TIDMEME
RNS Number : 6094N
Empyrean Energy PLC
21 January 2019
This announcement contains inside information
Empyrean Energy PLC / Index: AIM / Epic: EME / Sector: Oil &
Gas
21 January 2019
Empyrean Energy PLC ("Empyrean" or the "Company")
Independent Resource Audit of Mako Gas Field and Conversion to
Gross Split PSC in Duyung PSC, Indonesia
Empyrean Energy plc, the oil and gas development company with
interests in China, Indonesia and the United States, is pleased to
announce an independent resource audit of the Mako gas field by
Gaffney Cline & Associates ("GCA"). Additionally, West Natuna
Exploration Limited ("WNEL" or the "Operator") has been invited to
convert the Duyung Production Sharing Contract ("Duyung PSC") to
the Government of Indonesia's ("GOI") new Gross Split PSC
structure.
WNEL is the owner and operator of the Duyung PSC in the West
Natuna basin, offshore Indonesia which contains the Mako gas field.
Empyrean currently own a 10 percent shareholding in WNEL, and
Conrad Petroleum Ltd. ("Conrad"), currently own a 90 percent
shareholding in WNEL.
Highlights
-- Gross 2C (contingent) resources audited by Gaffney Cline
& Associates in the field of 276 Bcf (48.78 MMboe) of
recoverable dry gas, and gross 3C resources of 392 Bcf (69.3
MMboe), representing additional field upside
-- Identified exploration targets beneath the Mako gas field,
including the high priority Tambak prospect (formerly 'Mako Deep')
with potential to be up to twice the size of the existing Mako gas
field discovery
-- The Duyung PSC has been converted to the new GOI contractor-
and investor-friendly Gross Split PSC scheme, which gives
contractors greater spending and operational flexibility to carry
out their business
-- An updated field development plan using the Gross Split based
fiscal terms has been submitted to the Indonesian authorities for
approval
Tom Kelly, CEO of Empyrean, commented:
"The audit by GCA provides a tremendous endorsement of the Mako
gas field, confirming much of Conrad's and our own technical
assessment of the field. More work on a given field-whether
drilling operations, technical maturation, or administrative
progress (such as gas commercialisation and securing access to
necessary infrastructure)-reduces risk, removes uncertainty and
allows for more accurate appraisal and valuation. The conversion of
the Duyung PSC to a Gross Split PSC is a step in the right
direction resulting in strengthening project economics while at the
same time lessening the bureaucratic burden on the execution of the
project. Rarely do you get such a unique mix of low risk appraisal
coupled with a potentially high reward exploration target under an
advantageous structure. Empyrean looks forward to continuing to
work closely with Conrad to unlock value from the Duyung PSC."
GCA Audit of the Mako Gas Field, Duyung PSC, Offshore
Indonesia
The Mako gas field is an extremely large, shallow structural
closure of over 350km(2). The reservoir is a Pliocene-age
sandstone, with a gas-water contact at approximately 391m true
vertical depth sub-sea. The field has excellent seismic definition
with direct hydrocarbon indicators being very evident.
Having been drilled but not tested by prior operators of the
acreage, the commercial viability of the Mako gas field was
demonstrated by the Mako South-1 well drilled by WNEL in 2017. The
well was drilled to core and test the Mako reservoir, flowing up to
10.8 MMscf/d of dry gas on test. In total, four wells have
penetrated the reservoir section, and while further appraisal is
planned given the huge areal extent of the field, the reservoir
distribution is reasonably well understood.
The Mako field is located in the prolific West Natuna basin,
approximately 16km from the WNTS pipeline system which delivers gas
from Indonesia to Singapore. A plan of development has been
submitted to the Indonesian authorities, and gas marketing
discussions are in advanced stages, with a Heads of Agreement
already signed with a buyer in Singapore for the Mako gas
("HOA").
GCA were commissioned to conduct an independent resource audit
of the Mako gas field. GCA is a leading reserves certification and
audit firm with 50 years' experience in conducting reserves and
resource evaluations, and audits to the standards demanded by
securities regulators and professional engineering bodies
worldwide.
GCA rigorously tested internal reservoir models, development
concepts, production estimates, and cash flow projections. This
resulted in GCA rendering the following opinion on the resources
and economics of the field:
GCA Estimated Contingent Resource & Post-Tax NPV, Mako Gas
Field Development, Duyung PSC
========================================================================
Contingent Resources Gross 100% Field Net Attributable to Empyrean
(10%)
====================== ================= =============================
Bcf Bcf
====================== ================= =============================
1C (Low Case) 184 18.4
====================== ================= =============================
2C (Mid Case) 276 27.6
====================== ================= =============================
3C (High Case) 392 39.2
====================== ================= =============================
The resources are classified as "contingent" since no gas sales
agreement ("GSA") has yet been signed and a Final Investment
Decision ("FID") has not yet been taken. However, the HOA is a
definitive step on the path to executing a GSA, the definitive gas
sales document detailing all the terms regarding the sale of all
Mako gas to Singapore. Once a GSA is signed / FID has been made,
these resources will automatically be upgraded to reserves, and
classified as proved, probable and possible. Negotiations on the
GSA are underway and progressing as expected.
The Operator's current field development plan envisages an
initial four well development scheme, a small platform with
compression facilities and an additional four wells as a second
phase to be drilled later in the field's life. The plateau
production rate is envisaged to be up to 90 MMscf/d.
Near Field Exploration Potential
A series of prospects both beneath and above the Mako field have
been mapped. Of particular note is the Tambak prospect (formerly
'Mako Deep'), a Lower Gabus structure that sits beneath the
northern end of the Mako gas field. The target interval within
Tambak exhibits seismic amplitude brightening, conformable with
structural closure.
At the southern end of the field, over the structure's crest,
sits the Mako Shallow prospect. This again shows very strong direct
hydrocarbon indicators on seismic, conformable with closure in
shallow Muda sandstones.
A drilling campaign is being planned to comprise an appraisal
well within the Mako gas field and a well to test the Tambak
prospect. Further announcements regarding the upcoming drilling
program will be made in due course.
Conversion to Gross Split
In 2017, the Ministry of Energy and Mineral Resources in
Indonesia ("MEMR") issued new regulations, introducing a new PSC
scheme based upon a "Gross Production Split". The Gross Split PSC
eliminates the previous cost recovery scheme in favour of a higher
headline contractor share of revenues. Under the cost recovery
regime, with the government take being directly reduced by
contractor expenditure, budgeting is often a lengthy negotiation
with potentially significant compromise. Under the new regime, the
government take no longer depends on the exploration and
development costs, hence the approval process for budgets has been
dramatically streamlined, with the determination of optimal
expenditure made by the contractor.
The Gross Split scheme on the other hand, being similar to the
international well-established royalty/tax regime provides for more
flexibility in the way that the various operational activities are
procured and expended.
Mako Gas Field Plan of Development
A Plan of Development for the Mako gas field ("POD") was
submitted early August 2018. The POD has been approved by SKK
Migas, the Indonesian oil and gas regulator, and was pending
approval from the MEMR prior to conversion of the Duyung PSC to a
Gross Split PSC. Post the conversion to the Gross Split PSC, the
POD has been revised to conform with the new requirements and
submitted, and the revised POD is being evaluated by SKK Migas and
the GOI. WNEL have advised that the POD is expected to be approved
within Q1 2019. Approval of the POD will be another significant
milestone for the project and the Company.
The information contained in this announcement has been reviewed
by Empyrean's Executive Technical director, Gaz Bisht, who has over
29 years' experience as a hydrocarbon geologist and
geoscientist.
**ENDS**
For further information:
Empyrean Energy plc
Tom Kelly Tel: +61 8 9380 9920
Cenkos Securities plc
Neil McDonald Tel: +44 (0) 131 220 9771
Beth McKiernan Tel: +44 (0) 131 220 9778
Pete Lynch Tel: +44 (0) 131 220 9772
St Brides Partners Ltd
Lottie Wadham Tel: +44 (0) 20 7236 1177
Frank Buhagiar Tel: +44 (0) 20 7236 1177
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