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November 5, 2012 5:33 pm
Egdon Resources, the Aim-quoted UK onshore oil company, is joining forces with fellow explorer Europa Oil & Gas to challenge a decision by Surrey county council blocking the drilling of test wells near Dorking.
The company confirmed on Monday that it was backing an appeal in the High Court against a decision made by Eric Pickles, secretary of state for communities and local government, to uphold the council’s drilling ban on the commuter belt site.
Egdon holds a 38 per cent stake in a licence consortium led by Europa, and its decision to risk further funds on the legal challenge came as it reported a pre-tax loss of £2.9m for the year to July 31, after taking impairment charges on other UK onshore assets. It had reported a pre-tax profit of £4.1m in the previous 12-month period.
The other partners in the consortium, Warwick Energy and Altwood Petroleum, are also backing the legal action.
Originally, the application to secure permission for a drilling project – which would be on land designated an Area of Outstanding Natural Beauty – had been supported by planning officials.
However, a campaign led by local residents, and backed by the National Trust and the Campaign to Protect Rural England, led to the decision being overturned by the county council’s planning committee last year.
Egdon’s projects in the north of England have also proved “challenging” for the company. Philip Stephens, chairman, blamed production problems at two gasfields as well as “regulatory and planning delays at a number of assets” for a shortfall in expected output. As a result, the company booked £3.15m of impairment charges, including £2.35m for its Kirkleatham gasfield in Yorkshire and Ceres gasfield in the North Sea.
Overall, production dipped slightly from 128 to 125 barrels of oil equivalent per day in the year to July 31, generating revenues of £2.6m compared with £2.4m last year.
Egdon also wrote down £800,000 of the value of its minority investment in the Markwells Wood oil project in West Sussex. Work on the site near Chichester started last year, also on land designated an Area of Outstanding Natural Beauty which has since become part of the South Downs National Park. But an extended well test “has cast doubt on the commercial viability of the asset”, Egdon said on Monday.
The company said it would rationalise its interests because of a shortfall in budgeted cash flow. But it insisted that investors could still expect to profit from the shale gas potential of its northern England licences, despite a UK moratorium on producing gas through the hydraulic fracturing of rock.
Shares in the company, down by half over the year, slipped 0.08p to 6.8p on Monday.
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