provided by RNS The company news service from the London Stock Exchange

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