A Small British energy company saw its shares soar yesterday after it gave an update on plans for a major gas-storage facility which could potentially be worth hundreds of millions of pounds.
Egdon Resources wants to store gas for other companies in salt caverns more than 6,000ft below the ground on the Isle of Portland in Dorset. Initial feasibility work has been completed and a planning application is expected to be made next summer.
Joint managing director Mark Abbott said it was hoped to have the facility up and running by the end of decade.
The total investment could be up to £150million, although the ultimate value of the scheme may exceed £500million.
The Portland facility is expected to store gas equivalent to up to 6million barrels of oil. Egdon anticipates it would store gas during periods of low demand when prices were lower, then release it on to the national gas grid at times of year when demand was strong.
Mr Abbott said there several options about how the project would be financed, but for now the directors were concentrating on getting over the planning and technical hurdles.
Andrew Hindle, the other joint MD, added that the UK was "well short" of gas-storage facilities.
Shares in the company rose more than 23% to 66.5p yesterday, giving it a market capitalisation of £34million.
Egdon - formed in 1997 by Mr Hindle and Mr Abbott - focuses primarily on onshore UK sites. It also has exploration interests in British waters and France.
The firm says in its latest results statement that the Waddock Cross field in Dorset is a significant oil discovery for onshore UK, with oil in place of more than 40million barrels. Test production from the field will start in December.
Following the Waddock Cross well, two exploration wells will be drilled on the Kirkleatham and Westerdale gas prospects in Yorkshire.
The rig will then return to Dorset to drill at Portland and potentially a further appraisal well at Waddock Cross.
Egdon said this back-to-back drilling programme would result in significant overall cost savings on materials, equipment and services.
Chairman Philip Stephens said: "The company is currently debt free with cash of £2.95million at July 31, 2005.
"The company has made good progress since joining Aim (the Alternative Investment Market) in December 2004, and we are looking forward to an active phase of exploration and appraisal drilling which should add material value to the company.
"The potential of our gas-storage project at Portland will also drive shareholder value."
In the year to the end of July, Egdon's pre-tax losses widened to £420,000 from £246,000 in the previous 12 months.
Source: The Press & Journal