REG - Empyrean Energy PLC - Capital raising, drill analysis & debt restructure

Empyrean EnergyAnnouncement

10/05/2022 12:00

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RNS Number : 9542K  Empyrean Energy PLC  10 May 2022

This announcement contains inside information

 

Empyrean Energy Plc / Index: AIM / Epic: EME / Sector: Oil & Gas

 

Empyrean Energy plc

 

Capital raising, further post drill analysis, Mako gas and debt restructure

 

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 provide the following update on capital raising, debt restructure and
preliminary regional oil charge analysis and its implication for Topaz
prospect at its 100% owned Block 29/11 permit, offshore China.

 

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.

 

HIGHLIGHTS

 

·      £1.83m raised at a price of 1.5p per share

·      Convertible Loan Note debt restructured

·      Regional oil charge and migration analysis being conducted with
CNOOC assistance following the results from the Jade well

·      Main focus of the migration work is to assess viability of the
Topaz prospect receiving oil charge

·      Preliminary analysis indicates the Topaz prospect is located in a
better location for potentially receiving oil charge from the proven source
rock - Baiyun East Sag via the CNOOC LH-16 oil field - as well as from the
Baiyun North Sag source rock that lies in between Jade and Topaz identified on
Empyrean's 3D seismic

 

Issue of Shares

 

Empyrean is pleased to advise that it has entered into binding subscription
agreements to issue 121,750,001 new ordinary Shares in the Company (the "New
Ordinary Shares") at a price of 1.5p per New Ordinary Share, raising £1.83m
(before costs) (the "Subscription").

 

The funds raised from the Subscription will be used to complete further post
well analysis of the Jade well, satisfy any further costs associated with the
Jade drill, conduct a comprehensive oil migration study in conjunction with
CNOOC for potential oil charge to the Topaz prospect, and for the Company's
general working capital requirements.

 

The Subscription is being completed under the Company's existing authorities
and is not subject to the approval of shareholders. Following the
Subscription, the Company's enlarged issued share capital will comprise
788,431,892 ordinary shares of 0.2p each (the "Shares"). This figure may be
used by shareholders as the denominator for the calculations by which they
will determine if they are required to notify their interest in, or a change
to their interest in, securities of the Company under the Financial Conduct
Authority's Disclosure and Transparency Rules.

 

Application will be made for the New Ordinary Shares to be admitted to trading
on AIM. Admission is expected to take place on 19 May 2022. The New Ordinary
Shares will rank pari passu with existing Shares in issue.

 

Regional Oil Charge Analysis - Preliminary assessment

 

Geoscientists from the Shenzhen branch of Empyrean's partner in the project,
China National Offshore Oil Corporation ("CNOOC") are providing assistance in
regional oil charge analysis in and around Block 29/11. Whilst comprehensive
analysis is currently underway, initial conclusions are encouraging for the
Topaz prospect.

 

The CNOOC four light oil discoveries along the western boundary of the block
clearly demonstrate a working petroleum system and light oil charge to these
nearby oil discoveries. All successful wells have been drilled on traps that
were in place at the time of oil migration. The dry wells drilled during the
1990s by Amoco were drilled into traps that came into existence after the time
of oil generation and migration in the basin and therefore could not trap that
oil.  However, weak oil fluid inclusion fluorescence (in the core) at both
Amoco wells to the east of Topaz suggests these wells are located on paleo
migration pathways that received oil migration. Topaz lies along these paleo
migration pathways in between the CNOOC discovery LH 16-2 to the west and the
Amoco wells to the east.

 

In addition, regional oil geochemical evaluation conducted by CNOOC indicates
oil is migrating updip from Baiyun East Sag and charging the LH 23-1d and LH
16-2 oil discoveries. This analysis, in conjunction with regional 3D data,
also indicates oil to most likely be migrating east from LH 16-2 towards the
Topaz prospect because the geological setup doesn't allow the oil to migrate
either to the south, west or to the north of the LH 16-2 discovery because
those directions are downdip or have a downdip component or they are in a
migration shadow.

 

At the same time, thermal maturity modelling completed by CNOOC indicates the
Baiyun Sag North has been generating and expulsing oil around 5 million years
ago when the Topaz prospect was optimally located to receive oil charge.

 

Current plan

 

EME is working closely with CNOOC geoscientists on this migration analysis and
aims to complete the study around the end of May. At that stage, a final
decision to enter the second phase of exploration is likely to be made and
further announcements will be made in due course.

 

Mako Gas Field ("Mako")

 

Empyrean is pleased to report that regional gas prices in Europe and South
East Asia remain strong and that the macro environment is creating incentive
for the negotiations of the current Heads of Agreements for gas offtake at
Mako to be negotiated to a binding Gas Sales Agreement ("GSA"). Mako is one of
the largest gas discoveries in the West Natuna Sea and the largest undeveloped
resource in the area. Pipeline quality methane gas has become a critical
component of the energy mix that sees Singapore as a major gas hub in the
region. Empyrean also notes that Conrad Asia Energy Ltd, the operator and
owner of 76.5% of the Duyung PSC within which Mako sits, has an IPO in
Australia as a key milestone for delivery. This planned IPO may present, at
the least, a useful benchmark for valuation of the Mako Gas Field.

 

Debt Restructuring

 

In December 2021, the Company announced that it had entered into a Convertible
Loan Note Agreement with a Melbourne-based investment fund (the "Lender"),
pursuant to which the Company issued a convertible loan note to the Lender and
received gross proceeds of £4.0 million (the "Convertible Note"). 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.

 

As subsequently announced, in March 2022 the Company received conversion
notices from the Lender to issue a total of 27,500,000 Shares at a conversion
price of 8p, reducing the principal owing on the Convertible Note to £2.2
million, including upfront capitalised interest.

 

Following the announcement regarding the Jade well on 27 April 2022, the
Company and the Lender proactively entered discussions to amend the key
repayment terms of the Convertible Note, which included the right by the
Lender to redeem the Convertible Note within five business days of the
announcement of the results of the Jade well.

 

The parties have now agreed the following key amendments to the terms of the
Convertible Note:

1.     The face value of the Convertible Note is increased to £3.3
million;

2.     The Company may, at its sole and absolute discretion, redeem the
Convertible Note at any time;

3.     The Lender will not redeem the Notes prior to 31 July 2022;

4.     If a binding GSA is entered into with regard to the Mako Gas
Discovery in Indonesia on or before 31 July 2022, the Lender will not redeem
the Convertible Note prior to 1 December 2022, with interest accruing
thereafter at a rate of £330,000 per calendar month;

5.     If a binding GSA is not entered into with regard to the Mako Gas
Discovery in Indonesia on or before 31 July 2022, the Lender may redeem the
Convertible Note at any time thereafter, in which circumstances the face value
of the Convertible Note will be reduced to £2.67 million;

6.     If the Company completes a sale of its interest in the Mako Gas
Discovery, it will redeem the Convertible Note contemporaneously with that
agreement; and

7.     The Company will not execute any agreement in respect of a sale of
its interest in the Mako Gas Discovery if the proceeds are less than the
expected value of the Convertible Note on the date of completion of that
agreement.

 

The technical 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:

 

"CNOOC assistance is proving a defining step in better understanding the oil
migration pathways in the area, and Empyrean is appreciative of CNOOC's
ongoing support.

 

We are aiming to complete the current post-drill analysis and comprehensive
oil migration studies with a deep focus on oil migration pathways from CNOOC
oil discovery LH16-2 towards Topaz in short order to enhance the prospectivity
of Topaz as a world class large exploration target for the second phase of
exploration in Block 29/11. This capital raising and debt restructuring will
allow Empyrean to move forward with its plans to maximise the value at the
Mako Gas field whilst completing a comprehensive analysis of all pre-drill and
post-drill technical data to ensure that we proceed with the drill
preparations at Topaz with due diligence and confidence."

 

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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