REG - Empyrean Energy PLC - Proposed drilling of Topaz Prospect

Empyrean EnergyAnnouncement

04/05/2022 07:45

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RNS Number : 2515K  Empyrean Energy PLC  04 May 2022

This announcement contains inside information

 

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

 

Empyrean Energy plc

 

Block 29/11, China - Proposed drilling of Topaz Prospect following Jade well
results

 

4 May 2022

 

Empyrean Energy plc ("Empyrean" or the "Company"), the oil and gas development
company with interests in China, Indonesia and the United States, provides the
following update on Block 29/11 offshore China.

 

Empyrean is the operator of Block 29/11 in China and has a 100% working
interest during the exploration phase. In the event of a commercial discovery,
its partner CNOOC, may assume a 51% participating interest in the development
and production phase.

 

Based upon the preliminary assessments of the Jade well results and the
ongoing agreement with its partner, China National Offshore Oil Company
("CNOOC"), to further cooperate with regards to follow up post well analysis,
it is Empyrean's current intention to proceed with the second phase of
exploration at Block 29/11 and to participate in the drilling of the Topaz
prospect.

 

Jade Well results - Preliminary interpretation

 

Final logs have been run with demobilisation of the China Oilfield Services
Limited ("COSL") owned NH9 rig to take place over the next few days.

 

The final log data confirmed several elements of the pre-drill prognosis:

·      292 metres of excellent quality reservoir was intersected;

·      more than 2330 metres of regional marine clay seal formation; and

·      validity of the trap confirmed by intersecting the reservoir top
within the anticipated depth

 

Pre-drill, Jade was chosen over Topaz to drill first because it was a 4-way
dip trap with less structural risk, had a slightly higher geological chance of
success and was situated closer to the proven Bayiun Sag East source rock in
the basin. Effective hydrocarbon charge was recognised as a key geological
risk of the Jade prospect. As a result, comprehensive "gas cloud" analysis of
Empyrean's 3D seismic data as well as that of CNOOC oil discoveries and dry
wells was conducted to help assess the potential for hydrocarbon charge to the
Jade prospect. The drilling of Jade has proven that there was no oil migration
into the Jade trap, yet oil migration has effectively charged the four CNOOC
light oil discoveries to the immediate west and south-west of Empyrean's
permit. Empyrean has immediately teamed with CNOOC to analyse and assess the
reasons for this and the implications that all of the data, including the
positives and negatives, now have for the prospectivity at the Topaz prospect,
in particular oil migration pathways.

 

The Jade (LH 17-2-1) well recorded elevated gas (C1) from 1550 metres to 1800
metres MD which was interpreted pre-drill to be a "gas cloud" zone. Post-drill
analysis of 3D seismic data in light of the results of the Jade well indicates
the presence of gas clouds over the Jade trap was potentially a result of gas
migrating from the Bayiun Sag East kitchen vertically via a large basinal
fault followed by lateral migration through coarser clays in the 1550 metres
to 1800 metres MD zone. Preliminary post-Jade assessment of the gas clouds
over the nearby CNOOC discoveries indicates that there is no linkage to the
basinal faults for those CNOOC discovery gas clouds. The Topaz prospect has a
similar structural setup to the CNOOC discoveries with no apparent linkage to
basinal faults.

 

 

Implications for the Topaz Prospect

The 2017 seismic data analysis matured two prospects - Jade and Topaz - along
the western block boundary. Pre-Jade drilling, comprehensive analysis
confirmed Topaz as a large and genuine exploration target in Block 29/11, with
Gaffney Cline independently assessing a target in place oil estimate of 506
mmbbls (Mean case) of oil and an upside of 891 mmbbls (P10 case) with a 30%
Geological Chance of Success ("GCoS").

The Jade well data has validated Post Stack Acoustic Impedance conclusions for
reservoir and seal facies at the Topaz prospect. At the same time, the
penetration of reservoir top within the pre-drill depth prognosis confirms the
reliability of the depth conversion approach Empyrean used and confirms the
trap definition of the Topaz prospect. As a result, the Jade well results have
helped provide confidence in Reservoir, Trap and Seal of the Topaz prospect.

Similar to Jade, effective hydrocarbon charge has been recognised as a key
remaining geological risk for the Topaz prospect.

Jade had relied on relatively long-distance direct oil migration from Baiyun
Sag East source rock that is located over 26 km to the south. The Topaz
prospect relies on more local oil charging mechanisms. Firstly, it has the
potential to be charged by the newly identified - Baiyun Sag North - located
less than 6 km to the southeast of Topaz. The Baiyun Sag North kitchen was
identified by Empyrean's own 3D seismic data, is entirely covered by this 3D
and provides the mapping of direct migration pathways to the Topaz prospect.
Secondly, cooperation between CNOOC and Empyrean on the respective data sets
shows there is a potential migration pathway from the CNOOC LH16-2 discovery
well spilling on to the Topaz prospect.

Drilling of the Topaz prospect

Under the PSC, Empyrean must elect to enter the second phase of exploration
period by 12 June 2022. The second phase of exploration involves the
commitment to drill the Topaz prospect before 12 June 2024.

Following the Jade well results, Empyrean has held several technical meetings,
including with the CNOOC technical team in China, to review the well results
and its implications for Block 29/11 prospectivity and, in particular, the
pros and cons of the well results for the much larger Topaz prospect. In this
regard, CNOOC has already been very cooperative in sharing its regional data
and assisting by passing on a greater technical understanding of the basin.

Based upon these preliminary assessments of the Jade well results and the
ongoing agreement with CNOOC to further cooperate with regards to follow up
post well analysis, it is Empyrean's current intention to proceed with the
second phase of exploration at Block 29/11 and to participate in the drilling
of the Topaz prospect, subject to availability of financing.

Forward Plan

It is Empyrean's intention to maximise the value of its interest in the Mako
Gas Discovery on the Duyung permit in Indonesia and position itself for
participation in the drilling of the high impact Topaz prospect. Demand for
oil and gas in the South East Asian region is strong and growing. Demand and
prices for pipeline quality gas that the Mako Gas Discovery offers is strong
into the Singapore energy hub.

China is the largest importer of oil in the world. Exploration throughout the
region has gathered momentum and CNOOC is drilling a large number of domestic
exploration wells. Empyrean is currently considering its alternatives to
funding the Topaz prospect drill and is preparing a work program that it
believes can see the Topaz well drilled within the next drilling weather
window in the Pearl River Mouth Basin in 1H 2023. Topaz is a slightly
shallower target depth. Given the very large target size at Topaz, Empyrean
will also investigate potential risk share alternatives and farm out
possibilities.

The information contained in this announcement has been reviewed by Empyrean's
Executive Technical director, Gaz Bisht, who has over 31 years' experience as
a hydrocarbon geologist and geoscientist.

Empyrean CEO, Tom Kelly, stated:

"Whilst we are extremely disappointed with the results of the Jade well, we
have made significant investment of resources and time in systematically
maturing the prospectivity of this large block. Empyrean's early assessment is
that the much larger Topaz prospect remains a world class conventional light
oil target that, based on existing understanding of available data, will be
drilled.

 

Over the past 6 years, Empyrean has built a deep and strong relationship with
CNOOC and has found an experienced team in CNOOC EnerTech that, together, has
proven to be able to execute a safe drilling campaign in an offshore
environment. The COSL team has been extremely professional and effective in
managing various aspects of the drilling operations including a Covid-safe
campaign. I would like to thank our partner and consultant teams for their
support and we now look forward to their ongoing assistance with the proposed
drilling of the Topaz prospect."

 

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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