Egdon Resources plc
Annual Report and Financial
Statements for the year ended
31 July 2020
3
www.egdon-resources.com
Egdon Resources plc
The Wheat House
98 High Street
Odiham, Hampshire
RG29 1LP
+44 (0)1256 702292
OVERVIEW Annual Report 2020
Egdon Resources plc
is an independent
onshore focused oil and
gas exploration and
production business
Strategic Report
Overview
Highlights
Chairman’s Statement
Operations
Operating Review
Oil and Gas Reserves and Resource Estimates
United Kingdom Licences Summary
Performance
Financial Review
Governance
Corporate Governance Statement
Board of Directors
Directors’ Report
Statement of Directors’ Responsibilities
Independent Auditor’s Report
1
4
8
15
16
18
23
30
32
34
35
Financial Statements
Consolidated Statement of Comprehensive Income 39
40
Consolidated Statement of Financial Position
41
Company Statement of Financial Position
42
Consolidated Statement of Cash Flows
43
Company Statement of Cash Flows
44
Consolidated Statement of Changes in Equity
45
Company Statement of Changes in Equity
46
Notes Forming Part of the Financial Statements
76
Directors, Officers and Advisors
Designed & printed by Perivan 259326
Highlights
OVERVIEW
1
An established UK focused
oil and gas exploration and
production business with 42
licences in proven oil and gas
producing basins
A balanced portfolio of
production, development,
appraisal and exploration
projects for conventional and
unconventional hydrocarbons
placing the Company in a
strong position for growth
A proven operator with an
experienced and respected
management team
A firm commitment to safety,
environmental and social
responsibility in all aspects of
its operations
Operational and Corporate Highlights
•
Production during the year was 145 boepd (2019: 182 boepd) ahead of guidance of 130-140
boepd.
•
•
•
•
•
Planning permission was granted for the Wressle development on appeal on 17 January
2020 following a public inquiry in November 2019. Full costs were awarded against North
Lincolnshire Council and have been received. Field development operations are progressing
well and first oil is targeted during January 2021, which will add 150 bopd to Egdon’s production.
During March 2020, we announced the results of an in-depth assessment of the Biscathorpe
project (PEDL253) which identified technically and commercially attractive target areas
accessible via a side-track of the suspended Biscathorpe-2 well. A planning application is in the
process of being prepared for submission to enable this.
The farm-out of the Resolution and Endeavour gas discoveries (P1929 and P2304) to Shell Oil
U.K. Limited (“Shell”) and agreed licence extensions and new work programme obligations
with the Oil and Gas Authority (“OGA”). We now look forward to the acquisition of 3-D seismic
during February 2022.
During September 2019, the encouraging gas in place results for Springs Road-1 were
announced indicating the presence of a potentially world class resource in the “Gainsborough
Shales” of the Gainsborough Trough where Egdon holds 71,361 net acres (289 km2).
During early November 2019 the Government announced the introduction of a moratorium
on high volume hydraulic fracturing for shale-gas that will remain in place until new evidence
is provided. Along with our industry peers we are continuing to work with the OGA and other
regulators on this matter.
•
On 18 June 2020 a confidential settlement was reached with Humber Oil and Gas in respect of
PEDL253 litigation and monies were received on 25 August 2020.
Financial Highlights
•
Gross oil and gas revenues during the year decreased by 56% to £0.96 million (2019: £2.20
million).
•
Loss for the year ended 31 July 2020 of £4.75 million after write-downs, pre-licence costs and
impairments of £3.03 million (2019: loss of £1.72 million after write-downs, pre-licence costs and
impairments of £0.45 million).
•
Basic loss per share of 1.53p (2019: 0.64p).
• Cash at bank £0.85 million as at 31 July 2020 (2019: £1.62 million).
•
Placing of equity in April 2020 raised £0.50 million (gross of expenses) at a price of 2p per
share.
•
Net current liabilities as at 31 July 2020 of £0.33 million (2019: Net current assets £1.91 million).
• Net assets as at 31 July 2020 of £26.67 million (2019: £30.99 million).
Subsequent Events
•
On 25 August 2020 the farm-outs to Shell were completed for the Resolution and Endeavour
assets (P1929 and P2304).
•
•
•
•
On 7 September 2020 we received approval for an extension of planning consent to 31 December
2021 for the drilling of North Kelsey-1 (PEDL241) which had been delayed due to COVID-19
restrictions during the earlier part of the year.
PEDL143 Licence relinquished during September 2020.
On 26 November 2020 Egdon announced that it had entered into a £1.00 million loan facility
with Union Jack Oil plc
On 5 January 2021 Egdon finalised the documentation for £1.05 million convertible loan notes
with a concert party of Petrichor Holdings BV. The transaction, which will require a whitewash,
is subject to shareholder approval through a vote by independent shareholders at a General
Meeting to be held on 22 January 2021.
•
Egdon has been advised by Shell that the Resolution 3-D seismic survey is now planned for
February 2022, subject to approval by the OGA of an amendment to the licence obligations.
Egdon Resources plc Annual Report and Financial Statements 2020 2
Our Strategy
The Directors have identified three key strategic
objectives to drive and enhance shareholder
value:
1. Production
A continued focus on maximising production rates, revenues,
and profitability from existing producing assets through targeted
investment.
2. Conventional Resources
Exploration and Appraisal
Adding additional reserves/revenues through an active drilling
programme for conventional resources whilst managing risk and
financial exposure through farm-outs.
3. UK Unconventional Resources
De-risking the technical aspects of our substantial Northern
England unconventional resource portfolio.
Egdon Resources plc Annual Report and Financial Statements 2020 OVERVIEW
3
Egdon Resources plc Annual Report and Financial Statements 2020
4
Chairman’s Statement
I can report on the results for the year
ended 31 July 2020, a period which has seen
unprecedented challenges for individuals and
businesses alike as we respond to COVID-19,
a national and international public health
emergency, which has impacted all aspects of
our lives.
Philip Stephens Chairman
As the scale of the COVID-19 pandemic became evident, the
initial focus and primary concern for the Company was, and
remains, the health and safety of our employees, contractors,
and other stakeholders. In this regard, Egdon’s office-based
employees have been working from home since March
2020. We have established procedures and plans to ensure
the continued safe operation of our production sites whilst
adapting our operations to enable and implement social
distancing. Oil and gas workers are classified as ‘key workers’,
recognising the importance of maintaining oil and gas supply
to meet the UK’s energy demands, and our production
operations have been unaffected.
However, the impact on demand for oil and gas caused by the
worldwide “lockdown” has had a severe impact on commodity
prices which has adversely impacted our revenues and
profitability. As such we have taken measures to reduce our
costs, with all employees and Directors taking a temporary
20% salary reduction and by maintaining a strong focus on
cost-control across our business. We plan to be in a position
to benefit and prosper as the UK and world economy emerges
from the current crisis.
Despite these highly challenging headwinds the Company has
continued to make progress in a number of key strategic areas and
continues to adapt its business to operate in the “new normal”.
Key Events
Key events since the start of the year were;
a) Production during the year, from Ceres, Keddington and
Fiskerton Airfield, was 145 boepd (2019: 182 boepd) ahead of
guidance of 130-140 boepd.
b) During September 2019, the encouraging gas in place
estimates for Springs Road-1 were announced indicating
the presence of a potentially world class resource in the
“Gainsborough Shales” of the Gainsborough Trough where
Egdon holds 71,361 net acres (289 km2).
c) During early November 2019 the Government announced
the introduction of a moratorium on high volume hydraulic
fracturing for shale-gas that will remain in place until new
evidence is provided. Along with our industry peers we are
continuing to work with the OGA and other regulators on
this matter.
d) Planning permission was granted for the Wressle
development on appeal on 17 January 2020 following a public
inquiry in November 2019. Full costs were awarded against
North Lincolnshire Council and have been received. Field
development operations are progressing well and first oil
is targeted during January 2021, which will add 150 bopd to
Egdon’s production.
e) During March 2020, we announced the results of an in-depth
assessment of the Biscathorpe project (PEDL253) which
identified technically and commercially attractive target areas
accessible via a side-track of the suspended Biscathorpe-2
well. A planning application is in the process of being
prepared for submission to enable this.
f ) On 18 June 2020 a confidential settlement was reached with
Humber Oil and Gas in respect of PEDL253 litigation and
monies were received on 25 August 2020.
g) Post year-end Egdon completed the farm-out of the
Resolution and Endeavour gas discoveries (P1929 and
P2304) to Shell Oil U.K. Limited (“Shell”) having agreed
licence extensions and new work programme obligations
with the OGA. We now look forward to the acquisition of 3-D
seismic during February 2022.
h) Post year-end on 7 September 2020 we received approval
for an extension of planning consent to 31 December 2021
for the drilling of North Kelsey-1 (PEDL241) which had been
delayed due to COVID-19 restrictions during the earlier part
of the year.
Egdon Resources plc Annual Report and Financial Statements 2020 OVERVIEW
5
Financial and statutory information
Revenue from oil and gas production during the year was £0.96
million (2019: £2.20 million). The reduction in revenues was
driven by a 20% decline in overall production (2020: 53,070 boe
against 2019: 66,364 boe) and a 58% reduction in realised price
per boe due to the unprecedented low gas price seen during the
year and the collapse in oil price in response to the COVID-19
pandemic (2020: $18.08/boe against 2019: $42.60/boe).
The Group recorded a net loss of £4.75 million for the year,
(2019: loss of £1.72 million). This included impairments totalling
£2.84 million (2019: £0.41 million). Impairments of £2.19 million
were made at our interims to Ceres, Dukes Wood/Kirklington
and certain non-core unconventional licences (PEDL001,
PEDL130, PEDL202, EXL253 and PEDL039). PEDL143 was
relinquished during September 2020 with an additional
impairment of £0.64 million recognised.
The operating loss, calculated as gross loss less admin
expenses, plus other operating income, before impairments was
£1.79 million (2019: £1.26 million).
The Group continues to focus on managing cash resources
and at the end of the year had cash and cash equivalents of
£0.85 million (2019: £1.62 million) and net current liabilities of
£0.33 million (2019: net current assets of £1.91 million). The
Company raised £0.50 million (gross) via a placing of shares
in April 2020. In November 2020, Egdon secured a £1.00
million loan facility from Union Jack Oil plc. The loan has a
term of 18 months with an interest rate of 11% per annum and
is secured against a 25% interest in the Wressle project. On
5 January 2021, Egdon finalised the documentation for £1.05
million convertible loan notes with a concert party of Petrichor
Holdings BV. The transaction, which will require a whitewash, is
subject to shareholder approval through a vote by independent
shareholders at a General Meeting to be held on 22 January 2021.
The loss per share for the year was 1.53p (2019: loss of 0.64p).
In line with last year, the Directors do not recommend the
payment of a dividend.
Strategy
Our strategy has three main objectives; maximising production
rates, revenues and profitability from our producing assets;
adding additional reserves and revenues through an active
drilling programme; and technically de-risking our substantial
Northern England unconventional resource portfolio.
The current low oil and gas price environment makes our
existing late life producing assets marginal or uneconomic and,
as such, we have continued to focus on reducing costs and on
progressing near term high impact projects such as Wressle
and Biscathorpe. Progress in developing our unconventional
resources in Northern England has been impacted by the
current moratorium which is discussed below.
Political and regulatory
With our material shale-gas portfolio, Egdon was adversely
impacted in November 2019 by the Government’s imposition,
prior to the last election, of a moratorium on high volume
hydraulic fracturing for shale-gas, introduced in response
to induced seismicity at the Preston New Road well site in
Lancashire. Lifting of the moratorium will require new evidence
to demonstrate that operations can be undertaken without
unacceptable levels of induced seismicity. Each basin and site
is different and the Gainsborough Trough, where Egdon holds
its core licences, is characterised by its simple structure and
limited faulting. Egdon along with its industry peers continues
to be committed to working closely with the OGA and other
regulators to demonstrate that we can operate safely and in an
environmentally responsible manner, and we remain confident
of doing so by adopting a rigorous scientific approach.
Egdon Resources plc Annual Report and Financial Statements 2020 6
Chairman’s Statement
continued
Notwithstanding the current moratorium, highly positive results
from Springs Road-1, coupled with production of the first
UK shale-gas at Preston New Road begin to confirm that a
potentially world class gas resource is present onshore UK.
The UK is committed by law to reaching “net zero” carbon
emissions by 2050. The public narrative around this tends to be
the demonisation of oil and gas with renewables fully displacing
the use of fossil fuels. However, the Climate Change Committee
(“CCC”) in its December 2020 report again highlighted the need
for an energy mix in the UK. It is a fact that in the period to 2050
the UK cannot rely on renewables alone for all energy needs and
that there will be a continuing need for oil and gas. In particular
the need for natural gas for the production of hydrogen is vital
as hydrogen is expected to be an increasingly important fuel for
domestic heating and industrial use.
Given the predicted sharp decline in UK Continental Shelf
(“UKCS”) production, the UK would continue to have a gas
import dependency under most scenarios in the period through
to 2050 and beyond. The results of various studies demonstrate
that UK sourced shale-gas would have significantly lower
(up to 75% lower) pre-combustion carbon emissions than
gas imported via LNG or long-distance pipelines. So, UK
shale-gas could be an important part of the energy transition
to the UK moving to a “net zero” economy. The national
and local benefits of an indigenous supply of shale-gas are
clearly evident and even more compelling in the context of a
post-COVID-19 recovery, with a positive impact on the balance
of payments, tax, business rates and employment. Without
indigenous shale-gas, the UK will simply offshore its emissions,
employment, and fiscal benefits.
Asset Portfolio
Egdon held interests in 42 licences (2019: 44 licences) in the UK
at year end with exposure to the full cycle of opportunities from
exploration through to development and production. The Egdon
website (www.egdon-resources.com) provides further details of
all assets and operations and Egdon’s key assets are discussed
more fully in the Operating Review below.
The Company will maintain its current focus on the highest
potential projects whilst divesting its non-core assets.
31 December 2021 post year end in September 2020.
The Company continues to review options for additional drilling
at the Keddington oil field and for restoration of production at
Waddock Cross and Kirkleatham. It is likely that Dukes Wood/
Kirklington will be restored with options for repurposing the wells
for geothermal use, currently being investigated.
Having tripled Egdon’s unconventional resources acreage in the
period 2014 to 2017 to c. 186,600 net acres (755 km²) the Group
has paused from further acreage growth to concentrate on
improving its technical understanding of the play, and refocusing
on the highest potential licences whilst work continues on the
lifting of the moratorium. Licences PEDL001, PEDL130, PEDL202,
EXL253 and PEDL039 have been impaired during the year
and the farm-in to PL161/162 has lapsed, reducing net acreage
to 164,280 acres and independently assessed mean volume
of undiscovered Gas Initially In Place (“GIIP”) to 47.6 trillion
cubic feet (“TCF”) (from 50.9 TCF). This still represents a highly
material resource. The primary focus remains the Gainsborough
Trough where Springs Road-1 was drilled.
Outlook
The expected start of production at Wressle during late
January 2021 will transform Egdon’s production and cash-flow.
Production guidance for the first half of the financial year 2020-
21 is 100 boepd and 200 boepd for the second half of the year
resulting in full year guidance of 140-150 boepd.
The historically low gas price seen over the last winter and
continuing through the summer of 2020 has seen a recovery in
recent months and is expected to return to more normal levels
during the coming winter period. Oil prices have recovered
from the lows seen at the onset of the COVID-19 pandemic, but
are expected to remain strongly linked to worldwide economic
activity levels.
Operationally, in the short-term we will continue to focus on high
impact projects within our conventional resource portfolio whilst
working with the industry to demonstrate to the OGA and other
regulators that we can operate safely to deliver lower emission
UK gas to the market.
Our key activities and focus for the coming year will be:
The portfolio of conventional resource assets provides potential
for growth via exploration and appraisal drilling and the
Company continues to progress the best opportunities. The
pace of exploration drilling activity is in part dependent upon
successful farm-outs as the Company carefully looks to balance
financial exposure and technical risk. Partly dependent upon
securing a further farm-out, Egdon hopes to drill a side-track at
Biscathorpe and a new well on the North Kelsey prospect during
2021, where planning was extended for a further 12 months to
•
•
•
Continuing to carefully manage costs and cash through the
current challenging operating environment
Finalising the development of the Wressle oil field for
production start-up in January 2021
Progressing the planning application for a Biscathorpe-2
side-track well to be drilled in 2021 and where we may look to
secure a partial farm-out
Egdon Resources plc Annual Report and Financial Statements 2020 OVERVIEW
7
•
Progressing a farm-out of North Kelsey-1 for drilling in 2021
•
•
•
•
Streamlining the conventional resource portfolio to
concentrate on a smaller number of key assets whilst
maintaining our position in core unconventional resource
assets
Progressing the acquisition of the planned marine 3-D
seismic survey over the Resolution and Endeavour gas
discoveries in February 2022
Subject to lifting of the current moratorium on hydraulic
fracturing operations for shale-gas, progressing the planning
and permitting for the drilling and subsequent testing of the
Springs Road-2 well
Reviewing the Energy Transition opportunities within the
current portfolio, including repurposing of existing wells for
geothermal energy
Despite the unprecedented challenges experienced during
the year, the fundamentals of the business are robust with the
Company having a range of high potential assets in both the
conventional hydrocarbon resource and nascent shale-gas
sectors.
The Company is focused on reducing costs and expenditure and
on progressing key near term cash generative projects such as
Wressle. We will continue to keep activity under review in light of
the current circumstances and position the Company for growth
once normality returns.
We will also continue to review opportunities in the energy space
that leverage our expertise with a focus on projects with near
term predictable cash flows, opportunities to reduce costs and a
low execution risk and capital requirement.
As always, I would like to thank our shareholders for their
continued patience and support and the unwavering effort of the
Egdon team on behalf of shareholders through the current highly
challenging times.
Philip Stephens
Chairman
5 January 2021
Egdon Resources plc Annual Report and Financial Statements 2020 8
Operating Review
I am pleased to provide shareholders with a
more detailed review of the Group’s assets,
operations and plans with a focus on progress
against objectives, key priorities, risks and
potential growth drivers. Egdon’s website
(www.egdon-resources.com) provides further
details of the Group’s assets and operations.
Mark Abbott
Managing Director
Operating Environment & COVID-19
Notwithstanding the impact on commodity prices and the
resultant reduction in revenues, the restrictions imposed by
Government to deal with the COVID-19 pandemic have not
materially impacted our operations. The one exception was at
North Kelsey, where drilling plans have been delayed and an
extension to planning consent through to the end of 2021 was
granted during September 2020.
We have kept our employees, contractors, and other
stakeholders safe by adopting home working and social
distancing measures and will continue to take a cautious
approach as lockdown restrictions evolve.
Health, Safety & Environment
Egdon is fully committed to high standards of Health, Safety
and Environmental (“HSE”) management, protection and
performance with all operational activity performed under the
umbrella of the Group’s HSE Management System (“HSEMS”).
In line with our approach of continual improvement, the
HSEMS is subject to continuing review and revision to ensure
it remains fit for purpose. During the reporting year there were
no reportable health and safety incidents and the Company
was compliant with all of its environmental permits and
planning consents.
Communications
Egdon maintains a website (www.egdon-resources.com)
which provides stakeholders with up to date information on
the Company and its operations. Egdon has launched a new
community facing website, www.egdon-community.com, which
provides a portal for information related to Egdon’s operational
sites. In addition, we provide summaries of press releases, non
price-sensitive information and other relevant updates via the
Company’s Twitter account (@EgdonResources).
Strategy
Our strategy remains the same, but its emphasis has shifted to
a greater focus on cost-control and to progressing our higher
impact conventional projects such as Wressle and Biscathorpe.
In parallel we continue working with our industry peers to lift the
moratorium and to maintain Egdon’s enviable unconventional
resource acreage position at minimal cost.
Objectives
As part of our preliminary results reporting (November 2019)
and Interim Results (April 2020) we set out several objectives
against which I can report on progress:
Egdon Resources plc Annual Report and Financial Statements 2020 9
Objective Set
Progress Against Objective
1) Subject to a positive outcome to the planning inquiry,
developing the Wressle oil field for production start-up in H2
2020
2) Completing the farm-out of the Resolution and Endeavour
projects with our exclusivity partner (Shell) and progressing
the acquisition of the planned marine 3-D seismic survey
3) Subject to lifting of the current moratorium on hydraulic
fracturing operations for shale-gas, progressing the planning
and permitting for the drilling and subsequent testing of the
Springs Road-2 well
•
•
•
•
•
•
•
•
Planning for development granted on appeal in January 2020
Planning conditions discharged, design and regulatory works
completed, site operations commenced and progressing
according to schedule
Minor slippage to January 2021 production start-up
Farm-out to Shell completed during August 2020
OGA agreed to licence extensions to 31 May 2024 and amended
work programme milestone obligations
Licence operatorship and equity (70%) transferred to Shell
3-D seismic survey now planned for February 2022
Discussions are ongoing between industry and regulators to
make the scientific case for lifting the moratorium
4) Finalising the forward plan for Biscathorpe and progressing
•
plans for a Biscathorpe-2 side-track well
Detailed technical work completed which concludes significant
commercial potential exists at Biscathorpe which can be tested
via a side-track well of Biscathorpe-2
5) Maintaining the option for North Kelsey-1 exploration well for
drilling in 2021 and advancing a farm-out
6) Carefully managing costs and cash through the current
challenging operating environment
•
•
•
•
•
•
Settlement reached in June 2020 with Humber Oil & Gas
Limited resulting in JV alignment on forward plan
Planning application being developed for side-track drilling,
testing and production, which will need a supporting
environmental statement
EA Permit for operations issued in July 2020
Planning permission extended to 31 December 2021
Agreement signed with Union Jack in October 2020 to align
interests and jointly farm-out, to be completed in January 2021
Temporary salary reductions of 20% implemented for all staff
and Directors in April 2020 and will continue until further notice
• Placing to raise £0.50 million (gross) completed during April 2020
• Loan facility of £1.00 million drawn-down in November 2020
•
Convertible Loan Notes of c. £1.05 million to be issued in January
2021 subject to Shareholder approval at a General Meeting
Egdon Resources plc Annual Report and Financial Statements 2020STRATEGIC REPORT 10
Operating Review
continued
Assets & Operations
Egdon held interests in 42 licences (2019: 44 licences) in the UK at year end with exposure to the full cycle of opportunities from
exploration through to development and production.
Licensing
Highlighted below are key changes to our licence portfolio during the year and post-year.
Licence
Changes
PEDL180/PEDL182 (Wressle)
Continuation of second term approved
PEDLs 191, 201, 202, 241, 273, 306, 334
Licence terms extended
PEDL253
PEDL209
P1929 and P2304
Continuation of second term approved
Egdon increased interest to 100% due to withdrawal of other JV parties,
Reduced interest to 30% via farm-out, Licence term extended and work programme
obligations and milestones amended
PEDL143 (Holmwood)
Licence relinquished during September 2020
PEDL241
PL161/162
Alignment of interest with Union Jack Oil plc and Egdon on a 50:50 basis
Farm-in lapsed
Fiskerton Airfield (EXL294: Egdon 80%)
Fiskerton Airfield produced at a net rate of 13 bopd during the
year (2019: 15 bopd). Our focus at Fiskerton Airfield continues
to be on maximising production from the existing wells and
managing costs. Longer term potential for the site is to use it
to manage produced water from other Egdon sites through the
existing water injection well on site.
Wressle (PEDL180/182: Egdon 30%)
The Wressle development was granted planning consent
on appeal on 17 January 2020 following a public inquiry in
November 2019. Economic modelling has demonstrated that
Wressle is economically robust even in the current low oil price
environment with an estimated project break-even oil price of
$17.62 per barrel. Initial production is expected to be 500 barrels
of oil per day (“bopd”) (150 bopd net to Egdon). The Wressle
Field has been independently audited (2016 Competent Persons
Report (“CPR” ERCE)) with gross 2P Reserves of 0.62 million
barrels of oil (“mmbo”) and 2C Resources of 1.53 mmbo.
Production and Development Assets
Production during the year, from Ceres, Keddington and
Fiskerton Airfield, was 145 boepd (2019: 182 boepd) ahead of
guidance of 130-140 boepd.
Ceres (P1241: Egdon 10%)
Ceres gas production during the year was 118 boepd plus
six boepd of condensate down from 148 boepd plus eight boepd of
condensate in the previous financial year. Production is expected
to cease in the 2021-23 period dependent upon economic life
with abandonment following probably in 2023-24 together with
associated fields in the system. The current historically low gas price
and forward curve have resulted in an impairment of £0.51 million
(2019: £Nil) being made for the Ceres asset at this time.
Keddington (PEDL005R: Egdon 45%)
Keddington continued to produce at a net rate of eight bopd
(2019: 11 bopd) from one well. During the year we completed
a detailed sub-surface review of the Keddington field and
the surrounding licence area which indicates that gross
Mean Contingent Resources of 567,000 bbls remain to be
produced. This presents an opportunity to increase production
via a development side-track from one of the existing wells.
In addition, a near-field exploration opportunity exists at
Keddington South, which has a gross Mean Prospective
Resource Volume of 635,000 barrels of oil and the Louth
Prospect, with a gross Mean Prospective Resource of 600,000
barrels of oil. We will now look to progress plans for a potential
side-track.
Egdon Resources plc Annual Report and Financial Statements 2020 11
The plan for the Wressle oil field development comprises the following key stages:
Stage
Status/progress
1) Discharging the planning conditions, finalising detailed designs,
Completed
tendering and procurement of materials, equipment, and services,
and finalising all HSE documentation and procedures
2) Installation of groundwater monitoring boreholes and establishing
baseline groundwater quality through monitoring and analysis
3) Reconfiguration of the site
Completed and report provided to EA
Commenced on 29 July 2020 and completed on schedule on
19 October 2020
4) Installation and commissioning of surface facilities
Commenced in early November 2020 and ongoing
5) Sub-surface operations
6) Commencement of production
Commenced January 2021
Expected January 2021
The Company continues to review options for the restoration of
production at Waddock Cross and Kirkleatham.
Waddock Cross (PL090: Egdon 55%)
Waddock Cross is currently shut-in. Significant work has
been completed over the past year and initial indications from
independent reservoir modelling are that a new horizontal well
on the field could yield commercial oil volumes (500-800 bopd),
albeit at high water cut. Further work is ongoing to finalise a
forward plan for redevelopment of the field, which would include
enhanced produced water handling facilities. Given the large
in place oil volume (Mean STOIIP: ca. 70 mmbls) this has been
high graded by the Company as planning and facilities are in
place to test this opportunity.
Kirkleatham (PEDL068: Egdon 68%)
The Kirkleatham gas field remains shut-in whilst the asset is
marketed for farm-in. Potential exists for a side-track to access
a small volume of gas in the attic of the structure. Furthermore,
additional upside may exist for a tight gas resource in the
underlying Carboniferous. The production facilities remain in
place and can easily be reinstated.
Dukes Wood/Kirklington (PEDL118/PEDL203:
Egdon 55.55%)
Given the reduced likelihood of attracting external investment
to redevelop the Dukes Wood and Kirklington assets, during the
global downturn in the energy industry, it has been decided to
impair these assets fully at this time. Therefore, an impairment
of £1.15 million has been made. It is likely that Dukes Wood/
Kirklington will be restored over the coming period with options
for repurposing the wells for geothermal uses currently being
investigated.
Avington (PEDL070: Egdon 28%)
Avington remains shut-in. Planning consent was refused by the
South Downs National Park Authority for continuing production
at the site. The JV has agreed to appeal this decision and future
activity will be dependent upon the outcome of the appeal.
Conventional Exploration and
Appraisal Assets
Resolution and Endeavour (P1929 & P2304:
Egdon 30%)
Post year-end Egdon completed a farm-out Agreement with
Shell U.K. Limited (“Shell”) in relation to UK offshore licences
P1929 and P2304 which contain the Resolution and Endeavour
gas discoveries respectively. Concurrently, we have also agreed
extensions to both licences through to 31 May 2024 together
with revised work programmes and milestones agreed with the
OGA.
Under the terms of the farm-out Agreement which completed
during August 2020, Shell has acquired a 70% working interest
in the licences and has been appointed as the licence operator
and administrator. In consideration, Shell will pay 85% of the
costs of the acquisition and processing of a 3-D seismic survey
(capped at US$5 million) covering both the Resolution and
Endeavour gas discoveries and will also pay 100% of all studies
and manpower costs up to a well investment decision on both
licences.
Egdon Resources plc Annual Report and Financial Statements 2020STRATEGIC REPORT 12
Operating Review
continued
A Competent Person’s Report (Schlumberger Oilfield UK PLC)
reported Mean Contingent Gas Resources of 231 billion cubic
feet of gas (“bcf”) attributable to the Resolution gas discovery
(P1929). In addition, Egdon estimates that the Endeavour gas
discovery (P2304) contains Mean Contingent Resources of
18 bcf, with a P90 to P10 range of 10 to 28 bcf. It is a testament
to the quality of the assets that despite challenging market
conditions Egdon was able to secure a material carry on costs to
the well investment decision.
We now look forward to acquisition of the 3-D seismic which is
planned for February 2022, subject to the OGA approving an
extension to the licence obligations.
Biscathorpe (PEDL253: Egdon 35.8%)
During March 2020, we announced the results of an in-depth
technical and commercial assessment of the Biscathorpe
project. The sub-surface analysis which integrated the
reprocessing and remapping of 264 square kilometres of 3-D
seismic with the results of the Biscathorpe-2 well has identified
target areas with evidence for a thickened Westphalian
sandstone, accessible via a side-track of the suspended
Biscathorpe-2 well. The gross Mean Prospective Resources
associated with the Westphalian target area are estimated by
Egdon to be 3.95 mmbo, with an upside case of 6.69 mmbo.
Screening conducted by Egdon indicates break-even full cycle
economics to be US$18.07 per barrel with an NPV (10) valuation
of £55.60 million. The results of this work lead us to conclude
that a possible material and commercially viable hydrocarbon
resource remains to be tested at Biscathorpe.
The side-track would also target the 57 metre live oil column
logged in the underlying Dinantian Carbonate in Biscathorpe-2.
Although not considered a primary target, should there be
effective permeability, or fractures, the Dinantian Carbonate
represents a further, potentially commercial play. The Dinantian
Carbonate is estimated by Egdon to have a gross Mean
Stock Tank Oil Initially in Place (“STOIIP”) of 24.3 mmbo with
an upside STOIIP case of 36 mmbo. The next steps will be
to finalise a bottom hole target location and then progress
the planning and permitting for the side-track. The OGA has
approved the continuation of licence PEDL253 into its Second
Term which commenced on 1 July 2020.
A planning application is in the process of being prepared for
submission for the drilling of a side-track well, testing and long
term production or site restoration. It is intended to drill the side-
track during 2021 subject of course to receipt of all necessary
consents. Egdon may look to farm-down its interest further.
North Kelsey (PEDL241: Egdon 50%)
The North Kelsey Prospect has been mapped from 3-D seismic
data and has potential for oil in up to four stacked conventional
Carboniferous reservoir targets: the Chatsworth Grit, Beacon
Hill Flags, Raventhorpe Sandstone and Santon Sandstone.
Egdon has calculated the gross Prospective Resources to range
from 4.66 million barrels up to 8.47 million barrels, with a Mean
Resource volume of 6.47 million barrels.
Plans to construct the well site during early 2020 were impacted
by COVID-19 restrictions and delays in issuing of the EA permit,
which was finally received on 29 July 2020. In light of this
Egdon applied for and was granted on 7 September 2020 an
extension of the existing planning consent to 31 December 2021.
Egdon will now look to conclude a further farm-out and plans
to drill this potentially high-impact well during 2021. In October
2020 Egdon and its partner , Union Jack Oil plc announced an
agreement to align equity in PEDL241 on a 50:50 basis. Egdon
will receive a cash consideration of £0.10 million on completion
which is expected during January 2021.
Holmwood (PEDL143: Egdon 18.4%)
The operator of PEDL143, UK Oil and Gas Limited (“UKOG”)
was unable to find an operationally and commercially viable
location from which to drill the A24 prospect (previously
Holmwood). As such the Joint Venture has relinquished
PEDL143. As a result, Egdon will impair the full carrying value
of PEDL143 totalling £0.64 million. Whilst disappointing given
the undoubted potential of the prospect, this will enable the
Company’s technical resources to focus on other higher
potential projects.
Elsewhere within Egdon’s portfolio, we continue to evaluate
and high-grade potential prospects as follow ups to those
highlighted above.
Unconventional Resources
Following a number of changes to our licence interests as
detailed elsewhere, the Group’s unconventional resources
acreage position in Northern England is 164,280 net acres
(664km2 net) (2019:186,600 net acres (755km² net)). This
remains a significant and potentially highly valuable position
with Egdon estimating Mean volumes of undiscovered GIIP of
47.6 TCF net (2019: 50.9 TCF).
Although Egdon holds material interests in a number of
key prospective geological basins, our core area is the
Gainsborough Trough of Nottinghamshire, Lincolnshire and
Yorkshire where the Group holds interests in 71,361 net acres
(2019: 82,000 net acres).
Egdon Resources plc Annual Report and Financial Statements 2020 13
The results from the 2019 Springs Road-1 well (“SR-01” -
Egdon 14.5%) compare favourably with some of the best US
commercial shale operations and highlight a potentially world
class resource in the Gainsborough Shale (previously named
the Bowland Shale) of the Gainsborough Trough. The analyses
of cored shale indicate the presence of a mature, organic
rich source rock with good porosity confirming favourable
gas resource density. In particular, the low clay content is
encouraging and is an indication that hydraulic fracturing of the
rock should be effective.
Activity in the basin is currently on pause due to the moratorium
on hydraulic fracturing of shale-gas introduced in November
2019. Egdon remains optimistic of being able to demonstrate
that hydraulic fracturing for shale-gas in the basins where
we operate can be undertaken in a safe and environmentally
responsible manner, and will justify a lifting of the hydraulic
fracturing moratorium.
Egdon has increased its interest in PEDL209 during the year to
100% as the other JV partners have withdrawn. PEDL209 is well
situated in a core part of the basin.
Scottish Power has advised that it will not extend the term of
the farm-in agreement in relation to PL161/162 where Egdon
needed to drill a well to earn a 50% interest in the area outside
of the Hatfield Moors development area. This has resulted
in a reduction in both net acreage and resources, which is
summarised in the first paragraph of this section.
Egdon also retains material licence interests in the Widmerpool
Basin and Humber Basins of the East Midlands which have
similarities to the Gainsborough Trough and in the Cleveland
Basin of NE England and the Blacon Basin of NW England.
Activity levels will be on a care and maintenance basis during
the coming year.
Energy Transition Opportunities
The UK is committed by law to reaching “net zero” carbon
emissions by 2050 and the CCC identifies the continuing need
for oil and gas up to and beyond 2050, particularly a potentially
major role for gas in the production of hydrogen, coupled with
Carbon Capture Utilisation and Storage (“CCUS”). However,
the energy transition to more renewable energy will present a
number of business opportunities and Egdon recognises the
potential for repurposing its fields, sites and wells for renewable
purposes. Of initial interest is the potential for geothermal
energy and the Company is reviewing its portfolio to identify any
opportunities which may exist.
Risks
The key business risks are set out on pages 20 to 21.
Outlook and Priorities
Full year production guidance for the 2020-2021 financial year is
140-150 boepd from Wressle, Ceres, Keddington and Fiskerton
Airfield. Guidance for the first half of the year is 100 boepd and
200 boepd for the second half of the year.
The key priorities for the Group during the coming year will be:
•
•
•
•
Managing our operations to ensure the continued safety of
employees, contractors and other stakeholders in response
to the evolving COVID-19 situation
Continuing to carefully manage costs and cash through
the current challenging operating and macro-economic
environment and ensuring the business is capitalised for
the future
Completing the development of the Wressle oil field for
production start-up in January 2021
Progressing the planning application for a Biscathorpe-2
side-track well to be drilled in 2021 and to potentially
farm-out
•
Progressing a farm-out of North Kelsey-1 for drilling in 2021
•
•
•
•
Streamlining the conventional resource portfolio to
concentrate on a smaller number of key assets whilst
maintaining our position in core unconventional resource
assets at minimal cost
Progressing the acquisition of the planned marine 3-D
seismic survey over the Resolution and Endeavour gas
discoveries in February 2022
Subject to lifting of the current moratorium on hydraulic
fracturing operations for shale-gas, progressing the planning
and permitting for the drilling and subsequent testing of the
Springs Road-2 well
Reviewing the Energy Transition opportunities within the
current portfolio, including repurposing of existing wells for
geothermal energy
The CCC report and subsequent “net zero” legislation underline
the continued future need for gas in the UK, in the medium and
longer term as a feedstock for hydrogen combined with CCUS.
We believe that the lifecycle CO₂ emissions of gas will become
of increasing importance favouring domestically produced gas
over higher emission long-distance pipeline or LNG imports and
that opportunities will exist to repurpose our sites as part of the
energy transition.
Egdon Resources plc Annual Report and Financial Statements 2020STRATEGIC REPORT 14
Operating Review
continued
Despite the current challenges of COVID-19 and its impact on
the UK and worldwide economy, with the breadth and quality
of our assets, our strategy and planned activity we remain
optimistic in the potential to deliver value for our shareholders in
the near to medium term.
Mark Abbott
Managing Director
5 January 2021
Egdon Resources plc Annual Report and Financial Statements 2020 Oil and gas reserves
and resource estimates
15
CLASS OF RESERVE/RESOURCE
PROVEN
PROVEN
+ PROBABLE
PROVEN
+ PROBABLE
+ POSSIBLE
UNITS
FIELD/PROSPECT NAME
Net Oil Reserves
0.20
0.39
0.66
MMbbls
Keddington, Fiskerton Airfield, Wressle,
Avington
CLASS OF RESERVE/RESOURCE
Net Oil Contingent Resources
Net Oil Prospective Resources
(conventional)
LOW
ESTIMATE
BEST
ESTIMATE
HIGH
ESTIMATE
UNITS
FIELD/PROSPECT NAME
0.92
11.03
1.65
19.83
2.25
33.47
MMbbls
Wressle (Penistone), Waddock Cross
MMbbls
Biscathorpe, North Kelsey, Keddington
South, Broadmayne and others
CLASS OF RESERVE/RESOURCE
PROVEN
PROVEN
+ PROBABLE
PROVEN
+ PROBABLE
+ POSSIBLE
UNITS
FIELD/PROSPECT NAME
Net Gas Reserves
0.71
1.09
2.04
Bcf
Ceres, Wressle, Nooks Farm
CLASS OF RESERVE/RESOURCE
LOW
ESTIMATE
BEST
ESTIMATE
HIGH
ESTIMATE
UNITS
FIELD/PROSPECT NAME
Net Gas Contingent Resources
33.46
68.08
127.06
Net Gas Prospective Resources
(conventional)
Net Gas Prospective Resources
(unconventional)
17.54
43.02
87.32
Bcf
Bcf
Resolution, Endeavour, Kirkleatham,
Wressle (Penistone)
Kirk Smeaton, North Somercotes,
Cloughton and others
1,834.66
3,791.39
8,577.33
Bcf
UK Northern England shale-gas
Total Net Prospective Gas Resources 1,852.20
3,834.41
8,664.65
Bcf
Total Contingent and Prospective
Resources (oil and gas)
326.23
671.90
1,501.00
Mmboe
Note: all numbers are Company estimates, prepared to industry standards, except Resolution (Schlumberger 2019),
Wressle (ERCEquipoise 2016)
Egdon Resources plc Annual Report and Financial Statements 2020STRATEGIC REPORT
16
United Kingdom Licences Summary
Licences
1 EXL253
2 EXL294
Operator
Egdon Resources U.K. Limited (Deep Rights)
Egdon Resources U.K. Limited
3
PL090 (Waddock Cross) Egdon Resources U.K. Limited
Egdon
Interest
100.00%
80.00%
55.00%
Area km²
2.90
2.70
19.00
Egdon Resources U.K. Limited
42.50%
182.98
PL090
4 PL161-2
5 PEDL001
Egdon Resources U.K. Limited (Deep Rights)
Egdon Resources U.K. Limited (Deep Rights)
6
PEDL005 (Keddington)
Egdon Resources U.K. Limited
PEDL005 (remainder)
Egdon Resources U.K. Limited
7
PEDL011
8 PEDL037
9 PEDL039
10 PEDL043
11 PEDL068
12 PEDL070
13 PEDL118
14 PEDL130
15 PEDL139
16 PEDL140
17 PEDL141
18 PEDL143
19 PEDL169
20 PEDL180
21 PEDL181
22 PEDL182
23 PEDL191
24 PEDL201
25 PEDL202
26 PEDL203
27 PEDL209
28 PEDL241
29 PEDL253
30 PEDL258
31 PEDL259
32 PEDL273
33 PEDL278
34 PEDL305
35 PEDL306
36 PEDL316
37 PEDL334
38 PEDL339
39 PEDL343
40 P1241
41 P1929
42 P2304
Egdon Resources U.K. Limited (Deep Rights)
Egdon Resources U.K. Limited (Deep Rights)
Egdon Resources U.K. Limited (Deep Rights)
Egdon Resources U.K. Limited (Deep Rights)
Egdon Resources U.K. Limited
Island Gas Limited (Star Energy Group)
Egdon Resources U.K. Limited
Egdon Resources U.K. Limited (Deep Rights)
Island Gas Limited (Star Energy Group)
Island Gas Limited (Star Energy Group)
Seven Star Natural Gas Limited (Infinis Limited)
UK Oil and Gas PLC
Island Gas Limited
Egdon Resources U.K. Limited
Europa Oil and Gas Limited
Egdon Resources U.K. Limited
Egdon Resources U.K. Limited (Deep Rights)
Egdon Resources U.K. Limited
Egdon Resources U.K. Limited (Deep Rights)
Egdon Resources U.K. Limited
Egdon Resources U.K. Limited
Egdon Resources U.K. Limited
Egdon Resources U.K. Limited
Egdon Resources U.K. Limited
Third Energy UK Gas Limited
Island Gas Limited
Island Gas Limited
Island Gas Limited
Egdon Resources U.K. Limited
Island Gas Limited
Egdon Resources U.K. Limited
Egdon Resources U.K. Limited
Third Energy UK Gas Limited
Centrica North Sea Limited
Shell (UK) Limited
Shell (UK) Limited
* relinquished post-year end
** on completion of withdrawal of other licence holders
*** post farm-out completed during August 2020
**** following alignment of interests with Union Jack Oil plc during October 2020
100.00%
100.00%
45.00%
65.00%
100.00%
100.00%
100.00%
100.00%
68.00%
28.00%
55.55%
100.00%
17.62
11.00
7.00
16.73
6.00
10.00
3.00
57.00
35.60
18.43
10.54
45.03
14.50%
100.00
14.50%
141.54
46.00%
18.40%*
20.00%
30.00%
30.00
91.75
62.00
40.00
25.00%
159.91
30.00%
100.00%
45.00%
100.00%
55.55%
19.00
66.00
80.00
14.21
10.52
100.00%**
64.11
50.00%**** 55.00
35.80%
100.00%
95.00
0.47
50.00%
139.09
15.00%
194.65
50.00%
38.00
15.00%
143.00
30.00%
88.50
15.00%
111.19
60.00%
162.78
65.00%
87.87
17.50%
110.29
10.00%
42.79
30.00%*** 201.51
30.00%*** 164.70
Springs Road
Wressle oil field
Kirkleatham gas field
Resolution
Endeavour
Ceres gas field
North Kelsey
Keddington oil field
Biscathorpe
Fiskerton Airfield oil field
Dukes Wood / Kirklington oil fields
7
Avington oil field
KEY
Producing Asset Oil
Producing Asset Gas
Discovery Oil
Discovery Gas
Conventional Oil/Gas Prospect
Unconventional Gas Prospect
Egdon Licences
Waddock Cross oil field
Egdon Resources plc Annual Report and Financial Statements 2020 3
PL090 (Waddock Cross) Egdon Resources U.K. Limited
Operator
Egdon Resources U.K. Limited (Deep Rights)
Egdon Resources U.K. Limited
Area km²
Egdon Resources U.K. Limited
42.50%
182.98
Egdon Resources U.K. Limited (Deep Rights)
Egdon Resources U.K. Limited (Deep Rights)
6
PEDL005 (Keddington)
Egdon Resources U.K. Limited
PEDL005 (remainder)
Egdon Resources U.K. Limited
Egdon
Interest
100.00%
80.00%
55.00%
100.00%
100.00%
45.00%
65.00%
100.00%
100.00%
100.00%
100.00%
68.00%
28.00%
55.55%
100.00%
46.00%
18.40%*
20.00%
30.00%
30.00%
100.00%
45.00%
100.00%
55.55%
2.90
2.70
19.00
17.62
11.00
7.00
16.73
6.00
10.00
3.00
57.00
35.60
18.43
10.54
45.03
30.00
91.75
62.00
40.00
19.00
66.00
80.00
14.21
10.52
100.00%**
64.11
50.00%**** 55.00
35.80%
100.00%
95.00
0.47
50.00%
139.09
15.00%
194.65
50.00%
38.00
15.00%
143.00
30.00%
88.50
15.00%
111.19
60.00%
162.78
65.00%
87.87
17.50%
110.29
10.00%
42.79
30.00%*** 201.51
30.00%*** 164.70
Egdon Resources U.K. Limited (Deep Rights)
Egdon Resources U.K. Limited (Deep Rights)
Egdon Resources U.K. Limited (Deep Rights)
Egdon Resources U.K. Limited (Deep Rights)
Egdon Resources U.K. Limited
Island Gas Limited (Star Energy Group)
Egdon Resources U.K. Limited
Egdon Resources U.K. Limited (Deep Rights)
Island Gas Limited (Star Energy Group)
Island Gas Limited (Star Energy Group)
Seven Star Natural Gas Limited (Infinis Limited)
UK Oil and Gas PLC
Island Gas Limited
Egdon Resources U.K. Limited
Europa Oil and Gas Limited
Egdon Resources U.K. Limited
Egdon Resources U.K. Limited (Deep Rights)
Egdon Resources U.K. Limited
Egdon Resources U.K. Limited (Deep Rights)
Egdon Resources U.K. Limited
Egdon Resources U.K. Limited
Egdon Resources U.K. Limited
Egdon Resources U.K. Limited
Egdon Resources U.K. Limited
Third Energy UK Gas Limited
Island Gas Limited
Island Gas Limited
Island Gas Limited
Egdon Resources U.K. Limited
Island Gas Limited
Egdon Resources U.K. Limited
Egdon Resources U.K. Limited
Third Energy UK Gas Limited
Centrica North Sea Limited
Shell (UK) Limited
Shell (UK) Limited
Licences
1 EXL253
2 EXL294
PL090
4 PL161-2
5 PEDL001
7
PEDL011
8 PEDL037
9 PEDL039
10 PEDL043
11 PEDL068
12 PEDL070
13 PEDL118
14 PEDL130
15 PEDL139
16 PEDL140
17 PEDL141
18 PEDL143
19 PEDL169
20 PEDL180
21 PEDL181
22 PEDL182
23 PEDL191
24 PEDL201
25 PEDL202
26 PEDL203
27 PEDL209
28 PEDL241
29 PEDL253
30 PEDL258
31 PEDL259
32 PEDL273
33 PEDL278
34 PEDL305
35 PEDL306
36 PEDL316
37 PEDL334
38 PEDL339
39 PEDL343
40 P1241
41 P1929
42 P2304
* relinquished post-year end
** on completion of withdrawal of other licence holders
*** post farm-out completed during August 2020
**** following alignment of interests with Union Jack Oil plc during October 2020
17
Kirkleatham gas field
Springs Road
Wressle oil field
14.50%
100.00
14.50%
141.54
Fiskerton Airfield oil field
Dukes Wood / Kirklington oil fields
25.00%
159.91
7
Resolution
Endeavour
Ceres gas field
North Kelsey
Keddington oil field
Biscathorpe
Avington oil field
KEY
Producing Asset Oil
Producing Asset Gas
Discovery Oil
Discovery Gas
Conventional Oil/Gas Prospect
Unconventional Gas Prospect
Egdon Licences
Waddock Cross oil field
Egdon Resources plc Annual Report and Financial Statements 2020
STRATEGIC REPORT 18
Financial Review
The Board considers both financial and non-
financial key performance indicators (“KPIs”) in
measuring the performance of the business as
summarised in the table opposite.
Ken Ratcliff
Chairman of Audit Committee
Results
The Group recorded a loss after tax of £4.75 million for the year
(2019: £1.72 million) after write-downs, impairments and pre-licence
costs amounting in total to £3.03 million (2019: £0.45 million).
Gross revenue from oil and gas production during the year was
down 56% to £0.96 million (2019: £2.20 million). This decrease is
due to the reduced production from the Ceres, Keddington and
Fiskerton wells and compounded by unprecedented weaker
commodity prices.
Cost of sales during the year includes a release of the contract
asset amounting to £99,704 (2019: £299,132), being the value of
back-out gas (as defined in Note 2) delivered to the Group in the
year. This represents the full release of this contract asset and no
further back-out gas will be delivered to the Group going forward.
Exploration costs written-off and pre-licence costs amounted to
£193,953 (2019: £46,279), the increase reflecting future project
feasibility work undertaken in the year. Additionally, following
on from the normal periodic impairment review of asset values,
an impairment charge of £2.84 million has been made in the
financial statements (2019: £0.41 million).
The decrease in other cost of sales from £2,123,023 in 2019 to
£1,566,397 is primarily due to a reduction in depreciation costs
on tangible fixed assets following the decision to impair Ceres
and the reduction in costs for shut-in fields as a consequence of
careful cost-control.
The reduction in administrative expenses to £956,289 (2019:
£1,066,041) is largely due to the temporary reduction in salaries
introduced across the Group from April 2020 onwards. This was
implemented to reduce pressure on Group cash flow caused by
the global COVID-19 pandemic.
Loss per share for the year was 1.53p (2019: 0.64p).
No taxation charge arises on the result for the year. As at 31 July
2020, the Group had carry forward tax losses of £53,587,367
(2019: £50,443,643). The increase in available losses primarily
reflects the trading loss and tax allowances related to intangible
expenditure in the year.
Statement of financial position
In a challenging environment the Group has maintained a
focus on managing its cash resources. At the year end the
Group had net current liabilities of £0.33 million (2019: net
current assets £1.91 million) of which £0.85 million was cash and
cash equivalents (2019: £1.62 million). The year end balance is
affected by the timing and quantum of fundraising in the current
and prior year with a net cash injection of £0.48 million in April
2020 (2019: £1.97 million in June 2019). The level of fundraising
in the year together with reduced revenues as a consequence
of both lower commodity prices and lower production rates in
2020 have contributed to a reduction of £0.77 million in the year
end cash balance. See Note 2 Going Concern for details of post
year end funding arrangements.
The year end position is further impacted by the inclusion for
the first time of net balances relating to the implementation of
IFRS 16, as shown in Notes 16, 18, 20 and 22, that reduce net
current assets by £0.09 million. The impact on net assets at the
year end is a reduction of £0.05 million. On implementation of
IFRS 16 the Group recognised a lease liability, a corresponding
right-of-use asset and a receivable for net investment in sub-
leases, in relation to leases that had previously been treated as
operating leases. Please see the accounting policies in Note 2
for further information on the implementation of IFRS 16 and its
effect on the presentation of our financial statements.
The net increase in receivables of £0.16 million represents the
impact of IFRS 16 mentioned above and an increase of £0.42
million in amounts to be billed to partners at the year end.
These are offset by the release of the Ceres contract asset
during the year and a reduction in trade receivables of £0.26
million reflecting reduced production revenues and lower
licence activity levels around the year end. Trade and other
payables include deferred consideration of £417,000 (2019:
Egdon Resources plc Annual Report and Financial Statements 2020 19
£417,000) in respect of the acquisition in a prior year of the
additional 5% interest in PEDL 180 and PEDL 182 and Other
taxation and social security of £67,758 (2019: £197,411). Accruals
and deferred income includes an amount repayable to the
PEDL253 Joint Venture partners upon settlement and receipt of
Humber’s debt.
In line with last year the Directors do not recommend the
payment of a dividend.
Key performance indicators
The Group has seen unprecedented falls in commodity
prices during the period in response to a warm winter and
oversupply of gas and a reduction in global oil demand
driven by COVID-19. This along with an expected decline in
production, has led to a reduction in year on year revenues and
also impacted the carrying value of certain assets resulting in
impairments during the period.
The Directors are disappointed with the results for the year
but in the view of the Board, these are due to circumstances
outside of the Group’s control and are understandable in the
context of the weak commodity prices and the wider economic
environment.
The Board considers both financial and non-financial Key
Performance Indicators (“KPI’s”) in measuring the performance
of the business as summarised in the table below.
KPIs
Revenues
FOR THE
YEAR ENDING
31 JULY 2020
FOR THE
YEAR ENDING
31 JULY 2019
£0.96 million
£2.20 million
Total Comprehensive Income (Net Loss)
£(4.75) million
£(1.72) million
Cash and cash equivalents
Net Current (Liabilities)/Assets
Equity
Production Volumes
No. of Licences
Best Resources Estimate
£0.85 million
£1.62 million
£(0.33) million
£1.91 million
£26.67 million
£30.99 million
53,070 boe
66,364 boe
42
44
672 mmboe
677 mmboe
Reportable Health and Safety Incidents
0
0
CHANGE %
(56)%
(176)%
(48)%
(117)%
(14)%
(20)%
(5)%
(0.7)%
0%
STRATEGIC REPORTEgdon Resources plc Annual Report and Financial Statements 2020 20
Financial Review
continued
Risk management
The Board takes into consideration a broad and comprehensive
analysis of potential risk factors that may affect the business of
the Group. From our current review of those factors the table
below identifies the key risks faced by the Group at this time,
their potential effect on the Group’s business and our strategies
to mitigate their impact. The risks listed are not exhaustive and
additional risks and uncertainties, not presently identified or
considered material by the Group, may arise or become material
in the future. Whilst the constituent elements of the overall
risk profile may not change significantly over time, the Board
continues to assess the weighting to be attached to each of
those elements.
Like all exploration and production businesses the Group is
exposed to a range of external risks which are, by definition,
beyond the Group’s control but are regarded as having a
potentially high impact upon the business. In addition there are
other risks arising through the conduct of the Group’s operations
that are also identified as having the potential to impact upon
the Group’s trading.
The Group seeks to manage and mitigate these risks through
maintaining a spread of exploration and production interests,
through compliance with the terms of its licences, through
External risks & mitigation
•
Political risk, detrimental regulatory and fiscal changes
presenting a high risk both financially and operationally
•
Oil and gas price volatility presenting a high risk both
financially and operationally
•
Delays and refusal of planning permission for operation
•
Civil Unrest/Protestor Action disrupts drilling/ testing
operations resulting in time and costs overruns on operations
and inability to conduct work as planned
•
National and international public health or other emergency
impacting business operations
adopting policies appropriate to the Group’s size and by the use
of skilled personnel.
A key risk at all times is related to the operational, financial
and reputational risk associated with a health, safety or
environmental incident in any of the Group’s operations.
Egdon employs a full-time HSE manager and operates using
best practice in all of its operations. The Group also maintains
appropriate levels of insurance for all of its operations to ensure
adequate cover in the case of any incident.
On 2 November 2019 the Government announced that, based
on a report by the OGA, they were imposing a moratorium on
fracking operations in England. Whilst acknowledging the huge
potential for UK shale-gas to provide a bridge to a Zero-Carbon
future, the uncertainties expressed by the OGA will need to be
resolved to Government’s satisfaction before such operations
can resume. Egdon along with its industry peers remains
committed to working with regulators and the government to
demonstrate the scientific case for resumption of shale-gas
exploration. With this effort ongoing the Directors consider that it
is premature to consider impairment of the carrying value of our
core shale-gas assets. This position will continue to be reviewed.
Develop sustainable relationships with Government ministries
and collaborate with industry bodies to communicate interests to
Government authorities. Actively engage with and lobby regulatory
bodies. Consult with independent advisors and law enforcement
agencies on matters of security. Pursue an adaptable business
model to respond to changes in the political landscape.
Use range of commodity prices in forecasting. Look to hedging
as production volumes and number of fields increase. Maintain
low cost of production at existing and future sites.
Develop professional, well-supported planning applications
using highly experienced advisors and consultants. Engage
with stakeholders early in process to determine any specific
problems and likelihood of a successful outcome. Active
community engagement with retained PR consultant to assist in
process. Pursue planning appeals as appropriate.
Liaison with local police to determine likelihood of problems.
Consider security issues as part of well design and planning
process. Site security measures designed to minimise chance
of incursion and disruption. Employ specialist site security
commensurate with the assessed risks. Use of injunctions
against unlawful protestor activity as required.
Maintain emergency response plan for office and sites for such
events. Ensure IT and other systems enable remote working and
business continuity. Ensure contingency within business.
Egdon Resources plc Annual Report and Financial Statements 2020 21
Inherent risks & mitigation
•
Loss of key staff resulting in operational risks to the business
Maintain competitive remuneration policies to attract and
retain staff. Regular review of staff incentive packages by
Remuneration Committee.
•
•
HSE incident or major well site hydrocarbon leakage resulting
in operational, environmental and financial risks
HSE management systems and standards set and monitored
across the Group. Comprehensive insurance policies.
Under-performing assets or failure in producing assets
representing a financial and operational risk
Range of production forecasting in budget process. Increase
number and breadth of producing assets to reduce reliance on
single-site performance.
•
Continued access to sufficient capital to ensure the business
remains a going concern
Maintain conservative cash flow forecasts and ensure careful
management of costs and commitments to match capital
available and expected revenue streams. Ensure continued
availability of debt and equity funding as appropriate.
Ken Ratcliff,
Chairman of Audit Committee
5 January 2021
STRATEGIC REPORTEgdon Resources plc Annual Report and Financial Statements 2020 22
22
Governance
The Directors recognise the importance of sound corporate governance
and are committed to maintaining the highest standards.
Egdon Resources plc Annual Report and Financial Statements 2020
Egdon Resources plc Annual Report and Accounts 2020
Egdon Resources plc Annual Report and Financial Statements 2020 Corporate Governance Statement
23
Statement by the Directors in
performance of their statutory
duties in accordance with s172(1)
Companies Act 2006
This section serves as our Section 172 statement and should be
read in conjunction with the Strategic Report on pages 1 to 18
and the Corporate Governance section on pages 24 to 29. The
Directors of the Company, as those of all UK companies, must
act in accordance with a set of general duties. These duties
are detailed in Section 172 of the UK Companies Act 2006
(“Section 172”) which is summarised as follows:
A director of a company must act in the way they consider, in
good faith, would be most likely to promote the success of the
company for the benefit of its shareholders as a whole and, in so
doing have regards (amongst other matters) to:
• The likely consequences of any decision in the long-term;
• The interests of the company’s employees;
•
•
•
The need to foster the company’s business relationships with
suppliers, customers and others;
The impact of the company’s operations on the community
and environment;
The desirability of the company maintaining a reputation for
high standards of business conduct; and
•
The need to act fairly as between shareholders of the company.
The Directors are aware of their responsibilities to promote
the success of the Company in accordance with Section 172.
Additional training and advice will be provided to the Board as
required to ensure continued compliance with these duties.
The Board consider, both individually and collectively, that they
have acted in a way they consider, in good faith, would be most
likely to promote the success of the Company for the benefit of
its members as a whole (having regard to the stakeholders and
matters set out in Section 172 of the Companies Act 2006) in the
decisions taken during the year ended 31 July 2020.
Long term consequences
In assessing the long term consequences of strategic decisions
the Board seeks to engage with all of its stakeholders. The
stakeholder voice is brought into the boardroom through
information provided by management and also by direct
engagement with stakeholders themselves at the AGM and
through other forms of communication.
Our key stakeholders are our regulators (OGA, EA, HSE, Planning
authorities), local communities, shareholders, staff, our joint venture
partners and our suppliers and contractors. Egdon engages
directly with all of our regulators and as an active member of
UKOOG, the onshore oil and gas industry body, engages on
strategic matters with Government and the other regulators. The
Company seeks to engage with the communities in which we
operate through a dedicated website (www.egdon-community.com)
and via Community Liaison Groups (e.g. Biscathorpe) and local
newsletters. Egdon engages with its shareholders through release
of news via RNS, online presentations and roadshows at its interim
and preliminary results, the AGM and through responding to calls
and correspondence throughout the year.
The Group’s three key strategic objectives underpin all decision-
making. Material decisions taken in the year include decisions to
develop Wressle, to progress exploration plans at Biscathorpe and
North Kelsey and the decision to control costs and to introduce
funding during the year and post year end.
In making these material decisions, the Board took conscious
steps to identify and take account of the potential impact on
key stakeholders and concluded the decisions and anticipated
outcomes were aligned with promoting the success of the
Company for the benefit of its members.
Interest of employees
Due to the size of the Company, Egdon’s employees have direct
access to both the Executives and Non-executives to raise
any issues or concerns. We endeavour to provide safe working
conditions which enable employees to perform well and develop
their potential. During this year we have ensured safe working
practices in line with Government guidance to minimise the
risks associated with COVID-19.
Business relationships
We aim to work responsibly with our joint venture partners and
suppliers and have anti-corruption and anti-modern slavery
clauses where appropriate in our contracts for materials and
services.
Impact of operations
Egdon is fully committed to high standards of Health, Safety
and Environmental (“HSE”) management, protection and
performance. A full HSE report is considered at every board
meeting. During the reporting year there were no reportable
health and safety incidents and the Company was compliant
with all of its environmental permits and planning consents.
Maintaining reputation:
The Board is committed to ensuring that Egdon maintains a
high standard for business conduct across all aspects of the
business and with all stakeholders.
GOVERNANCEEgdon Resources plc Annual Report and Financial Statements 2020 24
Corporate Governance Statement
continued
Future Board documents will include a reminder of the
principles of S172 to ensure that stakeholder interests are
always taken into account. Papers prepared by management for
Board approval will highlight relevant stakeholder issues to be
considered as part of the decision making.
Acting fairly
The relevance of each stakeholder group may increase or
decrease depending on the matter or issue in question, so the
Board will seek to consider the needs and priorities of each
stakeholder group during its discussions and as part of its
decision making.
Corporate governance statement
The Directors recognise the importance of sound corporate
governance and are committed to maintaining the highest
standards of corporate governance. As a company whose
shares are traded on AIM, the Board has adopted and complies
with the Quoted Companies Alliance’s Corporate Governance
Code (“the QCA Code”). In addition, the Directors have adopted
a code of conduct for dealings in the shares of the Company
by Directors and employees. Philip Stephens, in his capacity
as Non-executive Chairman, has assumed responsibility
for ensuring that the Company has appropriate corporate
governance standards in place and that these requirements are
followed and applied. The corporate governance arrangements
that the Board has adopted are designed to ensure that the
Company delivers long-term value to its shareholders and that
shareholders have the opportunity to express their views and
expectations for the Company in a manner that encourages
open dialogue with the Board. The Board recognises that its
decisions regarding strategy and risk will affect the corporate
culture of the Company as a whole and in turn the performance
of the Company. The Board is very aware that the tone and
culture set by the Board will determine the nature of the
Company as a whole and the way that employees behave.
A large part of the Company’s activities is centred upon what
needs to be an open and respectful dialogue with investors,
whether they be individuals or corporate. Therefore, the
importance of sound ethical values and behaviours is crucial to
the ability of the Company to achieve its corporate objectives.
The Board places great importance on this aspect of corporate
life and seeks to ensure that this flows through all that the
Company does.
The Board has put in place procedures to ensure that the Group
is compliant with all laws and guidance in respect of COVID-19.
Since March 2020 the Board has met through remote means
to maintain social distancing. The impact of COVID-19 on
the Group has largely been through its impact on the macro
economic environment which has reduced demand for oil and
gas and hence price. The Board has instigated a temporary
20% reduction in salaries to reflect the challenges of the current
operating environment.
The Board reviews investor engagement, public relations and
health and safety performance as a routine part of every board
meeting to ensure these cultural objectives and the principles
defined in QCA code principles 2–4, 8 and 10 are being met.
The Board currently consists of six Directors, of whom two are
Executive and four are Non-executive. The Board believes that
the shareholdings of Non-executives are not large enough to
render them not independent and that therefore, apart from Tim
Davies who represents a large shareholder, the Non-executive
Directors are independent. The Board is conscious that some
Non-executive Directors have served for a significant number
of years but believes that their independently professional
background qualifications and the arms’ length nature of the
working relationships between the Non-executive Directors and
the Executive Directors means that this does not compromise
their independence. The Board continues to consider whether
it would be appropriate to seek to appoint additional Non-
executive and/or Executive Directors but currently believes
that appropriate oversight of the Company is provided. This
view will continue to be reviewed by the Board. The Board has
appointed, Philip Stephens, as Chairman recognising his wide
experience of corporate governance gained from a long career
in UK Corporate Finance and having served as a non-executive
director and chairman of many disparate companies over the
last twenty-five years. The Board believes that the presence
of other senior Non-executive Directors means that the roles
of Chairman and senior independent Director are adequately
separated.
The Board meets regularly throughout the year. The table below
shows the number of meetings held and the individual Director
attendance. Board meetings typically take half a day with
one day of preparation time per meeting. The Non-executive
Directors are contracted for seventeen days per year and the
Executive Directors are full-time. The Directors undertake a
formal process to evaluate the functioning of the Board which is
undertaken on an annual basis via an anonymous questionnaire
process with any issues or recommendations reported and
actions identified to address these.
The latest review was undertaken in October 2020 and
concluded that the Board was functioning well. It was noted that
matters identified in the 2019 review in respect of formalised
reporting of potential conflicts of interest and regular review of
the risk register had been addressed. Areas for improvement
identified were in relation to ensuring timely provision of Board
documentation and diversity of the Board.
Egdon Resources plc Annual Report and Financial Statements 2020 25
The Board meets regularly throughout the year. The table below shows the number of meetings held and the individual director
attendance.
Meetings held during the year
to 31 July 2020
Executive Directors
Mark Abbott
Martin Durham
Non-Executive Directors
Philip Stephens
Tim Davies
Ken Ratcliff
Walter Roberts
BOARD
101
10
8
8
8
8
9
AUDIT
COMMITTEE
REMUNERATION
COMMITTEE
2
–
–
2
–
2
–
1
–
–
1
–
1
1
1 Two of the meetings were minimally attended in order to give formal approval to matters already approved in outline.
The QCA Code sets out 10 principles which should be applied. These are detailed on the Company’s website (www.egdon-resources.
com/corporate-governance) and listed below together with a short explanation of how the Company applies each of the principles:
Deliver Growth
QCA Code Principle
1.
Establish a strategy and business model which promote
long-term value for shareholders
2.
Seek to understand and meet shareholder needs and
expectations
What Egdon does and why
Egdon’s strategy is explained fully within the Strategic Report
section on pages 1 to 18 of the Report and Financial Statements
for the year ended 31 July 2020.
Our strategy is focused around three key near term objectives as
detailed on page 5 of the Strategic Report.
The key risks to the business and how these are mitigated
are detailed on pages 20 to 21 of the Report and Financial
Statements for the year ended 31 July 2020.
The Board is committed to investing all resources in the
Company and accordingly intends to defer payment of any
dividends until such time as the portfolio of assets is self-
sustaining.
Egdon encourages two-way communication with both its
institutional and private investors and responds quickly to all
queries received. The Chairman, Executive Directors and senior
managers talk regularly with the Company’s major shareholders
and analysts and invite them to presentations immediately
following publication of both the interim and final results. They
then ensure that investors’ views are communicated fully to the
Board.
The Company commissions research by Edison Investment
Research Limited to ensure that a non-introspective viewpoint is
also available to private and institutional investors alike.
GOVERNANCEEgdon Resources plc Annual Report and Financial Statements 2020 26
Corporate Governance Statement
continued
QCA Code Principle
What Egdon does and why
2.
Seek to understand and meet shareholder needs and
expectations (continued)
3.
Take into account wider stakeholder and social
responsibilities and their implications for long-term
success
4.
Embed effective risk management, considering both
opportunities and threats, throughout the organisation
Notwithstanding the current situation resulting from the
COVID-19 pandemic, the Board recognises the AGM as an
important opportunity to meet private shareholders. Although
COVID-19 will mean that the AGM will have limited attendance,
the Board intends to seek shareholder questions in advance of
the AGM so that they can be addressed.
A presentation will be made available online, providing an
update on developments since the Annual Report went to press.
Where voting decisions are not in line with the Company’s
expectations the Board will engage with those shareholders to
understand and address any issues. The Chairman is the main
point of contact for such matters.
The largest shareholder (Petrichor Holdings Coöperatief, U.A.)
has indicated that it does not wish to have a seat on the Board
for the time being. The second largest shareholder (Premier Oil
plc) is currently represented on the Board by Tim Davies.
Egdon is fully committed to safe and environmentally sensitive
working in all aspects of its business and all communities in
which it operates. This is evidenced and underpinned by the
detailed work done with HSE on all operations and the pride
with which the Board was again able to record no reportable
health, safety or environmental incidents during the year to
31 July 2020.
Egdon encourages feedback at the AGM and at other times from
investors and the public at large. We utilise social media such as
Twitter® to communicate Egdon and UK onshore industry news
and we closely monitor responses on this and bulletin boards.
Risk Management on pages 20 to 21 of the Report and Financial
Statements for the year ended 31 July 2020 details risks to
the business, how these are mitigated and the change in the
identified risk over the last reporting year.
The Board formally reviews, re-classifies and tabulates the
principal risks to the business at least annually. Whenever a
change to the business environment is identified the Board
considers whether this affects any particular risk or mitigation
strategy.
Egdon Resources plc Annual Report and Financial Statements 2020 27
Maintain A Dynamic Management Framework
QCA Code Principle
What Egdon does and why
5.
Maintain the Board as a well-functioning, balanced
team led by the Chair
The Company is controlled by the Board of Directors. Philip
Stephens, the Non-executive Chairman, is responsible for the
running of the Board and Mark Abbott, the Managing Director,
has executive responsibility for running the Company’s business
and implementing strategy.
All Directors receive regular and timely information on the Company’s
operational and financial performance. Board Papers are circulated
to all Directors in advance of meetings, together with other relevant
information. In addition, minutes of the meetings of the Directors are
circulated to the Directors for review and correction before being
tabled for signature by the Chairman at the next meeting. All Directors
have direct access to the advice and services of the Company
Secretary and are able to take independent professional advice in the
furtherance of their duties, if necessary, at the Company’s expense.
The Board comprises two Executive Directors and four
Non-executive Directors. The Board considers that all Non-executive
Directors bring an independent judgement to bear and that their
various backgrounds foster consideration of many viewpoints.
The Board meets at least eight times per annum. It has established
an Audit Committee and a Remuneration Committee, particulars of
which appear hereafter. The Board agreed that appointments to the
Board are made by the Board as a whole and so has not created a
Nominations Committee.
Audit Committee and Report
An Audit Committee has been established and currently comprises
Ken Ratcliff (Chairman) and Philip Stephens. The Audit Committee
is responsible for ensuring that the financial performance of the
Group is properly reported on and monitored. This includes reviewing
significant financial reporting issues and accounting policies and
disclosures in financial reports. The Audit Committee reviews the
scope and results of the external audit and monitors the integrity
of the financial statements of the Company. If required, meetings
are attended by appropriate members of senior management. The
external auditor has unrestricted access to the Chairman of the
committee. The Audit Committee is also responsible for reviewing the
requirement for an internal audit function. The Audit Committee plans
to meet at least twice a year and did so in the year to 31 July 2020.
Matters of audit planning, accounting judgement and audit risks were
considered by the committee during the year and in their meeting
with senior representatives from the Company’s auditors.
The Chairman of the committee, Ken Ratcliff, advises the Board
of the outcome of the committee’s deliberations and remains
available for direct approach from the auditors should that be
necessary.
GOVERNANCEEgdon Resources plc Annual Report and Financial Statements 2020 28
Corporate Governance Statement
continued
QCA Code Principle
What Egdon does and why
Remuneration Committee and Report
A Remuneration Committee has been established and its current
members comprise Walter Roberts (Chairman), Philip Stephens and
Ken Ratcliff. The principal objective of the Remuneration Committee
is to ensure that members of the Executive management of the
Company are provided with appropriate incentives to encourage
enhanced performance and are, in a fair and responsible manner,
rewarded for their individual contributions to the success of the
Group. The Company’s policy is to remunerate senior Executives
fairly in such a manner as to facilitate the recruitment, retention
and motivation of staff. The Remuneration Committee agrees with
the Board a framework for the remuneration of the Chairman, the
Executive Directors and the senior management of the Company.
Non-executive fees are considered and agreed by the Board as
a whole. The Remuneration Committee plans to meet at least
once in each year to consider salary increases for Executive and
Non-executive Directors and did so once in the year to 31 July 2020,
there were various ad-hoc discussions between members during
the year, usually as part of main Board meetings. During the year
the committee decided there would be no changes to the base
remuneration of Executive and Non-executive Directors and senior
management, which is detailed in Note 7 of the Financial Statements.
In response to the current operating challenges all staff including
the Executive and Non-executive Directors and senior management
have taken a temporary salary cut of 20%.
The Non-executive Directors are contracted to provide more
time to the Company than in practice has been needed and no
significant lack of availability has been identified.
The Board believes that between the Directors there should be
a complete range of current relevant experience. It also believes
that its members should have as full a variety as possible of
personal attributes and experience. The extent to which any
prospective Director adds to this is an essential part of the
appointment process.
The Board as a whole has regular briefings, training and
refresher seminars in respect of Corporate Governance matters
including the AIM Rules and Market Abuse Regulations.
Individual Directors are active in other businesses and activities
relevant to their specific skills and attend ad-hoc training,
seminars and conferences. The Board is aware of the gender
imbalance of the current Board and will keep this under review.
The Board carries out an evaluation of its performance annually,
taking into account the Financial Reporting Council’s Guidance on
Board Effectiveness.
All Directors will undergo a performance evaluation before being
proposed for re-election to ensure that their performance is and
continues to be effective, that where appropriate they maintain
their independence and that they are demonstrating continued
commitment to the role.
All continuing Directors stand for re-election at least every
three years.
6.
Ensure that between them the Directors have the
necessary up-to-date experience, skills and capabilities
7.
Evaluate Board performance based on clear and
relevant objectives, seeking continuous improvement
Egdon Resources plc Annual Report and Financial Statements 2020 29
QCA Code Principle
What Egdon does and why
8.
Promote a corporate culture that is based on ethical
values and behaviours
The Board recognises that its decisions regarding ethics,
strategy and risk will determine the whole corporate culture of
the Company and that this will in turn determine the long-term
performance of the Company. The Company’s success relies on
establishing and maintaining a relationship of trust and respect
with Government and its various national and local agencies,
the HSE, local people in its areas of operations and its industry
partners and contractors. The Board is therefore resolved to
ensure that sound ethical values and behaviour are core to the
culture of the Company.
The Company has adopted, with effect from the date on which
its shares were first admitted to AIM, a code for Directors’
and employees’ dealings in securities which is appropriate
for a company whose securities are traded on AIM, and is in
accordance with rule 21 of the AIM rules. The Chairman and the
Company Secretary are responsible for administering the code
and have always adopted a conservative approach in doing so.
9.
Maintain governance structures and processes that are
fit for purpose and support good decision-making by
the Board
This Corporate Governance Statement details the Company’s
governance structures and why they are appropriate and
suitable for the Company.
Build trust
QCA Code Principle
10. Communicate how the Company is governed
and is performing by maintaining a dialogue with
shareholders and other relevant stakeholders
What Egdon does and why
Egdon encourages two-way communication with both its
institutional and private investors and endeavours to respond
quickly to all queries received. The Chairman and the Managing
Director talk regularly with the Company’s major shareholders
and invite them to presentations immediately following
publication of both the interim and final results. They then ensure
that investors’ views are communicated fully to the Board.
The Company commissions research by Edison Investment
Research Limited to ensure that a non-introspective viewpoint is
also available to private and institutional investors alike.
Notwithstanding the current situation resulting from the
COVID-19 pandemic, the Board recognises the AGM as an
important forum to meet private shareholders. The Chairman has
a record of allowing wide-ranging discussion at the AGM even
when not germane to the resolution being discussed.
The AGM invariably includes a presentation by the Managing
Director and others on developments which have occurred since
the Annual Report went to press.
Investors also have access to current information on the
Company through its website, www.egdon-resources.com, and
via Mark Abbott (Managing Director) Martin Durham (Technical
Director) and James Elston (Director of Egdon Resources U.K.
Limited) who are available to answer investor relations enquiries.
GOVERNANCEEgdon Resources plc Annual Report and Financial Statements 2020 30
Board of Directors
Philip Stephens
Non-executive Chairman
Mark Abbott
Managing Director
Martin Durham
Technical Director
appointed 21 October 2004
appointed 26 August 1997
appointed 8 January 2019
Philip retired from the City
in 2002 after nearly 40 years
working in UK Corporate
Finance for various financial
institutions including Lazards,
Chase Manhattan and UBS
where he was head of UK
Corporate Finance. Since 2002
Philip has served on the boards
of many companies as a non-
executive director mostly as
chairman and brings significant
corporate governance and
corporate finance skills and
experience to the Board.
Mark is a founding Director
of Egdon Resources plc. He
worked for the British Geological
Survey from 1985 to 1992,
British Gas Exploration and
Production Limited from 1992
to 1996 and Anadarko Algeria
Corporation from 1996 to
1997. He is a council member
of UKOOG and a trustee of
the UK Onshore Geophysical
library. He is also a Director
of MA Exploration Services
Limited and Bishopswood
Pavilion Limited. Mark is an
experienced geophysicist and
project manager with in-depth
knowledge of the Company’s
assets. He has significant
experience in all aspects of
running an AIM listed oil and gas
business.
Martin graduated from the
University of Wales in 1978 with
a Bachelor of Science Degree
in Geology and also holds a
Master of Science Degree in
Petroleum Geology from Imperial
College, London University
(1982). Martin has significant
industry experience gained
through companies including the
Louisiana Land and Exploration
Inc, LASMO Plc, Eni and
Northern Petroleum Plc. During
this time he has held senior
technical and management
roles for exploration and field
development projects. Martin
was a founding director of Union
Jack Oil Plc a position he held
until his appointment to Egdon
in September 2014. Martin
is a Fellow of the Geological
Society of London and in 2012
he was awarded Honorary Life
Membership of the Petroleum
Exploration Society of Great
Britain (PESGB). Martin is Past
President (2019) of the PESGB.
Egdon Resources plc Annual Report and Financial Statements 2020 31
Walter Roberts
Non-executive Director
and Company Secretary
appointed 30 July 2001
Ken Ratcliff
Non-executive Director
Tim Davies
Non-executive Director
appointed 30 July 2001
appointed 12 April 2019
Walter is a highly experienced
oil and gas lawyer with an
engineering background. He
qualified as a solicitor with
Simmons & Simmons before
joining Phillips Petroleum in
1980. In 1986 he set up the
legal department for LASMO
in Australia and later became
the principal UK joint venture
negotiator for Talisman. He is an
executive director of Pinnacle
Energy Limited. Walter provides
a wealth of knowledge and
experience in both company law
and the legal and commercial
aspects of the oil and gas
business.
Ken is a chartered accountant.
Ken was non-executive
chairman of Infrastrata plc
and has previously held senior
management positions with
GDC UK Limited, Ensign
Geophysics Limited, Seismic
Geocode Limited, Tenneco
Corporation and Merlin
Geophysical Limited. Ken was
a long-serving Justice of the
Peace and Tier 1 judge in the
Family Court until retiring in
March 2020 as well as currently
serving as a director and trustee
of the Phyllis Tuckwell Hospice.
Ken’s extensive business
and finance experience and
knowledge provides oversight
of the accounting and financial
functions of the business.
Tim has extensive knowledge
in respect of both the technical
and commercial aspects of
the oil and gas sector having
helped shape Premier’s North
Sea exploration strategy and
evolution through significant
organic and inorganic growth.
A qualified non-executive
director, with over 25 years of
experience in the oil and gas
business as a geoscientist and
manager. Tim is currently Group
Exploration Manager for Premier
Oil, responsible for new ventures
and delivery from the captured
exploration portfolio including
Brazil, Mexico and the UK.
GOVERNANCEEgdon Resources plc Annual Report and Financial Statements 2020 32
Directors’ Report
The Directors submit their report together with the audited
consolidated financial statements of Egdon Resources plc for
the year ended 31 July 2020.
No Directors, other than Mark Abbott, hold 3% or more in the
Company’s share capital.
Principal activity and business
review
The principal activity of the Group during the year continued to
be exploration for and production of hydrocarbons in the UK.
A review of the business is given in the Operating Review within
the Strategic Report.
Health, safety and environmental
The Company wishes to build value through developing
sustainable long-term relationships with partners and the
community and is committed to the highest standards of health,
safety and environmental protection; these aspects command
equal prominence with other business considerations.
There were no reportable health and safety incidents during the
year (2019: None).
Results and dividends
The Group recorded a loss after tax of £4.75 million for the year
(2019: £1.72 million).
In line with last year, the Directors do not currently recommend
the payment of a dividend.
Share capital
At the date of this report 328,315,625 Ordinary shares are issued
and fully paid (2019: 303,315,625). During the year 25,000,000
(2019: 43,330,803) shares were issued through an open offer.
Substantial shareholders
As of the date of this report the Company had been notified of
the following interests of 3% or more in the Company’s Ordinary
share capital:
Petrichor Holdings Coperatif, U.A.*
Premier Oil plc
Canaccord Genuity Group
Hargreaves Lansdown Asset Mgt
P Evershed and Clients
Mr Mark Abbott
% SHARES
33.99%
14.11%
9.28%
4.95%
3.56%
3.62%
*
Petrichor shareholding includes that of concert party
Jalapeño Corporation’s holding
Directors
The Directors of the Company who served in the year, and their
biographical summaries, are given on pages 30 to 31.
The Directors’ remuneration is detailed in Note 7 to the financial
statements. All Directors benefit from the provision of Directors’
and Officers’ indemnity insurance policies. Premiums payable to
third parties are described in Note 7.
Financial instruments
The financial risk management objectives and policies of the
Company in relation to the use of financial instruments and the
exposure of the Company and its subsidiary undertakings to its
main risks, credit risk and liquidity risk, are set out in Note 21 to
the financial statements.
Employees
The Group had 11 employees as at 31 July 2020 (2019: 11).
Employees are encouraged to directly participate in the
business through a share option scheme. Details of the share
option scheme are given in Note 8 to the financial statements.
Future developments
Future developments are disclosed in the Operating Review set
out on pages 8 to 14.
Auditor
A resolution to reappoint the auditor, Nexia Smith & Williamson,
will be proposed at the forthcoming Annual General Meeting.
Going concern
Having completed their going concern assessment the Directors
have concluded that it remains appropriate to prepare the
financial statements on the going concern basis. However, it is
recognised that uncertainties exist in relation to certain of the
assumptions and projections made which if they were to differ
materially may impact upon the Group’s ability to continue as a
going concern. Further detail is given in Note 2.
Subsequent events
Note 32 refers to the subsequent events that the Directors
consider to be relevant to the financial statements.
Egdon Resources plc Annual Report and Financial Statements 2020 33
Disclosure of information to the
auditor
In the case of each person who was a Director at the time this
report was approved: so far as the Director was aware there was
no relevant available audit information of which the Company’s
auditor was unaware and that Director had taken all steps that
the Director ought to have taken as a Director to make himself
aware of any relevant audit information and to establish that the
Company’s auditor was aware of that information.
Mark Abbott
Managing Director
5 January 2021
GOVERNANCEEgdon Resources plc Annual Report and Financial Statements 2020 34
Statement of Directors’ Responsibilities
The Directors are responsible for preparing the Group Strategic
Report, the Directors’ Report and the financial statements in
accordance with applicable law and regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
have elected to prepare the Group and Parent Company
financial statements in accordance with applicable law and
International Financial Reporting Standards (IFRSs) as adopted
by the European Union and, as regards the Parent Company
financial statements, as applied in accordance with the
provisions of the Companies Act 2006. Under company law
the Directors must not approve the financial statements unless
they are satisfied that they give a true and fair view of the state
of affairs of the Company and of the Group and of the profit or
loss of the Group for that period. In preparing these financial
statements, the Directors are required to:
•
•
state whether applicable IFRSs as adopted by the European
Union have been followed subject to any material departures
disclosed and explained in the financial statements; and
prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time
the financial position of the Company and the Group and enable
them to ensure that the financial statements comply with the
Companies Act 2006. They are also responsible for safeguarding
the assets of the Company and the Group and hence for taking
reasonable steps for the prevention and detection of fraud and
other irregularities.
•
•
select suitable accounting policies and then apply them
consistently;
The Directors are also responsible for ensuring that they meet
their responsibilities under the AIM Rules.
make judgements and accounting estimates that are
reasonable and prudent;
The Directors are responsible for the maintenance and
integrity of the corporate and financial information included
on the Company’s website. Legislation in the United Kingdom
governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
Egdon Resources plc Annual Report and Financial Statements 2020 Independent Auditor’s Report to the
Members of Egdon Resources plc
35
Opinion
We have audited the financial statements of Egdon Resources
plc (the “Parent Company”) and its subsidiaries (the “Group”) for
the year ended 31 July 2020 which comprise the Consolidated
Statement of Comprehensive Income, the Consolidated and
Company Statements of Financial Position, the Consolidated
and Company Statements of Cash Flows, the Consolidated
and Company Statements of Changes in Equity and the notes
to the financial statements, including a summary of significant
accounting policies. The financial reporting framework that
has been applied in their preparation is applicable law and
International Financial Reporting Standards (IFRSs) as adopted
by the European Union and, as regards the Parent Company
financial statements, as applied in accordance with the
provisions of the Companies Act 2006.
In our opinion:
•
•
•
the financial statements give a true and fair view of the state
of the Group’s and of the Parent Company’s affairs as at 31
July 2020 and of the Group’s loss for the year then ended;
the Group financial statements have been properly prepared
in accordance with IFRSs as adopted by the European
Union;
the Parent Company financial statements have been
properly prepared in accordance with IFRSs as adopted by
the European Union and as applied in accordance with the
provisions of the Companies Act 2006; and
•
the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law.
Our responsibilities under those standards are further described
in the Auditor’s responsibilities for the audit of the financial
statements section of our report. We are independent of the
Group and Parent Company in accordance with the ethical
requirements that are relevant to our audit of the financial
statements in the UK, including the FRC’s Ethical Standard as
applied to SME listed entities, and we have fulfilled our other
ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our opinion.
Material uncertainty relating to
going concern
We draw attention to Note 2 Going Concern in the financial
statements which indicates that, whilst the projections prepared
by the Directors show that the Group and the Company will
be able to continue as a going concern, actual future events
may differ from the Directors’ assumptions on which those
projections are based. As also noted, uncertainty also exists in
relation to the approval of the whitewash and authorities to issue
shares, and the Company’s ability to access further financing as
and when required.
As stated in Note 2 Going Concern, these events or conditions,
along with other matters as set forth in Note 2 Going Concern,
indicate that a material uncertainty exists that may cast significant
doubt on the Group and Company’s ability to continue as a going
concern. Our opinion is not modified in respect of this matter.
Emphasis of matter – Carrying value
of unconventional assets
We have considered the adequacy of the disclosures made in
Note 14 (“Intangible Fixed Assets”) when preparing the annual
financial statements, concerning the unconventional assets and
the impact on those of the moratorium on hydraulic fracking.
As disclosed in Note 14, following the moratorium the Group
concluded that it was appropriate to impair £0.53m of the
‘non-core’ unconventional assets. The remainder of the
unconventional assets have not been impaired, because
the Directors believe that it is too early to do so, and there
is insufficient information to justify making an impairment.
However, the realisation of the value of these assets is
dependent upon the moratorium being lifted. Our opinion is not
modified in respect of this matter.
Key audit matters
In addition to the matters described in the material uncertainty
related to going concern and emphasis of matter sections
above, we have identified the key audit matters described
below as those that were of most significance in the audit
of the financial statements of the current year. Key audit
matters include the most significant assessed risks of material
misstatement, including those risks that had the greatest effect
on our overall audit strategy, the allocation of resources in the
audit and the direction of the efforts of the audit team. These
matters were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these
matters.
GOVERNANCEEgdon Resources plc Annual Report and Financial Statements 2020 36
Independent Auditor’s Report to the
Members of Egdon Resources plc
continued
Carrying values and impairment of exploration
and evaluation costs and development and
production assets
Description of the risk
The Group’s net assets as shown on its Statement of Financial
Position exceed the current market capitalisation of the Group,
which could indicate that the exploration and evaluation, and the
development and production assets are impaired in value.
The Group’s impairment assessments require significant
judgement, in particular regarding recoverable reserves,
production profiles, commodity prices, costs of production,
discount rates and sensitivity assumptions.
Our response to the risk
We challenged the assumptions used in the impairment models
described in Notes 2 (Accounting policies – judgements
and estimates), 14 (exploration and evaluation costs) and 15
(development and production assets).
As part of our procedures we:
•
•
•
•
•
assessed if the Directors’ impairment models are consistent
with the requirements of IFRSs and whether all relevant
assets had been subject to review;
for development and production assets, compared forecast future
production with historical trading performance and in particular
considering production volumes and costs of production;
assessed the appropriateness of the key assumptions, the
most significant of these being costs of production, future
commodity prices, discount rates and reserves;
assessed if the outcome of the impairment reviews had been
properly reflected within the financial statements;
considered whether the impairment due to the government
moratorium on hydraulic fracturing for shale gas in England
was sufficient, and considered the impact of the moratorium
on the unconventional assets remaining on the Statement of
Financial Position.
Revenue recognition
Description of the risk
The Group’s revenue is self-billed by the Group’s customers.
There is a risk that the revenue may be incomplete or that
the revenue received may be inconsistent with the actual
production.
Our response to the risk
The Group’s revenue recognition policy is stated in Note 2 to
the financial statements under the heading “Revenue and other
operating income”.
For recorded revenues from gas sales, we reviewed the client’s
reconciliation of production records to sales records and
confirmed that the reconciliation agreed to relevant supporting
information.
For each field on production in the year, we agreed recorded
revenue to the customers’ self-bills and confirmed that the self-
bills covered the entire reporting year.
For income previously accrued in prior years and received in
the current year, we confirmed that the movement in accrued
income agreed with the reduction in the volume of gas accrued
and the value ascribed to that volume.
Carrying values and impairment of the Parent
Company’s investment in its subsidiaries and
balances due to the Parent Company from its
subsidiaries
Description of the risk
Due to accumulated losses incurred by the subsidiaries of the
Parent Company, the value of investments held by the Parent
Company in those subsidiaries and the value of receivables
due to the Parent Company from those subsidiaries may not be
recoverable. This could lead to impairment in these asset values
on the Parent Company’s Statement of Financial Position.
As described in Note 2 under the heading “Inter-company
balances and investments” the Parent Company has compared
the underlying values of the subsidiaries to the Parent
Company’s net investment in the subsidiaries; the underlying
asset values are derived from the output from the impairment
tests carried out in respect of exploration and evaluation costs
and development and production assets; the risks relating to
these tests are described above.
Our response to the risk
We compared the Parent Company’s total investment in each
subsidiary (comprising the cost of the investment in, and
balance due from, that subsidiary) to the subsidiary’s gross
assets less third-party liabilities.
Where there was a material shortfall, we also included the
relevant headroom identified in management’s impairment
forecasts, which were subject to audit as described above.
Our application of materiality
The materiality for the Group financial statements as a whole
was set at £1,250,000. This has been determined with reference
to the benchmark of the Group’s net assets, which we consider
to be one of the principal considerations for members of the
Parent Company in assessing the performance of the Group.
Materiality represents 5% of the Group’s net assets as presented
Egdon Resources plc Annual Report and Financial Statements 2020 37
on the face of the Group’s Statement of Financial Position,
rounded down to the nearest £250k.
The materiality for the Parent Company financial statements as
a whole was set at £1,000,000. This has been determined with
reference to the benchmark of the Parent Company’s net assets
as the Parent Company exists only as a holding company for
the Group and carries on no trade in its own right. Materiality
represents 2.6% of net assets as presented on the face of the
Parent Company’s Statement of Financial Position.
An overview of the scope of our
audit
The Group had two reporting components during the year, both
of which were UK limited companies. We are appointed auditor
and have performed audits of the financial statements of each of
these companies.
The Group’s assets and liabilities are located in the UK and all
Group entities have common management and centralised
process and controls. Our audit work was therefore all
conducted solely in the UK.
Other information
The other information comprises the information included in
the Annual Report and Financial Statements, other than the
financial statements and our auditor’s report thereon. The
Directors are responsible for the other information. Our opinion
on the financial statements does not cover the other information
and, except to the extent otherwise explicitly stated in our report,
we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in
the audit or otherwise appears to be materially misstated. If
we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there
is a material misstatement in the financial statements or a
material misstatement of the other information. If, based on the
work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report
that fact.
We have nothing to report in this regard.
Opinion on other matters prescribed
by the Companies Act 2006
In our opinion, based on the work undertaken in the course of
the audit:
•
the information given in the Strategic Report and the
Directors’ Report for the financial year for which the financial
statements are prepared is consistent with the financial
statements; and
•
the Strategic Report and the Directors’ Report have been
prepared in accordance with applicable legal requirements.
Matters on which we are required to
report by exception
In the light of the knowledge and understanding of the Group
and the Parent Company and their environment obtained
in the course of the audit, we have not identified material
misstatements in the Strategic Report or the Directors’ Report.
We have nothing to report in respect of the following matters
where the Companies Act 2006 requires us to report to you if, in
our opinion:
•
•
•
•
adequate accounting records have not been kept by the
Parent Company, or returns adequate for our audit have not
been received from branches not visited by us; or
the Parent Company financial statements are not in
agreement with the accounting records and returns; or
certain disclosures of Directors’ remuneration specified by
law are not made; or
we have not received all the information and explanations we
require for our audit.
Responsibilities of Directors
As explained more fully in the Directors’ Responsibilities
Statement set out on page 34, the Directors are responsible
for the preparation of the financial statements and for being
satisfied that they give a true and fair view, and for such internal
control as the Directors determine is necessary to enable the
preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
GOVERNANCEEgdon Resources plc Annual Report and Financial Statements 2020 38
Independent Auditor’s Report to the
Members of Egdon Resources plc
continued
In preparing the financial statements, the Directors are
responsible for assessing the Group’s and the Parent
Company’s ability to continue as a going concern, disclosing,
as applicable, matters related to going concern and using the
going concern basis of accounting unless the Directors either
intend to liquidate the Group or the Parent Company or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the
audit of the financial statements
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to
issue an auditor’s report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with ISAs (UK)
will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably
be expected to influence the economic decisions of users taken
on the basis of these financial statements.
A further description of our responsibilities for the audit of
the financial statements is located on the Financial Reporting
Council’s website at: www.frc.org.uk/auditorsresponsibilities.
This description forms part of our auditor’s report.
Use of our report
This report is made solely to the Parent Company’s members,
as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so
that we might state to the Parent Company’s members those
matters we are required to state to them in an auditor’s report
and for no other purpose. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than
the Parent Company and the Parent Company’s members as a
body, for our audit work, for this report, or for the opinions we
have formed.
Sancho Simmonds
Senior Statutory Auditor, for and on behalf of
Nexia Smith & Williamson
Statutory Auditor
Chartered Accountants
25 Moorgate
London
EC2R 6AY
5 January 2021
Egdon Resources plc Annual Report and Financial Statements 2020 Consolidated Statement
of Comprehensive Income
for the year ended 31 July 2020
39
Revenue – continuing
Cost of sales:
– exploration costs written-off and pre-licence costs
– impairments – Intangible fixed assets
– impairments – Property, plant and equipment
– depreciation
– direct production costs
– other, including shut-in fields
– release of Ceres contract asset
Total cost of sales
Gross loss
Administrative expenses
Other operating income
Finance income
Finance costs
Loss before taxation
Taxation
Loss for the year
Other comprehensive income for the year
Total comprehensive income for the year attributable to equity holders of the parent
Loss for the year per share
Basic loss per share
Diluted loss per share
The notes on pages 46 to 75 form part of these financial statements.
NOTE
3
2020
£
2019
£
963,620
2,196,526
(193,953)
(1,171,591)
(1,663,473)
(162,646)
(1,215,968)
(187,783)
(99,704)
(4,695,118)
(3,731,498)
(956,289)
61,204
(46,279)
–
(408,000)
(632,234)
(1,242,118)
(248,671)
(299,132)
(2,876,434)
(679,908)
(1,066,041)
77,843
(4,626,583)
(1,668,106)
48,212
(169,830)
(4,748,201)
–
3,844
(52,663)
(1,716,925)
–
(4,748,201)
(1,716,925)
–
–
(4,748,201)
(1,716,925)
(1.53)p
(1.53)p
(0.64)p
(0.64)p
10
11
4
12
13
13
FINANCIAL STATEMENTSEgdon Resources plc Annual Report and Financial Statements 2020 40
Consolidated Statement
of Financial Position
at 31 July 2020
Company number 06409716
Non-current assets
Intangible assets
Property, plant and equipment
Right-of-use asset
Trade and other receivables
Total non-current assets
Current assets
Inventory
Trade and other receivables
Cash and cash equivalents
Total current assets
Current liabilities
Trade and other payables
Net current (liabilities)/assets
Total assets less current liabilities
Non-current liabilities
Lease liabilities
Provisions
Net assets
Equity
Share capital
Share premium
Share-based payment reserve
Retained earnings
NOTE
2020
£
2019
£
14
15
16
18
18
19
20
22
23
24
25
21,451,306
7,986,094
709,192
403,486
21,780,577
9,696,458
–
–
30,550,078
31,477,035
5,466
1,831,859
847,224
2,684,549
(3,019,375)
(334,826)
30,215,252
–
1,675,003
1,617,925
3,292,928
(1,378,950)
1,913,978
33,391,013
(1,067,844)
–
(2,477,503)
(2,396,525)
26,669,905
30,994,488
15,234,035
26,967,656
122,254
14,984,035
26,742,656
113,537
(15,654,040)
(10,845,740)
26,669,905
30,994,488
The notes on pages 46 to 75 form part of these financial statements.
The financial statements were approved by the Board of Directors and authorised for issue on 5 January 2021.
Mark Abbott
Managing Director
Egdon Resources plc Annual Report and Financial Statements 2020 Company Statement
of Financial Position
at 31 July 2020
Company number 06409716
41
Non-current assets
Property, plant and equipment
Right-of-use asset
Investments
Total non-current assets
Current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
Current liabilities
Trade and other payables
Net current assets
Total assets less current liabilities
Non-current liabilities
Lease liabilities
Provisions
Net assets
Equity
Share capital
Share premium
Merger reserve
Share-based payment reserve
Retained earnings
NOTE
15
16
17
18
19
2020
£
–
105,727
14,172,924
14,278,651
2019
£
–
–
14,172,824
14,172,824
24,953,499
23,726,845
43,213
1,066,964
24,996,712
24,793,809
20
(209,524)
(91,312)
24,787,188
39,065,839
24,702,497
38,875,321
22
23
24
25
26
(84,884)
(20,525)
–
(20,525)
38,960,430
38,854,796
15,234,035
26,967,656
2,357,816
122,254
14,984,035
26,742,656
2,357,816
113,537
(5,721,331)
(5,343,248)
38,960,430
38,854,796
The notes on pages 46 to 75 form part of these financial statements.
The Company has elected to take exemption under section 408 of the Companies Act 2006 from presenting the Parent Company Statement of
Comprehensive Income. The Company loss for the financial year is £384,275 (2019: loss - £399,431).
The financial statements were approved by the Board of Directors and authorised for issue on 5 January 2021.
Mark Abbott
Managing Director
FINANCIAL STATEMENTSEgdon Resources plc Annual Report and Financial Statements 2020 42
Consolidated Statement
of Cash Flows
for the year ended 31 July 2020
Cash flows from operating activities
Loss before tax
Adjustments for:
2020
£
2019
£
(4,748,201)
(1,716,925)
Depreciation and impairments of non-current assets
3,017,334
1,040,234
Increase in decommissioning provision written off to cost of sales
Gain on disposal of fixed assets
Reinstatement provision write off
Foreign exchange loss
(Increase)/decrease in inventory
Increase in trade and other receivables
Increase in trade and other payables
Finance costs
Finance income
Share based remuneration charge
Cash used in operations
Interest paid
Taxation paid
Net cash flow used in operating activities
Cash flows from investing activities
Finance income
Payments for exploration and evaluation assets
Purchase of property, plant and equipment
Sale of property, plant and equipment
Net cash used in capital expenditure and investing activities
Cash flows from financing activities
Issue of shares
Costs associated with issue of shares
Principal paid on lease liabilities
Interest paid on lease liabilities
Interest paid
Net cash flow generated from financing
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Effects of exchange rate changes on the balance of cash held in foreign currencies
Cash and cash equivalents at end of year
The notes on pages 46 to 75 form part of these financial statements.
1,996
(5,058)
–
12,594
(5,466)
(102,840)
1,491,576
169,830
(48,212)
8,968
(207,479)
–
–
–
–
(96,862)
3,982
8,011
(434,515)
228,933
52,663
(3,844)
10,948
(907,375)
(39)
–
(207,479)
(907,414)
755
3,844
(842,320)
(2,095,824)
(58,713)
31,376
(124,086)
–
(868,902)
(2,216,066)
500,000
(25,000)
(91,481)
(65,230)
(15)
318,274
(758,107)
1,617,925
(12,594)
847,224
2,166,540
(192,770)
–
–
–
1,973,770
(1,149,710)
2,771,617
(3,982)
1,617,925
In 2020 significant non-cash transactions included the recognition of a right-of-use asset, a net investment in sub-lease and a lease liability
arising on implementation of IFRS 16 as disclosed in Note 2.
In 2019, significant non-cash transactions comprised of the recognition of the Biscathorpe-2 abandonment provision of £125,125.
Egdon Resources plc Annual Report and Financial Statements 2020 Company Statement
of Cash Flows
for the year ended 31 July 2020
43
Cash flows from operating activities
Loss before tax
Adjustments for:
Depreciation
Increase in trade and other receivables
Increase in trade and other payables
Finance costs
Finance income
Share-based remuneration charge
Cash used in operations
Net cash flow used in operating activities
Cash flows from investing activities
Finance income
Acquisition of subsidiary
Net cash generated from capital expenditure and financial investment
Cash flows from financing activities
Issue of shares
Costs associated with issue of shares
Principal paid on lease liabilities
Interest paid on lease liabilities
Net cash flow generated from financing
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
2020
£
2019
£
(384,275)
(399,431)
19,624
–
(1,226,653)
(2,682,420)
100,969
1,287
–
8,968
26,232
–
(2,903)
10,948
(1,480,080)
(1,480,080)
(3,047,574)
(3,047,574)
–
(100)
(100)
500,000
(25,000)
(17,284)
(1,287)
456,429
(1,023,751)
1,066,964
43,213
2,903
–
2,903
2,166,540
(192,770)
–
–
1,973,770
(1,070,901)
2,137,865
1,066,964
The notes on pages 46 to 75 form part of these financial statements.
In 2020 significant non-cash transactions included the recognition of a right of use asset and a lease liability on implementation of IFRS 16 as
disclosed in Note 2.
There were no significant non-cash transactions in 2019.
FINANCIAL STATEMENTSEgdon Resources plc Annual Report and Financial Statements 2020 44
Consolidated Statement
of Changes in Equity
for the year ended 31 July 2020
Balance at 31 July 2018
Loss for the year
Total comprehensive income for the year
Issue of shares
Share issue costs
Share based payment
Transfer on lapse of options
Balance at 31 July 2019
SHARE
CAPITAL
£
SHARE
PREMIUM
£
SHARE-
BASED
PAYMENT
RESERVE
£
RETAINED
EARNINGS
£
TOTAL
EQUITY
£
14,550,727
25,202,194
176,696
(9,202,922)
30,726,695
–
–
–
–
433,308
1,733,232
(192,770)
–
–
–
–
–
–
–
(1,716,925)
(1,716,925)
(1,716,925)
(1,716,925)
–
–
–
2,166,540
(192,770)
10,948
74,107
–
–
–
10,948
(74,107)
14,984,035
26,742,656
113,537
(10,845,740)
30,994,488
Impact of adoption of IFRS 16 (see Note 2)
–
–
–
(60,350)
(60,350)
1 August 2019 as restated
Loss for the year
Total comprehensive income for the year
Issue of shares
Share issue costs
Share based payment
Transfer on lapse of options
Balance at 31 July 2020
14,984,035
26,742,656
113,537
(10,906,090)
30,934,138
–
–
250,000
–
–
–
–
–
250,000
(25,000)
–
–
–
–
–
–
8,968
(251)
(4,748,201)
(4,748,201)
(4,748,201)
(4,748,201)
–
–
–
251
500,000
(25,000)
8,968
–
15,234,035
26,967,656
122,254
(15,654,040)
26,669,905
The notes on pages 46 to 75 form part of these financial statements.
Egdon Resources plc Annual Report and Financial Statements 2020 Company Statement
of Changes in Equity
for the year ended 31 July 2020
45
SHARE
CAPITAL
£
MERGER
RESERVE
£
SHARE
PREMIUM
£
SHARE-
BASED
PAYMENT
RESERVE
£
RETAINED
EARNINGS
£
TOTAL
EQUITY
£
Balance at 31 July 2018
14,550,727
2,357,816
25,202,194
176,696
(5,017,924)
37,269,509
Loss for the year
Total comprehensive income for the year
Issue of shares
Share issue costs
Share based payment
Transfer on lapse of options
–
–
433,308
–
–
–
–
–
–
–
–
–
–
–
1,733,232
(192,770)
–
–
–
–
–
–
10,948
(74,107)
(399,431)
(399,431)
–
–
–
(399,431)
(399,431)
2,166,540
(192,770)
10,948
74,107
–
Balance at 31 July 2019
14,984,035
2,357,816
26,742,656
113,537
(5,343,248)
38,854,796
Impact of IFRS 16 adoption (see Note 2)
–
–
–
–
5,941
5,941
1 August 2019 as restated
14,984,035
2,357,816
26,742,656
113,537
(5,337,307)
38,860,737
Loss for the year
Total comprehensive income for the year
Issue of shares
Share issue costs
Share based payment
Transfer on lapse of options
–
–
250,000
–
–
–
–
–
–
–
–
–
–
–
250,000
(25,000)
–
–
–
–
–
–
8,968
(251)
(384,275)
(384,275)
(384,275)
(384,275)
–
–
–
251
500,000
(25,000)
8,968
–
Balance at 31 July 2020
15,234,035
2,357,816
26,967,656
122,254
(5,721,331)
38,960,430
The notes on pages 46 to 75 form part of these financial statements.
FINANCIAL STATEMENTSEgdon Resources plc Annual Report and Financial Statements 2020 46
Notes Forming Part of the Financial Statements
for the year ended 31 July 2020
1 General Information
Egdon Resources plc is a public company limited by shares incorporated and domiciled in England & Wales with registered number 06409716.
The address of the registered office is: The Wheat House, 98 High Street, Odiham, Hampshire, RG29 1LP. The Company’s administrative office
is at the same address.
Egdon Resources plc (the “Company”) and its subsidiaries (together, the “Group”) explore for and develop oil and gas reserves in England.
The Company’s shares are quoted on the AIM Market (“AIM”) of the London Stock Exchange.
2 Accounting Policies
The financial statements are based on the following accounting policies of the Group and the Company.
Basis of preparation and statement of compliance with IFRS
The Group’s and Company’s financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS)
and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. IFRS comprises the Standards issued by the
International Accounting Standards Board (IASB) and Interpretations issued by the International Financial Reporting Interpretations Committee
(IFRIC) that have been endorsed by the European Union (EU). The principal accounting policies adopted by the Group and by the Company
where applicable are set out below.
As permitted by Section 408 of the Companies Act 2006, no Statement of Comprehensive Income or associated notes are presented for the
Company as an entity.
Going concern
The Directors have prepared the financial statements on the going concern basis, which assumes that the Group and the Company will
continue in operational existence without significant curtailment of its activities for the foreseeable future.
2020 has been a year of uncertainty for the oil and gas industry as a whole characterised by weak oil and gas prices and an uncertain
operating and economic environment driven by COVID-19 and the Government’s response. Understandably, Egdon has not been immune to
these considerable uncertainties.
Forward cash flows necessarily make assumptions as to the timing and value of cash flows from production at Wressle as well as the Group’s
other existing producing sites. Whilst there is currently no evidence that the timing or value of these revenues is unrealistic, the Directors
acknowledge that delays in bringing assets to production, along with volatility in both oil and gas prices and realising of amounts invoiced to
joint venture partners, give some level of uncertainty in respect of the timing of future cash flows.
Uncertainty currently exists in relation to the approval by shareholders of the whitewash and authorities to issue shares in respect of the
convertible loan notes to raise £1.05 million before costs where the documentation was finalised on the 5 January 2021 as detailed in the
Subsequent Events Note on page 75. Having taken advice, the Board considers that this course of action is in the best interests of the business
and anticipates that approval will be given at the forthcoming General Meeting.
The Group has recently secured a £1.00 million debt facility as detailed in the Subsequent Events Note on page 75. The Group also requires
further funding to be raised and plans to access additional sources of funding via debt and/or equity to fund certain future activities. Whilst,
after having made enquiries of our advisors, there is a high expectation on the part of the Directors that such debt and/or equity will be
available in the market as and when required, a level of uncertainty exists in relation to this.
The Group has flexibility in relation to the timing and quantum of future expenditures and will continue to look to balance financial exposure
and risk by minimising its exposure to future cash expenditure on existing projects during the coming period.
After preparing cash flow forecasts, making enquiries and considering the uncertainties described above, the Directors have a reasonable
expectation that the Group will have access to adequate resources to continue in operational existence for the foreseeable future. For these
reasons, they continue to adopt the going concern basis of accounting in preparing the annual financial statements. However, the Directors
have concluded that in acknowledging the combination of adverse circumstances outlined above, it is appropriate to recognise that they
represent a material uncertainty that may cast significant doubt upon the Group’s ability to continue as a going concern and that, therefore,
the Group may be unable to realise its assets and discharge its liabilities in the normal course of business. Were the Group no longer a
going concern, adjustments may be required to the carrying value of assets, provision would be required for the future liabilities arising as a
consequence of the Group ceasing business and assets and liabilities currently classified as non-current would be reclassified as current.
However, after making enquiries and considering the relevant uncertainties, the Directors have a reasonable expectation that the Group and
the Company will have access to adequate resources to continue in operational existence for the foreseeable future and have prepared the
financial statements on that basis.
Egdon Resources plc Annual Report and Financial Statements 2020 47
Going concern – Implications of COVID-19 pandemic
The coronavirus pandemic represents a significant national and international public health emergency. The primary concern and focus for the
Company is the health and safety of our employees, contractors and other stakeholders. In this regard, Egdon’s office-based employees have
been working from home since March 2020 and will continue to do so until Government guidance changes.
At our well sites we have established procedures and plans to ensure continued safe operations are maintained in full compliance with existing
Government regulations and guidelines. Oil and gas workers are considered by the Government to be ‘key workers’. As such, travel to and from
site remains unrestricted as does the transportation of produced oil to the nearby refinery. We will continue to monitor the situation and act
within Government guidelines as matters develop, but at this stage do not anticipate any adverse impacts to our production operations.
Our plans for drilling at North Kelsey (PEDL241: Egdon 50%) have been adversely impacted by COVID-19. We have received approval from
Lincolnshire Council for an extension to the current planning to 31 December 2021 to enable works to be undertaken during 2021. We do not
anticipate that this delay will have a significant negative impact on the cash flow position of the Group, and therefore on its ability to continue
to operate as a going concern. Predicted future cash flows are dependent upon current timing assumptions on certain projects which should
operating conditions deteriorate could be negatively impacted. However, at the present time we have a reasonable expectation that there will
be no significant adverse impact on timing from the pandemic.
Adoption of new and revised standards
a) New standards, interpretations and amendments effective from 1 January 2019
New standards impacting the Group that have been adopted in the financial statements for the year ended 31 July 2020 are as follows:
IFRS 16 Leases
The Group adopted IFRS 16 using the modified retrospective approach, with recognition of transitional adjustments on the date of initial
application (1 August 2019), without restatement of comparative figures. The Group elected to apply the practical expedient to not reassess
whether a contract is, or contains a lease at the date of initial application. Contracts entered into before the transition date that were not
identified as leases under IAS 17 and IFRIC 4 were not reassessed. The definition of a lease under IFRS 16 was applied only to contracts
entered into or changed on or after 1 August 2019.
IFRS 16 provides for certain optional practical expedients, including those related to the initial adoption of the standard. The Group applied the
following practical expedients when applying IFRS 16 to leases previously classified as operating leases under IAS 17:
(a) Apply a single discount rate to a portfolio of leases with reasonably similar characteristics;
(b) Exclude initial direct costs from the measurement of right-of-use assets at the date of initial application for leases where the right-of-use
asset was determined as if IFRS 16 had been applied since the commencement date;
(c) Reliance on previous assessments on whether leases are onerous as opposed to preparing an impairment review under IAS 36 as at the
date of initial application.
As a lessee, the Group previously classified leases as operating or finance leases based on its assessment of whether the lease transferred
substantially all of the risks and rewards of ownership. Under IFRS 16, the Group recognises right-of-use assets and lease liabilities for most
leases.
Lease payments relating to leases previously accounted for as operating leases were spread on a straight-line basis over the lease term with
the total lease commitment disclosed in the financial statements. The operating lease cost for the year ended 31 July 2019 was £158,595.
From 1 August 2019, right-of-use assets are recognised in the financial statements at the carrying value that would have resulted from IFRS 16
being applied from the commencement date of the leases, subject to the practical expedients noted above.
At 31 July 2019, operating lease commitments amounted to £2,181,703 and this is not materially different to the undiscounted lease liability at
1 August 2019. From 1 August 2019, lease liabilities are measured at the present value of the remaining lease payments, discounted using the
Group’s incremental borrowing rate as at 1 August 2019. The Group’s incremental borrowing rate is the rate at which a similar borrowing could
be obtained from an independent creditor under comparable terms and conditions. The weighted-average rate applied was 10%.
The lease liability of £1.22 million as at 31 July 2020 represents the full discounted value of leases entered into by the Group as operator in a
joint arrangement. Where the Group is operator in a joint arrangement the Directors assess whether there is any obligation for the other parties
to fulfil payment towards the lease entered into by the Group under the joint arrangement. In order to recognise the obligation of the other
parties to the joint arrangement to fulfil their payment commitments under the joint operating agreement, a separate net investment in sub-
lease asset has been created. This asset is recognised at the discounted value of the liability to be settled by such other parties of £0.46 million
as at 31 July 2020; subsequently it is increased by the unwinding of the discount and reduced by receipts from the other parties to the joint
venture arrangements.
FINANCIAL STATEMENTSEgdon Resources plc Annual Report and Financial Statements 2020 48
Notes Forming Part of the Financial Statements
continued
2 Accounting Policies (continued)
It has been noted that due to a change in assumptions and measurement method the effect of IFRS 16 on adoption has been restated from
that disclosed in the interim financial information as at 31 January 2020. The total impact to retained earnings on adoption was reported as a
credit of £44,727 as at 31 January 2020. As at 31 July 2020 this value has been restated to a debit of £60,350.
The following table summarises the impacts of adoption of new reporting standards on the Group’s financial statements:
Non-current assets
Intangible assets
Property, plant and equipment
Right-of-use asset
Trade and other receivables
Total non-current assets
Current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
Current liabilities
Trade and other payables
Net current assets
Total assets less current liabilities
Non-current liabilities
Provisions
Lease liabilities
Net assets
Equity
Share capital
Share premium
Share-based payment reserve
Retained earnings
31 JULY 2019
AS ORIGINALLY
PRESENTED
£
IFRS 16
£
1 AUGUST 2019
AS RESTATED
£
21,780,577
9,696,458
–
–
–
–
635,929
457,502
21,780,577
9,696,458
635,929
457,502
31,477,035
1,093,431
32,570,466
1,675,003
1,617,925
3,292,928
(1,378,950)
1,913,978
33,391,013
48,388
–
48,388
1,723,391
1,617,925
3,341,316
(123,437)
(75,049)
(1,502,387)
1,838,929
1,018,382
34,409,395
(2,396,525)
–
(2,396,525)
–
(1,078,732)
(1,078,732)
30,994,488
(60,350)
30,934,138
14,984,035
26,742,656
113,537
(10,845,740)
30,994,488
–
–
–
(60,350)
(60,350)
14,984,035
26,742,656
113,537
(10,906,090)
30,934,138
Egdon Resources plc Annual Report and Financial Statements 2020 49
The following table summarises the impacts of adoption of new reporting standards on the Company’s financial statements:
31 JULY 2019
AS ORIGINALLY
PRESENTED
£
IFRS 16
£
1 AUGUST 2019
AS RESTATED
£
Non-current assets
Property, plant and equipment
Right-of-use asset
Investments
Total non-current assets
Current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
Current liabilities
Trade and other payables
Net current assets
Total assets less current liabilities
Provisions
Net assets
Equity
Share capital
Share premium
Merger reserve
Share-based payment reserve
Retained earnings
–
–
14,172,824
14,172,824
23,726,845
1,066,964
24,793,809
(91,312)
24,702,497
38,875,321
(20,525)
38,854,796
14,984,035
26,742,656
2,357,816
113,537
(5,343,248)
38,854,796
Reconciliation of minimum lease commitment to lease liabilities:
Minimum operating lease commitment at 31 July 2019
Less: adjustments as a result of a different treatment of extension and termination options
Undiscounted lease payments
Less: effect of discounting
Lease liability as at 1 August 2019
–
17,832
–
17,832
–
–
–
(11,891)
(11,891)
5,941
–
5,941
–
–
–
–
5,941
5,941
–
17,832
14,172,824
14,190,656
23,726,845
1,066,964
24,793,809
(103,203)
24,690,606
38,881,262
(20,525)
38,860,737
14,984,035
26,742,656
2,357,816
113,537
(5,337,307)
38,860,737
1 AUGUST 2019
£
2,181,703
(164,000)
2,017,703
(815,534)
1,202,169
b) New standards, interpretations and amendments not yet effective
There are a number of standards, interpretations and amendments to existing standards which have been issued by the International
Accounting Standards Board that are effective in future accounting periods, but are not mandatory for 31 July 2020 reporting periods. These
standards are effective from 1 January 2020, are not expected to have a material impact on the entity in the current or future reporting periods
and have not been early adopted by the Group. The most significant of these are shown below:
•
•
IAS 1 and IAS 8 Definition of Material;
IFRS 3 Definition of a Business – Amendments to IFRS 3; and
• The Conceptual Framework for Financial Reporting.
FINANCIAL STATEMENTSEgdon Resources plc Annual Report and Financial Statements 2020 50
Notes Forming Part of the Financial Statements
continued
2 Accounting Policies (continued)
Basis of consolidation
The Group financial statements incorporate the financial statements of Egdon Resources plc (the “Company”) and entities controlled by
the Company prepared to 31 July each year. Control is achieved where the Company is exposed to or has rights to variable returns from its
involvement with the investee and has the ability to affect those returns through its power over the investee.
The results of subsidiaries acquired or disposed of during the year are included in the Consolidated Statement of Comprehensive Income from
the effective date of acquisition or up to the effective date of disposal, as appropriate.
The financial statements of subsidiaries are prepared for the same reporting year as the Parent Company, using consistent accounting policies.
All inter-company balances and transactions, including unrealised profits arising from them, are eliminated in preparing the consolidated
financial statements.
Business combinations and goodwill
The Group uses the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisition
of a subsidiary is the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration
transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement.
Acquisition-related costs are expensed as incurred. Identifiable assets and liabilities and contingent liabilities assumed in a business
combination are measured initially at their fair values at the acquisition date.
The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree, and the acquisition date fair value of any
previous equity interest in the acquiree over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If
this is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly
in the Statement of Comprehensive Income in profit or loss as negative goodwill.
Where the Group incurs obligations to pay a net profit interest as part of an acquisition, the estimated fair value of the net profit interest is
recognised at the date of acquisition. Any subsequent variations in the net profit interest arising from events occurring after acquisition are
recognised through the Statement of Comprehensive Income in profit or loss. Where the fair value of a net profit interest cannot be established
(for example, because the relevant licence has yet to be fully appraised) no provision is recognised.
The value of options and any net profit interests arising on disposal are recognised at their fair value as at the date of disposal, except in
circumstances where the fair value cannot be determined.
An acquisition is not classified as a business combination when an acquired entity does not have business processes or outputs as defined by
IFRS 3 (Revised). Such transactions are accounted for as asset acquisitions and the assets acquired are measured at cost.
Investments in subsidiaries
Investments in subsidiaries are stated at cost less any provision for impairment.
Revenue from oil and gas sales
Revenue represents amounts receivable for oil and gas sales, net of VAT and trade discounts, and is recognised on delivery to third party
facilities. The revenue relates to sales of the Company’s own production and the sale of any back-out gas received. The price achieved is the
market price at the date of delivery. There is no right of return. Debtors arising from oil and gas sales typically have payment terms of 30 days
from the date of delivery.
Other operating income
Income charged to other companies net of VAT in respect of fees for acting as operator and consultancy fees is disclosed within other
operating income and is recognised on an accruals basis when the services are provided. The price charged is based on a market rate for the
services, agreed annually in advance. Debtors arising from charges to joint venture partners typically have payment terms of 30 days from the
end of the month in which the services are provided.
Back-out gas contract asset
Back-out gas arises under a contractual arrangement between parties sharing capacity through the pipeline that is used to bring gas from the
Ceres gas field onshore.
The contractual back-out arrangement seeks to provide compensation over the producing life of the asset to other pipeline users for capacity
given up to accommodate production from Ceres by allocating a proportion of the expected monthly production to the original users. Under the
agreement, the surrendered production is being recovered from the original users. However, future recoveries are not recognised in the financial
statements due to the high degree of uncertainty relating to the volumes of gas expected to be recovered within the contractual time frame.
Egdon Resources plc Annual Report and Financial Statements 2020 51
In 2013, Egdon was required to surrender its gas production to meet the back-out gas liability of a third party sharing the pipeline capacity.
The 2019 financial statements included a contract asset in respect of this back-out gas totalling £99,704 (2020: £Nil). This contract asset was
recorded at the best estimate of the price that was expected to be achieved when the back-out gas was recovered, movements in the value of
the contract asset were reflected in costs of sales in the prior year.
Jointly controlled operations and assets
The Group’s exploration and development activities are generally conducted as co-licensees in joint operation with other companies.
The financial statements reflect the relevant proportions of capital expenditure and operating revenues and costs applicable to the Group’s
interest.
The Group’s exploration and development activities in respect of the licence interests are accounted for as jointly controlled operations, except
for those where 100% of the licence is held within the Group.
Intangible assets – exploration and evaluation assets
The Group accounts for oil and gas expenditure under the full cost method of accounting.
Costs (other than payments to acquire the legal right to explore) incurred prior to acquiring the rights to explore are charged directly to cost of
sales in the Statement of Comprehensive Income. All costs incurred after the rights to explore an area have been obtained, such as geological,
geophysical, data costs and other direct costs of exploration and appraisal, are accumulated and capitalised as intangible exploration and
evaluation (“E&E”) assets.
E&E costs are not amortised prior to the conclusion of appraisal activities. At completion of appraisal activities if technical feasibility is
demonstrated and commercial reserves are discovered, then following development sanction, the carrying value of the relevant E&E asset will
be reclassified as a development and production asset, but only after the carrying value of the E&E asset has been assessed for impairment
and, where appropriate, its carrying value adjusted.
If after completion of appraisal activities in an area, it is not possible to determine technical feasibility or commercial viability, then the costs of
such unsuccessful exploration and evaluation are written-off to the Statement of Comprehensive Income as a component of cost of sales in the
period the relevant events occur. The costs associated with any wells which are plugged and restored are fully amortised when the decision
not to proceed is taken.
As permitted by IFRS 6, on adoption of IFRS, the Group continued to apply the accounting guidance of the Statement of Recommended
Practice issued by the UK Oil Industry Accounting Committee as applied under UK GAAP in respect of revenue generated from the sale
of oil during the appraisal process and the treatment on disposal of any part of an E&E asset. Revenue is recorded in the Statement of
Comprehensive Income. In order that no profit is recognised on the sale, an entry of the equivalent value is recorded in cost of sales with a
corresponding credit to exploration and evaluation assets.
On disposal of any part of an E&E asset, proceeds are credited against the cost of the asset. No profit is recognised on the disposal, unless the
proceeds exceed the total capitalised cost of the asset.
Intangible assets – other
Costs of purchased data used to assist with formulating strategy for licence applications and asset purchases are accumulated and capitalised
as other intangibles.
Such assets are considered to have an indefinite useful life and are not subject to amortisation but are tested annually for impairment and
elements that have no ongoing commercial value are written-off to cost of sales in the Statement of Comprehensive Income.
Impairment of intangible assets
E&E assets are reviewed annually for impairment and these are grouped with the development and production assets belonging to the
same exploration area to form the Cash Generating Unit (“CGU”) for impairment testing. The equivalent combined carrying value of the
CGU is compared against the CGU’s recoverable amount and any resulting impairment is written-off to cost of sales in the Statement of
Comprehensive Income. The recoverable amount of the CGU is determined as the higher of its fair value less costs to sell and its value in use.
E&E assets which are relinquished are written-down immediately in the accounting period of the relinquishment date. If the impairment tests
indicate that the circumstances resulting in a previous impairment charge have recovered so that the asset’s recoverable amount exceeds its
carrying value, previous impairments are reversed and a gain is recognised in cost of sales. Impairment reversals will not exceed any previous
impairment write-offs.
FINANCIAL STATEMENTSEgdon Resources plc Annual Report and Financial Statements 2020 52
Notes Forming Part of the Financial Statements
continued
2 Accounting Policies (continued)
Property, plant and equipment – development and production assets
Development and production (“D&P”) assets are accumulated into cost centres and represent the cost of developing the commercial reserves
and bringing them into production together with the E&E expenditures previously transferred from E&E assets as outlined in the policy above.
On acquisition of a D&P asset from a third party, the asset will be recognised in the financial statements on signature of the sale and purchase
agreement, subject to satisfaction of any substantive conditions within the agreement.
Costs relating to each cost centre are depleted on a unit of production method based on the commercial proven reserves for that cost centre.
Development assets are not depreciated until production commences. The depreciation calculation takes account of the residual value of
site equipment and the estimated future costs of development of recognised Proven and Probable Reserves, based on current price levels.
Changes in reserve quantities and cost estimates are recognised prospectively.
On disposal of any part of a D&P asset, proceeds are credited to the Statement of Comprehensive Income, less the percentage cost relating to
the disposal.
Impairment of development and production assets
A review is performed for any indication that the value of the D&P assets may be impaired. For D&P assets when there are such indications,
an impairment test is carried out on the CGU. Additional depletion is included within cost of sales within the Statement of Comprehensive
Income if the capitalised costs of the CGU exceed the associated estimated future discounted cash flows of the related commercial oil and
gas reserves. If impairment tests indicate that the circumstances resulting in a previous impairment charge have recovered so that the asset’s
future discounted cash flows exceed its carrying value, previous impairments are reversed and a gain is recognised in cost of sales. Impairment
reversals will not exceed any previous impairment write-offs.
Property, plant and equipment – other than D&P assets
Property, plant and equipment other than D&P assets are stated in the Statement of Financial Position at cost less accumulated depreciation.
Depreciation is provided at rates calculated to write-off the cost less estimated residual values of each asset over its expected useful life, as
follows:
Fixtures and fittings
Equipment
Computer equipment
Right-of-use asset
Provisions
–
–
–
–
25% straight-line
33% straight-line
33% straight-line
Over the lease term
Provisions are recognised when the Group has a present obligation as a result of a past event where it is probable it will result in an outflow of
economic benefits that can be estimated with reasonable certainty. If the effect of the time value of money is material, provisions are discounted
using a pre-tax rate that reflects, where appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due
to the passage of time is recognised as a finance cost.
Decommissioning and reinstatement provisions
Licensees have an obligation to restore fields to a condition acceptable to the relevant authorities at the end of their commercial lives. Provision
for decommissioning and reinstatement is recognised in full as a liability and an asset when the obligation arises. The asset is included
within exploration and evaluation assets or property, plant and equipment as is appropriate. The liability is included within provisions. The
amount recognised is the estimated cost of decommissioning and reinstatement, discounted where appropriate to its net present value, and
is reassessed each year in accordance with local conditions and requirements. Revisions to the estimated costs of decommissioning and
reinstatement which alter the level of the provisions required are also reflected in adjustments to the decommissioning and reinstatement
asset. The increase in the net present value of the future cost arising from the unwinding of the discount is included within finance costs.
Foreign currencies
Transactions denominated in foreign currencies are translated into sterling at the rate of exchange ruling at the date of the transaction.
Monetary assets and liabilities in foreign currencies are translated into sterling at the rate of exchange ruling at the end of the financial year. All
exchange differences are dealt with in the Statement of Comprehensive Income in profit or loss.
Egdon Resources plc Annual Report and Financial Statements 2020
53
Leases
The Group as a lessee
The Group has applied IFRS 16 using the modified retrospective approach, under which the cumulative effect of initial application is recognised
in retained earnings at 1 August 2019. As such, the 2019 comparatives have not been restated.
For the year ended 31 July 2019, the Group had operating leases which were accounted for as follows:
Rentals paid under operating leases are charged to the Statement of Comprehensive Income on a straight line basis over the lease term.
From 1 August 2019, the Group has adopted IFRS 16 and accounted for leases as follows:
The Group assesses whether a contract is or contains a lease, at the inception of a contract. The Group recognises a right-of-use asset and a
corresponding lease liability with respect to all lease agreements in which it is the lessee, except for short-term leases (defined as leases with a
lease term of 12 months or less) and leases of low value assets (defined as those with a value below £1,000 at inception). For these leases, the
Group recognises the lease payments as an operating expense on a straight-line basis over the term of the lease unless another systematic
basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by
using the rate implicit in the lease. If this rate cannot be readily determined, the Group uses its incremental borrowing rate.
Lease payments included in the measurement of the lease liability comprise:
•
fixed lease payments (including in-substance fixed payments), less any lease incentives;
• variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date;
•
the amount expected to be payable by the lessee under residual value guarantees;
• payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease
The lease liability is included in ‘Trade and other payables’ in the Statement of Financial Position.
The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective
interest method) and by reducing the carrying amount to reflect the lease payments made.
The Group re-measures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) whenever:
•
•
•
the lease term has changed in which case the lease liability is re-measured by discounting the revised lease payments using the initial
discount rate.
the lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual value, in
which cases the lease liability is re-measured by discounting the revised lease payments using the initial discount rate (unless the lease
payments change is due to a change in a floating interest rate, in which case a revised discount rate is used).
a lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease liability is re-
measured by discounting the revised lease payments using a revised discount rate.
The Group did not make any such adjustments during the periods presented.
The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the
commencement day and any initial direct costs. They are subsequently measured at cost less accumulated depreciation and impairment losses.
Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset. If a lease transfers ownership of
the underlying asset or the cost of the right-of-use asset reflects that the Group expects to exercise a purchase option, the related right-of-use
asset is depreciated over the useful life of the underlying asset. The depreciation starts at the commencement date of the lease.
The Group applies IAS 36 to determine whether a right-of-use asset is impaired and accounts for any identified impairment loss in full in profit
or loss in the year in which the impairment is identified.
For leases that occur under a Joint Operating Agreement (“JOA”), where the Group is the lead operator and holds the lease obligation with
the lessor, the Group recognises the lease liability in full, but applies IFRS 11 to identify if the right-of-use asset is shared between the partners
under the JOA. The Group therefore recognises the portion of the lease liability attributable to the partners under the JOA separately as a net
investment in a sub-lease in the Group’s Statement of Financial Position. The net investment in sub-lease is treated as a receivable and split
between short and long term receivables, in line with the terms of the corresponding lease. Subsequently the net investment in sub-lease is
measured by reflecting the movements on the corresponding lease, primarily reducing the receivable balance by the value of the payments
received from joint partners. Increases in the receivable are recognised as interest receivable in the Statement of Comprehensive Income,
calculated using the effective interest rate method.
FINANCIAL STATEMENTSEgdon Resources plc Annual Report and Financial Statements 2020 54
Notes Forming Part of the Financial Statements
continued
2 Accounting Policies (continued)
Inventory
Inventory is stated at the lower of cost and net realisable value. Cost is calculated annually based on the ratio of closing stock to total annual
production and the cost of production (including depreciation) for the year.
Cash and cash equivalents
Cash and cash equivalents comprise cash held by the Group and short-term bank deposits with an original maturity of three months or less.
The cash and cash equivalent amount in the Statements of Cash Flows includes overdrafts where relevant.
Financial instruments
Financial assets and financial liabilities are recognised in the Statement of Financial Position when the Group becomes a party to the
contractual provisions of the instrument.
Trade receivables are measured on initial recognition at transaction price and are subsequently measured at amortised cost using the effective
interest method less any impairment. Lease receivables relate entirely to net investment in sub-leases, the recognition and measurement of
which has been disclosed within the Leases accounting policy above. Other receivables are measured on initial recognition at fair value and
are subsequently measured at amortised cost using the effective interest method less any impairment. An impairment provision is established
by applying an expected credit loss model. The expected credit loss model assesses the probability of default over the lifetime of the receivable.
The simplified approach is adopted as, taking historic, current and forward looking information into account, no receivables have been
assessed as including a significant financial component. The provision amount is recognised in the Statement of Comprehensive Income.
Trade and other payables are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest
rate method.
Financial liabilities and equity instruments issued by the Group are classified in accordance with the substance of the contractual arrangements
entered into and the definitions of a financial liability and an equity instrument. An equity instrument is any contract that evidences a residual
interest in the assets of the Group after deducting all of its liabilities. Equity instruments issued by the Company are recorded at the proceeds
received, net of direct issue costs. Equity issued for non-monetary consideration is recorded at the fair value of the equity instruments issued or,
if appropriate, and where these can be reliably measured, at the fair value of the goods and services received.
Interest bearing bank loans, overdrafts and other loans are recorded at fair value, net of direct issue costs, when the proceeds are received and
subsequently at amortised cost. Finance costs are accounted for on an accruals basis using the effective interest method.
Taxation
The tax expense represents the sum of the tax currently payable and any deferred tax.
The tax currently payable is based on the taxable profit for the year. Taxable profit differs from net profit as reported in the Statement of
Comprehensive Income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes
items that are never taxable or deductible. The Company’s liability for current tax is calculated using tax rates that have been enacted or
substantively enacted by the reporting date.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements
and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences
and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can
be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business
combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, except where the Group is able
to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that
sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised. Deferred tax
is charged or credited to profit or loss, except when it relates to items charged or credited directly to equity, in which case the deferred tax is
also dealt with in equity.
Share-based payment transactions
Employees (including senior Executives) of the Group receive remuneration in the form of share-based payment transactions, whereby
employees render services as consideration for equity instruments (equity settled transactions). The cost of equity settled transactions is
Egdon Resources plc Annual Report and Financial Statements 2020 55
recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled,
ending on the date on which the relevant employees become fully entitled to the award (the vesting date).
The cumulative expense recognised for equity settled transactions at each reporting date until the vesting date reflects the extent to which
the vesting period has expired and the Group’s best estimate of the number of equity instruments that will ultimately vest. The Statement of
Comprehensive Income charge or credit for a period represents the movement in cumulative expense recognised as at the beginning and end
of that period.
Where equity instruments are granted other than to employees, the amount recognised in equity is the fair value of goods and services
received. An equivalent charge is capitalised within non-current assets where the equity instruments have been issued as consideration for the
acquisition of intangible exploration and evaluation assets.
No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are
treated as vesting irrespective of whether or not the market condition is satisfied, provided that all other performance conditions are satisfied.
Where the terms of an equity settled award are modified, as a minimum an expense is recognised as if the terms had not been modified. In
addition, an expense is recognised for any modification which increases the total fair value of the share-based payment arrangement or is
otherwise beneficial to the employee as measured at the date of modification.
Where an equity settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for
the award is recognised immediately. However, if a new award is substituted for the cancelled award, and designated as a replacement award
on the date that it is granted, the cancelled and new awards are treated as if they were a modification of the original award, as described in the
previous paragraph.
Retirement benefit costs
The Group has a defined contribution plan which requires contributions to be made into an administered fund. The amount charged to the
Statement of Comprehensive Income in respect of pension costs reflects the contributions payable in respect of the year.
Differences between contributions payable during the year and contributions actually paid are shown as either accrued liabilities or prepaid
assets in the Statement of Financial Position.
Use of judgements and estimates when preparing the annual financial statements
Preparation of the consolidated financial statements in accordance with IFRS requires management to make estimates and assumptions
affecting recognition and measurement in the Consolidated Statement of Financial Position and Statement of Comprehensive Income, as well
as the disclosure of contingent assets and liabilities. Future events may lead to these estimates being changed. In particular, judgements and
estimates are required when:
• Assessing the need for and measurement of impairment of exploration and evaluation costs and development and production assets
• Capitalising project costs
• Assessing the need for impairment of inter-company balances and investments
• Assessing contingent consideration on acquisition
• Estimating decommissioning and reinstatement liabilities
• Determining going concern
• Assessing the recoverability of the contract asset representing the right to receive future revenue
• Estimating the present value of lease liabilities and the associated right-of-use asset
The following key judgements have been applied in preparing these financial statements:
Exploration and evaluation costs and development and production assets
Management is required to assess the exploration and evaluation costs and development and production assets for indicators of impairment.
This assessment involves judgement in determining the likelihood that any of the identified potential indicators of impairment might result in a
material adjustment to the carrying value of the assets. Notes 14 and 15 disclose the carrying values of these assets. Following this assessment,
management has carried out an impairment test on the assets. This test compares the carrying value of the assets at the reporting date with
the expected discounted cash flow from the project. The assumptions and sensitivities considered in carrying out this test are set out under
Other key sources of estimation uncertainty below.
FINANCIAL STATEMENTSEgdon Resources plc Annual Report and Financial Statements 2020 56
Notes Forming Part of the Financial Statements
continued
2 Accounting Policies (continued)
Capitalisation of project costs
The assessment of whether costs incurred on project exploration and evaluation should be capitalised or expensed involves judgement.
Management considers the nature of the costs incurred and the stage of project development and concludes whether it is appropriate to
capitalise the costs.
Inter-company balances and investments
Management is required to assess the inter-company balances and investments held by the Parent Company for indicators of impairment
at the reporting date. As part of this assessment management considers the output from the impairment tests carried out in respect of
exploration and evaluation costs and development and production assets. The derived asset values at the reporting date are considered to be
an indicator of the underlying value of the relevant Company. These values are compared to the carrying values of the inter-company balances
or investments at the reporting date, as disclosed in Notes 17 and 18, and consideration is given to whether any provision for impairment is
required. The assumptions and sensitivities applied in the assessment are therefore the same as those detailed under Other key sources of
estimation uncertainty for exploration and evaluation costs and development and production assets below. As required by IFRS 9, the expected
credit loss model is applied to balances due from Group companies. Judgement is required in assessing whether there have been any changes
to the business environment in which the Group operates since initial recognition of the balances. Should any such changes occur, an
assessment of the impact on the carrying value of the Group balances is required.
Leases
Assessing the length of the lease
In assessing the length of a lease in respect of exploration and evaluation and development and production assets, the Directors have
considered whether the lease agreements contain appropriate break clauses and/or provisions for extension, it has been assumed that the
leases will remain in place for the life of the asset as estimated for the purposes of the associated asset impairment reviews.
Other key sources of estimation uncertainty:
Exploration and evaluation costs and development and production assets
In calculating the discounted cash flows, management has used a production profile based on its Best Estimate of Proven and Probable
Reserves of the asset and a range of assumptions, including oil/gas prices and discount rates. The Best Estimate of Proven and Probable
Reserves are derived from Monte Carlo simulations generated from geological models of the relevant resources. By their nature these models
are only able to be validated once the relevant field is developed and is on production. The production profiles are based on existing and
planned facilities; the production profiles are subject to revision based on current production and other data, and if any planned expenditure
is deferred. Revisions to the best estimate of Proven and Probable Reserves resulted in the recognition in both 2020 and 2019 of impairments
as disclosed in Notes 14 and 15. Oil and gas prices are subject to fluctuation dependant on market conditions. As a generality, a change in
commodity prices or expected recoverable reserves would have a corresponding change on the expected cash flows attributable to the
relevant asset. Should the production profile extend, the relevant assets would be on production for longer and therefore operating costs would
be incurred over a longer period. As such costs are largely independent of production volumes, there would be a reduction in cash flows;
discounting would also further reduce the present value of the cash flows.
The timing of expected cash flows may be impacted by planning delays and political uncertainty. Delays may lead to increased costs resulting
in a reduction to the present value of cash flows. The likelihood of such delays occurring has been taken into account in preparing forward cost
estimates and production forecasts.
Management considers the likelihood that the OGA will renew licences expiring in future periods when assessing future expected cash flows.
Where there is no expectation that a licence will not be renewed no adjustment is made to the future expected cash flow.
Government moratorium
Management considers the likely impact of the Government moratorium on hydraulic fracturing when assessing future expected cash
flows. Given the ongoing dialogue between the Group, its industry peers, the OGA and other regulators, the Directors have reviewed the
unconventional licence portfolio and have impaired certain less prospective and/or non-core licences; as disclosed in Note 14 but no
significant adjustment to future cash flows has been made in respect of its core unconventional licence interests.
Contingent consideration
Contingent consideration is measured at fair value at the date of the transaction. Changes to the amount of the contingent consideration arising
as a result of a post-acquisition event are reflected in profit or loss where the additional consideration is cash or other assets. The amount is
not re-measured where the additional consideration is equity. Trade and other payables include a liability of £417,000 (2019: £417,000) in respect
of deferred consideration arising on the acquisition of an additional 5% interest in PEDL180 and PEDL182.
Egdon Resources plc Annual Report and Financial Statements 2020 57
Decommissioning and reinstatement
The Group determines decommissioning and reinstatement liabilities by making assumptions, based on the current economic environment,
which management believes are a reasonable basis upon which to estimate the future liability. These estimates are reviewed regularly to take
into account any material changes to assumptions. However, the actual decommissioning and reinstatement cost will ultimately depend upon
future market prices for the necessary works required which will reflect market conditions at the relevant time.
Furthermore, actual costs will also reflect the extent of decommissioning and reinstatement work required to be performed, whether the works
can be performed as part of a multi-well programme or in isolation and progress in the relevant technologies. The carrying value of provisions
for decommissioning and reinstatement is given in Note 23.
Going concern
The preparation of the financial statements requires an assessment of the validity of the going concern assumption, this being dependent on
the availability of adequate financial resources to allow the Group to continue in operational existence for the foreseeable future. The incoming
financial resources expected to be available depend on estimated production volumes, forecast oil and gas prices and operating costs.
Expenditure is primarily dependent on the planned programme of exploration, its estimated cost and timing. The Directors also consider the
effect and timing of potential corporate transactions.
Contract asset relating to the right to receive gas
The 2019 financial statements included a contract asset in respect of the right to receive back-out gas relating to the Ceres field recoverable
from future production from neighbouring fields. In determining the likely value of the asset, the Directors considered estimates of future
production volumes provided by the operators of these neighbouring fields and the anticipated future commodity price. The carrying amount of
this asset at 31 July 2020 is £Nil (2019: £99,704).
Leases
Determining the discount rate
In determining the discount rate, the Directors have considered the borrowing rates implicit in the lease agreements. In the absence of implicit
borrowing rates, the Directors have determined that an interest rate of 10% is a fair representation of the Group’s incremental borrowing rate
and this rate has been used to calculate the present value of lease liabilities and the associated right-of-use asset.
3 Segmental Information
For management purposes, the Group has operated in two geographical markets: UK and historically France. With effect from 31 July 2018
the Group ceased all activity in France. No activity occurred in France in the 2020 financial year. In 2019 an abandonment provision no longer
required in respect of the Mairy prospect was released following the closure of French operations.
No information relating to the Group’s operating segments has been presented for the year ended 31 July 2020 or the year ended 31 July 2019
due to the immaterial nature of the amounts associated with the French operations in both years.
Revenue of the Group for the year has been derived from the sale of oil and gas which has been extracted from wells in the UK during
production. Oil is a commodity product and can be sold to a number of customers on industry-standard terms. For reasons of operational
convenience, 79% (2019: 59%) of oil sales in the year were made to one organisation. Gas is a commodity product and can be sold to a number
of customers on industry-standard terms. For contractual reasons in both 2020 and 2019 gas from the Group’s producing field was sold to only
one customer at any point in time.
Oil and gas prices are affected by different economic factors. Revenue from contracts with customers has therefore been disaggregated as
follows:
Revenue from gas sales
Revenue from oil sales
2020
£
693,527
270,093
963,620
2019
£
1,697,117
499,409
2,196,526
FINANCIAL STATEMENTSEgdon Resources plc Annual Report and Financial Statements 2020 58
Notes Forming Part of the Financial Statements
continued
4 Loss before Taxation
The loss for the year before taxation is stated after charging/(crediting):
Auditor’s remuneration (see Note 5)
Depreciation
Impairments – intangible fixed assets
Impairments – property, plant and equipment
Gain on disposal of assets
Exploration and appraisal costs written-off
Pre-licence costs expensed
Foreign exchange loss
Share based payment
Operating lease rentals:
– land and buildings (in administrative expenses)*
– leases on operational sites (in costs of sales)*
2020
£
65,371
182,270
1,171,591
1,663,473
(5,058)
–
193,953
12,594
8,968
–
–
2019
£
54,550
632,234
–
408,000
–
(2,490)
48,769
3,982
10,948
25,000
133,595
*
IFRS 16 has been applied from 1 August 2019 under which all leases have been recognised as finance leases, therefore no operating lease
rental charges have been recognised through the Statement of Comprehensive Income. Please see Note 2 for details of the accounting
policy for leases under IFRS 16.
5 Auditor’s Remuneration
Audit services:
2020
£
2019
£
Fees payable to the Group’s auditor for the audit of the Group’s annual financial statements
20,350
16,320
Other services:
The auditing of financial statements of subsidiaries of the Company
Audit related assurance services
All other services
Total audit and other services
6 Employee Information
Employee costs for the Group and Company during the year amounted to:
Wages and salaries
Social security costs
Pension costs
31,545
6,400
7,076
65,371
2020
£
749,187
93,750
51,837
894,774
32,130
3,900
2,200
54,550
2019
£
838,079
104,054
75,853
1,017,986
The average number of persons employed by the Group and Company in the year, including Executive and Non-executive Directors, was:
Management and administration
2020
NUMBER
11
2019
NUMBER
12
Egdon Resources plc Annual Report and Financial Statements 2020 59
7 Remuneration of Directors and Key Management
The Board considers that the Group and Company’s key management comprises the Directors of the Company.
Group and Company
Directors’ emoluments
Medical cover
Employer’s national insurance contributions
Short-term employment benefits
Post-employment benefits
Share based payment attributable to Directors
The emoluments and compensation of individual Directors were as follows:
2020
£
411,600
5,483
51,062
468,145
39,431
4,291
511,867
2019
£
413,767
4,240
66,081
484,088
55,827
5,238
545,153
M Abbott
P Stephens
K Ratcliff
W Roberts
J Field
(resigned 8 January 2019)
A Lodge
(resigned 12 April 2019)
M Durham
(appointed 8 January 2019)
T Davies
(appointed 12 April 2019)
SALARY
AND
FEES
£
183,584
40,125
26,750
5,600
–
–
137,708
17,833
411,600
BONUS
£
MEDICAL
£
PENSION
(NOTE 9)
£
TOTAL
2020
£
TOTAL
2019
£
–
–
–
–
–
–
–
–
–
2,546
8,867
194,997
205,986
–
–
–
–
–
–
–
23,564
–
–
40,125
26,750
29,164
–
–
45,000
30,000
32,815
48,126
13,333
2,937
7,000
147,645
93,574
–
–
17,833
5,000
5,483
39,431
456,514
473,834
The emoluments of the highest paid Director excluding pension contributions were £186,130 (2019: £180,041). Pension contributions include
contributions made under a salary sacrifice arrangement totalling £Nil (2019: £17,070).
Life policy and critical illness premiums of £5,378 (2019: £5,378) were paid in respect of the Managing Director and Directors’ indemnity
insurance premiums of £14,905 (2019: £11,307) were paid in respect of all Directors.
FINANCIAL STATEMENTSEgdon Resources plc Annual Report and Financial Statements 2020 60
Notes Forming Part of the Financial Statements
continued
7 Remuneration of Directors and Key Management (continued)
Directors’ share options outstanding at 31 July 2020 and at 31 July 2019:
EXERCISE
PRICE (P)
NUMBER OF
OPTIONS
DATE
GRANTED
VESTING
DATE
Options awarded in the current year
No options awarded in the current year
Options awarded in prior years and still extant
as at 31 July 2020
M Abbott
M Abbott
M Durham
M Abbott
M Durham
M Abbott
M Durham
Options extant as at 31 July 2019, but lapsing or forfeited
in the current year
No options lapsed in respect of Directors’ share options in
the current year
10.00
20.62
22.75
9.70
9.70
7.85
7.85
600,000
363,725
659,341
979,381
773,196
1,210,191
955,414
01/01/2013
01/01/2014
13/05/2014
01/05/2016
18/08/2014
01/08/2016
16/11/2015
16/11/2015
01/08/2016
01/08/2016
24/01/2019
01/01/2020
24/01/2019
01/01/2020
No Director is entitled to receive any shares under the terms of any long-term incentive scheme in respect of qualifying services other than as
noted above.
8 Share-Based Payment Plans
On 13 May 2008, the Company established an Enterprise Management Incentive Scheme and made the initial grant of options to all eligible
employees.
The following share-based payment arrangements were in existence during the current and prior years:
NUMBER AT
DATE OF GRANT
GRANT
DATE
EXPIRY
DATE
PRICE
VESTING
DATE
Options awarded in the current year
No options were awarded in the current year
Options awarded in prior years and still extant
as at 31 July 2020
Granted on 20 November 2012
791,750
20/11/2012
31/03/2022
Granted on 1 January 2013
Granted on 14 January 2014
Granted on 13 May 2014
Granted on 9 June 2014
Granted on 18 August 2014
Granted on 27 March 2017
Granted on 24 January 2019
Options extant as at 31 July 2019, but lapsing or
forfeited in the current year
1,200,000
01/01/2013
31/03/2022
762,765
654,705
780,000
659,341
14/01/2014
31/12/2023
13/05/2014
01/05/2024
09/06/2014
31/05/2024
18/08/2014
31/07/2024
300,000
27/03/2017
28/02/2027
4,526,561
24/01/2019
01/01/2030
10.00p
10.00p
10.38p
20.62p
26.00p
22.75p
10.00p
7.85p
20/11/2013
01/01/2014
01/01/2016
01/05/2016
01/06/2016
01/08/2016
27/03/2017
01/01/2020
Granted on 24 January 2019
57,134
24/01/2019
01/01/2030
7.85p
01/01/2020
The exercise price is determined as the average middle-market closing price on the three days preceding the grant. The options do not have a
cash settlement alternative. Options vest for all grantees that remain in service at the vesting date.
Egdon Resources plc Annual Report and Financial Statements 2020 61
The fair value of equity settled share options granted is estimated as at the date of grant using a Black–Scholes option pricing model, taking
into account the terms and conditions upon which the options were granted.
The expected volatility in respect of all options granted in or after December 2011 is based on the assumption that the historic volatility of Egdon
Resources plc is indicative of future trends for Egdon Resources plc, which may not necessarily be the actual outcome.
The following table lists the inputs into the model for the share options granted in the prior year:
Grant date share price (pence)
Expected price (pence)
Expected volatility (%)
Option life (years)
Risk free interest rate (%)
24/01/2019
7.85
7.85
5.13
11
0.21
The following table illustrates the number and weighted average exercise prices (WAEP) in pence of and movement in share options during
the year:
Group and Company
Opening balance
Granted during the year
Lapsed during the year
Exercised during the year
Outstanding at 31 July 2020
2020
NUMBER
11,183,483
–
(57,134)
–
11,126,349
2020 WAEP
(PENCE)
11.27
–
7.85
–
11.29
2019
NUMBER
9,881,810
4,526,561
(3,224,888)
–
11,183,483
2019 WAEP
(PENCE)
13.21
7.85
12.40
–
11.27
The weighted average remaining contractual life of share options outstanding as at 31 July 2020 is 7.00 years (2019: 7.79 years). At 31 July 2020,
11,126,349 (2019: 6,656,921) of the total number of share options outstanding could be exercised and these options had a weighted average
exercise price of 11.29 pence (2019: 13.60 pence).
9 Defined Contribution Pension Plan
The Group operates a defined contribution retirement plan for all qualifying employees who wish to participate. The assets of the scheme are
held separately from those of the Group in funds under the control of trustees.
The total cost in the year of £28,273 (2019: £35,568) represents the sum payable to the scheme by the Group at rates agreed in respect of
participating employees excluding contributions made under a salary sacrifice arrangement.
10 Finance Income
Interest receivable on net investment in sub-lease
Interest receivable on short-term deposits
11 Finance Costs
Unwinding of decommissioning discount
Other finance charges
Interest on lease liabilities
2020
£
47,457
755
48,212
2020
£
56,373
15
113,442
169,830
2019
£
–
3,844
3,844
2019
£
52,624
39
–
52,663
FINANCIAL STATEMENTSEgdon Resources plc Annual Report and Financial Statements 2020 62
Notes Forming Part of the Financial Statements
continued
12 Income Tax
The major components of income tax expense for the years ended 31 July 2020 and 2019 are:
a) Recognised in profit or loss
Current income tax charge
b) A reconciliation between tax expense and the product of the
accounting loss and the standard rate of tax in the UK
for the years ended 31 July 2020 and 2019 is as follows:
Accounting loss before tax from continuing operations
Loss multiplied by the standard rate of tax of 19.00% (2019: 19.00%)
Expenses not permitted for tax purposes
Movement in unrecognised deferred tax assets
Income tax expense recognised in the current year relating to continuing operations
2020
£
–
2019
£
–
(4,748,201)
(902,158)
10,711
891,447
–
(1,716,925)
(326,216)
9,947
316,269
–
c) Factors that may affect the future tax charge
The Group expects to be able to access trading losses of £53,587,367 (2019: £50,443,643) which may reduce future tax charges. Future tax
charges may also be reduced by capital allowances on cumulative capital expenditure, supplementary allowance on ring-fenced exploration
expenditure and the extent to which any profits are outside ring-fenced activities.
d) Deferred taxation
The Group has an unrecognised deferred taxation asset of £9,058,062 (2019: £7,767,286) at the year end, calculated at a rate of 30% (2019: 30%)
which is an estimate of the rate anticipated to be applicable at the time the net tax losses are expected to be utilised. The deferred tax rate
for 2020 is based on the rate applicable to ring-fenced activities as for 2019. This is represented by accumulated tax losses of £53,587,367
(2019: £50,443,643) and short-term timing differences in respect of provisions of £2,456,978 (2019: £2,376,000) offset by accelerated capital
allowances of £25,850,803 (2019: £26,928,690).
13 Loss Per Share
Basic loss per share
Loss for the financial year
Basic weighted average Ordinary shares in issue during the year
Basic loss per share
Diluted loss per share
Loss for the financial year
Diluted weighted average Ordinary shares in issue during the year
Diluted loss per share
The share options are not dilutive in 2020 or 2019 as a loss was incurred.
2020
£
2019
£
(4,748,201)
(1,716,925)
309,822,474
266,870,265
PENCE
(1.53)
2020
£
PENCE
(0.64)
2019
£
(4,748,201)
(1,716,925)
309,822,474
266,870,265
PENCE
(1.53)
PENCE
(0.64)
Egdon Resources plc Annual Report and Financial Statements 2020
63
14 Intangible Fixed Assets
Group
At 31 July 2018
Additions
Transfers to property, plant and equipment
At 31 July 2019
Additions
Impairment charge
At 31 July 2020
Net book value
At 31 July 2020
At 31 July 2019
At 31 July 2018
EXPLORATION
AND
EVALUATION
COSTS
£
19,441,749
2,220,949
(12,080)
21,650,618
842,320
(1,171,591)
OTHER
INTANGIBLES
£
129,959
–
–
TOTAL
£
19,571,708
2,220,949
(12,080)
129,959
21,780,577
–
–
842,320
(1,171,591)
21,321,347
129,959
21,451,306
21,321,347
21,650,618
19,441,749
129,959
129,959
129,959
21,451,306
21,780,577
19,571,708
Exploration and evaluation costs
Exploration and evaluation costs represent the Group’s unevaluated oil and gas interests at 31 July 2020. These are its equity interests in
licences in the UK held through its wholly owned subsidiaries and through its indirect subsidiaries as disclosed in Note 17. Additions to
exploration and evaluation costs represent exploration and appraisal costs incurred in the year in respect of unproven properties.
A formal impairment review has been carried out and the Directors have considered and reviewed the potential value of all projects and
licences. The Directors have also considered the likely opportunities for realising the value of licences, either by development of discovered
hydrocarbons, the farm-out of the asset leading to a development or by the disposal of the assets, and have concluded that, the likely value of
each exploration area is individually in excess of its carrying amount.
The key inputs into the net present value calculations are a discount rate of 10% (2019: 10%) and gas prices per therm of 26.5p – 40p (2019:
50p) or oil prices per barrel of US$43 – US$60 (2019: US$65). Commodity price forecasts are taken from published information and established
as at the effective date of the impairment. The gas and oil prices used reflect an estimate of the forward curve in July 2020 based on a range of
the current views of London based investment banks and an average is used to reflect the prevailing range of forecasts. The price is based on
the National Balancing Point (NBP) price for gas and the Brent price for oil.
In determining an appropriate discount rate, the Directors have considered the time value of money and the cost of capital specific to the asset
being assessed. Despite the historically low interest rates and low inflation rates currently being experienced and anticipated going forward, the
discount rate has been set at a value of 10% to reflect the anticipated costs of capital.
The underlying assumption relating to the exploration and evaluation assets is that commercial reserves will be discovered, with the quantities
being estimated using Monte Carlo simulation techniques, which reflect exploration risks. Based on this assumption and the key estimates, the
excess of the aggregate net present value of the expected future cash flows is substantially in excess of the aggregate book value of the assets.
Therefore, any reasonably possible changes to the key estimates would have no impact on the carrying value of the assets. However, should
future exploration results indicate that commercial reserves do not or are unlikely to exist within any one prospect, the carrying value of that
prospect would be expected to be written-off.
The Directors have considered the potential impact of the moratorium on hydraulic fracturing for shale-gas. In light of the moratorium and
updated technical information the Directors have reviewed the portfolio of unconventional assets and believe it prudent and appropriate
to impair certain less prospective and/or non-core licences at this time. These comprise licences in the so-called Welbeck Low in the East
Midlands and in NW England and include PEDLs 001, 039, 130, 202 and EXL253. These impairments total £0.53 million.
However, the Directors have also considered the potential impact of the moratorium on the Group’s assets in its core area of the Gainsborough
Trough. Activity in the basin is currently on pause. The Directors remain optimistic that it will be possible to demonstrate that hydraulic
fracturing for shale-gas in this core basin can be undertaken in a safe and environmentally responsible manner and that this will result in the
lifting of the hydraulic fracturing moratorium. As at 31 July 2020, the book value of the Group’s unconventional assets was £15.15 million
(2019: £15.29 million).
FINANCIAL STATEMENTSEgdon Resources plc Annual Report and Financial Statements 2020 64
Notes Forming Part of the Financial Statements
continued
14 Intangible Fixed Assets (continued)
The Directors have also agreed upon an impairment for the PEDL 143 licence on the basis that the new operator was unable to identify a
suitable drilling location in the Holmwood area and has therefore relinquished the licence. This impairment is for the full value of the asset
(£0.64 million). The total value of impairments is therefore £1.17 million (2019 - £Nil).
Other intangibles
Other intangibles represent the costs of purchased data and other geological standards which are used to assist with formulating strategy
for licence applications and asset purchases. The costs are subject to an annual impairment test, and elements are written-off if they have no
future commercial value.
15 Property, Plant and Equipment
Group
Cost
At 1 August 2018
Additions
Transfers from intangible assets
At 31 July 2019
Additions
Disposals
At 31 July 2020
Depreciation
At 1 August 2018
Charge for the year
Impairments
At 31 July 2019
Charge for the year
Impairments
At 31 July 2020
Net book value
At 31 July 2020
At 31 July 2019
At 31 July 2018
DEVELOPMENT
AND
PRODUCTION
ASSETS
£
EQUIPMENT,
FIXTURES AND
FITTINGS
£
COMPUTER
EQUIPMENT
£
TOTAL
£
21,074,591
181,894
12,080
21,268,565
81,323
(26,318)
25,774
9,145
–
34,919
–
–
103,911
21,204,276
–
–
191,039
12,080
103,911
21,407,395
–
–
81,323
(26,318)
21,323,570
34,919
103,911
21,462,400
10,541,018
629,694
408,000
11,578,712
98,846
1,663,473
13,341,031
7,982,539
9,689,853
10,533,573
25,774
2,540
–
28,314
3,050
–
31,364
3,555
6,605
–
103,911
10,670,703
–
–
103,911
–
–
632,234
408,000
11,710,937
101,896
1,663,473
103,911
13,476,306
–
–
–
7,986,094
9,696,458
10,533,573
Impairment reviews have been performed using recoverable amounts based on the estimated residual values of the wider licence area plus
pre-tax value in use assessed from forecast production over the life of the fields, gas prices per therm of 26.5p - 40p (2019: 50p), or oil prices
per barrel of US$43 – US$60 (2019: US$65) and a discount rate of 10% (2019: 10%). Commodity price forecasts are taken from published
information and established as at the effective date of the impairment. The gas and oil prices used reflect an assessment of the forward curve
in July 2020 based on a range of the current views of London based investment banks and an average is used to reflect the prevailing range of
forecasts. The price is based on the National Balancing Point (NBP) price for gas and the Brent price for oil.
In determining an appropriate discount rate, the Directors have considered the time value of money and the cost of capital specific to the asset
being assessed. Despite the historically low interest rates and low inflation rates currently being experienced and anticipated going forward,
the discount rate has been set at a value of 10% to reflect the anticipated costs of capital. As explained in the accounting policies, Monte
Carlo simulation is used for determining production profiles and therefore the production profiles reflect the inherent risks associated with the
production assets.
Egdon Resources plc Annual Report and Financial Statements 2020 65
The excess of the aggregate net present value of the expected future cash flows over the aggregate book value of the assets is circa
£5.98 million (2019: £4.3 million). The Directors do not consider that any reasonably possible changes to the key estimates would require a
material impairment provision; however, certain assets have limited headroom and therefore immaterial impairment charges may arise on
individual assets.
All impairment charges and reversals are recognised as a component of cost of sales within the Statement of Comprehensive Income.
Current year
An impairment charge of £506,903 (2019 - £Nil) has been recognised in relation to the Ceres Gas Field. The impairment arises as a
consequence of the current gas price forecast and operating pattern which has caused the Ceres production to become uneconomical. Based
on the impairment reviews, the pre-tax value in use of the Ceres Gas Field as at 31 July 2020 is £Nil (2019 - £695,000) and the asset has been
fully impaired to reflect this.
An impairment charge of £1,156,570 (2019 - £Nil) has been recognised in relation to the Dukes Wood and Kirklington oil fields. The impairment
arises as a consequence of the level of investment required in order for the fields to operate economically and the challenging outlook for the
E&P farm-out space. Based on the impairment reviews, the pre-tax value in use of Dukes Wood and Kirklington oil fields as at 31 July 2020 is
£Nil (2019 - £1,548,000) and the assets have been fully impaired to reflect this.
Prior year
The impairment charge of £408,000 related to the Fiskerton Airfield Oil Field. The impairment arose following seismic data reprocessing which
resulted in a reduction to the forward production profile and reserves for the field. Based on the impairment reviews, the pre-tax value in use
of the Fiskerton Airfield Oil Field at 31 July 2019 was estimated at £0.22 million and the book value of the asset was reduced to this amount.
Any reduction in the net present value of future cash flow forecasts resulting from changes in key estimates was expected to result in a further
impairment charge.
Company
Cost
At 1 August 2018
Additions
At 31 July 2019
Additions
At 31 July 2020
Depreciation
At 1 August 2018
Charge for the year
At 31 July 2019
Charge for the year
At 31 July 2020
Net book value
At 31 July 2020
At 31 July 2019
At 31 July 2018
COMPUTER
EQUIPMENT
£
TOTAL
£
27,168
–
27,168
–
27,168
27,168
–
27,168
–
27,168
–
–
–
27,168
–
27,168
–
27,168
27,168
–
27,168
–
27,168
–
–
–
FINANCIAL STATEMENTSEgdon Resources plc Annual Report and Financial Statements 2020 66
Notes Forming Part of the Financial Statements
continued
16 Right-of-Use asset
Group
Cost
At 31 July 2019
Impact of adoption of IFRS 16
At 1 August 2019 as restated
Additions
At 31 July 2020
Depreciation
At 31 July 2019
Charge for the year
At 31 July 2020
Net book value
At 31 July 2020
At 31 July 2019
Company
Cost
At 31 July 2019
Impact of adoption of IFRS 16
At 1 August 2019 as restated
Additions
At 31 July 2020
Depreciation
At 31 July 2019
Charge for the year
At 31 July 2020
Net book value
At 31 July 2020
At 31 July 2019
RIGHT OF USE
ASSET –
EXPLORATION
AND
EVALUATION
ASSETS
£
RIGHT OF USE
ASSET –
DEVELOPMENT
AND
PRODUCTION
ASSETS
£
RIGHT OF USE
ASSET –
PROPERTY
£
–
17,832
17,832
107,519
125,351
–
19,624
19,624
105,727
–
–
192,557
192,557
–
192,557
–
11,088
11,088
181,469
–
–
425,540
425,540
46,118
471,658
–
49,662
49,662
421,996
–
RIGHT OF USE
ASSET –
PROPERTY
£
–
17,832
17,832
107,519
125,351
–
19,624
19,624
105,727
–
TOTAL
£
–
635,929
635,929
153,637
789,566
–
80,374
80,374
709,192
–
TOTAL
£
–
17,832
17,832
107,519
125,351
–
19,624
19,624
105,727
–
Egdon Resources plc Annual Report and Financial Statements 2020 67
17 Investments in Subsidiaries
Company
Balance at 31 July 2018
Balance at 31 July 2019
Additions
Balance at 31 July 2020
SHARES IN
SUBSIDIARY
UNDERTAKINGS
£
LOANS TO
SUBSIDIARY
UNDERTAKINGS
£
9,138,000
9,138,000
100
5,034,824
5,034,824
–
TOTAL
£
14,172,824
14,172,824
100
9,138,100
5,034,824
14,172,924
Holdings of more than 20%
As at the year end the Company directly and indirectly held more than 20% of the share capital of the following companies:
Company
Egdon Resources U.K. Limited*
Egdon Resources Europe Limited
Erstor Limited*
* Held directly.
COUNTRY OF
REGISTRATION OR
INCORPORATION
CLASS OF
SHARES HELD
% OF SHARES
HELD
England
England
England
Ordinary
Ordinary
Ordinary
100
100
100
All active companies are involved in oil and gas exploration and production. The registered office address of the subsidiary companies is the
same as that of the Parent Company.
Erstor Limited was incorporated on 16 June 2020 and was dormant throughout the period.
18 Trade and Other Receivables
Amounts falling due after more than one year:
Net investment in sub-lease (Note 22)
Amounts falling due within one year:
Trade receivables – balances due from customer contracts
Trade receivables – balances due from joint venture partners
Amounts owed by subsidiaries
VAT recoverable
Other receivables
Prepayments
Ceres contract asset
Net investment in sub-lease (Note 22)
GROUP
2020
£
403,486
403,486
45,897
939,056
–
53,158
63,419
676,313
–
54,016
1,831,859
GROUP
2019
£
COMPANY
2020
£
COMPANY
2019
£
–
–
74,856
1,172,272
–
–
75,285
252,886
99,704
–
–
–
–
–
–
–
–
–
24,906,048
23,638,822
14,383
–
33,068
–
–
24,503
–
63,520
–
–
1,675,003
24,953,499
23,726,845
During the prior year, one of the Group’s joint venture partners on PEDL253 (Humber Oil and Gas Limited), defaulted on a balance due to
Egdon. The payments were due under the JOA and the farm-out Agreements. The outstanding balance at the date of default was £0.78 million.
This amount is still outstanding as at 31 July 2020 and is shown in the table below as over six months past due. On 25 August 2020, on receipt
of funds from Humber Oil and Gas Limited in accordance with the settlement agreement, this debtor was cleared in full. See Note 32 for further
details.
FINANCIAL STATEMENTSEgdon Resources plc Annual Report and Financial Statements 2020 68
Notes Forming Part of the Financial Statements
continued
18 Trade and Other Receivables (continued)
The Directors consider that the carrying amount of trade and other receivables approximates to their fair value.
Considerations relating to the credit risk of the Group and Company’s trade and other receivables are detailed in Note 21.
Trade and other receivables represent amounts due from customers for the Group’s oil and gas products, balances due from joint venture
partners regulated by signed operator agreements.
Amounts owed to the Company from subsidiaries are due at call but are not expected to be called in the year ahead.
As at 31 July 2020 no trade receivables were considered to be impaired (2019: £Nil). Where trade receivables relate to recharges to joint venture
partners, Egdon has a right of recourse to the licence interest and assets of any defaulting party.
As at 31 July 2020 trade receivables of £958,243 (2019: £1,073,129) were past due but not impaired. The ageing analysis of these trade
receivables is as follows:
Up to three months past due
Three to six months past due
Over six months past due
2020
£
41,637
33,416
883,190
958,243
2019
£
11,075
186,813
875,241
1,073,129
The above past due balances include £0.78 million due from Humber Oil & Gas Limited. Subsequent to 31 July 2020, pursuant to a settlement
agreement with Humber Oil and Gas Limited, this balance has been cleared in full. Of the remaining balance, 45% has been received prior to
the date of this report. It is expected that the remaining balances will have been cleared by 31 July 2021.
Other receivables do not contain impaired assets.
19 Cash and Cash Equivalents
Short-term bank deposits
Restricted cash at bank
Cash at bank
GROUP
2020
£
716,235
–
130,989
847,224
GROUP
2019
£
146,244
207,647
1,264,034
1,617,925
COMPANY
2020
£
109
–
43,104
43,213
COMPANY
2019
£
109
–
1,066,855
1,066,964
The Directors consider that the carrying amount of these assets approximates to their fair value. The credit risk on liquid funds is limited
because the counterparties are banks with high credit ratings.
The 2019 balance for Restricted cash at bank represented funds held in escrow accounts under arrangements relating to decommissioning and
similar obligations at Keddington. Agreements renegotiated in 2020 have resulted in no ongoing requirement to hold these amounts in escrow
and balances previously disclosed as Restricted cash at bank are now shown with Cash at bank.
Egdon Resources plc Annual Report and Financial Statements 2020 69
GROUP
2019
£
COMPANY
2020
£
COMPANY
2019
£
GROUP
2020
£
1,067,844
1,067,844
67,758
7,254
1,145,545
148,849
3,019,375
1,649,969
758,202
–
–
197,411
6,154
417,183
–
84,884
84,884
43,933
67,758
1,199
79,391
17,243
1,378,950
209,524
–
–
31,979
–
–
59,333
–
91,312
20 Trade and Other Payables
Amounts falling due after more than one year:
Lease liabilities (Note 22)
Amounts falling due within one year:
Trade payables
Other taxation and social security
Other payables
Accruals and deferred income
Lease liabilities (Note 22)
The Directors consider that the carrying amount of trade and other payables approximates to their fair value.
21 Financial Assets and Liabilities
The Group’s objective is to minimise financial risk. The Group’s capital comprises Ordinary and Deferred shares, which are considered to be
equity capital, together with share premium, share-based payment reserve and retained earnings. The Group is not subject to any externally
imposed capital requirements.
The Group’s financial instruments comprise cash and cash equivalents, trade payables, accruals, trade receivables and other receivables
which arise directly from its operations. All financial assets (£2,819,614, 2019: £3,026,724) and liabilities (£4,019,461, 2019: £1,181,539) are recorded
at amortised cost. The Group’s operations expose it to a variety of financial risks including credit risk, liquidity risk, interest rate risk, foreign
currency exchange risk and market risk. Given the size of the Group, the Directors have not delegated the responsibility of monitoring financial
risk management to a sub-committee of the Board. The policies set by the Board of Directors are implemented by the Company’s finance
department.
Credit risk
The credit risk on liquid funds is limited because the Group policy is to only deal with counterparties with high credit ratings and the Group
has facilities to deposit cash holdings with more than one institution. At year end, the Group had cash and cash equivalents of £847,224 (2019:
£1,617,925) and the Company £43,213 (2019: £1,066,964). The balances at 31 July 2020 are held with one bank (2019: one). Trade receivables
comprise amounts due from trading entities and total £984,953 (2019: £1,247,128) for the Group and £Nil (2019: £Nil) for the Company (Note 18).
Trade receivables are mainly due from joint venture partners and the purchasers of the Group’s produced oil and gas. For joint venture partners,
the Group would have alternative means of recourse in the event of any credit default. The purchasers of the Group’s oil and gas production are
substantial companies or subsidiaries of major international companies. At the year end, the total exposure to credit risk was £1,882,177 (2019:
£3,026,724); Company £29,984,085 (2019: £29,740,610). In considering the credit risk of its financial assets, the Group separates its financial
assets into the following categories:
• Balances due in respect of contracts with customers
• Balances due in respect of amounts due from joint venture parties
• Balances held at banks with a high credit rating
• Balances due from Group companies (for the Company)
The credit risk associated with all of the above categories is considered to be low.
In respect of balances due from joint venture parties, including the net investment in sub-lease, the Group has noted an increase in the risk
of joint venture partner default through its own trading experience and that of other companies with similar business models. However, the
provisions of the various joint venture agreements which govern the Group’s operations specify that the Group has alternative means of
recourse in the event of such default and it is, therefore, considered that the risk of the Group suffering a material credit loss remains low.
FINANCIAL STATEMENTSEgdon Resources plc Annual Report and Financial Statements 2020 70
Notes Forming Part of the Financial Statements
continued
21 Financial Assets and Liabilities (continued)
The Group has experienced no historic losses in respect of either balances due from contracts with customers or cash balances held with UK
banks. The Directors do not consider that there has been any change to the credit risk since initial recognition of these financial instruments as
a result of changes to the business environment of the Group.
No provision for expected credit losses has been recognised as the Group’s past experience shows that any loss to the Group on default,
regardless of number of days past due, would not be material to the results of the Group.
The Company’s exposure to credit risk largely relates to amounts owed by subsidiaries. These balances are considered recoverable by virtue
of the value of the underlying licence interests in the subsidiaries, through future revenue generation from production or the disposal of the
licence interests. Balances with subsidiaries waived in 2017 and 2018 arose on the winding up of single asset companies and therefore these
historic write-offs have not been taken into account in assessing the expected credit risk of the current Group balances.
Liquidity risk
The Group policy is to actively maintain a mixture of long-term and short-term deposits that are designed to ensure it has sufficient available
funds for operations. The Group monitors its levels of working capital to ensure it can meet financial liabilities as they fall due. The Group’s
financial liabilities comprise trade and other payables as set out in Note 20, held at amortised cost, which total £2,802,768 (2019: £1,181,539).
Of this balance, £2,335,768 (2019: £604,539) is due within one to two months. Lease liabilities have been excluded from this figure as they
represent discounted cash flows. The contractual maturities are shown separately in Note 22. Additionally, the Group has a liability under a Net
Profit Interest agreement where £Nil (2019: £2,567) is estimated to be due within 12 months.
Interest rate risk
The Group has interest-bearing assets, comprising cash balances which earn interest at variable rates. These interest-bearing assets are cash
at bank and short-term bank deposits (money market), most of which are sterling denominated, as shown in Note 19.
Short-term bank deposits include money market deposits which earn interest at rates set in advance for periods of up to three months by
reference to sterling LIBOR. Restricted cash at bank represents amounts lodged in support of guarantee commitments, earning interest at
short-term rates based on sterling LIBOR.
An effective interest rate increase or decrease by 1% on the cash and cash equivalents balance at year end would result in a before tax financial
effect of an increase or decrease in finance income of £7,162 (2019: £3,539).
The Group’s lease liabilities are categorised as fixed rate liabilities. The Group had no other fixed rate liabilities and no floating rate liabilities in
2020 or 2019.
Foreign currency exchange risk
The Group is exposed to foreign currency exchange rate risk in relation to short-term bank deposits, trade receivables and payables
denominated in US dollars and euros. The value of the Group’s financial assets denominated in foreign currencies at 31 July 2020 was £158,415
(2019: £137,668); Company £Nil (2019: £Nil). There were no financial liabilities denominated in foreign currencies at 31 July 2020 or 31 July 2019.
A 10% change in the sterling exchange rate would result in an increase or decrease of £15,841 (2019: £13,767) in loss before tax.
Market risk
Payments to the former shareholder of Egdon Resources Avington Ltd under the Net Profit Interest (“NPI”) agreement vary in line with the
oil price. If the oil price is below $100 per barrel, NPI payments are based on 5% of Egdon’s net revenues realised from the licences after
subtracting allowable costs. If the oil price exceeds $130 per barrel, the NPI payment percentage increases to 10%. If the oil price is between
$100 and $130 per barrel, the NPI payment percentage is 7.5%. The provision at 31 July 2020 assumes that the oil price will be less than $100
per barrel. If this level were to be exceeded, the liability would rise, but any increase would be exceeded by the corresponding increase in
revenue from oil sales.
The contract asset accrued in respect of production from the Ceres field was recognised at a price of 50p per therm in 2019 as an
approximation to the selling price that was expected to be achieved when the revenue was realised. If the gas price at the point of sale were
to vary by +/- 10%, income recognised in respect of historic production would have increased or decreased by £9,970. The contract asset was
fully realised during the year ended 2020.
Egdon Resources plc Annual Report and Financial Statements 2020 22 Leases
Group as a lessee
See Note 2 Adoption of new and revised standards for nature of leases undertaken by the Group and Company
Group
Lease liabilities are due as follows:
Not later than one year
Between one year and five years
More than five years
Total
Net investment in sub-lease are due as follows:
Not later than one year
Between one year and five years
More than five years
Total
Company
Lease liabilities are due as follows:
Not later than one year
Between one year and five years
More than five years
Total
Group
Lease liability reconciliation
At 31 July 2019
Impact of adoption of IFRS 16
At 1 August 2019 as restated
Additions
Interest expense
Lease payments
At 31 July 2020
LEASE LIABILITY
– EXPLORATION
AND EVALUATION
ASSETS
£
LEASE LIABILITY
– DEVELOPMENT
AND
PRODUCTION
ASSETS
£
LEASE LIABILITY
– PROPERTY
£
–
11,891
11,891
107,519
1,287
(18,570)
102,127
–
300,846
300,846
–
18,299
(34,520)
284,625
–
889,432
889,432
46,118
93,856
(199,465)
829,941
71
2020
£
148,849
458,462
609,382
1,216,693
54,016
150,044
253,442
457,502
2020
£
17,243
84,884
–
102,127
TOTAL
£
–
1,202,169
1,202,169
153,637
113,442
(252,555)
1,216,693
FINANCIAL STATEMENTSEgdon Resources plc Annual Report and Financial Statements 2020 72
Notes Forming Part of the Financial Statements
continued
23 Provisions for Liabilities
Group
At 1 August 2018
Provision created during the year
Unwinding of discount
Release of provision on asset disposal
At 31 July 2019
Provision created during the year
Unwinding of discount
At 31 July 2020
Company
At 1 August 2018
Paid during the year
At 31 July 2019
Paid during the year
At 31 July 2020
OTHER
PROVISIONS
£
DECOMMISSIONING
PROVISION
£
REINSTATEMENT
PROVISION
£
20,525
2,032,636
–
–
–
20,525
–
–
20,525
66,953
52,624
–
2,152,213
24,605
56,373
2,233,191
TOTAL
£
2,248,685
192,078
52,624
(96,862)
2,396,525
24,605
56,373
195,524
125,125
–
(96,862)
223,787
–
–
223,787
2,477,503
OTHER
PROVISIONS
£
DECOMMISSIONING
PROVISION
£
REINSTATEMENT
PROVISION
£
20,525
–
20,525
–
20,525
–
–
–
–
–
–
–
–
–
–
TOTAL
£
20,525
–
20,525
–
20,525
At 31 July 2020 provision has been made for decommissioning costs on the productive fields at Fiskerton, Keddington, Kirkleatham, Ceres,
Avington, Dukes Wood/Kirklington and Waddock Cross. Provision has also been made for reinstatement costs relating to exploration and
evaluation assets where work performed to date gives rise to an obligation, principally for site restoration.
Assumptions, based on the current economic environment, have been made which management believes are a reasonable basis upon which
to estimate the future liability. This estimate will be reviewed regularly to take into account any material change to assumptions. Actual costs
will depend on future market prices, any variation in the extent of decommissioning and reinstatement to be performed, whether the works can
be performed as part of a multi-well programme or in isolation and progress in the relevant technologies.
Decommissioning and reinstatement costs are expected to arise between 2021 and 2038.
Other provisions represent the amount expected to be payable to the former shareholder of Egdon Resources Avington Ltd under the Net
Profit Interest agreement entered into at the time of acquisition. Of the total provision, £Nil (2019: £2,567) is estimated to be payable within
one year.
In 2019, the reinstatement provision release of £96,862 relates to the Mairy site in France where clarification was received during 2019 that
Egdon had no ongoing liability for site restoration.
Egdon Resources plc Annual Report and Financial Statements 2020 73
24 Share Capital and Redeemable Preference Shares
1P ORDINARY SHARES
1P DEFERRED SHARES
ALLOTTED, CALLED UP AND FULLY PAID
NUMBER
£
NUMBER
£
TOTAL
£
259,984,822
2,599,848
1,195,087,887
11,950,879
14,550,727
43,330,803
303,315,625
25,000,000
328,315,625
433,308
–
–
433,308
3,033,156
1,195,087,887
11,950,879
14,984,035
250,000
–
–
250,000
3,283,156
1,195,087,887
11,950,879
15,234,035
At 31 July 2018
Shares issued in the year
At 31 July 2019
Shares issued in the year
At 31 July 2020
Redeemable preference shares of £1 each (classed as liabilities)
At 31 July 2019
At 31 July 2020
ALLOTTED, CALLED UP
AND PARTLY PAID
NUMBER
50,000
50,000
£
12,500
12,500
The Deferred Shares do not carry any rights to vote or any dividend rights. The Deferred Shares will not be admitted to AIM and holders will
only be entitled to a payment on return of capital or winding up of the Company after each of the holders of Ordinary Shares has received a
payment of £10,000,000 on each such share.
On 27 April 2020, following an open offer, the Company issued 25,000,000 New Ordinary 1p shares for total cash consideration of £500,000. The
nominal value of the shares was £250,000 and the additional share premium created totalled £250,000.
On 6 November 2007, 50,000 redeemable preference shares of £1 each were issued and are now held by InfraStrata plc. One-quarter of the
nominal value of these shares is paid up and the shares are entitled to an annual dividend out of distributable profits of 0.00001% per annum
on the amount for the time being paid up on each such share and do not carry any voting rights. The Company may redeem the shares at any
time by giving preference shareholders one week’s notice. Preference shareholders may require the Company to redeem their shares at any
time by giving six months notice. In each case, any redemption is at par and is subject to the provisions of the Companies Act. The preference
shares are treated as short-term liabilities and included within trade payables.
25 Share Premium Reserve
Shares issued during the year are detailed in Note 24.
Share costs associated with the share transactions above of £25,000 (2019: £192,770) were offset against the premium generated on issue.
The above share issues when added to the opening reserve as at 1 August 2019 of £26,742,656 resulted in a closing share premium reserve
carried forward of £26,967,656 (2019: £26,742,656).
26 Merger Reserve
Company
The merger reserve arose on the de-merger of the Egdon Resources group of companies from InfraStrata plc (formerly Portland Gas plc) and
represented the difference between the book value of Egdon Resources U.K. Limited’s net assets on the date of the de-merger and the nominal
value of the shares so issued.
The reserve is not distributable.
FINANCIAL STATEMENTSEgdon Resources plc Annual Report and Financial Statements 2020 74
Notes forming part of the Financial Statements
continued
27 Movements in Cash and Cash Equivalents
Group
Cash at bank
Short-term bank deposits
Restricted cash at bank
AS AT
31 JULY 2019
£
CASH FLOW
£
EXCHANGE RATE
MOVEMENTS
£
AS AT
31 JULY 2020
£
1,264,034
(1,133,045)
146,244
207,647
582,585
(207,647)
–
(12,594)
–
130,989
716,235
–
Cash and cash equivalents as per Statement of Financial
Position
1,617,925
(758,107)
(12,594)
847,224
Company
Cash at bank
Short-term bank deposits
AS AT
31 JULY 2019
£
CASH FLOW
£
AS AT
31 JULY 2020
£
1,066,855
(1,023,751)
109
–
43,104
109
43,213
Cash and cash equivalents as per Statement of Financial Position
1,066,964
(1,023,751)
The above balances also represent cash and cash equivalents for the purposes of the Statement of Cash Flows.
28 Obligations under Leases
At 31 July 2020 the Group had future minimum commitments under non-cancellable operating leases as follows:
Within one year:
– leases on operational and exploration and evaluation sites
– leases on land and buildings
Within two to five years:
– leases on operational and exploration and evaluation sites
– leases on land and buildings
After more than five years:
– leases on operational and exploration and evaluation sites
2020
£
2019
£
–
–
–
–
–
–
–
–
218,587
22,917
–
809,096
–
–
1,131,103
2,181,703
For the purposes of assessing the length of a lease in respect of exploration and evaluation and development and production assets, where the
lease agreements contain appropriate break clauses and/or provisions for extension, it has been assumed that the leases will remain in place
for the life of the asset as estimated for the purposes of the associated asset impairment reviews.
See Note 2 Adoption of new and revised standards for a reconciliation of the operating lease commitments at 31 July 2019 to the lease liability
created upon adoption of IFRS 16 at 1 August 2019.
29 Capital Commitments
Capital commitments of £162,434 (2019: £44,992) relate to expenditure committed under signed authorisations for expenditure and relate to
development and production assets. No other capital commitments have been made as at 31 July 2020.
30 Related Party and Other Transactions
Mr Walter Roberts is a Non-executive Director of Egdon Resources plc and also has joint control of Pinnacle Energy Limited, a company that
provides legal and consultancy services to the oil and gas industry. During the year to 31 July 2020 Pinnacle Energy Limited invoiced the Group
£7,740 (2019: £6,300) for legal and consultancy services provided at commercial rates and agreed by the Directors of the Company. At the year
end £9,288 was owing to Pinnacle Energy Limited (2019: £2,074).
Petrichor Holdings Coöperatief U.A. holds 33.99% of the Company’s share capital. The Directors of Egdon Resources plc do not consider that Egdon
is an associate of Petrichor Holdings Coöperatief U.A., however, Petrichor Holdings Coöperatief U.A. is a related party in accordance with the AIM
Rules by virtue of this shareholding. During the year, Egdon Resources U.K. Limited invoiced Petrichor Energy UK Limited £3,274 (2019: £5,963) in
respect of licence related costs. There was a balance of £1,511 outstanding at the year owed by the Group (2019: £2,870 owed to the Group).
Egdon Resources plc Annual Report and Financial Statements 2020 75
On 14 April 2020 Petrichor Holdings Coöperatief U.A. subscribed to purchase 7,055,720 shares for a total price of £141,114 as part of an open offer
equity fund raising offer. This subscription has not altered the percentage shareholding of 33.99%.
During the year the Group provided services to companies with interests in jointly controlled operations as follows:
Time costs
Overhead recharged in accordance with Joint Operating Agreement
2020
£
171,196
39,407
210,603
2019
£
185,122
50,200
235,322
The balances due from companies with interests in jointly controlled operations in respect of these transactions as at 31 July 2020 and 31 July
2019 are set out below:
Due from companies with interest in jointly controlled operations
The Company has a related party relationship with its subsidiaries in the course of normal operations.
2020
£
3,841
2019
£
30,953
During the year the Company provided management services and billed for time spent on subsidiary Company projects. The total amounts
invoiced were as follows:
Invoiced to subsidiary companies
2020
£
951,821
2019
£
1,090,011
As at 31 July 2020 the balance due to Egdon Resources plc from its subsidiary undertakings was £29,940,872 (2019: £28,673,646) as shown in
Notes 17 and 18.
31 Control of The Group
There is no ultimate controlling party of Egdon Resources plc.
32 Subsequent Events
On 25 August 2020 the Company completed a farm-out Agreement with Shell U.K. Limited (“Shell”) in respect of offshore licences P1929 and
P2304 (“the Licences”) which contain the Resolution and Endeavour gas discoveries.
The OGA has approved the transfer of a 70% interest and operatorship in both licences and the associated documentation including Joint
Operating Agreements in respect of both licences has now been executed.
The Company retained a 30% interest in the Licences. Under the terms of the farm-out Agreement, Shell will pay 85% of the costs of the
acquisition and processing of the 3-D seismic survey covering both the Resolution and Endeavour gas discoveries. The carry on the acquisition
costs will be capped at US$5 million gross, beyond which the Company would pay 30% of the survey costs. Furthermore, Shell will also pay
100% of all studies and manpower costs through to the well investment decision on the Licences. Egdon has been advised by Shell that the
Resolution 3-D seismic survey is now planned for February 2022, subject to approval by the OGA of an amendment to the licence obligations.
On 25 August 2020 the Company received funds totalling £775,000 from Humber Oil & Gas Limited on behalf of the JV partnership in settlement of
the dispute initiated in the prior year. On 18 June 2020 the Company signed a legally binding and confidential settlement agreement (the “Settlement
Agreement”) between the Company (acting on behalf of the PEDL253 joint venture partners) and Humber Oil & Gas Limited (“Humber”). The joint
parties to PEDL253 have therefore resolved the dispute arising under the JOA and look forward to co-operating in the future in the development of the
licence.
Following implementation of the terms of the Settlement Agreement Egdon Resources U.K. Limited holds a 35.8% operated interest in PEDL253.
On 26 November 2020 Egdon announced that it had entered into a £1.00 million loan facility with Union Jack Oil plc. The loan has an 18 month
term with the principal sum payable at end of the term or in part or in full at any earlier time at the borrower’s discretion. Interest accrues on
a daily basis on the outstanding loan amount at an interest rate of 11% per annum and is payable quarterly commencing on the earlier of the
quarter following first production or on April 2021. The loan is secured against an unencumbered 25% interest in the Wressle Project (PEDL180,
and PEDL182), including the Wressle development project and associated infrastructure.
On 5 January 2021 Egdon finalised the documentation for £1.05 million convertible loan notes with a concert party of Petrichor Holdings BV.
The transaction, which will require a whitewash, is subject to shareholder approval through a vote by independent shareholders at a General
Meeting to be held on 22 January 2021.
FINANCIAL STATEMENTSEgdon Resources plc Annual Report and Financial Statements 2020 76
76
Directors, Officers and Advisors
Directors
Philip Stephens – Chairman
Mark Abbott
– Managing Director
Martin Durham – Technical Director
Walter Roberts – Non-executive Director and Company Secretary
Ken Ratcliff
– Non-executive Director
Tim Davies
– Non-executive Director
Principal and Registered Office
The Wheat House, 98 High Street, Odiham, Hampshire, RG29 1LP
Nominated Advisor and Joint Broker
WH Ireland, 24 Martin Lane, London, EC4R 0DR
Joint Broker
VSA Capital Limited, Fourth Floor, New Liverpool House, 15-17 Eldon Street, London, EC2M 7LD
Statutory Auditor
Nexia Smith & Williamson, Chartered Accountants, 25 Moorgate, London, EC2R 6AY
Accountants and Tax Advisors
BDO LLP, 31 Chertsey Street, Guildford, Surrey, GU1 4HD
Legal Advisors
Norton Rose Fulbright, 3 More London Riverside, London, SE1 2AQ
Financial Public Relations
Buchanan, 107 Cheapside, London, EC2V 6DN
Registrars
Link Market Services Limited, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU
Egdon Resources plc Annual Report and Financial Statements 2020
Annual Report 2020
Egdon Resources plc
is an independent
onshore focused oil and
gas exploration and
production business
Strategic Report
Overview
Highlights
Chairman’s Statement
Operations
Operating Review
Oil and Gas Reserves and Resource Estimates
United Kingdom Licences Summary
Performance
Financial Review
Governance
Corporate Governance Statement
Board of Directors
Directors’ Report
Statement of Directors’ Responsibilities
Independent Auditor’s Report
1
4
8
15
16
18
23
30
32
34
35
Financial Statements
Consolidated Statement of Comprehensive Income 39
40
Consolidated Statement of Financial Position
41
Company Statement of Financial Position
42
Consolidated Statement of Cash Flows
43
Company Statement of Cash Flows
44
Consolidated Statement of Changes in Equity
45
Company Statement of Changes in Equity
46
Notes Forming Part of the Financial Statements
76
Directors, Officers and Advisors
Designed & printed by Perivan 259326
Egdon Resources plc
Annual Report and Financial
Statements for the year ended
31 July 2020
3
www.egdon-resources.com
Egdon Resources plc
The Wheat House
98 High Street
Odiham, Hampshire
RG29 1LP
+44 (0)1256 702292
OVERVIEW