REG - Empyrean Energy PLC - Mako Gas Project - Updated Plan of Development

Empyrean EnergyAnnouncement

09/09/2022 07:00

For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20220909:nRSI9034Ya&default-theme=true

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 (100%) *        NET ATTRIBUTABLE 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 last 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

 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
 or visit
www.rns.com (http://www.rns.com/)
.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
.   END  UPDEKLBBLKLEBBZ