TIDMEME
RNS Number : 1585F
Empyrean Energy PLC
15 May 2017
This announcement contains inside information
Empyrean Energy PLC / Index: AIM / Epic: EME / Sector: Oil &
Gas
Empyrean Energy PLC ("Empyrean" or the "Company")
Multi Project Farm-In in Sacramento Basin, California
-- Farming in to a portfolio of multi-trillion cubic feet
('TcF') gas projects onshore USA - fits strategy to build a robust
exploration portfolio with both onshore and offshore assets which
is geographically diverse
o 25% of Dempsey Prospect, targeting 1 Tcf conventional gas, to
be drilled Q3 2017
o 10% of Alvares Appraisal Prospect, targeting 2 Tcf gas
o 25% of Dempsey Trend AMI, including at least three large
Dempsey style follow up prospects
-- Package includes extensive geological database including
access to 2D & 3D seismic, existing surface infrastructure and
some minor production
Empyrean is pleased to announce that it has entered into an
agreement with Sacgasco Limited (ASX: SGC) ("Sacgasco"), a
Sacramento Basin-focused natural gas developer and producer, to
farm-in to a package of gas projects in the Sacramento Basin,
onshore California (the "Farm-In"). The package includes two
mature, multi-Tcf gas prospects, 'Dempsey' and 'Alvares', and an
Area of Mutual Interest (the "Dempsey Trend AMI") that includes at
least three already identified, large Dempsey-style follow up
prospects. Having recently acquired interests in two offshore Asian
oil and gas assets, this agreement diversifies the Company in terms
of its geographical focus, and adds an onshore asset to its
portfolio.
Dempsey
Dempsey is a large structure mapped with 3D seismic and
interpreted by Sacgasco to have the potential to hold a prospective
resource of over 1 Tcf of gas in up to seven stacked target
reservoirs. The Company plans to commence a 3,200 metre (10,500
feet) combined appraisal and exploration well, Dempsey-1, in Q3
2017 to evaluate this prospect. The proposed Dempsey-1 well
cross-section will be available within the version of the
announcement uploaded to the Company's website.
Aside from compelling technical merit, the Dempsey-1 well
location sits next to existing gas metering and surface
infrastructure that is owned by the joint venture. This will allow
for any gas discovery to be tested and connected into the local
pipeline at relatively low cost and in an accelerated timeframe.
This early potential for short-term cash flow in the event of a
commercial discovery would be significant for the joint venture and
for the state of California where gas demand is high and
approximately 90% of consumption is imported from other states. Gas
produced in the Sacramento Basin currently prices at a 10-15%
premium to Henry Hub Gas Prices.
Empyrean has agreed to pay an amount of US$10,000 now, with a
further US$90,000 (collectively "the Dempsey Deposit") upon signing
a definitive Farm-out Agreement (the "Farm-Out Agreement")and Joint
Operating Agreement ("JOA") with Sacgasco in order to secure
Empyrean's right to participate in the Dempsey Prospect. Empyrean
is then required to pay US$1,500,000 by 17 June 2017 (the "Dempsey
Consideration") towards the dry hole cost (i.e. up to the point of
testing and running production casing or abandonment) of the
Dempsey-1 Well to earn its 25% Working Interest ("WI") in the
Dempsey Prospect. If the Dempsey-1 well costs exceed US$3,200,000
then Empyrean will pay 25% of any further costs under standard JOA
terms.
Assuming completion of the Farm-In and the payment of both the
Dempsey Deposit and the Dempsey Consideration, the interests in the
Dempsey Gas Project will be: Sacgasco (Operator): 55%; Bombora
Natural Energy Pty Ltd: 10%; Xstate Resources Limited (ASX: XST):
10%; and Empyrean: 25%.
Alvares
Alvares is a large structure mapped with 2D seismic and
interpreted by Sacgasco to hold prospective resources of over 2 Tcf
estimated potential recoverable gas. A well drilled by American
Hunter Exploration Limited in 1982 for deeper oil intersected
5,000ft of gas shows. No valid flow test was conducted due to
equipment limitations and the deeper oil target failing. However
minor gas flows to surface were recorded even with these
limitations.
Empyrean has agreed to pay 13.33% of the dry hole well costs
(i.e. to testing and setting of production casing or abandonment)
in the next Alvares appraisal well to earn a 10% WI in the Alvares
prospect. Empyrean's 13.33% earn-in is capped at a total well cost
for Alvares of US$10,000,000, after which Empyrean will pay 10% of
the costs moving forward (the "Alvares Consideration"). Empyrean
has also agreed to pay US$20,000 upon signing the Farm-out
Agreement and JOA to reimburse Sacgasco for back costs associated
with leasing and permitting the Alvares prospect. The joint venture
partners have decided that drilling a well at the Dempsey Prospect
is a first ranking priority before any proposal or decision to
drill a well at Alvares will be made. The possibility of using the
existing well bore to sidetrack and get a valid flow test, thus
reducing costs will be examined.
Assuming completion of the Farm-In and the payment of both the
Alvares Deposit and the Alvares Consideration, the interests in the
Alvares Gas Project will be: Sacgasco (Operator): 59%; Bombora
Natural Energy Pty Ltd: 10%; Xstate Resources Limited (ASX: XST):
21%; and Empyrean: 10%.
Dempsey Trend AMI
The Dempsey Trend AMI is an Area of Mutual Interest extending to
approximately 250,000 acres and containing the Dempsey prospect
(described above) as well as at least three other, Dempsey-style
prospects which have been identified on existing seismic. Empyrean
will provide technical assistance to Sacgasco to further mature
prospects within the Dempsey Trend AMI in order to earn a 25% WI.
In addition, Empyrean will have an option to participate in the
already identified prospects on the following basis:
-- Prospect #1: EME pays 50% of dry hole cost (i.e.to testing
and setting production casing or abandonment) to earn 25% WI
-- Prospect #2: EME pays 37.5% of dry hole cost (i.e. to testing
and setting production casing or abandonment) to earn 25% WI
-- Prospect #3: EME pays 37.5% of dry hole cost (i.e. to testing
and setting production casing or abandonment) to earn 25% WI
Strategy and Funding
The Company has worked to secure a range of strategic
opportunities and to allow it significant optionality on the route
forward in each project, with minimal up front commitment. The
Board is therefore currently assessing all projects in which the
Company has an option to participate - most notably the acquisition
of a further 10 per cent. interest in the Duyung PSC, Indonesia,
and the other projects in the Sacramento basin which are outlined
in this announcement. Each such project will require additional
funding to be secured over and above the Company's existing
resources.
Accordingly, the Board will continue to assess the Company's
progression of, and participation in, the various opportunities
available to it in view of the Company's financial and other
resources. No decision has been made at this time as to which
project represent the best use of further funding (if any) and
shareholders should note that there is no guarantee that such
further funding will be available in order to allow the Company to
acquire the additional interest in the Duyung PSC or to participate
in the projects outlined above.
However, as previously announced, the Board of Empyrean intends
to use its reasonable endeavours to place those shares not taken up
pursuant to the recently-closed Open Offer, amounting to 43,141,912
ordinary shares of 0.2p each ("Ordinary Shares"), at not less than
the 3.5p per Ordinary Share, in order to raise up to the maximum
proceeds under the Open Offer. The Board also has additional
authority to issue further Ordinary Shares which may be utilised at
its discretion to secure additional funding for the Company.
Tom Kelly, Empyrean CEO, commented:
"Empyrean is excited to be working alongside Sacgasco in the
highly productive and prospective Sacramento Basin. We hope to help
Sacgasco leverage many determined years of pre-drilling geological
exploration and experience to unlock the potential that these large
conventional gas prospects hold. The Sacramento Basin projects
package adds balance to Empyrean's portfolio in a number of
important ways. Firstly, it provides geographical balance -
Empyrean has had operations in California and the USA since 2005
and is very comfortable with the framework for oil and gas
exploration and development in this part of the world. Secondly, it
provides an onshore focus for the Company - Empyrean's Pearl River
Mouth Basin Oil Project, in China and its Duyung PSC, in Indonesia
are both offshore hydrocarbon exploration projects with
transformational upside potential. Adding an onshore USA project
with similar transformational upside potential helps to build a
robust exploration portfolio. Thirdly, we are spreading the
statistical risk across our portfolio by choosing excellent,
potentially transformational targets in countries that have strong
demand for any discovered hydrocarbons. And lastly, we have added a
project that includes surface infrastructure with the first high
impact well to be drilled shortly that can provide the Company with
almost instant cash flow should the well be successful. The next
three months will be very exciting for our Company with potentially
transformational drilling and 3D seismic on all three of Empyrean's
new projects."
Gary Jeffery, Sacgasco's Managing Director, commented:
"Sacgasco welcomes Empyrean to the joint venture. They have a
highly successfully track record of exploring in the USA and
rewarding their shareholders with positive exploration and
development outcomes. Their extensive experience will be highly
complementary to the Sacgasco joint venture and, based on our
dealings with them to date, we believe the Empyrean team will be a
great fit as we look forward to unlocking the true potential of the
Sacramento Basin.
"The recent farm-outs provide Sacgasco with the financial
capacity to move forward with the drilling of Dempsey. Planning for
spud of the Dempsey-1 well is now well underway. Our extensive
portfolio of Sacramento Basin Assets continues to attract interest
from other companies and additional farm outs are currently under
consideration.
"Sacgasco is committed to building a world-class natural gas
business in the energy-hungry Californian market, and we look
forward to providing our shareholders with further updates as we
realize this exciting phase in the Company's development."
**ENDS**
For further information:
Empyrean Energy plc
Tom Kelly Tel: +61 8 9481 0389
Cenkos Securities plc
Neil McDonald Tel: +44 (0) 131 220 9771
Beth McKiernan Tel: +44 (0) 131 220 9778
Nick Tulloch Tel: +44 (0) 131 220 9772
St Brides Partners Ltd
Elisabeth Cowell Tel: +44 (0) 20 7236 1177
Lottie Brocklehurst Tel: +44 (0) 20 7236 1177
The information contained in this announcement was completed and
reviewed by the Company's Technical Director, Mr Frank Brophy, who
has over 40 years' experience as a petroleum geologist.
Notes to Editors
About Empyrean Energy Plc (LON: EME)
Empyrean is a London AIM listed oil and gas explorer with three
potentially high impact new projects. Empyrean has a 1800km2
offshore oil permit located in the Pearl River Mouth Basin, China
where it will commence 3D seismic Q2, 2017 to further mature two
large oil prospects, Jade and Topaz. The permit is directly South
East of the billion barrel+ Liuhua Oil Field operated by CNOOC and
two recent discoveries to the permits West and South further
enhance the merit of Jade and Topaz. Empyrean is operator and holds
100% of the exploration rights through to commercial discovery
where CNOOC have a back-in right to 51%.
Empyrean also has a 10% interest in West Natuna Exploration
Limited that holds 100% of the Duyung PSC in offshore Indonesia and
is targeting the Mako Shallow Gas Discovery that has an
independently verified 2C and 3C gas resource of between 430-650
Bcf recoverable gas. Empyrean is able to increase its interest in
Duyung to 20% by paying a further US$2m by 26 May 2017. The Mako
South-1 well is being planned to take core, run a full suite of
modern logs and conduct a flow test commencing June 2017.
Empyrean also has a joint venture with ASX listed Sacgasco
Limited on a suite of projects in the Sacramento Basin, onshore
California, USA. The joint venture will be drilling and testing the
Dempsey Prospect, a 1 Tcf gas target in Q3, 2017.
www.empyreanenergy.com
About Sacgasco Limited (ASX. SGC)
Sacgasco Limited (ASX: SGC) is an Australian-based energy
company focused on conventional gas exploration in the Sacramento
Basin, onshore California. SGC has an extensive portfolio of gas
prospects at both exploration and appraisal stages, including
multi-Tcf opportunities. The Company is targeting gas supply to the
local Californian gas market and burgeoning LNG market in North
America. SGC is of the view that the size of the prospects in
California have the potential to supply both the domestic
Californian gas market and export LNG markets.
www.sacgasco.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
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