Egdon Resources - UK shale appraisal in focus

We have slightly increased our valuation of Egdon’s conventional asset base from 12.5p/share to 12.7p/share (+2%). Moving parts include higher forecast Ceres production in FY19 and a stronger dollar offset by the removal of Holmwood. Our valuation of Egdon’s net shale resource (188,000 net acres) remains uncertain but, in our view, has the potential to be worth a risked c 100p/share based on current expectations of well cost, type curves and forward gas prices. Appraisal activity at Cuadrilla operated Preston New Road is set to provide information on horizontal well flow rates in the Bowland Basin with results due at the end of CY18 or early 2019. Initial flow-back gas at Preston New Road announced on 2 November is encouraging.