TIDMRMP
RNS Number : 1221W
Red Emperor Resources NL
30 July 2018
30 July 2018
RED EMPEROR EXECUTES DEFINITIVE AGREEMENTS FOR ALASKA
ACQUISITION
The Board of Red Emperor Resources NL (ASX/AIM: RMP) ("Red
Emperor" or the "Company") is pleased to advise that it has
executed "Definitive Agreements" in relation to the recently
announced farm-in acquisition of four (4) highly prospective leases
containing a significantly large oil prospect on the Alaska North
Slope.
Highlights
-- Red Emperor, along with its consortium partners, has executed
formal "Definitive Agreements" to acquire and drill a significantly
large oil prospect on the prolific Alaska North Slope
-- Permitting is currently underway, ahead of scheduled drilling in 1Q2019
-- The drill target is immediately adjacent to and a direct
analogue of the successful Horseshoe-1/1A oil well drilled by the
Repsol-led joint venture in 2017
-- Horseshoe is part of the billion-barrel plus Nanushuk oil
play fairway, one of the largest conventional oil fields discovered
in the US in more than 30 years(1)
-- Red Emperor to recommence trading on ASX
Red Emperor, along with 88 Energy Limited (ASX: 88E) ("88
Energy") and Otto Energy Limited (ASX: OEL) ("Otto") (collectively
the "Consortium Partners"), has executed formal "Definitive
Agreements", including a Participation Agreement, with Great Bear
Petroleum Ventures II LLC ("Great Bear") to acquire the majority of
Great Bear's working interest in four leases on the western flank
of the Alaska North Slope, specifically ADL#s 391718, 391719,
319720 & 391721; collectively the "Western Blocks".
Pursuant to the agreement, the Consortium Partners have funded
their share of a US$3,000,000 performance bond to the State of
Alaska and a US$500,000 cash payment to Great Bear as part of the
consideration for the acquisition of the working interests in the
Western Blocks.
Further information in relation to each of the four lease areas
was provided in the Company's ASX and AIM announcements dated 25
June 2018.
In summary, as consideration for acquiring the leases the
consortium partners will undertake the following:
-- Provide a performance bond to the State of Alaska of US$3.0
million (RMP share US$1.05m) by 31 July 2018. RMP has provided its
share of the performance bond; and
-- Drill an exploration well in the Western Blocks by 30 May
2019. The performance bond will be refunded if the well is drilled
by this date.
The Consortium Partners will provide the following consideration
to Great Bear:
-- Free carry Great Bear for a 10% working interest in the
leases for the drilling, completion and production testing of an
initial test well, including all associated costs such as
permitting, ice road access and test production disposition;
-- Pay US$500,000 (RMP share US$175,000) upon execution of the
Definitive Agreements. (This has been paid);
-- Pay US$500,000 (RMP share US$175,000) upon receipt of final
permits necessary to drill the initial test well, in any case by no
later than 31 December 2018; and
-- Provide an option for Great Bear to acquire a further 10%
working interest prior to the initial test well by paying its
pro-rata share of all costs of the initial test well or, if
exercised within 6 months of completing the initial test well, by
paying 200% of its pro-rata share of all costs of the initial test
well.
The relevant interests in the Western Blocks under the
commercial agreements (subject to standard regulatory approval by
the State of Alaska) are as follows:
Current Post Transaction
Working
Interest
==================== ---------------------------------------------------------------------------------------------------------
Working
Working Interest Interest
(before back-in) Net *** (after
Revenue back-in)
Interest
*
Paying Interest (before
(before back-in) back-in)
==================== ============================ ============================ ==================== =======================
Red Emperor - 31.5% 35% 26.25% 28%
=============================== ==================== ============================ ============================ ==================== =======================
88 Energy
(Drilling Manager) - 36.0% 40% 30.00% 32%
=============================== ==================== ============================ ============================ ==================== =======================
Otto Energy 10.8% 22.5% 25% 18.75% 20%
=============================== ==================== ============================ ============================ ==================== =======================
Great Bear
Petroleum** 89.2% 10.0% - 8.33% 20%
=============================== ==================== ============================ ============================ ==================== =======================
Alaskan State - - - 16.67%
=============================== ==================== ============================ ============================ ==================== =======================
100.0% 100.0% 100.0% 100.0% 100%
=============================== ==================== ============================ ============================ ==================== =======================
* Government royalty of 16.67%
** Currently Operator of record on leases
*** "After back-in" interests reflect position if Great Bear
exercise option to acquire further 10% working interest
Red Emperor's Managing Director, Greg Bandy, commented: "The
speed and efficiency with which this transaction was both
consummated and subsequently executed is testament to the quality
of the consortium partners involved. Red Emperor is delighted to be
part of this joint venture and looks forward to the coming months
in anticipation of an extremely exciting drilling campaign."
Drilling Planning
88 Energy will manage the drilling of the initial test well on
behalf of the joint venture and Consortium Partners. Internal
interpretation by 88 Energy of the 3D seismic over the Western
Blocks has confirmed the original interpretation by Otto's
technical team, which identified a gross best estimate resource
volume of 400-million barrels and a geological chance of success in
the range of 25-35%. RMP's 31.5% working interest (before Great
Bear's 10% back-in) would be 126 MMbbl net to RMP. (The estimated
quantities of petroleum that may potentially be recovered by the
application of future development projects relate to undiscovered
accumulations. These estimates have both an associated risk of
discovery and a risk of development. Further appraisal and
evaluation is required to determine the existence of a significant
quantity of potentially moveable hydrocarbons.)(2) A location to
optimally test the prospect has been selected and permitting is
underway, ahead of scheduled drilling in 1Q2019.
88 Energy has already commenced a rig market survey and is
identifying a suitable rig with which to commence the drilling
operations. Given that the location is only accessible through an
ice road, drilling will be undertaken during the winter months once
the Alaska North Slope is opened for operations. The joint venture
has met with the Alaska Department of Natural Resources to expedite
required approvals and permits to undertake the initial test
well.
Lease Terms
The four North Slope leases comprising the Western Blocks have
recently been extended by three years with the term now expiring on
30 April 2021. During this period the joint venture is required to
post a US$3.0 million performance bond and undertake the drilling
and testing of an initial test well by no later than 30 May 2019.
The leases have an annual rental of US$10.00 per acre or fraction
thereof and have been fully paid through to May 2019.
Funding
The well is estimated to cost approximately US$15 million (100%
dry hole cost) in which case Red Emperor's share would be US$5.25
million. The Company is currently fully funded to meet its share of
costs associated with both the drilling of the well and all
ancillary transaction costs.
Philippines (SC-55)
The Company also has a participating interest of 37.5% in
Service Contract no. 55 (SC 55) in the Philippines. The Company
received confirmation during April 2018 from the Philippine
Department of Energy (DoE) ratifying the request for transfer of
participating interests in SC 55 from Otto Energy Limited to its
partners Century Red Pte. Ltd (a 100% owned subsidiary of Red
Emperor), Palawan55 Exploration and Production Corporation and
Pryce Gases Inc.
Red Emperor's equity interest in Block SC 55 is now 37.5%
(previously 15%) after the DoE found the partners to be
"Financially qualified to assume the proposed interests. Legally
qualified to assume the participating interest from Otto Energy
considering that they are existing petroleum companies operating
either as operator and/or consortium members in petroleum service
contracts; And technically qualified, as exemplified by the joint
co-operation and completion of previous exploration activities,
such as the drilled Hawkeye-1 well."
As a result, the participating interests in SC 55 are as
follows.
Company Participating Interest
=======================
Palawan55 Exploration & Production Corporation
(Operator) 37.50%
================================================ =======================
Century Red Pte Ltd (Red Emperor) 37.50%
================================================ =======================
Pryce Gases, Inc. 25.00%
================================================ =======================
Total 100%
================================================ =======================
The timeline for the moratorium period and Sub-Phase (SP) 5 has
now been revised to reflect the transfer of interest. It is
understood the minimum work program and budget for the moratorium
period and SP 5 are unaffected by the transfer of interest, as
shown below:
Sub-Phase (SP) Work Program and Budget
Moratorium Period Conduct a Qualitative Interpretation (QI) study
(Date of approval of of the greater Hawkeye area, lithology and petrophysical
transfer until 13 months modelling and contingent program of AVO studies
thereafter) = USD596,500 (USD793,800 with contingency)
---------------------------- ----------------------------------------------------------
SP 5 Drill one (1) Ultra-deepwater well = USD3,000,000
(date of end of moratorium
period until 12 months
thereafter)
---------------------------- ----------------------------------------------------------
The moratorium period will end in May 2019.
Nominated "Operator", Palawan 55 Exploration and Production
Corporation, chaired an Operating Committee meeting to discuss the
proposed amendments to the Joint Operating Agreement, and, having
recently completed their evaluation of prospective geophysical
contractors, proposed a Work Program and Budget for the remainder
of the moratorium period. Each participant was asked to identify
their representative to the Operating Committee. A formal vote on
the proposed resolutions is expected in the coming weeks. Proposed
expenditure under the Work Program and Budget will be determined as
part of this process.
Director, Management and Advisor Options
The Board has resolved to issue the following options to the key
personnel associated with the Company. The options will be
exercisable at 4 cents per share on or before 31 December 2020. The
options issued to the CEO and corporate advisor will be issued
immediately, whilst the proposed grants to the Managing Director
and the non-executive directors will be subject to shareholder
approval which will be sought at the upcoming Annual General
Meeting.
-- Mr Greg Bandy (Managing Director) - 6 million options
-- Mr Gracjan Lambert (CEO) - 6 million options
-- Mr Jason Bontempo (Non-executive Director) - 2 million options
-- Mr Aaron Bertolatti (Non-executive Director) - 2 million options
-- Max Capital Pty Ltd or nominee (Corporate advisor) for
introduction, facilitation, corporate advisory and investor
relations services for the Alaskan acquisition - 10 million
options.
Notifications set out below, made in accordance with the
requirements of the EU Market Abuse Regulation, provide further
detail in relation to the issue of options to Mr Gracjan Lambert
and Max Capital Pty Ltd (Tony King).
Capital Structure
The Company has 425,292,776 fully paid ordinary shares on issue.
Upon grant of the options to the CEO and corporate advisor as set
out above, it will have 16,000,000 options exercisable at 4 cents
each on or before 31 December 2020.
Business Strategy
Red Emperor's strategic focus continues to be oil and gas
exploration. The Company's participation in the Western Blocks
exploration program will be its main project in the immediate
future. The Company continues its involvement in SC 55.
ASX
The Company confirms that it is in compliance with all ASX
Listing Rules including Listing Rule 3.1.
Following release of this announcement, the Company's securities
has been reinstated to official quotation on ASX on Monday 30 July
2018.
(1) Oil Search Limited announcement 1 November, 2017
For further information please visit
http://www.redemperorresources.com/ or contact:
Red Emperor Resources:
Greg Bandy +61 8 9212 0102
Grant Thornton UK LLP (Nominated Adviser):
Philip Secrett, Jen Clarke 020 7383 5100
The information contained within this announcement is deemed to
constitute inside information as stipulated under the Market Abuse
Regulations (EU) No. 596/2014. Upon the publication of this
announcement, this inside information is now considered to be in
the public domain.
About Red Emperor Resources NL
Red Emperor Resources NL is an Australian natural resource
exploration company listed on both the Australian Securities
Exchange (ASX: RMP) and Alternative Investment Market (AIM: RMP).
Red Emperor has oil and gas interests on the Alaska North Slope and
in South East Asia.
Red Emperor has executed Definitive Agreements with its
consortium partners 88 Energy Limited and Otto Energy Limited that
will see the Company participate in the drilling of a highly
prospective Nanushuk oil trend exploration well on the Alaska North
Slope in early 2019. The drill target is immediately adjacent to
and a direct analogue of the Horseshoe-1/1A oil well drilled.
Horseshoe is part of the billion-barrel plus Nanushuk oil
play-fairway, one of the largest conventional oil fields discovered
in the US in more than 30 years.
Technical work on the Western Blocks has identified a gross best
estimate prospective resource volume of 400 MMbbls (126 MMbbls net
to RMP), and a geological chance of success of 25%-35%. The
estimated quantities of petroleum that may potentially be recovered
by the application of future development projects relate to
undiscovered accumulations. These estimates have both an associated
risk of discovery and a risk of development. Further appraisal and
evaluation is required to determine the existence of a significant
quantity of potentially moveable hydrocarbons.
SC55 is located in the southwest Palawan Basin, covers an area
of 9,880km(2) and was awarded to Otto Energy Investments Ltd
(formerly NorAsian Energy Ltd) in 2005. It is a deep-water block in
the middle of a proven regional oil and gas fairway that extends
from the productive offshore Borneo region in the southwest to the
offshore Philippine production assets northwest of Palawan.
Red Emperor participated in a USD $25m exploration well
(Hawkeye-1) within the block in 2015 and contributed in excess of
AUD $5m towards drilling costs. Over USD $50m has been spent
exploring SC55 to date and a number of drill-ready targets remain,
including the "Cinco" gas prospect which has a best estimate
prospective resource of 1.6tcf recoverable gas.
Red Emperor's Tenements
Tenement Location Area Structure
Philippines
SC55 Palawan Basin, Philippines 9,880 km(2) 37.5%
============= ============================ ============ ==========
KM(2) - Kilometres squared
Changes: The Company acquired an additional 22.5% interest in SC55 in April 2018.
Prospective Resources Reporting Notes
The Company announced the prospective resources estimate for the
Western Blocks in its announcement "Red Emperor to acquire interest
in large oil prospect in prolific Alaska North Slope" on 25 June
2018. The Company confirms that it is not aware of any new
information or data that materially affects the information
included in that announcement, and that all material assumptions
and technical parameters underpinning the estimates in that
announcement continue to apply and have not materially changed.
(2) The prospective resources information in this document is
effective as at 30 April 2018. (ii) The prospective resources
information in this document has been estimated and is classified
in accordance with SPE PRMS (Society of Petroleum Engineers
Petroleum Resources Management System). (iii) The prospective
resources information in this document is reported according to the
Company's economic interest in each of the resources and net of
royalties. (iv) The prospective resources information in this
document has been estimated and prepared using the deterministic
method. (v) The prospective resources information in this document
has been estimated using a 6:1 BOE conversion ratio for gas to oil;
6:1 conversion ratio is based on an energy equivalency conversion
method and does not represent value equivalency. (vi) The
prospective resources information in this document has been
estimated on the basis that products are sold on the spot market
with delivery at the sales point on the production facilities (vii)
Prospective resources are reported on a best estimate basis. (viii)
For prospective resources, the estimated quantities of petroleum
that may potentially be recovered by the application of a future
development project(s) relate 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 moveable hydrocarbons. (ix) In respect to the
prospective resources referred to in this statement, Red Emperor's
working interest in the four leases (ADL#s 391718, 391719, 319720
and 391721), totalling 22,711 acres all of which are located on the
North Slope, Alaska, USA will be 31.5% (as set out in the table on
page 2) upon completion of the transaction detailed in this ASX
release. (x) The prospective resources have been estimated on the
following basis: the best estimate prospective recoverable resource
calculation was based on a consideration of offset well information
and seismic expression; a combination of volumetric assessment and
field analogues have been used to estimate the prospective
resources; exploration drilling will be required to assess these
resources. (xi) The chance of discovery is considered moderate as
the prospective resources are near developed and undeveloped
reserves and in a proven oil and gas producing province. There is a
risk that exploration will not result in sufficient volumes of oil
and/or gas for a commercial development. (xii) Prospective
resources are un-risked and have not been adjusted for an
associated chance of discovery and a chance of development.
1 Details of the person discharging managerial responsibility
/ person closely associated
a) Name GRACJAN LAMBERT
----------------------------------------------- --------------------------------
2 Reason for the notification
---------------------------------------------------------------------------------
a) Position/status CEO
----------------------------------------------- --------------------------------
b) Initial notification/amendment INITIAL NOTIFICATION
----------------------------------------------- --------------------------------
3 Details of the issuer, emission allowance market participant,
auction platform, auctioneer or auction monitor
---------------------------------------------------------------------------------
a) Name RED EMPEROR RESOURCES NL
----------------------------------------------- --------------------------------
b) LEI 213800WZ1MNQPOAKNU50
------------------------------------------------ --------------------------------
4 Details of the transaction(s): section to be repeated
for (i) each type of instrument; (ii) each type of
transaction; (iii) each date; and (iv) each place
where transactions have been conducted
---------------------------------------------------------------------------------
a) Description UNLISTED OPTIONS
of the financial
instrument,
type of instrument
----------------------------------------------- ---------------------------------
Identification
code
----------------------------------------------- ---------------------------------
b) Nature of transaction GRANT OF OPTIONS
----------------------------------------------- ---------------------------------
c) Price(s) and Price(s) Volume(s)
volume(s)
----------------------------------------------- -------------- -----------------
$0.04 AUD 6,000,000
-------------- -----------------
d) Aggregated information
----------------------------------------------------------------------------------
Aggregated volume N/A
----------------------------------------------- --------------------------------------
Price
----------------------------------------------- --------------------------------------
e) Date of transaction 30/07/2018
----------------------------------------------- ---------------------------------
f) Place of transaction AUSTRALIA
----------------------------------------------- ---------------------------------
1 Details of the person discharging managerial responsibility
/ person closely associated
a) Name TONY KING
----------------------------------------------- ---------------------------------
2 Reason for the notification
----------------------------------------------------------------------------------
a) Position/status CORPORATE ADVISOR
----------------------------------------------- ---------------------------------
b) Initial notification/amendment INITIAL NOTIFICATION
----------------------------------------------- ---------------------------------
3 Details of the issuer, emission allowance market participant,
auction platform, auctioneer or auction monitor
----------------------------------------------------------------------------------
a) Name RED EMPEROR RESOURCES NL
----------------------------------------------- ---------------------------------
b) LEI 213800WZ1MNQPOAKNU50
------------------------------------------------ --------------------------------
4 Details of the transaction(s): section to be repeated
for (i) each type of instrument; (ii) each type of
transaction; (iii) each date; and (iv) each place
where transactions have been conducted
----------------------------------------------------------------------------------
a) Description UNLISTED OPTIONS
of the financial
instrument,
type of instrument
---------------------------------------------- ----------------------------------
Identification
code
---------------------------------------------- ----------------------------------
b) Nature of transaction GRANT OF OPTIONS
---------------------------------------------- ----------------------------------
c) Price(s) and Price(s) Volume(s)
volume(s)
---------------------------------------------- --------------- -----------------
$0.04 AUD 8,000,000
--------------- -----------------
d) Aggregated information
----------------------------------------------------------------------------------
Aggregated volume N/A
---------------------------------------------- ---------------------------------------
Price
--------------------------------------------------------------- ----------------------
e) Date of transaction 30/07/2018
---------------------------------------------- ----------------------------------
f) Place of transaction AUSTRALIA
---------------------------------------------- ----------------------------------
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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