REG - Empyrean Energy PLC - Interim Results
20/12/2022 07:00
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RNS Number : 2408K Empyrean Energy PLC 20 December 2022
Empyrean Energy PLC / Index: AIM / Epic: EME / Sector: Oil & Gas
20 December 2022
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 2022.
Highlights
· Block 29/11, Pearl River Mouth Basin, China (EME 100%)
o Jade well spudded and reached final total depth of 2,849 metres Measured Depth ("MD") during April 2022. No oil pay was encountered in the target reservoir and demobilisation operations were completed.
o Post-well analysis confirmed that the reservoir quality is better than pre-drill estimates with regional seal confirmed and depth conversion approach validated.
o Main technical reason identified for the absence of pay at Jade is no effective oil migration from the Baiyun Sag to Jade trap.
o China National Offshore Oil Corporation ("CNOOC") technical team has been assisting in understanding and analysing the migration pathways in the basin, particularly to the Topaz prospect.
o Empyrean entered second phase of exploration with the aim to drill the Topaz Prospect before June 2024.
· Duyung PSC Project, Indonesia (EME 8.5%)
o Indonesian Government approval for the revised Mako Plan of Development ("PoD") received.
o Updated PoD based upon Contingent Duyung PSC Resources of 384 billion cubic feet gross within the Duyung PSC area which represents 297 billion cubic feet net attributable* to 100% of the Duyung PSC Joint Venture.
o Gas sales agreement negotiations continue with several interested parties.
· Corporate
o £1.83 million (US$2.27 million) raised through Placing at a price of 1.5p per share; and
o Convertible Loan Note debt restructured.
Empyrean Energy plc
Tom Kelly Tel: +61 8 6146 5325
Cenkos Securities plc (Nominated Advisor and Broker)
Neil McDonald nmcdonald@cenkos.com Tel: +44 (0) 131 220 9771
Pearl Kellie pkellie@cenkos.com Tel: +44 (0) 131 220 9775
First Equity Limited (Joint Broker)
Jason Robertson jasonrobertson@firstequitylimited.com Tel: +44 (0) 20 7330 1883
Chairman's Statement
Following the drilling of the Jade Prospect at our 100% owned Block 29/11,
offshore China in April 2022, Empyrean, with assistance from its partner in
the project, CNOOC, conducted regional oil charge analysis in and around Block
29/11. The conclusions were encouraging for the Topaz prospect. When combining
the excellent quality 3D seismic data with the well data and post well
analysis, the validity of the Topaz prospect was such that the Company entered
the second phase of exploration at the Topaz prospect with the aim to drill
before June 2024. Further updates will be provided in due course.
The Company is pleased with the approval by the Indonesian Ministry of Energy
and Mineral Resources of the updated Plan of Development for the Mako Gas
Project within the Duyung PSC. This was a major milestone on the pathway to
developing this significant pipeline quality methane gas resource at the
project and allows the operator, Conrad, to re-focus resources on consummating
negotiations to complete a Gas Sales Agreement at the earliest opportunity.
On the corporate front, in May 2022 the Company completed a placement with
funds used primarily for the post Jade analysis work mentioned above and for
working capital and, at the same time, restructured the existing convertible
note agreement.
It has been a challenging year for the Company following the disappointing
Jade well result but the Company remains committed to working through these
challenges. The Company eagerly awaits completion of the Gas Sales Agreement
in Indonesia and is assessing other opportunities on the project front while
also pursuing avenues to secure the necessary support required from a funding
perspective. Patrick Cross
Patrick Cross
Non-Executive Chairman
20 December 2022
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, 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 GCA, who
completed an audit of the Company's oil in place estimates in November 2018.
Jade Prospect Drill Program
In April 2022, the Company commenced the drilling of the LH 17-2-1 well to
test the Jade Prospect in Block 29/11, offshore China. It was the first of the
three prospects high graded by the 2017 3D seismic survey.
On 10 April 2022, LH 17-2-1 spudded and on 27 April 2022 reached final total
depth of 2,849 metres in Zhuhai Sandstone formation. The interpretation from
LWD and mud logging data indicated no oil pay in the target reservoir. The
wireline logs confirmed the initial interpretation of no oil pay seen on LWD.
Post Well Jade Well Analysis and Implications for Topaz Prospect
Following the Jade drilling program, comprehensive post well analysis by
Empyrean and CNOOC confirmed the Jade well intersected carbonate reservoir as
prognosed with better parameters than pre-drill estimates with total thickness
of 292m and porosity in the range of 25 to 27%. In addition, the Jade well
penetrated thick and effective regional seal facies and the reservoir top was
encountered within the depth conversion range. These parameters can now be
more confidently mapped across Empyrean's 3D data set. Jade well failed due to
access to effective migration pathways.
As a result, reservoir, seal and trap validity of the Topaz prospect has been
enhanced by the Jade well data.
As a part of post-well evaluation, CNOOC geochemical and basin modelling
experts provided excellent assistance in assessing the critical elements of
effective regional oil migration pathways, leading to positive implications
for the Topaz prospect. Based on several oil discoveries in the area, CNOOC
has identified the following three key elements for effective regional oil
migration.
1. Presence of a deep sag for oil generation
2. Presence of a deep fault for efficient vertical migration that has
reactivated at the peak time of oil expulsion (10Ma)
3. Presence of a carrier bed for lateral migration to the prospect
Implications for the Topaz Prospect
Post-well evaluation indicates the Topaz prospect has the potential for oil
charge from two kitchen/source rocks, the Baiyun North and Baiyun East sags.
The Topaz prospect has an additional oil migration pathway from Baiyun East
Sag. This sag has been bio-marked as the proven source rock for all four CNOOC
light oil discoveries to the immediate West of Block 29/11.
Baiyun North Sag was mapped by the 2017 3D seismic data and is located within
Block 29/11 immediately south and down dip of the Topaz prospect and it has
all three key elements required for successful oil migration. It is a deep sag
that is in the timing and depth window for oil generation, and Empyrean has
identified a suitable deep fault for efficient vertical migration that
reactivated at the peak time of oil expulsion approximately 10 million years
ago (10Ma). Finally, a thick carrier bed exists for lateral migration to the
Topaz prospect. This carrier bed has been confirmed during the drilling of the
Jade well and is mapped on Empyrean's 3D data set.
The Topaz prospect has an additional oil migration pathway from Baiyun East
Sag. This sag has been bio-marked as the proven source rock for all four CNOOC
light oil discoveries to the immediate West of Block 29/11.
Post well analysis indicates that the gas shows within the "gas cloud" zone in
the overburden at the Jade well are now interpreted to have migrated from
Baiyun North Sag via reactivation of a nearby fault, approximately 800m away
rather than coming from basinal faults extending into Baiyun East Sag which is
approximately 20km away. The identification of this nearby fault that extends
into the Baiyun North Sag is now the most likely explanation for the gas shows
in the Jade well.
This interpretation enhances the prospects of Baiyun North Sag as a
potentially valid additional source rock and, in turn, the likelihood of the
Topaz prospect having access to two mature kitchens/source rocks.
Conclusions and the Entering of Second Phase of Exploration
Being able to combine excellent quality 3D seismic data with the confirmed
well data and post well analysis has resulted in the improved validity of the
Topaz prospect as a robust and large drilling target (approximately 891
million barrels in place (P10) per below table). Based on post drill
technical evaluation, and CNOOC-assisted migration pathways assessment,
Empyrean decided to enter the second phase of exploration with the aim of
drilling the larger Topaz prospect, estimated to occur in 2023.
Block 29/11 Oil in place (MMbbl) audited by GCA
Prospect P90 P50 P10 Mean GCoS
Topaz 211 434 891 506 30%
Pearl 38 121 302 153 15%
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, now Conrad Asia Energy
Ltd, ("Conrad") 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 1,100km(2) 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, 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.
Revised Plan of Development
In September 2022, Empyrean announced that the partners in the Duyung PSC have
approved the revised PoD and have secured alignment with SKK Migas on the
plan. The PoD was then submitted to the Indonesian Ministry of Energy and
Mineral Resources for approval, which was duly received in November 2022,
marking a major milestone on the pathway to developing this significant
pipeline quality methane gas resource. It also allows the operator Conrad to
focus on its stated objective of working with the Government of Indonesia to
complete Gas Sales Agreement negotiations at the earliest opportunity.
The revised Mako PoD amends an initial Mako Gas Project PoD approved in 2018
to reflect, inter alia, previously announced increases in Contingent Resources
following a successful 2019 drilling campaign. The award of the revised POD
represents a material event in progressing the Mako Gas Project and is a
significant milestone on the critical path to developing this significant
resource, which is currently the largest undeveloped gas field in South Natuna
Sea.
The revised Mako PoD is based on field Contingent Resources of 297 billion
cubic feet (net attributable to 100% of the Duyung PSC Joint Venture) and a
daily production of 120 MMscf/d, consistent with the GaffneyCline Associates
competent persons report dated 26 August 2022, details of which were also
announced by the Company on 9 September 2022.
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.
The first prospect that was drilled in 2018 was the Dempsey Prospect. Whilst
several potentially gas bearing zones were intersected in the well,
comprehensive testing of selected zones failed to sustain gas flow. Following
the Dempsey drilling campaign, the joint venture integrated the subsurface
data with regional geology and seismic data to evaluate additional targets
with thicker reservoir units for future drilling along the "Dempsey trend", in
which Empyrean could earn a 30% interest.
The operator matured Borba prospect was the next prospect drilled however in
2020 Empyrean notified Sacgasco that it would not be participating in this
drilling campaign.
The Company will continue to work with its joint venture partners in reviewing
and assessing any further technical and commercial opportunities as they
relate to the project but given the current status and presence of impairment
indicators the Company took the conservative measure of fully impairing
expenditure incurred at the project as at 31 March 2022 and continued to fully
impair the carrying value of the asset at 30 September 2022.
The information contained in this report was completed and reviewed by the
Company's Executive Director (Technical), Mr Gajendra (Gaz) Bisht, who has
over 32 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.
Statement of Comprehensive Income
For the Period Ended 30 September 2022
6 Months to 30 September (unaudited) Year Ended 31 March (audited)
2022 2021 2022
Notes US$'000 US$'000 US$'000
Revenue - - -
Administrative expenditure
Administrative expenses (201) (179) (377)
Compliance fees (121) (42) (302)
Directors' remuneration (186) (179) (402)
Foreign exchange differences 388 (28) (518)
Impairment - exploration and evaluation assets 3 (22,097) (1) (4,127)
Cyber fraud loss - - (1,981)
Total administrative expenditure (22,217) (429) (7,707)
Operating loss (22,217) (429) (7,707)
Finance expense (1,888) (23) (402)
Loss from continuing operations before taxation (24,105) (452) (8,109)
Tax expense in current period (1) (1) (1)
Loss from continuing operations after taxation (24,106) (453) (8,110)
Total comprehensive loss for the year (24,106) (453) (8,110)
Loss per share from continuing operations (expressed in cents)
- Basic 2 (3.22)c (0.09)c (1.43)c
- Diluted 2 (3.22)c (0.09)c (1.43)c
The accompanying accounting policies and notes form an integral part of these
financial statements.
Statement of Financial Position
As at 30 September 2022
6 Months to 30 September (unaudited) Year Ended 31 March (audited)
2022 2021 2022
Notes US$'000 US$'000 US$'000
Assets
Non-Current Assets
Exploration and evaluation assets 3 4,417 14,869 24,907
Total non-current assets 4,417 14,869 24,907
Current Assets
Trade and other receivables 50 38 36
Cash and cash equivalents 800 6,098 19
Total current assets 850 6,136 55
Liabilities
Current Liabilities
Trade and other payables 2,160 237 1,299
Provisions 140 135 140
Convertible loan notes 4 3,258 - 4,125
Derivative financial liabilities 722 - 722
Total current liabilities 6,280 372 6,286
Net Current Assets/(Liabilities) (5,430) 5,764 (6,231)
Net Assets/(Liabilities) (1,013) 20,633 18,676
Shareholders' Equity
Share capital 5 2,170 1,627 1,809
Share premium reserve 45,319 35,303 41,285
Warrant and share based payment reserve 598 1,040 576
Retained losses (49,100) (17,337) (24,994)
Total Equity (1,013) 20,633 18,676
The accompanying accounting policies and notes form an integral part of these
financial statements.
Statement of Cash Flows
For the Period Ended 30 September 2022
6 Months to 30 September (unaudited) Year Ended 31 March (audited)
2022 2021 2022
Notes US$'000 US$'000 US$'000
Operating Activities
Payments for operating activities (591) (394) (1,240)
Receipt of corporation tax - 358 358
Net cash outflow from operating activities (591) (36) (882)
Investing Activities
Payments for exploration and evaluation (1,045) (599) (14,391)
Payments due to cyber fraud - - (1,981)
Net cash outflow from investing activities (1,045) (599) (16,372)
Financing Activities
Issue of ordinary share capital 2,268 6,920 11,805
Proceeds from exercise of warrants 233 - 623
Proceeds from borrowings - - 5,412
Payment of finance costs (8) - (271)
Payment of equity issue costs (76) (309) (463)
Net cash inflow from financing activities 2,417 6,611 17,106
Net increase/(decrease) in cash and cash equivalents 781 5,976 (148)
Cash and cash equivalents at the start of the year 19 150 150
Forex loss on cash held - (28) 17
Cash and cash equivalents at the end of the period 800 6,098 19
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 2022
Share Capital Share Premium Reserve Warrant and SBP Reserve Retained Loss Total Equity
US$'000 US$'000 US$'000 US$'000 US$'000
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
Balance at 1 April 2021 1,398 29,408 487 (16,884) 14,409
Loss after tax for the year - - - (8,110) (8,110)
Total comprehensive loss for the year - -
- (8,110) (8,110)
Contributions by and distributions to owners
Shares and warrants issued 378 11,427 - - 11,805
Partial conversion of convertible note 23 896 - - 919
Exercise of warrants 10 613 - - 623
Equity issue costs - (463) - - (463)
Issue of placement warrants - (596) - - (596)
Share-based payment expense - - 66 - 66
Finance expense (share-based) - - 23 - 23
Total contributions by and distributions to owners 411 89 - 12,377
11,877
Balance at 1 April 2022 1,809 41,285 576 (24,994) 18,676
Loss after tax for the period - - - (24,106) (24,106)
Total comprehensive loss for the period - - - (24,106) (24,106)
Contributions by and distributions to owners
Shares and warrants issued 307 1,961 - - 2,268
Partial conversion of convertible note 49 1,921 - - 1,970
Exercise of warrants 5 228 - - 233
Equity issue costs - (76) - - (76)
Share-based payment expense - - 22 - 22
Total contributions by and distributions to owners 361 4,034 22 - 4,417
Balance at 30 September 2022 2,170 45,319 598 (49,100) (1,013)
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 2022
Basis of preparation
The Company's condensed interim financial statements for the six months ended
30 September 2022 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 2022.
The financial information for the period ended 30 September 2022 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 2022 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 2(nd) Floor, 38-43
Lincoln's Inn Fields, London, WC2A 3PE. 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$0.80 million at
30 September 2022 (31 March 2022: US$0.19 million) and made a loss after
income tax of US$24.11 million (31 March 2022 loss of US$8.11 million).
The Directors have prepared cash flow forecasts for the Company covering the
period to 31 December 2023 and these demonstrate that the Company will require
further funding within the next 12 months. In June 2022, the Company entered
into an agreement with CNOOC to drill an exploration well on the Topaz
prospect in China, by 12 June 2024, which includes a payment of US$250,000 to
CNOOC. It is estimated that the cost of drilling this well would be
approximately US$12 million. In addition, the Company was required to repay
the principal owing on the Convertible Note prior to 1 December 2022, being
£3.3 million as at the date of this report, before interest accrues, in
accordance with the restructured terms announced to the market on 10 May 2022.
The Convertible Note 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 May 2022 US$2.27 million was raised through an equity placement to complete
further post well analysis of the Jade well, satisfy any further costs
associated with the Jade drill, conduct a comprehensive oil migration study in
conjunction with CNOOC for potential oil charge to the Topaz prospect, and for
the Company's general working capital requirements.
The Company is required to raise further funding either through equity or the
sale of assets as at the date of this report to meet the well commitment at
Topaz, to meet the repayment terms of the Convertible Note and for working
capital purposes.The Directors note that if the well commitment at Topaz is
not met in the timeframe advised then either a renegotiation of the commitment
timing will be required or the licence could be relinquished.
The Directors have therefore concluded that it is appropriate to prepare the
Company's financial statements on a going concern basis, however, in the
absence of additional funding being in place at the date of this report, these
conditions indicate the existence of a material uncertainty which may cast
significant doubt over the Company's ability to continue as a going concern
and, therefore, that it may be unable to realise its assets and discharge its
liabilities in the normal course of business.
The financial statements do not include the adjustments that would result if
the Company was unable to continue as a going concern.
Note 1. Segmental Analysis
The Directors consider the Company to have three geographical segments, being
China (Block 29/11 project), Indonesia (Duyung PSC project) and North America
(Sacramento Basin project), which are all currently in the exploration and
evaluation phase. Corporate costs relate to the administration and financing
costs of the Company and are not directly attributable to the individual
projects. The Company's registered office is located in the United Kingdom.
Details China Indonesia USA Corporate Total
US$'000 US$'000 US$'000 US$'000 US$'000
30 September 2022
Revenue from continued operations - - - - -
Segment result
Unallocated corporate expenses - - - (120) (120)
Operating loss - - - (120) (120)
Finance expense - - - (1,888) (1,888)
Impairment of oil and gas properties (22,069) - (28) - (22,097)
Loss before taxation (22,069) - (28) (1,888) (24,105)
Tax expense in current period - - - (1) (1)
Loss after taxation (22,069) - (28) (2,009) (24,106)
Total comprehensive loss for the financial period (22,069) - (28) (2,009) (24,106)
Segment assets - 4,417 - - 4,417
Unallocated corporate assets - - - 850 850
Total assets - 4,417 - 850 5,267
Segment liabilities - - - - -
Unallocated corporate liabilities - - - 6,280 6,280
Total liabilities - - - 6,280 6,280
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
31 March 2022
Unallocated corporate expenses - - - (1,599) (1,599)
Operating loss - - - (1,599) (1,599)
Finance expense - - - (402) (276)
Impairment of oil and gas properties - - (4,127) - (4,127)
Cyber fraud loss - - - (1,981) (1,981)
Loss before taxation - - (4,127) (3,982) (8,109)
Tax expense in current year - - - (1) (1)
Loss after taxation - - (4,127) (3,983) (8,110)
Total comprehensive loss for the financial year - - (4,127) (3,983) (8,110)
Segment assets 20,662 4,245 - - 24,907
Unallocated corporate assets - - - 55 55
Total assets 20,662 4,245 - 55 24,962
Segment liabilities - - - - -
Unallocated corporate liabilities - - - 6,286 6,286
Total liabilities - - - 6,286 6,286
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 747,642,305 (2021: 521,903,803).
6 Months to 30 September (unaudited) Year Ended
31 March (audited)
2022 2021 2022
Loss per share from continuing operations
Loss after taxation from continuing operations US$(24,106,000) US$(453,000) US$(8,110,000)
Loss per share - basic (3.22)c (0.09)c (1.43)c
Loss after taxation from continuing operations adjusted for dilutive effects
US$(24,106,000) US$(453,000) US$(8,110,000)
Loss per share - diluted (3.22)c (0.09)c (1.43)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
6 Months to 30 September (unaudited) Year Ended
31 March
(audited)
2022 2021 2022
US$'000 US$'000 US$'000
Balance brought forward 24,907 14,184 14,643
Additions((a)) 1,607 686 14,391
Impairment((b)(c)(d)) (22,097) (1) (4,127)
Net book value 4,417 14,869 24,907
(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) Empyrean and its China Block 29/11 partner CNOOC, along with its
technical service providers CNOOC Enertech and COSL, completed significant
pre-drilling operational, technical and permitting work to enable the safe,
but ultimately unsuccessful drilling of the Jade prospect in April 2022. As a
result of the unsuccessful well at Jade, Empyrean has, in accordance with
applicable accounting standards, written off all historical expenditure
incurred on Block 29/11 and also the dry hole costs associated with the Jade
drilling program, totaling $US22.07 million. Post-well analysis at Jade
however has confirmed reservoir quality is better than pre-drill estimates
with regional seal confirmed and the depth conversion approach validated. As a
part of post-well evaluation, CNOOC geochemical and basin modelling experts
together with Empyrean have interpreted the critical elements of effective
regional oil migration pathways-leading to positive implications for the Topaz
prospect, and ultimately the decision to proceed with the second phase of
exploration at Block 29/11, being the drilling of the Topaz Prospect before
June 2024.
(c) While the Company will continue to work with its joint venture
partners in reviewing and assessing any further technical and commercial
opportunities as they relate to the Sacramento Basin project, particularly in
light of strong gas prices for gas sales in the region, it has not budgeted
for further substantive exploration expenditure. The Company has continued to
fully impair the carrying value of the asset at 30 September 2022.
(d) In light of current market conditions, little or no work has been
completed on the Riverbend or Eagle Oil projects in the period and no
substantial project work is forecast for either project in 2022/23 whilst the
Company focuses on other projects. Whilst the Company maintains legal title it
has continued to fully impair the carrying value of the asset at 30 September
2022.
Project Operator Working Interest 2022 2021
Carrying Value Carrying Value
US$'000 US$'000
Exploration and evaluation
China Block 29/11 Empyrean Energy 100%* - 6,690
Sacramento Basin Sacgasco 25-30% - 4,058
Duyung PSC Conrad 8.5% 4,417 4,121
Riverbend Huff Energy 10% - -
Eagle Oil Pool Development Strata-X 58.084% - -
4,417 14,869
*In the event of a commercial discovery, and subject to the Company entering
PSC, CNOOC Limited will have a back in right to 51% of the permit. As at the
date of these financial statements no commercial discovery has been made.
Note 4. Convertible Loan Notes
6 Months to 30 September (unaudited) Year Ended
31 March
(audited)
2022 2021 2022
US$'000 US$'000 US$'000
Current
Opening balance 4,125 - -
Drawdowns((a)) - - 5,412
Conversions((b)) (1,970) - (919)
Costs of finance((c)) 1,636 - (211)
Foreign exchange gain (533) - (157)
Total convertible loan notes - current 3,258 - 4,125
(a) On 16 December 2021, the Company entered into a Convertible Loan Note
Agreement with a Melbourne-based investment fund pursuant to which the Company
issued a convertible loan note to the Lender and received gross proceeds of
US$5.4 million (£4.0 million). Under the terms of original Convertible Note,
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 in December 2022 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 its 8.5% interest
in the Duyung PSC and Mako Gas Field.
(b) On 1 April 2022 the Company issued 18,750,000 Ordinary Shares at a
conversion price of 8.0p per share under the existing Convertible Loan Note
Agreement, as announced on 28 March 2022. The partial conversion reduced the
amount owing on the Convertible Note by US$1.97 million (£1.5 million).
(c) In May 2022, following the announcement regarding the Jade well on 27
April 2022, the Company and the Lender proactively entered discussions to
amend the key repayment terms of the Convertible Note, which included the
right by the Lender to redeem the Convertible Note within five business days
of the announcement of the results of the Jade well. The parties agreed the
following key amendments to the terms of the Convertible Note:
1. The face value of the Convertible Note is increased
to £3.3 million;
2. The Company may, at its sole and absolute
discretion, redeem the Convertible Note at any time;
3. The Lender will not redeem the Notes prior to 31
July 2022;
4. If a binding GSA is entered into with regard to the
Mako Gas Discovery in Indonesia on or before 31 July 2022, the Lender will not
redeem the Convertible Note prior to 1 December 2022, with interest accruing
thereafter at a rate of £330,000 per calendar month;
5. If a binding GSA is not entered into with regard to
the Mako Gas Discovery in Indonesia on or before 31 July 2022, the Lender may
redeem the Convertible Note at any time thereafter, in which circumstances the
face value of the Convertible Note will be reduced to £2.67 million;
6. If the Company completes a sale of its interest in
the Mako Gas Discovery, it will redeem the Convertible Note contemporaneously
with that agreement; and
7. The Company will not execute any agreement in
respect of a sale of its interest in the Mako Gas Discovery if the proceeds
are less than the expected value of the Convertible Note on the date of
completion of that agreement.
Note 5. Share Capital
6 Months to 30 September (unaudited) Year Ended
31 March (audited)
2022 2021 2022
US$'000 US$'000 US$'000
Issued and fully paid
788,431,892 (2021: 573,129,113) ordinary shares of 0.2p each 2,170 1,627 1,809
Opening balance (2022 number: 646,070,780) 1,809 1,398 1,398
Placements (2022 number: 121,750,001) 307 229 378
Partial conversion of Convertible Note (2022 number: 18,750,000) 49 - 23
Exercise of warrants (2022 number: 1,861,111) 5 - 10
Closing balance (2022 number: 788,431,892) 2,170 1,627 1,809
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:
6 Months to 30 September 2022 (unaudited) 6 Months to 30 September 2021 (unaudited)
Weighted Average Exercise Weighted Average Exercise
Price Number Price Number
of Options and Warrants Of Options and Warrants
2022 2022 2021 2021
Outstanding at the beginning of the period £0.116 65,890,916 £0.094 20,233,334
Issued during the period - - £0.120 41,849,249
Cancelled during the period £0.113 (53,413,139) - -
Exercised during the period £0.096 (1,861,111) - -
Outstanding at the end of the period £0.131 10,616,666 £0.114 62,082,583
Valuation and assumptions of options and warrants at 30 September 2022
Employee Options Equity Facility Options Equity Facility Options Substitute Warrants Bonus Warrants
Number of options remaining 2,500,000 250,000 250,000 3,803,333 3,803,333
Grant date 15/09/20 24/12/19 11/09/20 12/11/21 15/11/21
Expiry date 10/09/23 24/12/22 17/09/23 22/10/22 22/07/23
Share price £0.05 £0.084 £0.047 £0.073 £0.063
Exercise price £0.075 £0.123 £0.1014 £0.12 £0.18
Volatility 81% 79% 81% 79% 79%
Option life 3.00 3.00 3.00 1.00 1.70
Expected dividends - - - - -
Risk-free interest rate (based on national government bonds) 0.14% 0.52% 0.14% 0.08% 0.08%
The options and warrants outstanding at 30 September 2022 have an exercise
price in the range of £0.075 to £0.18 (2021: £0.075 to £0.125) and a
weighted average remaining contractual life of 0.57 years (2021: 1.07 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:
In November 2022 the Indonesian Ministry of Energy and Mineral Resources
approved the updated Plan of Development for the Mako Gas Project within the
Duyung PSC, as detailed in the Operational Review.
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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