TIDMEME
RNS Number : 5001W
Empyrean Energy PLC
23 December 2021
Empyrean Energy PLC / Index: AIM / Epic: EME / Sector: Oil &
Gas
23 December 2021
Empyrean Energy PLC ("Empyrean" or the "Company")
Interim Results
Empyrean Energy (EME: AIM), the oil and gas development company
with interests in China, Indonesia and the United States, is
pleased to provide its Interim Report for the six months ended 30
September 2021.
Highlights
-- Block 29/11, Pearl River Mouth Basin, China (EME 100%)
o Well design completed, Integrated Drill Contract signed with
China Oilfield Services Limited, drill rig confirmed and drill
preparation activities on track for drilling of Jade Prospect;
o IDC confirmed significantly reduced drilling cost estimate of
US$12.3 million (previous estimate US$18.5 million), plus a
success-based testing cost estimate of US$7.4 million; and
o Internal Geological Chance of Success Assessment has been
upgraded for Jade and Topaz prospects. Jade is now 41% and Topaz
35%.
-- Duyung PSC Project, Indonesia (EME 8.5%)
o Gas sale agreement negotiations continue with several
interested parties.
-- Corporate
o July 2021 Placement raises US$6.92 million (GBP5.02 million)
for China drill preparation activities; and
o December 2021 Convertible Note and Placement raises US$10.14
million (GBP7.62 million) to fully fund Jade prospect drilling.
Empyrean Energy plc
Tom Kelly Tel: +61 8 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
Chairman's Statement
Empyrean's focus during the half year period to 30 September
2021 has predominantly been on preparing for and funding the
drilling of the Jade Prospect at our 100% owned Block 29/11,
offshore China.
At the time of writing, it is most pleasing to advise that drill
preparation activities have progressed well throughout the latter
part of the year, culminating in the signing of an Integrated
Drilling Contract in November, at a significantly reduced cost to
initial estimates. With the drill rig confirmed, the well will spud
following the completion of the well site survey and final permits
are in hand. Needless to say this is a very exciting time for the
Company.
At Duyung, gas sale agreement ("GSA") negotiations continue with
several interested parties and we hope that these will be
successfully concluded in early 2022. Earlier in 2021 an
independent assessment confirmed a significant resource upgrade and
in the process confirmed the Mako field as one of the largest gas
fields ever discovered in the West Natuna Basin and one of the
largest undeveloped gas resources in the immediate region.
On the corporate front, the Company successfully conducted a
US$6.92 million placement iIn July and earlier this month secured
funding totalling US$10.14 million through an equity placing and
convertible loan note issue, the proceeds of which completed the
Company's funding requirements (on a dry hole basis) for Jade. I'd
like to extend special thanks on behalf of Tom and the Board to the
lender, whom we welcomed as a note holder and future shareholder,
and to all new and existing shareholders who supported these
raisings.
I would also like to thank the Board and staff for their efforts
during the year as it has been a particularly busy time, and of
course to our partner, China National Offshore Oil Company, for
their cooperation throughout the period as we progress towards the
safe drilling of the Jade Prospect. The coming months have the
potential to be transformational for Empyrean.
Patrick Cross
Non-Executive Chairman
23 December 2021
Operational Review
China Block 29/11 Project (100% WI)
Background
Block 29/11 is located in the prolific Pearl River Mouth Basin,
offshore China approximately 200km Southeast of Hong Kong. The
acquisition of this block heralded a new phase for Empyrean when it
became an operator with 100% of the exploration rights of the
permit during the exploration phase of the project. In the event of
a commercial discovery, China National Offshore Oil Corporation
Limited ("CNOOC") will have a back in right to 51% of the
permit.
Following the completion and interpretation of the 3D seismic
data acquired on Block 29/11, the prospective resources (un-risked)
of all three prospects on the Block (Jade, Topaz and Pearl) were
independently validated, by Gaffney, Cline and Associates, who
completed an audit of the Company's oil in place estimates in
November 2018. Total mean oil in place estimates on the three
prospects are now 884 MMbbl on an un-risked basis.
Oil in place (MMbbl) audited by Gaffney, Cline and
Associates
Prospect P90 P50 P10 Mean GCoS
Jade 93 187 395 225 32%
---- ---- ---- ----- -----
Topaz 211 434 891 506 30%
---- ---- ---- ----- -----
Pearl 38 121 302 153 15%
---- ---- ---- ----- -----
In addition, it is particularly pleasing that Gaffney, Cline and
Associates estimated close to a 1 in 3 chance of geological success
at Jade and Topaz. Exploration risk has been further mitigated by
the completion of an oil migration study during June 2018 which
established oil migration pathways into all three prospects. In May
2019, the Company further solidified the technical merits of the
project by confirming the presence of well-defined gas clouds over
the Jade and Topaz prospects.
Drilling Preparation Activities - The Jade Prospect
During the six-month interim report period the Company's focus
was predominantly on completing all necessary activities to ensure
the safe drilling of the Jade Prospect.
In May 2021, following analysis completed of nearby offset wells
drilling data including four CNOOC owned wells, a robust well
design for the Jade Prospect was finalised, after considering two
casing design options. The well design and engineering project,
completed by AGR, recommended the four-string design as it provides
a more robust well design with reduced exposure to potential
unplanned events and associated costs. In addition, the AGR report
has provided a comprehensive design recommendation for drilling
fluids, cement and abandonment for the well.
In November 2021, the Company announced that it has signed the
Integrated Drilling Contract ("IDC") with China Oilfield Services
Limited ("COSL"). In September 2021, the Company and COSL agreed
all technical, commercial and contractual terms after which the
Geological Program was incorporated into the final IDC. CNOOC
approval was sought and provided ahead of the award of the IDC and
again prior to signing of the IDC and all parties are aligned in
the targeted timing to drill the Jade Prospect in December.
The signed IDC confirms the 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.
COSL has currently assigned the NH8 drill rig to drill the Jade
prospect. The Company engaged COSL in October 2021 to complete a
required well site survey over the Jade drill location. The well
site survey requires 5 days of suitable sea conditions and the
Company hopes to complete this survey very soon once sea conditions
allow. The survey vessel is fully equipped and on standby to
mobilise immediately. The well site survey is critical to 2 of 8
essential permits required to drill. A total of 5 permit
applications have already been made and are expected to be granted
in the coming weeks. The last permit relates to the oil spill
response plan which is currently nearing completion and expected to
be lodged within the coming week. As these permits are granted, the
Company will provide updates by way of announcement.
It is expected that the Jade prospect will take approximately 26
days to reach total depth, with the testing of any oil column
encountered expected to take a further 14 days. The Jade prospect
is targeting a potentially world class conventional carbonate
reservoir, with discoveries nearby producing sweet light oil in the
38-41 api range. Four recent nearby discoveries exhibit gas clouds
on 3D seismic in the overburden rocks above the reservoir and seal.
This feature is not exhibited in nearby dry wells. Empyrean's Jade
and Topaz prospects both exhibit gas clouds on 3D seismic similar
to nearby discoveries. Any discovery at the Jade prospect will
significantly further de-risk the 'double the size of Jade' target
at the Topaz prospect.
Cautionary Statement: The volumes presented in this announcement
are STOIIP estimates only. A recovery factor needs to be applied to
the undiscovered STOIIP estimates based on the application of a
future development project. The subsequent estimates, post the
application of a recovery factor, will have both an associated risk
of discovery and a risk of development. Further exploration,
appraisal and evaluation is required to determine the existence of
a significant quantity of potentially movable hydrocarbons.
Duyung PSC, Indonesia (8.5% WI)
Background
In April 2017, Empyrean acquired from Conrad Petroleum a 10%
shareholding in West Natuna Exploration Limited ("WNEL"), which
held a 100% Participating Interest in the Duyung Production Sharing
Contract ("Duyung PSC") in offshore Indonesia and is the operator
of the Duyung PSC.
The Duyung PSC covers an offshore permit of approximately
1,100km2 in the prolific West Natuna Basin. The main asset in the
permit is the Mako shallow gas discovery with 23 feet of gas
bearing excellent reservoir quality rock with high permeability
sands in the multi Darcy range. The gas is of high-quality being
close to 100% methane.
In early 2019, both the operator, Conrad Petroleum, and Empyrean
divested part of their interest in the Duyung PSC to AIM-listed
Coro Energy Plc ("Coro"). Following the transaction, Empyrean's
interest reduced from 10% to 8.5% interest in May 2020, having
received cash and shares from Coro. As part of this transaction
Coro funded US$10.5 million of the costs of the successful 2019
drilling programme. Empyrean also received cash consideration of
US$295,000 and consideration shares in Coro with a value of
US$185,000 for the transfer to Coro of 1.5% of its at the time 10%
interest in the Duyung PSC. In May 2020, the final Indonesian
regulatory approvals for the transfer of title of the 15% direct
interest in the Duyung PSC to Coro were received. As part of this
completion process WNEL made a direct transfer of its interest in
the Duyung PSC to Empyrean and the other owners, who now hold their
interest in the Duyung PSC directly.
The Mako Gas Field is located close to the West Natuna pipeline
system and gas from the field can be marketed to buyers in both
Indonesia and in Singapore. The operator continues to make progress
towards the securing a GSA, and the conclusion of GSA negotiations
will mark a further important step toward the FID to develop and
commercialise the field.
Multi Project Farm-in in Sacramento Basin, California (25%-30%
WI)
Background
In May 2017, Empyrean agreed to farm-in to a package of
opportunities including the Dempsey and Alvares prospects in the
Northern Sacramento Basin, onshore California. The rationale for
participating in this potentially significant gas opportunity was a
chance to discover large quantities of gas in a relatively 'gas
hungry' market. Another attractive component of the deal was the
ability to commercialise a potential gas discovery using existing
gas facilities that are owned by the operator.
Following on from the Dempsey drilling campaign in 2018, the
joint venture integrated the subsurface data with regional geology
and seismic data to evaluate additional more attractive targets in
thicker reservoir units for future drilling along the Dempsey
trend, in which Empyrean will earn a 30% interest.
The drilling application for the Borba Prospect had previously
been approved by both the County and from California Department of
Geological and Geothermal Resources, however with the outbreak of
COVID-19 the travel restrictions and the uncertainty of being able
to execute a drilling campaign safely and without interruption
caused the commencement of any planned drilling at Borba to be
placed on hold.
In late 2020, Empyrean advised the operator Sacgasco Limited
(ASX: SGC) ("Sacgasco") that it would not be participating in the
drilling of the Borba Prospect, which occurred in early 2021. There
have been no further material updates during the reporting
period.
The information contained in this report was completed and
reviewed by the Company's Executive Director (Technical), Mr
Gajendra (Gaz) Bisht, who has over 30 years' experience as a
petroleum geoscientist.
Definitions
2C: Contingent resources are quantities of petroleum estimated,
as of a given date, to be potentially recoverable from known
accumulations by application of development projects, but which are
not currently considered to be commercially recoverable. The range
of uncertainty is expressed as 1C (low), 2C (best) and 3C
(high).
Bcf: Billions of cubic feet
MMbbl: Million Barrels of Oil
*Cautionary Statement: The estimated quantities of oil that may
potentially be recovered by the application of a future development
project relates to undiscovered accumulations. These estimates have
both an associated risk of discovery and a risk of development.
Further exploration, appraisal and evaluation is required to
determine the existence of a significant quantity of potentially
movable hydrocarbons.
Gajendra (GAZ) Bisht M.Sc. (Tech) in Applied Geology
Executive Director (Technical)
23 December 2021
Statement of Comprehensive Income
For the Period Ended 30 September 2021
Year Ended
6 Months to 30 31 March
September (unaudited) (audited)
-----------
2021 2020 2021
Notes US$'000 US$'000 US$'000
Revenue - - -
------------ ----------- -----------
Administrative expenditure
Administrative expenses (179) (146) (338)
Compliance fees (42) (89) (225)
Directors' remuneration (179) (197) (400)
Foreign exchange differences (28) (9) 20
Total administrative expenditure (428) (441) (943)
Operating loss (428) (441) (943)
Finance expense (23) (4) (7)
Impairment of oil and gas
properties 3 (1) (2) (3)
Loss from continuing operations
before taxation (452) (447) (953)
Tax expense in current period (1) - -
------------ ----------- -----------
Loss from continuing operations
after taxation (453) (447) (953)
------------ ----------- -----------
Total comprehensive loss for
the year (453) (447) (953)
============ =========== ===========
Loss per share from continuing
operations (expressed in cents)
* Basic 2 (0.09)c (0.10)c (0.20)c
* Diluted 2 (0.09)c (0.10)c (0.20)c
The accompanying accounting policies and notes form an integral
part of these financial statements.
Statement of Financial Position
As at 30 September 2021
Year Ended
6 Months to 30 31 March
September (unaudited) (audited)
-----------
2021 2020 2021
Notes US$'000 US$'000 US$'000
Assets
Non-Current Assets
Oil and gas properties: exploration
and evaluation 3 14,869 14,184 14,643
Investments 4 - - -
------------ ----------- -----------
Total non-current assets 14,869 14,184 14,643
Current Assets
Trade and other receivables 38 39 36
Corporation tax receivable - 358 358
Cash and cash equivalents 6,098 833 150
------------ ----------- -----------
Total current assets 6,136 1,230 544
Liabilities
Current Liabilities
Trade and other payables 237 470 667
Provisions 135 78 111
Total current liabilities 372 548 778
Net Current Assets/(Liabilities) 5,764 682 (234)
------------ ----------- -----------
Net Assets 20,633 14,866 14,409
============ =========== ===========
Shareholders' Equity
Share capital 5 1,627 1,398 1,398
Share premium reserve 35,303 29,408 29,408
Warrant and share based payment
reserve 1,040 438 488
Retained losses (17,337) (16,378) (16,885)
------------ ----------- -----------
Total Equity 20,633 14,866 14,409
============ =========== ===========
The accompanying accounting policies and notes form an integral
part of these financial statements.
Statement of Cash Flows
For the Period Ended 30 September 2021
Year Ended
6 Months to 30 31 March
September (unaudited) (audited)
------------------------- -----------
2021 2020 2021
Notes US$'000 US$'000 US$'000
Operating Activities
Payments for operating activities (394) (422) (831)
Receipt of corporation tax 358 - -
------------ ----------- -----------
Net cash outflow from operating
activities (36) (422) (831)
Investing Activities
P ayments for exploration and
evaluation (599) (857) (1,159)
Net cash outflow from investing
activities (599) (857) (1,159)
Financing Activities
Issue of ordinary share capital
and warrants 6,920 2,094 2,094
Payment of equity issue costs (309) (163) (163)
------------ ----------- -----------
Net cash inflow from financing
activities 6,611 1,932 1,931
Net decrease in cash and cash
equivalents 5,976 653 (59)
Cash and cash equivalents at
the start of the year 150 189 189
Forex loss on cash held (28) (9) 20
------------ ----------- -----------
Cash and cash equivalents at
the end of the period 6,098 833 150
============ =========== ===========
The accompanying accounting policies and notes form an integral
part of these financial statements.
Statement of Changes in Equity
For the Period Ended 30 September 2021
Share Share Premium Warrant Retained Total
Capital Reserve and SBP Loss Equity
Reserve
US$'000 US$'000 US$'000 US$'000 US$'000
Balance at 1 April
2020 1,291 27,811 153 (15,931) 13,324
========= ============== ========= ========= ========
Loss after tax for
the period - - - (447) (447)
Total comprehensive
loss for the period - - - (447) (447)
--------- -------------- --------- --------- --------
Contributions by
and distributions
to owners
Shares issued in
the period 107 1,760 227 - 2,094
Share-based payment
expense - (163) - - (163)
Derivative settlement - - 58 - 58
--------- -------------- --------- --------- --------
Total contributions
by and distributions
to owners 107 1,597 285 - 1,989
--------- -------------- --------- --------- --------
Balance at 30 September
2020 1,398 29,408 438 (16,378) 14,866
========= ============== ========= ========= ========
Balance at 1 April
2020 1,291 27,811 153 (15,931) 13,324
========= ============== ========= ========= ========
Loss after tax for
the year - - - (953) (953)
Total comprehensive
loss for the year - - - (953) (953)
--------- -------------- --------- --------- --------
Contributions by
and distributions
to owners
Shares issued in
the period 107 1,760 227 - 2,094
Equity issue costs - (163) - - (163)
Share-based payment
expense - - 100 - 100
Finance expense
(share-based) - - 7 - 7
Total contributions
by and distributions
to owners 107 1,597 334 - 2,038
Balance at 1 April
2021 1,398 29,408 487 (16,884) 14,409
========= ============== ========= ========= ========
Loss after tax for
the period - - - (453) (453)
--------- -------------- --------- --------- --------
Total comprehensive
loss for the period - - - (453) (453)
--------- -------------- --------- --------- --------
Contributions by
and distributions
to owners
Shares and warrants
issued 229 6,204 487 - 6,920
Equity issue costs - (309) - - (309)
Share-based payment
expense - - 43 - 43
Finance expense
(share-based) - - 23 - 23
Total contributions
by and distributions
to owners 229 5,895 553 - 6,677
--------- -------------- --------- --------- --------
Balance at 30 September
2021 1,627 35,303 1,040 (17,337) 20,633
========= ============== ========= ========= ========
The accompanying accounting policies and notes form an integral
part of these financial statements.
Notes to the Financial Statements
For the Period Ended 30 September 2021
Basis of preparation
The Company's condensed interim financial statements for the six
months ended 30 September 2021 have been prepared in accordance
with International Financial Reporting Standards ("IFRS") as
adopted by the United Kingdom and Companies Act 2006. The principal
accounting policies are summarised below. The financial report is
presented in the functional currency, US dollars and all values are
shown in thousands of US dollars (US$'000). The financial
statements have been prepared on a historical cost basis and fair
value for certain assets and liabilities. The same accounting
policies, presentation and methods of computation are followed in
these financial statements as were applied in the Company's latest
audited financial statements for the year ended 31 March 2021.
The financial information for the period ended 30 September 2021
does not constitute the full statutory accounts for that period.
They have not been reviewed by the Company's auditor. The Annual
Report and financial statements for the year ended 31 March 2021
have been filed with the Registrar of Companies. The independent
auditor's report on the Annual Report and financial statements was
unqualified and did not contain a statement under Section 498(2) or
498(3) of the Companies Act 2006, but did draw attention to a
material uncertainty relating to going concern.
Nature of business
The Company is a public limited company incorporated and
domiciled in England and Wales. The address of the registered
office is 200 Strand, London, WC2R 1DJ. The Company is in the
business of financing the exploration, development and production
of energy resource projects in regions with energy hungry markets
close to existing infrastructure. The Company has typically focused
on non-operating working interest positions in projects that have
drill ready targets that substantially short cut the life-cycle of
hydrocarbon projects by entering the project after exploration
concept, initial exploration and drill target identification work
has largely been completed.
Going concern
The Company's principal activity during the period has been the
development of its exploration projects. The Company had a cash
balance of US$6.10 million at 30 September 2021 (31 March 2021:
US$0.15 million) and made a loss after income tax of US$0.45
million (31 March 2021: loss of US$0.95 million).
The Directors have prepared cash flow forecasts for the Company
covering the period to 31 December 2022 and these demonstrate that
the Company will require further funding within the next 12 months.
Principally the Company has a commitment to drill an exploration
well on the Jade prospect in China, by 12 June 2022. In December
2021, US$10.14 million was raised through an equity placement and
convertible loan note issue, the proceeds of which completed the
Company's funding requirements (on a dry hole basis) for Jade. The
Directors also note that the equity facility agreement with Long
State Investment Limited will also provide a funding facility to
support future working capital requirements alongside the drill
commitment funding.
The Directors have therefore concluded that it is appropriate to
prepare the Company's financial statements on a going concern
basis.
Note 1. Segmental Analysis
The Directors consider the Company to have three geographical
segments, being China (Block 29/11 project), Indonesia (Duyung PSC
project) and North America (Sacramento Basin project), which are
all currently in the exploration and evaluation phase. Corporate
costs relate to the administration and financing costs of the
Company and are not directly attributable to the individual
projects. The Company's registered office is located in the United
Kingdom.
Details China Indonesia USA Corporate Total
US$'000 US$'000 US$'000 US$'000 US$'000
30 September 2021
Revenue from continued operations - - - - -
Segment result
Unallocated corporate expenses - - - (428) (428)
-------- ---------- -------- ---------- --------
Operating loss - - - (428) (428)
Finance expense - - - (23) (23)
Impairment of oil and gas properties - - (1) - (1)
Loss before taxation - - (1) (451) (452)
Tax expense in current period - - - (1) (1)
-------- ---------- -------- ---------- --------
Loss after taxation - - (1) (452) (453)
-------- ---------- -------- ---------- --------
Total comprehensive loss for
the financial period - - (1) (452) (453)
======== ========== ======== ========== ========
Segment assets 6,690 4,121 4,058 - 14,869
Unallocated corporate assets - - - 6,136 6,136
-------- ---------- -------- ---------- --------
Total assets 6,690 4,121 4,058 6,136 21,005
======== ========== ======== ========== ========
Segment liabilities - - - - -
Unallocated corporate liabilities - - - 372 372
-------- ---------- -------- ---------- --------
Total liabilities - - - 372 372
======== ========== ======== ========== ========
Details China Indonesia USA Corporate Total
US$'000 US$'000 US$'000 US$'000 US$'000
30 September 2020
Revenue from continued operations - - - - -
Segment result
Unallocated corporate expenses - - - (441) (441)
-------- ---------- -------- ---------- --------
Operating loss - - - (441) (441)
Finance expense - - - (4) (4)
Impairment of oil and gas properties - - (2) - (2)
Loss before taxation - - (2) (445) (447)
Tax benefit in current period - - - - -
-------- ---------- -------- ---------- --------
Loss after taxation - - (2) (445) (447)
-------- ---------- -------- ---------- --------
Total comprehensive loss for
the financial period - - (2) (445) (447)
======== ========== ======== ========== ========
Segment assets 6,202 3,969 4,013 - 14,184
Unallocated corporate assets - - - 1,230 1,230
-------- ---------- -------- ---------- --------
Total assets 6,202 3,969 4,013 1,230 15,414
======== ========== ======== ========== ========
Segment liabilities - - - - -
Unallocated corporate liabilities - - - 548 548
-------- ---------- -------- ---------- --------
Total liabilities - - - 548 548
======== ========== ======== ========== ========
Details China Indonesia USA Corporate Total
US$'000 US$'000 US$'000 US$'000 US$'000
31 March 2021
Revenue from continued operations - - - - -
Segment result - - - - -
Unallocated corporate expenses (943) (943)
-------- ---------- -------- ---------- --------
Operating loss - - - (943) (943)
Finance expense - - - (7) (7)
Impairment of oil and gas properties - - (3) - (3)
-------- ---------- -------- ---------- --------
Loss before taxation - - (3) (950) (953)
Tax benefit in current year - - - - -
-------- ---------- -------- ---------- --------
Loss after taxation - - (3) (950) (953)
-------- ---------- -------- ---------- --------
Total comprehensive loss for
the financial year - - (3) (950) (953)
======== ========== ======== ========== ========
Segment assets 6,537 4,052 4,054 - 14,643
Unallocated corporate assets - - - 544 544
-------- ---------- -------- ---------- --------
Total assets 6,537 4,052 4,054 544 15,187
======== ========== ======== ========== ========
Segment liabilities - - - - -
Unallocated corporate liabilities - - - 778 778
-------- ---------- -------- ---------- --------
Total liabilities - - - 778 778
======== ========== ======== ========== ========
Note 2. Loss Per Share
The basic loss per share is derived by dividing the loss after
taxation for the period attributable to ordinary shareholders by
the weighted average number of shares on issue being 521,903,803
(2020: 469,699,133).
Year Ended
6 Months to 30 September 31 March
(unaudited) (audited)
================================ ===============
2021 2020 2021
Loss per share from continuing
operations
Loss after taxation from continuing US$(453,000) US$(447,000) US$(953,000)
operations
Loss per share - basic (0.09)c (0.10)c (0.20)c
Loss after taxation from continuing
operations adjusted for dilutive US$(453,000) US$(447,000) US$(953,000)
effects
Loss per share - diluted (0.09)c (0.10)c (0.20)c
For the current and prior financial periods the exercise of the
options is anti-dilutive and as such the diluted loss per share is
the same as the basic loss per share. Details of the potentially
issuable shares that could dilute earnings per share in future
periods are set out in Note 5.
Note 3. Oil and Gas Properties: Exploration and Evaluation
Year Ended
6 Months to 30 September 31 March
(unaudited) (audited)
=========================== ===========
2021 2020 2021
US$'000 US$'000 US$'000
Balance brought forward 14,184 9,586 9,850
Additions(a) 686 651 847
Transfers(b) - 3,949 3,949
Impairment(c) (1) (2) (3)
------------- ------------ -----------
Net book value 14,869 14,184 14,643
============= ============ ===========
(a) The Company was awarded its permit in China in December
2016. Block 29/11 is located in the Pearl River Mouth Basin,
offshore China. Empyrean is operator with 100% of the exploration
right of the Permit during the exploration phase of the project. In
May 2017, the Company acquired a working interest in the Sacramento
Basin, California. Empyrean entered into a joint project with
ASX-listed Sacgasco Limited, to test a group of projects in the
Sacramento Basin, California, including two mature, multi-TcF gas
prospects in Dempsey (EME 30%) and Alvares (EME 25%) and also
further identified follow up prospects along the Dempsey trend (EME
30%). Please refer to the Operational Review for further
information on exploration and evaluation performed during the
period.
(b) In February 2019, Empyrean announced that it had entered
into a binding, conditional purchase agreement (the Agreement)
pursuant to which AIM listed Coro would acquire a 15% interest in
the Duyung PSC from WNEL for aggregate consideration in cash and
Coro shares of US$4.8 million (of which Empyrean received
US$295,000 in cash and 6,090,504 Coro shares) and the contribution
of US$10.5 million by Coro toward the 2019 drilling campaign at the
Mako gas field. The cash and share component of the consideration
was paid pro rata to the existing owners of WNEL, being Empyrean,
which currently had a 10% effective interest in the Duyung PSC, and
Conrad Petroleum Ltd, which currently had a 90% effective interest
in the Duyung PSC, each through shareholding in WNEL.
(c) The consideration paid comprised US$2.95 million in cash and
US$1.85 million in the form of 60,905,037 new ordinary shares in
Coro. Empyrean received cash consideration of US$295,000 and
Consideration Shares with a value of US$185,000 for the transfer to
Coro of 1.5% of its current 10% interest in the Duyung PSC,
reducing its interest to 8.5%.
(d) In May 2020, the final Indonesian regulatory approvals for
the transfer of title of the 15% direct interest in the Duyung PSC
to Coro were received. As part of this completion process WNEL made
a direct transfer of its interest in the Duyung PSC to Empyrean and
the other owners, who now hold their interest in the Duyung PSC
directly. As a result of this direct ownership, the Company's
interest in the Duyung PSC is no longer classified under IFRS 9 as
a financial asset at fair value through profit or loss and now
falls under IFRS 6 (Exploration for and Evaluation of Mineral
Resources). The carrying value post-disposal of US$3.95 million at
May 2020 has been transferred to Note 3 - Oil and Gas Properties:
Exploration and Evaluation. Please refer to Note 4 - Investments
for details on the fair value assessment of the project at transfer
date.
(e) In light of current market conditions, little or no work has
been completed on the Riverbend or Eagle Oil projects in the period
and no substantial project work is forecast for either project in
2021/22 whilst the Company focuses on other projects. Whilst the
Company maintains legal title it has continued to fully impair the
carrying value of the asset at 30 September 2021.
Project Operator Working 2021 2020
Interest Carrying Carrying Value
Value US$'000
US$'000
Exploration and evaluation
China Block 29/11 Empyrean Energy 100%* 6,690 6,202
Sacramento Basin Sacgasco 25-30% 4,058 4,013
Duyung PSC Conrad Petroleum 8.5% 4,121 3,969
Riverbend Huff Energy 10% - -
Eagle Oil Pool Development Strata-X 58.084% - -
---------- ----------------
14,869 14,184
========== ================
*In the event of a commercial discovery, and subject to the Company
entering PSC, CNOOC Limited will have a back in right to 51% of
the permit. As at the date of these financial statements no commercial
discovery has been made.
Note 4. Investments
Year Ended
6 Months to 30 September 31 March
(unaudited) (audited)
============================ ===========
2021 2020 2021
US$'000 US$'000 US$'000
Balance brought forward - 4,404 4,404
Additions(a) - 25 25
Disposals(b) - (480) (480)
Transfers(b) - (3,949) (3,949)
-------------- ------------ -----------
Total investments - - -
============== ============ ===========
(a) For further information on additional work performed on the
Duyung PSC during the period, please refer to the Operational
Review.
(b) In February 2019, Empyrean announced that it had entered
into a binding, conditional purchase agreement (the Agreement)
pursuant to which AIM listed Coro would acquire a 15% interest in
the Duyung PSC from WNEL for aggregate consideration in cash and
Coro shares of US$4.8 million (of which Empyrean received
US$295,000 in cash and 6,090,504 Coro shares) and the contribution
of US$10.5 million by Coro toward the 2019 drilling campaign at the
Mako gas field. The cash and share component of the consideration
was paid pro rata to the existing owners of WNEL, being Empyrean,
which currently had a 10% effective interest in the Duyung PSC, and
Conrad Petroleum Ltd, which currently had a 90% effective interest
in the Duyung PSC, each through shareholding in WNEL.
(c) The consideration paid comprised US$2.95 million in cash and
US$1.85 million in the form of 60,905,037 new ordinary shares in
Coro. Empyrean received cash consideration of US$295,000 and
Consideration Shares with a value of US$185,000 for the transfer to
Coro of 1.5% of its current 10% interest in the Duyung PSC,
reducing its interest to 8.5%.
(d) In May 2020, the final Indonesian regulatory approvals for
the transfer of title of the 15% direct interest in the Duyung PSC
to Coro were received. As part of this completion process WNEL made
a direct transfer of its interest in the Duyung PSC to Empyrean and
the other owners, who now hold their interest in the Duyung PSC
directly. As a result of this direct ownership, the Company's
interest in the Duyung PSC is no longer classified under IFRS 9 as
a financial asset at fair value through profit or loss and now
falls under IFRS 6 (Exploration for and Evaluation of Mineral
Resources).
(e) The carrying value post-disposal of US$3.95 million at May
2020 has been transferred to Note 3 - Oil and Gas Properties:
Exploration and Evaluation. The fair value of the project has been
assessed at transfer date and there has been no change from the
assessment made at 31 March 2020, when the carrying value
pre-disposal of US$4.4 million was deemed to approximate fair value
based on the purchase agreement detailed above, including costs
capitalised since the agreement was entered into. While the
successful appraisal drilling program conducted during 2019/20
resulted in a substantial increase in the contingent resources of
Mako gas field, there are, in the Board's opinion, several
milestones required to be achieved before an updated fair value of
the project can be reliably and objectively assessed. These include
steps required for contingent resources to be converted to reserves
at final investment decision (FID) and also the steps required to
finalise a gas sales agreement, which has been delayed by the
current COVID-19 pandemic and resultant disruptions. Given COVID-19
and the current uncertainty and volatility in the energy markets,
attempting to model fair value at this point in time would be
intrinsically difficult and subject to a number of
contingencies.
Note 5. Share Capital
Year Ended
6 Months to 30 September 31 March
(unaudited) (audited)
2021 2020 2021
US$'000 US$'000 US$'000
Issued and fully paid
573,129,113 (2020: 489,430,615) ordinary
shares of 0.2p each 1,627 1,398 1,398
------------- ------------ -----------
Opening balance (2021 number: 489,430,615) 1,398 1,291 1,291
Placement - 22 July 2021 (number: 229 - -
83,698,498)
Placements/Subscriptions - prior year
(number: 41,833,038) - 107 107
Closing balance (2021 number: 573,129,113) 1,627 1,398 1,398
============= ============ ===========
The Companies Act 2006 (as amended) abolishes the requirement
for a company to have an authorised share capital. Therefore, the
Company has taken advantage of these provisions and has an
unlimited authorised share capital.
Each of the ordinary shares carries equal rights and entitles
the holder to voting and dividend rights and rights to participate
in the profits of the Company and in the event of a return of
capital equal rights to participate in any sum being returned to
the holders of the ordinary shares. There is no restriction,
imposed by the Company, on the ability of the holder of any
ordinary share to transfer the ownership, or any of the benefits of
ownership, to any other party.
Share options and warrants
The number and weighted average exercise prices of share options
and warrants are as follows:
Weighted Average Weighted Average
Exercise Number Exercise Number
Price of Options and Price Of Options and
Warrants Warrants
2021 2021 2020 2020
Outstanding at the
beginning of the
period GBP0.094 20,233,334 GBP0.145 5,500,000
Issued during the
period(a) GBP0.120 41,849,249 GBP0.088 17,233,334
Cancelled during the
period - - GBP0.175 (2,500,000)
---------------------- --------------------- --------------------- ----------------------
Outstanding at the
end of the period GBP0.114 62,082,583 GBP0.094 20,233,334
====================== ===================== ===================== ======================
(a) 41,849,249 warrants were issued to subscribers of the Placement announced on 9 July 2021.
The warrants have an exercise price of GBP0.12 and expire on 22 July 2022. The warrants have
been valued using a Black-Scholes model and the fair value of US$487,000 is recorded in the
warrant and share based payment reserve.
Valuation and assumptions of options and warrants at 30 September 2021
Employee Employee Equity Equity Subscriber Placement
Options Options Facility Facility Warrants Warrants
Options Options
Number of Options 2,500,000 2,500,000 500,000 500,000 14,233,334 41,849,249
Grant date 17 Sep 15 Sep 24 Dec 11 Sep 11 Sep 2020 9 July 2021
2019 2020 2019 2020
Expiry date 30 Sep 10 Sep 24 Dec 17 Sep 25 Sep 2022 22 July 2022
2022 2023 2022 2023
Share price GBP0.098 GBP0.05 GBP0.084 GBP0.047 GBP0.047 GBP0.063
Exercise price GBP0.125 GBP0.075 GBP0.123 GBP0.1014 GBP0.09 GBP0.12
Volatility 79% 81% 79% 81% 81% 82%
Option life 3.00 3.00 3.00 3.00 2.00 1.00
Expected dividends - - - - - -
Risk-free interest
rate (based on
national
government bonds) 0.49% 0.14% 0.52% 0.14% 0.14% 0.08%
The options and warrants outstanding at 30 September 2021 have an exercise price in the range
of GBP0.075 to GBP0.125 (2020: GBP0.075 to GBP0.125) and a weighted average remaining contractual
life of 1.07 years (2020: 2.14 years). None of the outstanding options and warrants at 30
September are exercisable at period end .
Note 6. Events After the Reporting Date
Significant events post reporting date were as follows:
On 16 December 2021, the Company advised that it has secured
funding totalling US$10.14 million (GBP7.623 million) through an
equity placing and convertible loan note issue, the proceeds of
which will complete the Company's funding requirements (on a dry
hole basis) for the drilling of the Jade prospect at the Company's
100% owned Block 29/11 permit.
Pursuant to an equity placing, the Company has issued 60,383,334
new ordinary shares at a price of 6.0p per Share to raise GBP3.623
million (before costs). The Placing is being completed under the
Company's existing authorities and is not subject to the approval
of shareholders.
In conjunction with the Placing, the Company entered into a
Convertible Loan Note Agreement with a Melbourne-based investment
fund pursuant to which the Company has issued a convertible loan
note to the Lender and has received gross proceeds of GBP4.0
million. The Convertible Note has a maturity date of 16 December
2022 and the Lender can elect to convert all or part of the
principal amount of the Convertible Note into fully paid ordinary
shares in the Company at any time prior to maturity at a conversion
price of 8.0p per share. The Convertible Note bears interest at a
rate of 10% per annum and is secured by a senior first ranking
charge over the Company, including it's 8.5% interest in the Duyung
PSC and Mako Gas Field.
In November 2021, the Company announced that it has signed the
IDC with COSL. The signed IDC confirmed 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.
In December 2021, the Company announced a payment totalling
US$1.98 million to COSL, representing a 10% deposit on the dry hole
cost component of the IDC signed with COSL plus mobilisation costs;
had been redirected to an unknown third party as a result of a
sophisticated cyber fraud perpetrated against COSL and the
Company.
The Company is currently working with its bank, the recipient
bank and the police authorities in three jurisdictions and can
confirm that the recipient bank account has been frozen and that
recovery actions have commenced. It is not known at the time of
this report whether the full funds will be recovered. The Company
has notified and opened case files with the police in the UK,
Singapore and the Federal Police in Australia and criminal
investigations have duly commenced. The Company has notified its
insurers and has also taken action to ensure the integrity of its
own IT systems.
While these investigations take their course, the Company has
held proactive discussions with COSL with both parties agreeing in
good faith to continue with drilling preparation activities without
delay and to come to an arrangement over the misappropriated funds
(should all or part not be recovered) once the outcome of police
enquiries are known.
Despite this incident, Empyrean is fully funded to drill the
Jade Prospect and, due to the co-operative negotiations with COSL
detailed above, activities remain on track. Further updates will be
provided as the criminal investigations progress. It is anticipated
that this will take several months to complete.
No other matters or circumstances have arisen since the end of
the financial period which significantly affected or could
significantly affect the operations of the Company, the results of
those operations, or the state of affairs of the Company in future
financial years.
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END
IR FLFVIFELFFIL
(END) Dow Jones Newswires
December 23, 2021 01:59 ET (06:59 GMT)
Empyrean Energy (LSE:EME)
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