TIDMEME
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 GBP1.83 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.
T he 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
Year
Ended
6 Months to 30 31 March
September (unaudited) (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
Year
Ended
6 Months to 30 31 March
September (unaudited) (audited)
-----------
2022 2021 2022
Notes US$'000 US$'000 US$'000
Assets
Non-Current Assets
Exploration and evaluation
assets 3 4,417 14,869 24,907
Total non-current assets 4,417 14,869 24,907
Current Assets
Trade and other receivables 50 38 36
Cash and cash equivalents 800 6,098 19
------------ ----------- -----------
Total current assets 850 6,136 55
Liabilities
Current Liabilities
Trade and other payables 2,160 237 1,299
Provisions 140 135 140
Convertible loan notes 4 3,258 - 4,125
Derivative financial liabilities 722 - 722
Total current liabilities 6,280 372 6,286
Net Current Assets/(Liabilities) (5,430) 5,764 (6,231)
------------ ----------- -----------
Net Assets/(Liabilities) (1,013) 20,633 18,676
============ =========== ===========
Shareholders' Equity
Share capital 5 2,170 1,627 1,809
Share premium reserve 45,319 35,303 41,285
Warrant and share based payment
reserve 598 1,040 576
Retained losses (49,100) (17,337) (24,994)
------------ ----------- -----------
Total Equity (1,013) 20,633 18,676
============ =========== ===========
The accompanying accounting policies and notes form an integral
part of these financial statements.
Statement of Cash Flows
For the Period Ended 30 September 2022
Year Ended
6 Months to 30 31 March
September (unaudited) (audited)
------------------------- -----------
2022 2021 2022
Notes US$'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
P ayments 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 Share Warrant Retained Total
Capital Premium and SBP Loss Equity
Reserve Reserve
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 11,877 89 - 12,377
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 GBP3.3 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).
Year Ended
6 Months to 30 September 31 March
(unaudited) (audited)
=================================== ===================
2022 2021 2022
Loss per share from continuing
operations
Loss after taxation from continuing US$(24,106,000) US$(453,000) US$(8,110,000)
operations
Loss per share - basic (3.22)c (0.09)c (1.43)c
Loss after taxation from continuing
operations adjusted for dilutive US$(24,106,000) US$(453,000) US$(8,110,000)
effects
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
Year Ended
6 Months to 30 September 31 March
(unaudited) (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 $US22.07 million. Post-well analysis at Jade
however has confirmed reservoir quality is better than pre-drill
estimates with regional seal confirmed and the depth conversion
approach validated. As a part of post-well evaluation, CNOOC
geochemical and basin modelling experts together with Empyrean have
interpreted the critical elements of effective regional oil
migration pathways-leading to positive implications for the Topaz
prospect, and ultimately the decision to proceed with the second
phase of exploration at Block 29/11, being the drilling of the
Topaz Prospect before June 2024.
(c) While the Company will continue to work with its joint
venture partners in reviewing and assessing any further technical
and commercial opportunities as they relate to the Sacramento Basin
project, particularly in light of strong gas prices for gas sales
in the region, it has not budgeted for further substantive
exploration expenditure. The Company has continued to fully impair
the carrying value of the asset at 30 September 2022.
(d) In light of current market conditions, little or no work has
been completed on the Riverbend or Eagle Oil projects in the period
and no substantial project work is forecast for either project in
2022/23 whilst the Company focuses on other projects. Whilst the
Company maintains legal title it has continued to fully impair the
carrying value of the asset at 30 September 2022.
Project Operator Working 2022 2021
Interest Carrying Carrying
Value Value
US$'000 US$'000
Exploration and evaluation
China Block 29/11 Empyrean Energy 100%* - 6,690
Sacramento Basin Sacgasco 25-30% - 4,058
Duyung PSC Conrad 8.5% 4,417 4,121
Riverbend Huff Energy 10% - -
Eagle Oil Pool Development Strata-X 58.084% - -
---------- ----------
4,417 14,869
========== ==========
*In the event of a commercial discovery, and subject to the Company
entering PSC, CNOOC Limited will have a back in right to 51% of
the permit. As at the date of these financial statements no commercial
discovery has been made.
Note 4. Convertible Loan Notes
Year Ended
6 Months to 30 September 31 March
(unaudited) (audited)
=========================== ===========
2022 2021 2022
US$'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 (GBP4.0 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$1.97 million (GBP1.5 million).
(c) In May 2022, following the announcement regarding the Jade
well on 27 April 2022, the Company and the Lender proactively
entered discussions to amend the key repayment terms of the
Convertible Note, which included the right by the Lender to redeem
the Convertible Note within five business days of the announcement
of the results of the Jade well. The parties agreed the following
key amendments to the terms of the Convertible Note:
1. The face value of the Convertible Note is increased to GBP3.3 million;
2. The Company may, at its sole and absolute discretion, redeem
the Convertible Note at any time;
3. The Lender will not redeem the Notes prior to 31 July 2022;
4. If a binding GSA is entered into with regard to the Mako Gas
Discovery in Indonesia on or before 31 July 2022, the Lender will
not redeem the Convertible Note prior to 1 December 2022, with
interest accruing thereafter at a rate of GBP330,000 per calendar
month;
5. If a binding GSA is not entered into with regard to the Mako
Gas Discovery in Indonesia on or before 31 July 2022, the Lender
may redeem the Convertible Note at any time thereafter, in which
circumstances the face value of the Convertible Note will be
reduced to GBP2.67 million;
6. If the Company completes a sale of its interest in the Mako
Gas Discovery, it will redeem the Convertible Note
contemporaneously with that agreement; and
7. The Company will not execute any agreement in respect of a
sale of its interest in the Mako Gas Discovery if the proceeds are
less than the expected value of the Convertible Note on the date of
completion of that agreement.
Note 5. Share Capital
Year Ended
6 Months to 30 September 31 March
(unaudited) (audited)
=========================== ===========
2022 2021 2022
US$'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 Weighted Average
Exercise Number Exercise Number
Price of Options and Price Of Options and
Warrants Warrants
2022 2022 2021 2021
Outstanding at the
beginning of the
period GBP0.116 65,890,916 GBP0.094 20,233,334
Issued during the
period - - GBP0.120 41,849,249
Cancelled during the
period GBP0.113 (53,413,139) - -
Exercised during the
period GBP0.096 (1,861,111) - -
---------------------- ---------------------- ---------------------- ----------------------
Outstanding at the
end of the period GBP0.131 10,616,666 GBP0.114 62,082,583
====================== ====================== ====================== ======================
Valuation and assumptions of options and warrants at 30
September 2022
Employee Equity Facility Equity Substitute Bonus Warrants
Options Options Facility Warrants
Options
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 GBP0.05 GBP0.084 GBP0.047 GBP0.073 GBP0.063
Exercise price GBP0.075 GBP0.123 GBP0.1014 GBP0.12 GBP0.18
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 GBP0.075 to GBP0.18 (2021:
GBP0.075 to GBP0.125) 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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END
IR FFFVLFFLALIF
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December 20, 2022 02:00 ET (07:00 GMT)
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