TIDMEME
RNS Number : 9287V
Empyrean Energy PLC
16 December 2021
This announcement contains inside information
Empyrean Energy PLC / Index: AIM / Epic: EME / Sector: Oil &
Gas
16 December 2021
Empyrean Energy PLC ("Empyrean" or the "Company")
Empyrean raises GBP7.623 million (US$10.14m) to fully fund Jade
prospect drilling
Empyrean Energy plc ("Empyrean" or the "Company"), the oil and
gas development company with interests in China, Indonesia and the
United States, advises that it has secured funding totalling
GBP7.623 million through an equity placing and convertible loan
note issue, the proceeds of which will complete the Company's
funding requirements (on a dry hole basis) for the drilling of the
Jade prospect at the Company's 100% owned Block 29/11 permit,
offshore China, which is scheduled to be drilled in late December
2021.
Pursuant to an equity placing, the Company has issued 60,383,334
new ordinary shares in the Company (the "New Ordinary Shares") at a
price of 6.0p per New Ordinary Share (the "Placing Price") to raise
GBP3.623 million (before costs) (the "Placing"). The Placing is
being completed under the Company's existing authorities and is not
subject to the approval of shareholders.
In conjunction with the Placing, the Company has entered into a
Convertible Loan Note Agreement with a Melbourne-based investment
fund (the "Lender"), pursuant to which the Company has issued a
convertible loan note to the Lender and has received gross proceeds
of GBP4.0 million (the "Convertible Note"). The Convertible Note
has a maturity date of 16 December 2022 and 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 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 it's 8.5%
interest in the Duyung PSC and Mako Gas Field.
A condition of the Convertible Note was that the Company secure
commitments for a minimum of GBP3.0 million through an equity
placement in conjunction with the Convertible Note, which it has
now successfully achieved. The Company has accepted
over-subscriptions above the GBP3.0 million threshold that will be
used to partly fund testing of any oil column encountered whilst
drilling, though further funding will be required should the
Company encounter an oil column that requires testing. The Company
has a number of alternatives for that further funding under
consideration.
Significantly, the combined funds raised through the Placing and
Convertible Note now complete the funding requirements (on a dry
hole basis) for the drilling of the Jade Prospect. As announced in
November 2021, Empyrean executed an Integrated Drilling Contract
("IDC") with China Oilfield Services Limited ("COSL") which
confirmed a substantially reduced turnkey quote for the drilling of
the Jade prospect of US$12.38 million on a dry hole basis, an
approximate 34% saving on the initial quote. On a success basis,
testing of any oil column has been quoted at an additional US$7.4
million. Immediately following the Placing and Convertible Note
issue, the Company will have GBP10.68m (approx US$14.2m) cash on
hand.
Following the Placing, the Company's enlarged issued share
capital will comprise 637,320,780 ordinary shares of 0.2p each (the
"Shares"), each with voting rights. This figure may be used by
shareholders as the denominator for the calculations by which they
will determine if they are required to notify their interest in, or
a change to their interest in, securities of the Company under the
Financial Conduct Authority's Disclosure and Transparency
Rules.
The Placing Price represents a 16.67% discount to the price of
the Company's shares as at close of business on 15 December 2021
(7.20p), a 16.13% discount to the 7-day volume weighted average
price ('VWAP') and a 15.44% discount to the 30-day VWAP of the
Company's shares. The conversion price of the Convertible Note (8p)
represents a 11.11% premium to the price of the Company's shares as
at close of business on 15 December 2021, a 11.83% premium to the
7-day volume weighted average price ('VWAP') and a 12.75% premium
to the 30-day VWAP of the Company's shares
The majority of the subscribers to the Placing were
institutional and high net worth investors, including both new
investors and existing shareholders, and also clients of First
Equity Limited in the United Kingdom and both Petra Capital and Max
Capital in Australia. Petra Capital in Australia were the corporate
advisor to the Convertible Note.
Funds raised from the proceeds of the Placing and Convertible
Note will primarily be used for final drilling preparation
activities and the drilling of the Jade prospect, and for the
Company's general working capital requirements.
The 2021 drilling campaign is targeting a world class
conventional oil target in the Jade prospect, to which Gaffney
Cline assigned a Geological Chance of Success ("GCoS") of 32%.
Subsequent to this independent assessment, the Company has
completed a gas cloud study and post stack seismic inversion study
that further mitigate risk. As a result, the Company's internal
assessment of the GCoS for the Jade prospect now stands at 41%. The
Jade prospect has a Gaffney Cline audited mean in place potential
of 225 MMbbl and a P10 in place upside of 395 MMbbl. The drilling
of the Jade prospect is the first of the three identified prospects
within Block 29/11, which also contains the Topaz and Pearl
prospects. The combined audited mean in place potential of all
three prospects is 884 MMbbl and a P10 in place upside of 1,588
MMbbl.
COSL has currently assigned the NH8 drill rig to drill the Jade
prospect. The Company engaged COSL back in October to complete a
required well site survey over the Jade drill location. The well
site survey requires 5 days of suitable sea conditions, including
swells less than 1.2m, in order to complete this survey. Sea
conditions have not allowed this survey to proceed as at today's
date. The Company and COSL will complete this survey as soon as sea
conditions allow, and the survey vessel is fully equipped and on
standby to mobilise immediately should weather conditions allow.
The well site survey is critical to 2 of 8 essential permits
required to drill. A total of 5 permit applications have already
been made and are expected to be granted in the coming weeks. The
last permit relates to the oil spill response plan which is
currently nearing completion and expected to be lodged within the
coming week. As these permits are granted, the Company will provide
updates by way of announcement.
It is expected that the Jade prospect will take approximately 26
days to reach total depth, with the testing of any oil column
encountered expected to take a further 14 days. The Jade prospect
is targeting a potentially world class conventional carbonate
reservoir, with discoveries nearby producing sweet light oil in the
38-41 api range. Four recent nearby discoveries exhibit gas clouds
on 3D seismic in the overburden rocks above the reservoir and seal.
This feature is not exhibited in nearby dry wells. Empyrean's Jade
and Topaz prospects both exhibit gas clouds on 3D seismic similar
to nearby discoveries. Any discovery at the Jade prospect will
significantly further de-risk the 'double the size of Jade' target
at the Topaz prospect.
Empyrean has a 100% working interest in Jade during the
exploration phase of the project. Empyrean's partner in the
project, China National Offshore Oil Corporation ('CNOOC"), has the
right to assume a 51% interest in the project during the
development of any discovery. Exploration costs are recovered at an
accelerated rate from first production. Development costs are also
recovered from first production along with 9% interest.
Application will be made for the New Ordinary Shares to be
admitted to trading on AIM. Admission is expected to take place on
22 December 2021. The New Ordinary Shares will rank pari passu with
existing shares in issue.
Cyber Fraud Incident
The Company recently made a payment totalling US$1.98 million to
China Oilfield Services Limited ("COSL"), representing a 10%
deposit (US$1.23m) on the dry hole cost component of the Integrated
Drilling Contract ("IDC") signed with COSL plus mobilisation costs
(US$0.75m); however, the Company has been informed that this
payment has not been received by COSL and appears to have been
redirected to an unknown third party as a result of a sophisticated
cyber fraud perpetrated against COSL and the Company.
The Company is currently working with its bank, the recipient
bank and the police authorities in three jurisdictions and can
confirm that the recipient bank account has been frozen and that
recovery actions have commenced. It is not known at this stage
whether the full funds will be recovered. The Company has notified
and opened case files with the police in the UK, Singapore and the
Federal Police in Australia and criminal investigations have duly
commenced. The Company has notified its insurers and has also taken
action to ensure the integrity of its own IT systems.
While these investigations take their course, the Company has
held proactive discussions with COSL, with both parties agreeing in
good faith to continue with drilling preparation activities without
delay.
Despite this incident, Empyrean is fully funded to drill the
Jade Prospect and will continue to work cooperatively to ensure
that activities remain on track. Further updates will be provided
as the criminal investigations progress. It is anticipated that
this will take several months to complete.
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.
Tom Kelly, CEO of Empyrean, commented on the Placing:
"We are extremely pleased to successfully raise the necessary
funding to complete our drill preparation activities and drill the
exciting Jade Prospect in China, which remains on target to
commence shortly after weather conditions allow us to complete the
well site survey.
Drilling the large Jade prospect will be the culmination of over
five years of systematic, thorough and dedicated hard work by our
technical team led by Gaz Bisht. Gaz has overseen this project
since its inception, through acquiring 3D data and the excellent
additional and thorough pre-drill exploration. We are now getting
ready to drill, and this conventional light oil 395 million barrel
in place target has been given a 32% geological chance of success
by Gaffney Cline. Empyrean ranks that chance at 41%. It is now time
to let the drill bit do the talking. We have high hopes for both
the Jade and Topaz prospects and in addition we have a great
methane gas discovery at Mako in Indonesia to focus on in the
future.
I'd like to extend special thanks to the Lender and its team,
whom we welcome as a note holder and future shareholder, and to all
new and existing shareholders who supported this raising and to
those who have supported the Company throughout the build up to
this potentially transformational point in the Company's history.
I'd also like to again commend our partners CNOOC on their
co-operative approach and assistance throughout this process. We
now look forward to updating shareholders on the final drilling
preparation activities, including the well site survey, and the
announcement of the spud date for the hugely exciting Jade
Prospect."
**ENDS**
For further information:
Empyrean Energy plc
Tom Kelly Tel: +61 6 146 5325
Cenkos Securities plc (Nominated
Advisor and Broker)
Neil McDonald Tel: +44 (0) 131 220 9771
Pete Lynch Tel: +44 (0) 131 220 9772
First Equity Limited (Joint Broker)
Jason Robertson Tel: +44 (0) 20 7330 1883
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END
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