Investors in onshore UK oil and gas firms are reeling after the Planning Inspectorate unexpectedly upholds a decision to block development on the Wressle oil discovery in Lincolnshire.
The companies behind the project, Egdon Resources (EDR:AIM) (operator with a 25% stake), Union Jack Oil (UJO:AIM) and Europa Oil & Gas (EOG:AIM) are all sharply lower on the news. Egdon sinks 16.6% to 6.8p, Union Jack is down 19.2% to 0.13p and Europa falls 11.4% to 5.05p.
Other companies with interests in onshore projects in the UK are also down in sympathy, IGas Energy (IGAS:AIM) falling 4.4% to 82.5p.
WHY THE DECISION IS SURPRISING
The decision is a surprise given the company had already received environmental approval for the work and the council's initial decision went against the advice of its own planning officer.
The ruling appears to have been based on concerns over an adverse impact on groundwater and water courses.
The inspectorate has granted the appeal against the decision to refuse the application to retain existing planning for the well site. This is now retained until 28 April 2018 and offers some time for Egdon and its partners to consider their options.
ANALYSTS LOOK ON THE BRIGHT SIDE
Egdon's house broker VSA Capital comments: 'Clearly, the decision is a setback for Egdon and our estimates had included a significant benefit from Wressle production commencing in FY 2019 at a net rate of 125 barrels of oil equivalent per day.
'Although this would have provided a significant benefit to Egdon's near term earnings profile, the bulk of the value continues to be driven by the company's broader development portfolio with Wressle contributing 1.2p of our 48.8p target valuation.'
Egdon says it will update the market in the coming days when VSA will also revise its forecasts.
