TIDMEME
RNS Number : 4183J
Empyrean Energy PLC
22 December 2020
This announcement contains inside information
Empyrean Energy PLC / Index: AIM / Epic: EME / Sector: Oil &
Gas
22 December 2020
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 2020.
Highlights
-- Block 29/11, Pearl River Mouth Basin, China (EME 100%)
o Post Stack Seismic Inversion project has confirmed potentially
excellent reservoir properties with porosities in the highly
favourable range of 20-30% and 1 Darcy permeability at the Jade and
Topaz prospects; and
o 12-month extension for first phase of exploration drilling at
Block 29/11 secured, giving the Company until June 2022 to drill
first well.
-- Duyung PSC Project, Indonesia (EME 8.5%)
o Following the highly successful Mako gas field appraisal
drilling program an independent resource audit by Gaffney, Cline
and Associates ( 'GCA' ) confirmed a significant resource upgrade
of the Mako gas field including:
-- Mako gas discovery has been confirmed as one of the largest
undeveloped gas fields West Natuna Basin;
-- GCA audited 2C contingent resource estimate of 495 BcF, a 79%
increase from previous GCA estimate; and
-- GCA audited 3C contingent resource estimate of 817 BcF, a
108% increase from previous GCA estimate.
-- Sacramento Basin, California (EME 25-30%)
o COVID-19 travel restrictions and uncertainty of being able to
execute a drilling campaign safely and without interruption led to
the joint venture partners placing the intended drilling at Borba
on hold until the United States situation normalises.
-- Corporate
o Placement to raise US$0.509 million (GBP0.411 million)
completed in April 2020;
o Open Offer raised US$0.511 million (GBP0.415 million) in May
2020;
o US$0.258 million (GBP0.2 million) drawdown on Equity Placement
Facility in September 2020; and
o Placement to raise US$0.816 million (GBP0.641 million)
completed in September 2020.
For further information please visit www.empyreanenergy.com or
contact the following:
Empyrean Energy plc
Tom Kelly Tel: +618 6146 5325
Cenkos Securities plc (NOMAD)
Neil McDonald nmcdonald@cenkos.com Tel: +44 (0) 131 220
9771
Pete Lynch plynch@cenkos.com Tel: +44 (0) 131 220
9772
First Equity Limited (Joint Broker)
Jason Robertson jasonrobertson@firstequitylimited.com Tel: +44 (0) 20 7330
1883
Chairman's Statement
Set against the challenges of the COVID-19 pandemic, Empyrean
continued to make steady progress on its portfolio of exploration
projects, primarily in China and Indonesia, during the half year
period to 30 September 2020.
With the COVID-19 pandemic still running its course, the Company
continued its crucial technical de-risking activities in China,
including securing an important 12-month extension for the first
phase of drilling from CNOOC. At Duyung, following the highly
successful appraisal program, an independent assessment confirmed a
significant resource upgrade at the Mako Gas field.
On the corporate front the Company successfully conducted a
series of placements and an open offer during the year to maintain
working capital and with the GBP10 million equity placement
facility with Long State Investment Limited, has access to further
capital, if required, in the future.
I would like to thank the Board and staff for their continued
efforts during this difficult year which has positioned Empyrean to
deliver some exciting and value creative outcomes in 2021.
Patrick Cross
Non-Executive Chairman
22 December 2020
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, China National Offshore Oil Corporation
Limited (' 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 Gaffney, Cline and Associates, who
completed an audit of the Company's oil in place estimates in
November 2018. Total mean oil in place estimates on the three
prospects are now 884 MMbbl on an un-risked basis.
Oil in place (MMbbl) audited by Gaffney, Cline and
Associates
Prospect P90 P50 P10 Mean GCoS
Jade 93 187 395 225 32%
---- ---- ---- ----- -----
Topaz 211 434 891 506 30%
---- ---- ---- ----- -----
Pearl 38 121 302 153 15%
---- ---- ---- ----- -----
In addition, it is particularly pleasing that Gaffney, Cline and
Associates estimated close to a 1 in 3 chance of geological success
at Jade and Topaz. Exploration risk has been further mitigated by
the completion of an oil migration study during June 2018 which
established oil migration pathways into all three prospects. In May
2019 the Company further solidified the technical merits of the
project by confirming the presence of well-defined gas clouds over
the Jade and Topaz prospects.
Reservoir Quality Assessment - Post Stack Seismic Inversion
Project
During the six-month interim report period the Company completed
an issue-specific technical evaluation to address the quality of
reservoir. Geological data and analysis completed earlier provided
technical confirmation of an excellent quality reservoir at Jade
and Topaz prospects.
The Company decided to address this further via Post Stack
Seismic Inversion. The Company engaged China Offshore Services
Limited ('COSL') to carry out this project. In order to achieve the
most comprehensive and robust result from the Seismic Inversion
Project, the Company requested access from CNOOC to the log data of
a crucial well, LH-23-1-1d, located approximately 12 km southwest
of the Jade prospect in a permit operated by CNOOC. CNOOC agreed to
provide the data, resulting in increased technical confidence in
the results of the seismic inversion project. The LH-23-1-1d well
intersected both carbonate and sandstone reservoirs with oil
pay.
Analysis of the seismic inversion data confirmed potentially
excellent reservoir properties with porosities in the highly
favourable range of 20-30% and 1 Darcy permeability at both the
Jade and Topaz prospects.
12-Month Extension for First Phase Exploration Drilling
The initial contractual term called Geophysical Service
Agreement ('GSA') was for two years with a work programme
commitment of acquisition, processing and interpretation of
500km(2) of 3D seismic data. Having successfully completed the
committed work program for the GSA, the Company exercised its
option to enter a PSC on the Block, on pre-negotiated terms, with
CNOOC. The PSC was signed on 30 September 2018 with the date of
commencement of implementation of the PSC being 13 December 2018.
The first phase of the contract is for 2.5 years with a commitment
to drill one exploration well to a depth of 2,500m or to the
Basement Formation.
Due to the COVID-19 situation and the resultant global control
policies, the Company proactively engaged with CNOOC and applied
for a 12-month extension to the first phase of the exploration
period for the PSC. In June 2020 Empyrean announced that CNOOC had
granted the 12-month extension as requested. As a result, the first
phase of the exploration period for the PSC has been extended to 12
June 2022. The Company is taking all the necessary steps to ensure
the safe drilling of the well as soon as is practicable.
Under the PSC terms, Empyrean has the option of entering the
second phase of exploration after drilling the first exploration
well and subsequently relinquishing 25% of the current area. The
second phase has a commitment to drill one additional exploration
well to a depth of 2,500m or to the Basement Formation within a
further 2 years.
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 a 10%
shareholding in 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 Petroleum, 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. As part of this transaction
Coro funded US$10.5 million of the costs of the successful 2019
drilling programme. Empyrean also received cash consideration of
US$295,000 and consideration shares in Coro with a value of
US$185,000 for the transfer to Coro of 1.5% of its at the time 10%
interest in the Duyung PSC. In May 2020 the final Indonesian
regulatory approvals for the transfer of title of the 15% direct
interest in the Duyung PSC to Coro were received. As part of this
completion process West Natuna Exploration Limited ('WNEL') made a
direct transfer of its interest in the Duyung PSC to Empyrean and
the other owners, who now hold their interest in the Duyung PSC
directly.
Mako Resource Audit Confirms Significant Upgrade
Following on from the highly successful apprasial drilling
campaign during October and December 2019 , Conrad engaged Gaffney,
Cline and Associates ('GCA') to complete an independent resource
audit for the Mako Gas Field, further to the updated internal
resource estimates prepared by Conrad in May 2020.
GCA's audit ('2020 GCA Audit') confirmed a significant resource
upgrade for the Mako Gas Field compared to its previous resource
assessment released in January 2019 ('2019 GCA Audit'). 2C
(contingent) recoverable resource estimates have been increased to
495 Bcf, an increase of approximately 79% compared with the 2019
GCA Audit and confirming the work completed by the operator and
partners. In the upside case, the 3C (contingent) resources have
increased by approximately 108% compared with the 2019 GCA Audit
and GCA's assessment is also significantly higher than the 3C
estimate made by the Operator and partners in April 2020.
With the latest upgrade, Mako has been confirmed to be one of
the largest undeveloped gas fields in the West Natuna Basin and is
currently by far the largest undeveloped resource in the immediate
area.
Results of the Updated Resource Audit
The revised estimates of gross (full field) recoverable dry gas
audited in the 2020 GCA Audit are:
Contingent 2019 GCA 2020 GCA Increase
Resource Audit Audit
Estimates
Bcf Bcf %
--------- --------- ---------
1C (Low
Case) 184 287 56
--------- --------- ---------
2C (Mid
Case) 276 495 79
--------- --------- ---------
3C (High
Case) 392 817 108
--------- --------- ---------
The full field resources above are classified in the 2020 GCA
Audit as contingent. Gas volumes are expected to be upgraded to
reserves when certain commercial milestones are achieved, including
execution of a GSA and a final investment decision ('FID').
The Mako Gas Field is located close to the West Natuna pipeline
system and gas from the field can be marketed to buyers in both
Indonesia and in Singapore. A Heads-of-Agreement with a gas buyer
in Singapore is already in place. The conclusion of GSA
negotiations will mark a further important step toward the FID to
develop and commercialise the field. Further updates will be
provided in due course.
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.
Following on from the Dempsey drilling campaign in 2018, the
joint venture integrated the subsurface data with regional geology
and seismic data to evaluate additional more attractive targets in
thicker reservoir units for future drilling along the "Dempsey
trend", in which Empyrean will earn a 30% interest.
The drilling application for the Borba Prospect had previously
been approved by both the County and from California Department of
Geological and Geothermal Resources, however with the outbreak of
COVID-19 the travel restrictions and the uncertainty of being able
to execute a drilling campaign safely and without interruption
caused the commencement of any planned drilling at Borba to be
placed on hold.
Subsequent to the reporting period, Sacgasco Limited (ASX:SGC)
('Sacgasco') advised that it intended to commence drilling at Borba
prior to the end of the 2020 calendar year. Empyrean notified
Sacgasco that it will not be participating in the proposed drilling
of the Borba prospect under the current timeframes and terms
proposed by Sacgasco.
Riverbend Project (10%)
Located in Jasper County, Texas, USA, the Cartwright No.1
re-entry well produces gas and condensate from the arenaceous
Wilcox Formation.
The Cartwright No.1 well is currently virtually suspended
producing only nominal amounts of gas condensate.
Little or no work has been completed on the project in the year
and no budget has been prepared for 2020/21 whilst the Company
focuses on other projects. The Company fully impaired the carrying
value of the asset and any subsequent expenditure, mainly for
license fees, has been expensed through the profit and loss
statement.
Eagle Oil Pool Development Project (58.084% WI)
The Eagle Oil Pool Development Projects is located in the
prolific San Joaquin Basin onshore, southern California.
Little or no work has been completed on the project in the year
and no budget has been prepared for 2020/21 whilst the Company
focuses on other projects. The Company has fully impaired the
carrying value of the asset and any subsequent expenditure, mainly
for license fees, has been expensed through the profit and loss
statement.
The information contained in this report was completed and
reviewed by the Company's Executive Director (Technical), Mr
Gajendra (Gaz) Bisht, who has over 30 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.
Gajendra Bisht M.Sc. (Tech) in Applied Geology
Executive Director (Technical)
22 December 2020
Statement of Comprehensive Income
For the Period Ended 30 September 2020
Year Ended
6 Months to 30 31 March
September (unaudited) (audited)
-----------
2020 2019 2020
Notes US$'000 US$'000 US$'000
Revenue - - -
------------ ----------- -----------
Administrative expenditure
Administrative expenses (146) (153) (326)
Compliance fees (89) (87) (214)
Directors' remuneration (197) (186) (388)
Foreign exchange differences (9) (18) (34)
------------
Total administrative expenditure (441) (444) (962)
Operating loss (441) (444) (962)
Finance (expense)/income (4) - 43
Impairment of oil and gas
properties 3 (2) (47) (47)
Fair value revaluation - 30 -
Loss on sale of investment - - (29)
------------ ----------- -----------
Loss from continuing operations
before taxation (447) (461) (995)
Tax benefit - - 716
------------ ----------- -----------
Loss from continuing operations
after taxation (447) (461) (279)
------------ ----------- -----------
Total comprehensive loss for
the year (447) (461) (279)
============ =========== ===========
Loss per share from continuing
operations (expressed in cents)
* Basic 2 (0.10)c (0.11)c (0.06)c
* Diluted 2 (0.10)c (0.11)c (0.06)c
The accompanying accounting policies and notes form an integral
part of these financial statements.
Statement of Financial Position
As at 30 September 2020
Year Ended
6 Months to 30 31 March
September (unaudited) (audited)
-----------
2020 2019 2020
Notes US$'000 US$'000 US$'000
Assets
Non-Current Assets
Oil and gas properties: exploration
and evaluation 3 14,184 9,351 9,586
Investments 4 - 3,266 4,404
------------ ----------- -----------
Total non-current assets 14,184 12,617 13,990
Current Assets
Trade and other receivables 39 45 35
Corporation tax receivable 358 - 358
Cash and cash equivalents 833 472 189
------------ ----------- -----------
Total current assets 1,230 516 582
Liabilities
Current Liabilities
Trade and other payables 470 468 1,170
Provisions 78 54 78
Total current liabilities 548 522 1,248
Net Current Assets/(Liabilities) 682 (6) (666)
------------ ----------- -----------
Net Assets 14,866 12,611 13,324
============ =========== ===========
Shareholders' Equity
Share capital 5 1,398 1,278 1,291
Share premium reserve 29,408 27,304 27,811
Warrant and share based payment
reserve 438 99 153
Retained losses (16,378) (16,070) (15,931)
------------ ----------- -----------
Total Equity 14,866 12,611 13,324
============ =========== ===========
The accompanying accounting policies and notes form an integral
part of these financial statements.
Statement of Cash Flows
For the Period Ended 30 September 2020
Year Ended
6 Months to 30 31 March
September (unaudited) (audited)
------------------------- -----------
2020 2019 2020
Notes US$'000 US$'000 US$'000
Operating Activities
Payments for operating activities (422) (430) (579)
Receipt of corporation tax - - 358
------------ ----------- -----------
Net cash outflow from operating
activities (422) (430) (221)
Investing Activities
P ayments for exploration and
evaluation (857) (323) (557)
Payments for investments - (36) (953)
Proceeds from disposal of investments - 120 276
Net cash outflow for investing
activities (857) (239) (1,234)
Financing Activities
Issue of ordinary share capital
and warrants 2,094 826 1,375
Payment of equity issue costs (163) - (29)
------------ ----------- -----------
Net cash inflow from financing
activities 1,932 826 1,346
Net decrease in cash and cash
equivalents 653 157 (109)
Cash and cash equivalents at
the start of the year 189 332 332
Forex loss on cash held (9) (17) (34)
------------ ----------- -----------
Cash and cash equivalents at
the end of the period 833 472 189
============ =========== ===========
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 2020
Share Share Premium Warrant Retained Total
Capital Reserve and SBP Loss Equity
Reserve
US$'000 US$'000 US$'000 US$'000 US$'000
Balance at 1 April
2019 1,232 26,524 69 (16,958) 10,867
========= ============== ========= ========= ========
Loss after tax for
the period - - - (461) (461)
Total comprehensive
lossfor the period - - - (461) (461)
--------- -------------- --------- --------- --------
Contributions by
and distributions
to owners
Shares issued in
the period 46 780 - - 826
Share based payment
expense - - 30 - 30
Derivative settlement - - - 1,349 1,349
--------- -------------- --------- --------- --------
Total Contributions
by and distributions
to owners 46 780 30 1,349 2,205
--------- -------------- --------- --------- --------
Balance at 30 September
2019 1,278 27,304 99 (16,070) 12,611
========= ============== ========= ========= ========
Balance at 1 April
2019 1,232 26,524 69 (16,958) 10,867
========= ============== ========= ========= ========
Loss after tax for
the year - - - (279) (279)
Total comprehensive
loss for the year - - - (279) (279)
--------- -------------- --------- --------- --------
Contributions by
and distributions
to owners
Shares issued in
the period 59 1,316 - - 1,375
Equity issue costs - (29) - - (29)
Share based payment
expense - - 84 - 84
Derivative settlement - - - 1,306 1,306
Total Contributions
by and distributions
to owners 59 1,287 84 1,306 2,736
Balance at 1 April
2020 1,291 27,811 153 (15,931) 13,324
Loss after tax for
the period - - - (447) (447)
--------- -------------- --------- --------- --------
Total comprehensive
loss for the period - - - (447) (447)
--------- -------------- --------- --------- --------
Contributions by
and distributions
to owners
Shares and warrants
issued 107 1,760 227 - 2,094
Equity issue costs - (163) - - (163)
Share based payment
expense - - 58 - 58
Total Contributions
by and distributions
to owners 107 1,597 285 - 1,989
--------- -------------- --------- --------- --------
Balance at 30 September
2020 1,398 29,408 438 (16,378) 14,866
========= ============== ========= ========= ========
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 2020
Basis of preparation
The Company's condensed interim financial statements for the six
months ended 30 September 2020 have been prepared in accordance
with International Financial Reporting Standards ('IFRS') as
adopted by the European Union 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 2020.
The financial information for the period ended 30 September 2020
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 2020
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 200 Strand, London, WC2R 1DJ. 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 year has been the
acquisition and development of its exploration projects. The
Company had a cash balance of US$0.83m at 30 September 2020 (31
March 2020: US$0.19m), net current assets of US$0.68m at 30
September 2020 (31 March 2020: net current liabilities of US$0.67m)
and net operating cash outflows of US$0.42m at 30 September 2020
(31 March 2020 outflows: US$0.22m).
The Directors have prepared cash flow forecasts for the Company
covering the period to 31 December 2021 and show that the Company
will require further funding within the next 12 months. The
Directors have an appropriate plan to raise additional funds as and
when it is required, either through the sale of existing assets,
through joint ventures of existing assets or through further equity
or debt funding. In addition the entering into an Equity Facility
Agreement with Long State Investment Limited provides Empyrean with
a fully flexible funding facility and enables it to access capital
to fund its ongoing working capital, if required and subject to the
administrative conditions of the agreement.
The Directors have therefore concluded that it is appropriate to
prepare the Company's financial statements on a going concern
basis. However, in the absence of additional funding being in place
at the date of this report, these conditions indicate the existence
of a material uncertainty which may cast significant doubt over the
Company's ability to continue as a going concern and, therefore,
that it may be unable to realise its assets and discharge its
liabilities in the normal course of business. The financial
statements do not include the adjustments that would result if the
Company was unable to continue as a going concern.
Note 1. Segmental Analysis
The Directors consider the Company to have three geographical
segments, being China (Block 29/11 project), Indonesia (Duyung
PSC project) and North America (Sacramento Basin project),
which are all currently in the exploration and evaluation phase.
Corporate costs relate to the administration and financing
costs of the Company and are not directly attributable to the
individual projects. The Company's registered office is located
in the United Kingdom.
Details China Indonesia USA Corporate Total
US$'000 US$'000 US$'000 US$'000 US$'000
30 September 2020
Revenue from continued - - - - -
operations
Segment result
Unallocated corporate expenses - - - (441) (441)
-------- ---------- -------- ---------- --------
Operating loss - - - (441) (441)
Finance expense - - - (4) (4)
Impairment of oil and gas
properties - - (2) - (2)
Loss before taxation - - (2) (445) (447)
Tax benefit - - - - -
-------- ---------- -------- ---------- --------
Loss after taxation - - (2) (445) (447)
-------- ---------- -------- ---------- --------
Total comprehensive loss
for the financial year - - (2) (445) (447)
======== ========== ======== ========== ========
Segment assets 6,202 3,969 4,013 - 14,184
Unallocated corporate assets - - - 1,230 1,230
-------- ---------- -------- ---------- --------
Total assets 6,202 3,969 4,013 1,230 15,414
======== ========== ======== ========== ========
Segment liabilities - - - - -
Unallocated corporate liabilities - - - 548 548
-------- ---------- -------- ---------- --------
Total liabilities - - - 548 548
======== ========== ======== ========== ========
Details China Indonesia USA Corporate Total
US$'000 US$'000 US$'000 US$'000 US$'000
30 September 2019
Revenue from continued - - - - -
operations
Segment result - - - - -
Unallocated corporate expenses - - - (444) (444)
-------- ---------- -------- ---------- --------
Operating loss - - - (444) (444)
Impairment of oil and gas
properties - - (47) - (47)
Fair value revaluation - 30 - - 30
Profit/(Loss) before taxation - 30 (47) (444) (461)
Tax benefit - - - - -
-------- ---------- -------- ---------- --------
Profit/(Loss) after taxation - 30 (47) (444) (461)
-------- ---------- -------- ---------- --------
Total comprehensive income/(loss)
for the financial year - 30 (47) (444) (461)
======== ========== ======== ========== ========
Segment assets 5,479 3,266 3,872 - 12,617
Unallocated corporate assets - - - 516 516
-------- ---------- -------- ---------- --------
Total assets 5,479 3,266 3,872 516 13,133
======== ========== ======== ========== ========
Segment liabilities - 295 - - 295
Unallocated corporate liabilities - - - 227 227
-------- ---------- -------- ---------- --------
Total liabilities - 295 - 227 522
======== ========== ======== ========== ========
Details China Indonesia USA Corporate Total
US$'000 US$'000 US$'000 US$'000 US$'000
31 March 2020
Revenue from continued - - - - -
operations
Segment result - - - - -
Unallocated corporate expenses - - - (962) (962)
-------- ---------- -------- ---------- --------
Operating loss - - - (962) (962)
Finance income - - - 43 43
Impairment of oil and gas
properties - - (47) - (47)
Loss on sale of investment - (29) - - (29)
-------- ---------- -------- ---------- --------
Loss before taxation - (29) (47) (919) (995)
Tax benefit - - - 716 716
-------- ---------- -------- ---------- --------
Loss after taxation - (29) (47) (203) (279)
-------- ---------- -------- ---------- --------
Total comprehensive loss
for the financial year - (29) (47) (203) (279)
======== ========== ======== ========== ========
Segment assets 5,679 4,404 3,907 - 13,990
Unallocated corporate assets - - - 582 582
-------- ---------- -------- ---------- --------
Total assets 5,679 4,404 3,907 582 14,572
======== ========== ======== ========== ========
Segment liabilities - 480 - - 480
Unallocated corporate liabilities - - - 768 768
-------- ---------- -------- ---------- --------
Total liabilities - 480 - 768 1,248
======== ========== ======== ========== ========
Note 2. Loss Per Share
The basic loss per share is derived by dividing the loss after
taxation for the year attributable to ordinary shareholders by the
weighted average number of shares on issue being 469,699,133 (2019:
431,260,240).
Year Ended
6 Months to 30 September 31 March
(unaudited) (audited)
-------------------------------- ---------------
2020 2019 2020
Loss per share from continuing
operations
Loss after taxation from continuing US$(447,000) US$(461,000) US$(279,000)
operations
Loss per share - basic (0.10)c (0.11)c (0.06)c
Loss after taxation from continuing
operations adjusted for dilutive US$(447,000) US$(461,000) US$(279,000)
effects
Loss per share - diluted (0.10)c (0.11)c (0.06)c
For the current and prior financial years 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
Year Ended
6 Months to 30 September 31 March
(unaudited) (audited)
--------------------------- -----------
2020 2019 2020
US$'000 US$'000 US$'000
Balance brought forward 9,586 9,075 9,075
Additions(a) 651 323 558
Transfers(b) 3,949 - -
Impairment(c) (2) (47) (47)
------------- ------------ -----------
Net book value 14,184 9,351 9,586
============= ============ ===========
(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) In February 2019 Empyrean announced that it had entered into
a binding, conditional purchase agreement (the Agreement) pursuant
to which AIM listed Coro would acquire a 15% interest in the Duyung
PSC from WNEL for aggregate consideration in cash and Coro shares
of US$4.8 million (of which Empyrean received US$295,000 in cash
and 6,090,504 Coro shares) and the contribution of US$10.5 million
by Coro toward the 2019 drilling campaign at the Mako gas field.
The cash and share component of the consideration was paid pro rata
to the existing owners of WNEL, being Empyrean, which currently had
a 10% effective interest in the Duyung PSC, and Conrad Petroleum
Ltd, which currently had a 90% effective interest in the Duyung
PSC, each through shareholding in WNEL.
The consideration paid comprised US$2.95 million in cash and
US$1.85 million in the form of 60,905,037 new ordinary shares in
Coro. Empyrean received cash consideration of US$295,000 and
Consideration Shares with a value of US$185,000 for the transfer to
Coro of 1.5% of its current 10% interest in the Duyung PSC,
reducing its interest to 8.5%.
In May 2020 the final Indonesian regulatory approvals for the
transfer of title of the 15% direct interest in the Duyung PSC to
Coro were received. As part of this completion process WNEL made a
direct transfer of its interest in the Duyung PSC to Empyrean and
the other owners, who now hold their interest in the Duyung PSC
directly. As a result of this direct ownership, the Company's
interest in the Duyung PSC is no longer classified under IFRS 9 as
a financial asset at fair value through profit or loss and now
falls under IFRS 6 (Exploration for and Evaluation of Mineral
Resources). The carrying value post-disposal of US$3.95 million at
May 2020 has been transferred to Note 3 - Oil and Gas Properties:
Exploration and Evaluation. Please refer to Note 4 - Investments
for details on the fair value assessment of the project at transfer
date.
(c) In light of current market conditions, little or no work has
been completed on the Riverbend or Eagle Oil projects in the period
and no substantial project work is forecast for either project in
2020/21 whilst the Company focuses on other projects. Whilst the
Company maintains legal title it has continued to fully impair the
carrying value of the asset at 30 September 2020.
Project Operator Working 2020 2019
Interest Carrying Carrying Value
Value US$'000
US$'000
Exploration and
evaluation
China Block 29/11 Empyrean Energy 100%* 6,202 5,222
Sacramento Basin Sacgasco 25-30% 4,013 3,853
Duyung PSC Conrad Petroleum 8.5% 3,969 -
Riverbend Huff Energy 10% - -
Eagle Oil Pool Development Strata-X 58.084% - -
---------- ----------------
14,184 9,075
========== ================
*In the event of a commercial discovery, and subject to the
Company entering PSC, CNOOC Limited will have a back in right
to 51% of the permit. As at the date of these financial statements
no commercial discovery has been made.
Note 4. Investments
Year Ended
6 Months to 30 September 31 March
(unaudited) (audited)
--------------------------- -----------
2020 2019 2020
US$'000 US$'000 US$'000
Balance brought forward 4,404 3,200 3,200
Additions(a) 25 36 1,389
Disposals(b) (480) - (185)
Transfers(b) (3,949) - -
Fair value revaluation - 30 -
------------- ------------ -----------
Total investments - 3,266 4,404
============= ============ ===========
(a) The Company acquired a 10% working interest in the Duyung
PSC, Indonesia during the 2018 financial year. For further
information on additional work performed on the Duyung PSC during
the period, please refer to the Operational Review.
(b) In February 2019 Empyrean announced that it had entered into
a binding, conditional purchase agreement (the Agreement) pursuant
to which AIM listed Coro would acquire a 15% interest in the Duyung
PSC from WNEL for aggregate consideration in cash and Coro shares
of US$4.8 million (of which Empyrean received US$295,000 in cash
and 6,090,504 Coro shares) and the contribution of US$10.5 million
by Coro toward the 2019 drilling campaign at the Mako gas field.
The cash and share component of the consideration was paid pro rata
to the existing owners of WNEL, being Empyrean, which currently had
a 10% effective interest in the Duyung PSC, and Conrad Petroleum
Ltd, which currently had a 90% effective interest in the Duyung
PSC, each through shareholding in WNEL.
The consideration paid comprised US$2.95 million in cash and
US$1.85 million in the form of 60,905,037 new ordinary shares in
Coro. Empyrean received cash consideration of US$295,000 and
Consideration Shares with a value of US$185,000 for the transfer to
Coro of 1.5% of its current 10% interest in the Duyung PSC,
reducing its interest to 8.5%.
In May 2020 the final Indonesian regulatory approvals for the
transfer of title of the 15% direct interest in the Duyung PSC to
Coro were received. As part of this completion process WNEL made a
direct transfer of its interest in the Duyung PSC to Empyrean and
the other owners, who now hold their interest in the Duyung PSC
directly. As a result of this direct ownership, the Company's
interest in the Duyung PSC is no longer classified under IFRS 9 as
a financial asset at fair value through profit or loss and now
falls under IFRS 6 (Exploration for and Evaluation of Mineral
Resources).
The carrying value post-disposal of US$3.95 million at May 2020
has been transferred to Note 3 - Oil and Gas Properties:
Exploration and Evaluation. The fair value of the project has been
assessed at transfer date and there has been no change from the
assessment made at 31 March 2020, when the carrying value
pre-disposal of US$4.4 million was deemed to approximate fair value
based on the purchase agreement detailed above, including costs
capitaised since the agreement was entered into. While the
successful appraisal drilling program conducted during 2019/20
resulted in a substantial increase in the contingent resources of
Mako gas field, there are, in the Board's opinion, several
milestones required to be achieved before an updated fair value of
the project can be reliably and objectively assessed. These include
steps required for contingent resources to be converted to reserves
at final investment decision (FID) and also the steps required to
finalise a gas sales agreement, which has been delayed by the
current COVID-19 pandemic and resultant disruptions. Given COVID-19
and the current uncertainty and volatility in the energy markets,
attempting to model fair value at this point in time would be
intrinsically difficult and subject to a number of
contingencies.
Note 5. Share Capital
Year Ended
6 Months to 30 September 31 March
(unaudited) (audited)
--------------------------- -----------
2020 2019 2020
US$'000 US$'000 US$'000
Issued and fully paid
489,430,615 (2019: 442,930,910)
ordinary shares of 0.2p each 1,398 1,278 1,291
------------- ------------ -----------
Opening balance (2020 number: 447,597,577) 1,291 1,232 1,232
Subscription - 14 April 2020 (number: 30 - -
11,741,429)
Open Offer/Subscription - 12 May 30 - -
2020 (number: 11,858,275)
Placements - 11 Sep 2020 (number: 47 - -
18,233,334)
Exercise of options - prior year
(number: 15,000,000) - 37 38
Placements - prior year (number:
8,322,467) - 9 21
Closing balance (2020 number: 489,430,615) 1,398 1,278 1,291
============= ============ ===========
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:
Weighted Average Number Weighted Average Number
Exercise of Options and Exercise Of Options and
Price Warrants Price Warrants
2020 2020 2019 2019
Outstanding at the
beginning of the
year GBP0.145 5,500,000 GBP0.042 17,500,000
Issued during the
year(a)(b) GBP0.088 17,233,334 GBP0.125 3,000,000
Exercised during the
year - - GBP0.020 (15,000,000)
Cancelled during the
year(a) GBP0.175 (2,500,000) - -
---------------------- --------------------- ---------------------- -----------------------
Outstanding at the
end of the year GBP0.094 20,233,334 GBP0.145 5,500,000
====================== ===================== ====================== =======================
(a) On 15 September 2020, 2,500,000 unlisted options were issued to the Company Secretary,
Jonathan Whyte. The options have an exercise price of GBP0.075, expire on 10 September 2023
and have a vesting date of 15 September 2021. 2,500,000 options held by My Whyte, expiring
in January 2021, were cancelled in lieu of the award of the new options. On 11 September 2020,
500,000 unlisted options were issued to Long State Investments as part of activating the GBP10
million equity placement facility. The options have an exercise price of GBP0.1014 and expire
on 17 September 2023. Options are being expensed over the life of the options, resulting in
a share based payment expense of US$58,000 to 30 September 2020 (US$30,000 to 30 September
2019).
(b) 14,233,334 warrants were issued to subscribers of the Placement announced on 11 September
2020. The warrants have an exercise price of GBP0.09 and expire on 25 September 2022. The
warrants have been valued using a Black-Scholes model and the fair value of US$227,000 is
recorded in the warrant and share based payment reserve.
Valuation and assumptions of options and warrants at 30 September 2020
Employee Employee Equity Equity Subscriber
Options Options Facility Facility Warrants
Options Options
Number of Options 2,500,000 2,500,000 500,000 500,000 14,233,334
Grant date 17 Sep 2019 15 Sep 2020 24 Dec 2019 11 Sep 2020 11 Sep 2020
Expiry date 30 Sep 2022 10 Sep 2023 24 Dec 2022 17 Sep 2023 25 Sep 2022
Share price GBP0.098 GBP0.05 GBP0.084 GBP0.047 GBP0.047
Exercise price GBP0.125 GBP0.075 GBP0.123 GBP0.1014 GBP0.09
Volatility 79% 81% 79% 81% 81%
Option life 3.00 3.00 3.00 3.00 2.00
Expected dividends - - - - -
Risk-free interest
rate (based on
national
government bonds) 0.49% 0.14% 0.52% 0.14% 0.14%
The options and warrants outstanding at 30 September 2020 have an exercise price in the range
of GBP0.075 to GBP0.125 (2019: GBP0.125 to GBP0.17) and a weighted average remaining contractual
life of 2.14 years (2019: 1.77 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 October 2020 Sacgasco announced its intentions to drill the
Borba prospect in the Sacramento Basin, onshore California.
Empyrean subsequiently notified the market that under the current
timeframes and terms currently proposed by Sacgasco it would not be
participating in the proposed drilling program.
In December 2020 the Company announced that announced that
further significant work had been completed to update the Plan of
Development in respect of the Mako Gas Field ('Mako POD'),
specifically by incorporating important and extensive data
collected during the appraisal drilling program. As part of this
work SKK Migas (the Indonesian regulator) accepted the
significantly uplifted estimates of gas in place ('GIIP'), which
are broadly in line with the independent resource audit by Gaffney
Cline and Associates completed and announced in May 2020, and that
these volumes will form part of the updated Mako POD, which is
currently being prepared.
No other matters or circumstances have arisen since the end of
the financial year 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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END
IR FLFFEFFLLFII
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