TIDMEME
RNS Number : 9034Y
Empyrean Energy PLC
09 September 2022
This announcement contains inside information
Empyrean Energy Plc / Index: AIM / Epic: EME / Sector: Oil &
Gas
Empyrean Energy plc
Mako Gas Project - Updated Plan of Development
Empyrean Energy plc ("Empyrean" or the "Company"), the oil and
gas development company with interests in China, Indonesia and the
United States is delighted to announce that the partners in the
Duyung PSC have approved the updated Plan of Development ("PoD")
and have secured alignment with SKK Migas on the plan. The PoD has
now been submitted to the Indonesian Ministry of Energy and Mineral
Resources for approval. Empyrean holds an 8.5% interest in the
Duyung PSC.
Empyrean is also pleased to announce that an Operator
commissioned Competent Persons Report ("CPR") has been prepared by
GaffneyCline & Associates ("GCA") for the Mako development.
Highlights:
-- Revised PoD approved by partners and submitted for ministerial approval
-- Based on the CPR:
o Compelling project economics;
-- 51% IRR and
-- NPV10 net to Empyrean of US$49M (US$577M gross) in the Best
Case (2C) scenario
o 23.8 Bcf net entitlement 2C resources to Empyrean during the
PSC life;
o Plateau production of 120 MMscf/d for six years in the Best
Case (2C) scenario
o CPR capital expenditure requirement to first gas estimated at
US$251M gross (US$21.3M net to Empyrean). It is anticipated that a
reserve based lending ("RBL") debt structure would be appropriate
to fund the development.
-- Operator has indicated that termed Gas Sales Agreements
("GSA"), for gas sold into Singapore, are under discussion with SKK
Migas with a view to finalising sales arrangements in the near
future.
The Operator of the Duyung PSC is WNEL, a 100%-owned subsidiary
of Conrad Asia Energy Ltd, has continued to technically mature the
development of the Mako gas field alongside negotiations of GSA(s),
both in preparation for Final Investment Decision. This has
included finalising the revised PoD, on which the JV partners have
now secured alignment with governmental regulator, SKK Migas, and
submission for ministerial approval.
The GCA CPR is closely aligned with the PoD and is premised on a
two-phased development with six wells in phase 1 and a further two
wells in phase 2 after 5 years of production. The wells will be
tied back to a leased production platform at the field, with sales
gas transported via the West Natuna Transportation System pipeline
to Singapore for sales to the Singapore market. The development
plan includes first gas in 2025, with a 120 MMscf/d production
plateau and a gross recoverable 2C contingent resource of 413 Bcf
gas total and 281 Bcf net entitlement attributable to the Duyung
PSC JV partners (23.8 Bcf net to Empyrean) during the PSC life.
As reported in the CPR (dated 26 August 2022) and specified in
the PoD revision, upside exists to increase the plateau rate to 150
MMscf/d, should reservoir deliverability be sufficient. GCA has
confirmed Mako contingent resources that are broadly in agreement
with the PoD as set out in the table below.
Duyung PSC - Contingent Resources, GCA Operator CPR
MAKO GAS FIELD CONTINGENT RESOURCES CONTINGENT RESOURCES CONTINGENT RESOURCES
(Bcf gas) GROSS (100%) WITHIN PSC GROSS NET ATTRIBUTABLE
(100%) * TO EME (8.5%)
**
Reservoir: Low Best High Low Best High Low Best High
Upper sand,
intermediate
zone and Lower
sand
------- -------- -------- ------- -------- -------- ------- -------- --------
During Duyung
PSC life 249 413 442 219 363 389 14 24 26
------- -------- -------- ------- -------- -------- ------- -------- --------
Requires Duyung
PSC extension 24 336 21 296 1 19
------- -------- -------- ------- -------- -------- ------- -------- --------
Total 249 437 779 219 384 685 14 25 45
------- -------- -------- ------- -------- -------- ------- -------- --------
* The CPR assumes that 88% of the GIIP of the Mako field is
within the PSC boundary
** After allowing for boundary and all PSC terms
The Operator of the Duyung PSC is WNEL, a 100%-owned subsidiary
of Conrad Asia Energy Ltd, who hold a 76.5% interest in the Duyung
PSC. Coro Energy Plc hold 15%. Empyrean hold 8.5%.
The Operator CPR, and the updated PoD, assumes first gas in 2025
and calculates the l ast economic production years prior to the
current Duyung PSC expiry date for Low, Best and High cases of
2033, 2036 and 2036 respectively, which extend to 2039 and 2054 for
the Best and High respectively if the Duyung PSC is extended.
The Operator CPR utilises a gas price of US$9.97/Mscf in 2025
which is calculated on a Brent linked price formula with a Brent
slope of 12% and a Brent price deck of US$80/bbl in 2025,
escalating 2% pa from 2027 thereafter. Different gas prices may
eventually be agreed with the gas buyers and the regulator when the
GSA's are eventually signed. The Operator CPR estimates that the
post tax NPV10 resulting from the Best Case Contingent Resources
within the Duyung PSC acreage and within life of Duyung PSC (363
Bcf) is some US$578M (US$49M net to Empyrean) representing a 51%
IRR.
Under the PoD and CPR, first gas from the Mako gas project is
planned to be evacuated via the West Natuna Transportation System.
The development will utilise a Conductor Support Frame (CSF) for
one dry wellhead and gas import-export support, bridged-linked to a
leased Mobile Offshore Production Unit. The CPR Phase 1 capital
expenditure is estimated to be US$251M and total capital
expenditure will be US$303M. These estimates will be updated as a
consequence of envisaged Front End Engineering and Design (FEED)
studies. It is anticipated that RBL debt funding will be
appropriate to provide funds for the development.
The information contained in this announcement has been reviewed
by Empyrean's Executive Technical director, Gaz Bisht, who has over
32 years' experience as a hydrocarbon geologist and
geoscientist.
Empyrean CEO, Tom Kelly, stated:
"Empyrean would firstly like to thank the Conrad and SKK Migas
teams for the enormous volume of work that has gone into achieving
alignment with SKK Migas and the Duyung partners in order to submit
the PoD for ministerial approval. This is a great achievement. The
independent assessment of the project by Gaffney Cline shows that
the project economics are highly robust. Empyrean is also
encouraged by the significant upside that exists if the current
macro environment of higher South East Asian gas prices results in
any improvement on pricing assumptions contained in the CPR. There
also exists significant upside if the reservoir performs better
than the 2C Best case. We look forward to the conclusion of GSA
negotiations."
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) 20 7297 8900
Pete Lynch
Pearl Kellie
First Equity (Join Broker)
Jason Robertson Tel: +44 (0) 20 7330 1883
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