Egdon Resources - Deferred Ceres output offset by higher gas prices

Egdon’s operational update highlights lower production for FY18 at 84boed versus guidance of 100boed as a result of unplanned downtime at Ceres. Management remains confident in future production expectations and potential for increased gas recovery at Ceres based on pressure build-up analysis during shutdown. Our conventional asset RENAV moves to 12.5p/share from 12.8p/share (-2%) as a result of lower FY18 production and a higher risking applied to Wressle, offset by an increase in our short-term EIA-based oil price forecasts and higher NBP gas price assumptions. The valuation of Egdon’s net shale resource (205,000 net acres) remains uncertain but in our view has the potential to be worth over risked 100p/share based on current expectations of well cost, type curves and forward gas prices.