TIDMEME
RNS Number : 5189K
Empyrean Energy PLC
02 September 2021
This announcement contains inside information
Empyrean Energy Plc / Index: AIM / Epic: EME / Sector: Oil &
Gas
Empyrean Energy plc
Block 29/11, China - Award of Drilling Contract for Jade
Prospect including significantly reduced drilling cost estimate and
December target Spud Date
2 September 2021
Empyrean Energy plc ("Empyrean" or the "Company"), the oil and
gas development company with interests in China, Indonesia and the
United States, is pleased to advise that it has awarded an
Integrated Drilling Contract ("IDC") for the drilling of the Jade
prospect exploration well on Block 29/11, offshore China, (the
"Jade Prospect") to China Oilfield Services Limited ("COSL").
HIGHLIGHTS
-- Award of IDC to COSL with targeted well spud date set for 15 December to 30 December 2021
-- Drilling rig availability confirmed and all technical,
commercial and contractual terms agreed
-- The final IDC requires a Drilling Program and Geological
Program to be incorporated (underway) in the coming weeks
-- COSL proposal includes a significantly reduced drilling cost
estimate of US$12.3m (previous estimate US$18.5m), plus a
success-based testing cost estimate of US$7.4m
-- Drilling Program, Geological Program, preparation for the
Well Site Survey and preparation for various permits required to
drill are all underway
Empyrean is the operator of Block 29/11 in China and has 100%
working interest during the exploration phase. In the event of a
commercial discovery, its partner, China National Offshore Oil
Company ("CNOOC"), may assume a 51% participating interest in the
development and production phase.
As part of the award process, the Company and COSL have agreed
all technical, commercial and contractual terms and COSL has
confirmed rig availability and a target spud date of 15 December to
30 December 2021 for the Jade Prospect. A condition of the award is
that Empyrean and COSL have now agreed that there will be no
further exceptions, qualifications or deviations to the technical,
commercial and contractual terms and conditions ahead of signing
the IDC. The Drilling Program and Geological Program are the only
remaining items to be incorporated into the IDC and are procedural
in nature. CNOOC approval was sought and provided ahead of the
award of the IDC and all parties are aligned in the targeted timing
to drill the Jade Prospect in mid to late December.
As announced on 23 April 2021, Empyrean appointed AGR to
complete a comprehensive well design and engineering project for
the Jade Prospect. Empyrean then elected, based on AGR's analysis
and recommendation, to use a four-string casing design for the
drilling of the Jade Prospect.
The Company had previously been quoted US$18.5 million to drill
the Jade well with testing of any oil column to be in addition to
this amount. Following the well engineering and design work
completed with AGR, the Company has been working diligently with
COSL towards securing a rig and finalising costs for the well. To
this end, the parties have reached agreement on a substantially
reduced turnkey quote for the drilling of the Jade Prospect of
US$12.3 million on a dry hole basis, an approximate 34% saving on
the initial quote. On a success basis, testing of any oil column
has been quoted at US$7.4 million.
The substantially reduced drilling contract quote has been
reached without compromising the well design, safety or operational
efficiency of the proposed well.
The Company is making good progress on other drill preparations
including preparation of the Drilling Program, Geological Program,
Well Site Survey and various pre-drilling permits.
The Company announced on 9 July 2021 that it had raised gross
proceeds of GBP5.02 million (US$6.92 million) through an equity
placing and that the net proceeds would be used to secure a
suitable drilling rig and order long lead items, as well as for the
Company's general working capital requirements. The Company will
require further funding, via a joint venture, exercise of warrants
or from an equity raising in order to enable it to undertake the
drilling of the Jade Prospect.
Further updates in relation to the finalisation of the IDC will
be made in due course.
The Jade Prospect
The 2021 drilling campaign is targeting a world class
conventional oil target in the Jade Prospect, to which Gaffney
Cline & Associates ("GCA") assigned a Geological Chance of
Success ("GCoS") of 32%. Subsequent to this independent assessment,
the Company completed a gas cloud study and post stack seismic
inversion study that it believes further mitigates risk and
increases the GCoS to 41%.
The Jade Prospect has a GCA audited mean in place potential of
225 MMbbl and a P10 in place upside of 395 MMbbl. Four recent
nearby discoveries by CNOOC immediately to the West of the Jade
Prospect are filled to their P10 potential or better. All four
CNOOC discoveries have gas clouds showing in the overburden on
seismic.
Empyrean's excellent quality 3D seismic indicates that there is
a classic "fill to spill" geological setup in the basin, and a
robust regional seal, that provides the Jade and Topaz Prospects
with a very real possibility of being filled in a similar fashion
to nearby discoveries. The Jade and Topaz prospects have gas
clouds, similar to nearby discoveries, in the overburden on 3D
seismic. Dry wells nearby do not have gas clouds. The Jade Prospect
is the first of the three identified prospects within Block 29/11,
which also contains the Topaz and Pearl prospects. The combined
audited mean in place potential of all three prospects is 884 MMbbl
and a P10 in place upside of 1,588 MMbbl. The post stack seismic
inversion study showed Jade and Topaz both have the potential for
excellent carbonate buildup reservoir quality with excellent
porosity and permeability. Any oil discovered is expected to be
light oil in the 38-41 API range, similar to nearby discoveries.
These attributes combined with the potential for exceptional
natural reservoir drive supports the potential for excellent
recovery rates.
China is the largest importer of oil in the world.
The information contained in this announcement has been reviewed
by Empyrean's Executive Technical director, Gaz Bisht, who has over
31 years' experience as a hydrocarbon geologist and
geoscientist.
Empyrean CEO, Tom Kelly, stated:
"This award of contract to COSL at approximately 34% below our
previously anticipated drilling cost estimate is a massive leap
forward for Empyrean and the reduced drilling cost is effectively
better than a 34% JV style deal as there is zero dilution to
Empyrean. The countdown to the drilling of the Jade prospect has
begun. Locking in rig availability, finalising costs and setting a
target spud date were all essential to securing the remaining funds
required to drill the Jade Prospect whether that be by JV, warrant
exercise or equity raise. The thorough work Empyrean has completed
in conjunction with AGR resulting in the negotiation and award of
contract is a credit to our technical director Gaz Bisht and the
team at COSL. All other drilling preparation activities, including
finalising the site survey, ordering long lead items and securing
the necessary drill permits, are progressing well. We also thank
CNOOC for their continued support and cooperation throughout this
process."
For further information please contact the following:
Empyrean Energy plc
Tom Kelly Tel: +61 6146 5325
Cenkos Securities plc (Nominated
Advisor and Broker)
Neil McDonald Tel: +44 (0) 131 220 9771
Pete Lynch Tel: +44 (0) 131 220 9772
First Equity Limited (Joint
Broker)
Jason Robertson Tel: +44 (0) 20 7330 1883
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