TIDMEME
RNS Number : 9655X
Empyrean Energy PLC
24 December 2019
This announcement contains inside information
Empyrean Energy PLC / Index: AIM / Epic: EME / Sector: Oil &
Gas
24 December 2019
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 2019.
Highlights
-- Block 29/11, Pearl River Mouth Basin, China (EME 100%)
o Comprehensive analysis of 3D seismic confirms the presence of
well-defined "gas clouds" over Jade and Topaz prospects, further
mitigating exploration risk; and
o The presence of gas clouds has been used to discover a number
of significant oil accumulations globally.
-- Duyung PSC Project, Indonesia (EME 10%)
o Successful Mako gas field appraisal drilling programme
completed;
o Appraisal well (Tambak-2) logs confirm excellent quality
reservoir at a 13.5km step out from Mako South-1;
o Tambak-1 encountered very well-developed upper sandstone unit,
17 feet thick, together with a lower sandstone unit 66 feet thick,
providing an overall gross thickness of approximately 83 feet of
intra-Muda sandstone;
o Wireline logs confirming the excellent permeabilities and
porosities within the intra-Muda reservoir;
o Results of successful appraisal of Tambak-1 and Tambak-2
expected to provide significant uplift in overall tank size and
potential recoverable resources at the Mako gas field; and
o Independent re-assessment of resources commissioned, which is
expected to be completed during Q1 2020.
-- Sacramento Basin, California (EME 25-30%)
o Technical evaluation for future drilling program nears
completion
-- Corporate
o Placement at 10p per share raised GBP365,580 (US$450,406)
before costs in September 2019.
For further information please visit www.empyreanenergy.com or
contact the following:
Empyrean Energy plc
Tom Kelly Tel: +618 9380 9920
Cenkos Securities plc (NOMAD)
Neil McDonald nmcdonald@cenkos.com Tel: +44 (0) 131 220
9771
Peter Lynch plynch@cenkos.com Tel: +44 (0) 131 220
9778
St Brides Partners Ltd (Public Relations Adviser)
Priit Piip priit@stbridespartners.co.uk Tel: +44 (0) 20 7236
1177
Cosima Akerman cosima@stbridespartners.co.uk Tel: +44 (0) 20 7236
1177
Chairman's Statement
Empyrean continued to make progress on its portfolio of
exploration projects, primarily in China and Indonesia, during the
six months to 30 September 2019.
The Company has continued activity at its China project during
the period, in preparation for the drilling of an initial
exploration well under the PSC terms. To date the Company has
completed a substantial volume of work on the project, increasing
and independently validating its resource base and decreasing
exploration risk through rigorous seismic data analysis and an oil
migration study completed earlier in the year. During the reporting
period comprehensive analysis of the excellent quality 3D seismic
data acquired by Empyrean has confirmed the presence of
well-defined low reflectivity zones ('gas clouds'), adding further
confidence to the technical merits of the project. Gaffney and
Cline has estimated close to a 1 in 3 chance of geological success
at Jade and Topaz, which is particularly exciting. The Company now
looks forward to finalising preparations to drill the first of the
large scale, relatively low risk targets on Block 29/11.
Post-period end, the operator in Indonesia, Conrad Petroleum,
has conducted a successful appraisal of the Mako gas discovery
(comprising the Tambak-1 and Tambak-2 wells), confirming the
presence of a large, areally extensive single gas accumulation. The
results of the successful appraisal drilling in both Tambak-1 and
Tambak-2 should see a significant increase in the gross resources
in the Mako gas field to be included in the independent assessment
of resources, currently envisaged for completion during Q1
2020.
In California, the ongoing technical evaluation is now near
completion to determine the future drilling program for 2020.
In September, the Company completed a placement of its shares at
10p, raising approximately GBP365,000 to meet contributions to the
first phase of the successful drilling campaign in Indonesia and
for its general working capital requirements. The Company requires
to put in place additional funding in order to finance its share of
costs for the second phase of drilling in Indonesia and to fund its
ongoing activities across the portfolio. I am therefore pleased
that the Company has today announced the signing of a new two-year,
GBP10 million equity placement facility with Long State Investments
to provide Empyrean with long-term access to capital and the
ability to draw on the facility at its sole discretion, if
required. We are also currently assessing several other financing
and strategic alternatives to provide the Company with additional
short-term working capital, having received indications of interest
from a number of potential investors and with the earlier
restrictions on the resale of the Coro shares received by Empyrean
as consideration for the sale of part of its interest in Indonesia
now lifted. Further announcements will be made in due course.
The Company continues to assess other acquisition opportunities
in parallel with the current activities and will also evaluate any
attractive divestment opportunities in due course.
Patrick Cross
Non-Executive Chairman
24 December 2019
Operational Review
China Block 29/11 Project (100% WI)
Summary
Block 29/11 is located in the prolific Pearl River Mouth Basin,
offshore China, approximately 200km Southeast of Hong Kong.
Empyrean is the 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 and Cline, 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 and Cline
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, Gaffney and Cline estimated close to a 1 in 3
chance of geological success at Jade and Topaz, which is
particularly pleasing. 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. During
the reporting period, in May 2019 as detailed further below, 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.
Having completed the Geophysical Service Agreement phase (GSA)
successfully, Empyrean signed the PSC for Block 29/11 with CNOOC in
September 2018. The contract came into effect on 13 December 2018
with the first phase commitment being the drilling of one
exploration well within a 2.5 year period.
Presence of Gas Clouds on 3D seismic data further mitigates
exploration risk at Jade and Topaz prospects
In May 2019 the Company announced that comprehensive analysis of
the excellent quality 3D seismic data acquired by Empyrean during
2017 had confirmed the presence of well-defined low reflectivity
zones ('gas clouds') in the overburden strata above the Jade and
Topaz structures on offshore China Block 29/11. On good quality 3D
seismic, the presence of gas clouds has been used as an effective
exploration tool in prolific basins worldwide including the North
Sea, Gulf of Mexico, and the Malaysian Sabah basin, resulting in
the discovery of significant amounts of oil. CNOOC gave
authorisation to Empyrean to independently analyse their 3D seismic
data immediately west of Block 29/11 over 4 large oil discoveries
located close to Block 29/11. This analysis confirmed the presence
of gas clouds in the overburden on all 4 discoveries. At the same
time, three dry wells drilled by CNOOC in proximity to the
discoveries, outside Block 29/11, have been analysed, and the 3D
seismic data over these wells confirms the lack of any gas clouds.
Similar technical work was carried out over two dry wells in Block
29/11. These wells were drilled prior to Empyrean's involvement and
without any 3D seismic data. Both wells confirm the lack of any gas
clouds in overburden. As a result, it is Empyrean's interpretation
that the presence of well-defined gas clouds in the overburden on
both the Jade and Topaz structures mitigates the exploration risk
on these prospects significantly. The Pearl prospect does not have
100% coverage with 3D seismic to enable the same comprehensive
analysis and assessment at this point in time.
Duyung PSC Project, Indonesia (EME 10%)
Summary
In April 2017, Empyrean acquired from Conrad Petroleum Pte Ltd
(Conrad) a 10% shareholding in West Natuna Exploration Ltd (WNEL),
which holds a 100% Participating Interest in the Duyung Production
Sharing Contract (Duyung PSC) in offshore Indonesia and is the
operator of the Duyung PSC. Subject to final government approvals,
this shareholding will be reduced to 8.5% following the agreement
for Coro Energy plc ("Coro") to acquire a 15% interest in the
Duyung PSC from WNEL, completed on a pro rata basis from the
existing owners, as announced in February 2019.The gross cost of
the drilling programme is expected to be approximately $17MM-19MM
to the PSC partners on a fully tested basis, including rig
mobilisation and de-mobilisation, for which Coro is funding
US$10.5MM. Empyrean is funding 8.5% of the additional drilling
campaign costs over and above the Coro funding.
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 that has an independently
verified 2C and 3C gas resource of between 430-650 Bcf recoverable
gas, that was completed before drilling the Mako South-1 well.
Mako Gas Field - Contingent Resources certified by Gaffney and
Cline
Category 1C 2C 3C
Gas Recoverable (Bcf) 184 276 392
------- ---- ---- ----
The Mako South-1 well exceeded the Company's expectations
encountering excellent reservoir quality rock with high
permeability sands in the multi Darcy range with 23 feet of gas
bearing reservoir. This zone flowed gas at a stabilised rate of
10.9 million cubic feet per day through a 2 inch choke. The gas is
of high-quality being close to 100% methane.
Duyung PSC Drilling Programme - October/November 2019
During October and November 2019, the operator conducted a
successful appraisal drilling campaign in the Duyung PSC,
comprising two wells. Both wells appraised the intra-Muda sands of
the Mako gas field with one of those wells also designed to test
the deeper Tambak prospect in the Lower Gabus interval.
Tambak-2
The Tambak-2 well successfully reached a total depth of 1,650
feet on 15 October 2019, the top of the targeted intra-Muda
reservoir depth came in as prognosed approximately 10 feet up-dip
to Conrad's Mako South-1 gas discovery well over 13.5 km away.
A full logging suite was acquired, including formation pressure
measurements, confirming a 33 feet gross gas pay zone (30 feet net)
with formation permeabilities calculated to be over 1 Darcy across
the best quality zone. The pressures and gas-water contact depth in
Tambak-2 are the same as those encountered in Mako South-1,
confirming a very large "single-tank" or areal extent of the Mako
gas field.
While preparing for a Drill Stem Test (DST) across the
intra-Muda reservoir, an inflatable open hole bridge plug (packer),
used to isolate the gas-bearing reservoir for testing, failed.
During operations to recover the packer, the well started flowing
natural gas to surface. For safety reasons, the well was
immediately shut in. Subsequently, utilising the appropriate well
control practices, the well was killed using heavy mud containing
barite. A significant quantity of the heavy mud was lost in the
highly permeable intra-Muda reservoir.
Following this operation, the well was conditioned, and the DST
equipment set in place into the wellbore. Two separate DST attempts
failed to flow gas to the surface due to the heavy formation damage
from the kill mud.
Tambak-1
The Tambak-1 well, located approximately 4.5 km north of the
Mako South-1 well, was designed to both appraise the Mako gas field
and test the underlying Tambak exploration prospect.
Following a DST, which flowed dry gas at 11.4 MMscf/d on a
181/64 inch (2.8 inch) choke with well head tubing pressure being
maintained at 225psi, operations concluded in late November 2019,
resulting in the highly successful appraisal of the Mako gas field.
The Tambak-1 well encountered 82 feet of total intra-Muda reservoir
sandstones with 56 feet of better quality upper sandstone,
confirmed a common gas-water contact across the field and
culminated in the DST demonstrating the potential deliverability of
the Mako reservoir.
The well was deepened beneath the Mako field to a depth of 5,062
feet true vertical depth sub-sea (TVDSS) to test the Tambak
exploration prospect. The well encountered multiple sandstone
intervals in the Lower Gabus section as predicted, with
corresponding hydrocarbon shows seen while drilling. However,
petrophysical interpretation of wireline log data has concluded
that these sandstones have low gas saturations and attempts to
collect fluid samples and pressure data demonstrate low
permeabilities.
Tambak-1 was plugged and abandoned, as originally planned, prior
to the Asian Endeavour 1 rig being demobilised. While there is
still more comprehensive well data to be retrieved from down hole
tools and gauges, the drilling campaign was completed within the
expected time frame and within budget. All of the data is being
analysed and updated into static and dynamic models for the
field.
Conclusion
In summary, the appraisal of the intra-Muda sandstones of the
Mako gas field has been better than expected with better quality
sands and a thicker reservoir encountered and the flow test now
from two wells has confirmed the deliverability of Mako gas. The
deeper Tambak prospect has failed to provide a commercial discovery
but this disappointment has largely been offset by the excellent
appraisal results at Mako which we believe will deliver a
significant uplift in overall tank size.
As per the table above, an independent review by Gaffney Cline
& Associates previously ascribed gross 2C resources of 276 Bcf
(48.78 MMboe) of recoverable dry gas in the Mako field with gross
3C resources of 392 Bcf (69.3 MMboe) representing additional field
upside. The valuable information collected from this campaign will
be used to revisit the resource estimates for the field.
The Duyung PSC partners will be commissioning an independent
assessment of resources, which we currently expect to be completed
during Q1 2020.
Sacramento Basin, California (EME 25-30%)
Summary
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 first exploration well, Dempsey 1-15, was drilled to a TD of
9,747 feet in September 2017. Comprehensive data was collected
including wireline logs in the Dempsey 1-15 well. The analysis
confirmed numerous potentially gas-bearing zones. A comprehensive
production testing programme was conducted to assess the production
capability of these zones through Q4 2017 and Q1 2018 with three
zones in the well tested.
In July 2018, Dempsey 1-15 commenced production of sales gas
into pipeline at an approximate rate of 1,300 mcf per day from
combined zones in Kione Sandstone and deeper cretaceous zones.
However, the flow rate was not sustainable longer term due to a
relatively tight and poor-quality reservoir and subsequent water
ingress into the well resulted in the well-being shut in for
technical evaluation to determine the zone from which the water was
entering and to provide for forward program alternatives. A
workover is required to reduce water flow (interpreted to be from
separate wet reservoirs) in the wellbore. A detailed and
comprehensive analysis of subsurface data is to be undertaken with
the aim of finding a better-quality reservoir along the "Dempsey
trend".
Technical Evaluation
The joint venture continues to integrate the subsurface data
with regional geology and seismic data to evaluate additional more
attractive targets in thicker reservoir units for future
drilling.
The Dempsey Trend AMI, in which Empyrean has the right to earn a
30% interest, extends to approximately 250,000 acres (including the
Dempsey structure) and includes at least three large Dempsey style
identified follow up prospects, including the Anzus and Borba
prospects which have shown promising initial interpretation
results.
The joint venture continues evaluation work at the Alvares-1
well (regulatory approval was obtained to test the Alvares-1 well
in September 2018). The initial plan at Alvares was designed to
re-enter and assess the integrity of the wellbore as the basis for
a decision to either record modern logs through casing or to
identify the more prospective zones for perforation.
During the reporting period the drilling application for the
Borba Prospect was approved by the County and post the reporting
period the final approval from California Department of Geological
and Geothermal Resources was received.
Riverbend Project (10%) and Eagle Oil Pool Development Project
(58.084% WI)
Little or no work has been completed on these projects in the
period and no budget has been prepared for 2019/20 whilst the
Company focuses on other projects.
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).
* 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.
Gajendra Bisht M.Sc. (Tech) in Applied Geology
Executive Director (Technical)
24 December 2019
Statement of Comprehensive Income
For the Period Ended 30 September 2019
6 months 6 months Year ended
to 30 September to 30 September 31 March
2019 (unaudited) 2018 (unaudited) 2019 (audited)
Notes US$'000 US$'000 US$'000
Revenue - - -
------------------ ------------------ ----------------
Cost of sales
Operating costs - - -
Impairment of oil and gas
properties (47) (51) (47)
Total cost of sales (47) (51) (47)
Gross loss (47) (51) (47)
Administrative expenditure
Administrative expenses (153) (218) (375)
Directors' remuneration (186) (175) (212)
Compliance fees (87) (42) (386)
Foreign exchange differences (18) (34) (49)
Total administrative expenditure (444) (469) (1,022)
Operating loss (491) (520) (1,069)
Finance income 5 1,349 1,145 1,114
Fair value revaluation 4 30 - 98
------------------ ------------------ ----------------
Profit from continuing operations
before taxation 888 625 143
Tax benefit in current year - 5 2
------------------ ------------------ ----------------
Profit from continuing operations
after taxation 888 630 145
------------------ ------------------ ----------------
Total comprehensive profit
for the year 888 630 145
================== ================== ================
Earnings per share from continuing
operations (expressed in cents)
- Basic 2 0.21c 0.15c 0.03c
- Diluted 0.21c 0.15c 0.03c
Statement of Financial Position
As at 30 September 2019
6 months 6 months Year ended
to 30 September to 30 September 31 March
2019 (unaudited) 2018 (unaudited) 2019 (audited)
Notes US$'000 US$'000 US$'000
Assets
Non-current assets
Oil and gas properties: exploration
and evaluation 3 9,351 8,590 9,075
Investments 4 3,266 2,866 3,200
------------------ ------------------ ----------------
Total non-current assets 12,617 11,456 12,275
Current assets
Trade and other receivables 45 188 37
Cash and cash equivalents 472 230 332
------------------ ------------------ ----------------
Total current assets 516 418 369
Liabilities
Current liabilities
Trade and other payables 468 451 374
Provisions 54 54 54
Derivative financial liabilities 5 - 1,318 1,349
Total current liabilities 522 1,823 1,777
Net current liabilities (6) (1,405) (1,408)
Net assets 12,611 10,051 10,867
================== ================== ================
Shareholders' equity
Share capital 6 1,278 1,205 1,232
Share premium 27,304 25,280 26,524
Share based payment reserve 99 39 69
Retained losses (16,070) (16,473) (16,958)
------------------ ------------------ ----------------
Total equity 12,611 10,051 10,867
================== ================== ================
Statement of Cash Flows
For the Period Ended 30 September 2019
6 months 6 months Year ended
to 30 September to 30 September 31 March
2019 (unaudited) 2018 (unaudited) 2019 (audited)
Notes US$'000 US$'000 US$'000
Cash generated from operating
activities - continuing operations (430) (624) (971)
Receipt of corporation tax - 1,325 1,322
------------------ ------------------ ----------------
Net cash (outflow)/inflow
from operating activities (430) 701 351
Purchase of oil and gas properties:
exploration and evaluation
- continuing operations (323) (531) (1,424)
Acquisition of investments (36) (294) (530)
Prepayments received - disposal
of investments 120 - 175
Receipt of exploration bonds
and bank guarantees - - 150
Net cash outflow for investing
activities (239) (825) (1,629)
Issue of ordinary share capital 826 - 1,314
Payment of equity issue costs - - (43)
Net cash inflow from financing
activities 826 - 1,271
Net increase/(decrease) in
cash and cash equivalents 157 (124) (7)
Cash and cash equivalents
at the start of the year 332 388 388
Forex on cash held (17) (34) (49)
------------------ ------------------ ----------------
Cash and cash equivalents
at the end of the period 472 230 332
================== ================== ================
Statement of Changes in Equity
For the Period Ended 30 September 2019
Share Share Share Retained Total
capital premium based losses equity
reserve payment
reserve
US$'000 US$'000 US$'000 US$'000 US$'000
Balance at 1 April
2018 1,205 25,280 10 (17,103) 9,392
========= ========= ========= ========= ========
Profit after tax
for the period - - - 630 630
--------- --------- --------- --------- --------
Total comprehensive
profit for the period - - - 630 630
Contributions by
and distributions
to owners
Share based payment
expense - - 29 - 29
--------- --------- --------- --------- --------
Contributions by
and distributions
to owners - - 29 - 29
--------- --------- --------- --------- --------
Balance at 30 September
2018 1,205 25,280 39 (16,473) 10,051
========= ========= ========= ========= ========
Balance at 1 April
2018 1,205 25,280 10 (17,103) 9,392
Profit after tax
for the year - - - 145 145
Total comprehensive
profit for the year - - - 145 145
Contributions by
and distributions
to owners
Shares issued in
the period 27 1,287 - - 1,314
Equity issue costs - (43) - - (43)
Share based payment
expense - - 59 - 59
--------- --------- --------- --------- --------
Contributions by
and distributions
to owners 27 1,244 59 - 1,330
--------- --------- --------- --------- --------
Balance at 31 March
2019 1,232 26,524 69 (16,958) 10,867
========= ========= ========= ========= ========
Profit after tax
for the period - - - 888 888
--------- --------- --------- --------- --------
Total comprehensive
income for the period - - - 888 888
Contributions by
and distributions
to owners
Shares issued in
the period 46 780 - - 826
Share based payment
expense - - 30 - 30
--------- --------- --------- --------- --------
Contributions by
and distributions
to owners 46 780 30 - 856
--------- --------- --------- --------- --------
Balance at 30 September
2019 1,278 27,304 99 (16,070) 12,611
========= ========= ========= ========= ========
The accompanying accounting policies and notes form an integral
part of these financial statements.
Statement of Accounting Policies
For the Period Ended 30 September 2019
Basis of preparation
The Company's condensed interim financial statements for the six
months ended 30 September 2019 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 2019,
except for adoption of the following new standards:
(i) IFRS 16: Leases - effective for annual periods beginning on
or after 1 January 2019. The adoption of IFRS 16 has no impact on
the 30 September 2019 interim financial statements as no material
leases were held by the Company in this period or the comparative
period.
The financial information for the period ended 30 September 2019
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 2019
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.
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$0.47m at 30 September 2019
(US$0.33m: 31 March 2019), net current liabilities of US$0.01m at
30 September 2019 (net current liabilities of US$1.41m: 31 March
2019) and net operating cash outflows of US$0.43m at 30 September
2019 (US$0.35m inflows: 31 March 2019).
The Directors have prepared cash flow forecasts for the Company
covering the period to 30 November 2020 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 equity or debt
funding. In addition, the Company raised GBP0.37m (US$0.45m) in
September 2019 through a placement at 10p per share
The Directors have therefore concluded that it is appropriate to
prepare the Company's interim financial statements on a going
concern basis. However, in the absence of additional funding being
in place at the date of this report, these conditions indicate the
existence of a material uncertainty which may cast significant
doubt over the Company's ability to continue as a going concern
and, therefore, that it may be unable to realise its assets and
discharge its liabilities in the normal course of business. The
interim financial statements do not include the adjustments that
would result if the Company was unable to continue as a going
concern.
Notes to the Financial Statements
For the Year Ended 30 September 2019
1. Segmental analysis
The Directors consider the Company to have three geographical
segments, being China (Block 29/11 project), Indonesia (Duyung
PSC project) and North America (Sacramento Basin project),
which are all currently in the exploration and evaluation
phase. Corporate costs relate to the administration and financing
costs of the Company and are not directly attributable to
the individual projects. The Company's registered office is
located in the United Kingdom.
Details China Indonesia USA Corporate Total
US$'000 US$'000 US$'000 US$'000 US$'000
30 September 2019
Revenue from continued
operations - - - - -
Cost of sales of continued
operations - - (47) - (47)
Segment result - - (47) - (47)
Unallocated corporate expenses - - - (444) (444)
-------- ---------- -------- ---------- --------
Operating loss - - (47) (444) (491)
Finance income - - - 1,349 1,349
Fair value revaluation - 30 - - 30
-------- ---------- -------- ---------- --------
Profit/(loss) before taxation - 30 (47) 905 888
Tax benefit in current
year - - - - -
-------- ---------- -------- ---------- --------
Profit/(loss) after taxation - 30 (47) 905 888
-------- ---------- -------- ---------- --------
Total comprehensive profit/(loss) - 30 (47) 905 888
======== ========== ======== ========== ========
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$'000
30 September 2018
Revenue from continued
operations - - - - -
Cost of sales of continued
operations - - (51) - (51)
Segment result - - (51) - (51)
Unallocated corporate expenses - - - (469) (469)
-------- ---------- -------- ---------- --------
Operating loss - - (51) (469) (520)
Finance income/(expense) - - - 1,145 1,145
-------- ---------- -------- ---------- --------
Profit/(loss) before taxation - - (51) 676 625
Tax benefit in current
year - - - 5 5
-------- ---------- -------- ---------- --------
Profit/(loss) after taxation - - (51) 681 630
-------- ---------- -------- ---------- --------
Total comprehensive profit/(loss) - - (51) 681 630
======== ========== ======== ========== ========
Segment assets 4,769 3,017 3,821 - 11,607
Unallocated corporate assets - - - 267 267
-------- ---------- -------- ---------- --------
Total assets 4,769 3,017 3,821 267 11,874
======== ========== ======== ========== ========
Segment liabilities - - 290 - 290
Unallocated corporate liabilities - - - 1,533 1,533
-------- ---------- -------- ---------- --------
Total liabilities - - 290 1,533 1,823
======== ========== ======== ========== ========
Details China Indonesia USA Corporate Total
US$'000 US$'000 US$'000 US$'000 US$'000
31 March 2019
Revenue from continued
operations - - - - -
Cost of sales of continued
operations - - (47) - (47)
Segment result - - (47) - (47)
Unallocated corporate expenses - - - (1,022) (1,022)
-------- ---------- -------- ---------- --------
Operating loss - - (47) (1,022) (1,069)
Finance income/(expense) - - - 1,114 1,114
Fair value revaluation - 98 - - 98
-------- ---------- -------- ---------- --------
Profit/(loss) before taxation - 98 (47) 92 143
Tax benefit in current
year - - - 2 2
-------- ---------- -------- ---------- --------
Profit/(loss) after taxation - 98 (47) 94 145
-------- ---------- -------- ---------- --------
Total comprehensive profit/(loss)
for the financial year - 98 (47) 94 145
======== ========== ======== ========== ========
Segment assets 5,222 3,200 3,853 - 12,275
Unallocated corporate assets - - - 369 369
-------- ---------- -------- ---------- --------
Total assets 5,222 3,200 3,853 369 12,644
======== ========== ======== ========== ========
Segment liabilities - 175 - - 175
Unallocated corporate liabilities - - - 1,602 1,602
-------- ---------- -------- ---------- --------
Total liabilities - 175 - 1,602 1,777
======== ========== ======== ========== ========
6 months 6 months Year ended
to 30 September to 30 September 31 March
2019 (unaudited) 2018 (unaudited) 2019
(audited)
2. Earnings per share
The basic earnings per share is derived by dividing the profit/(loss)
after taxation for the year attributable to ordinary shareholders
by the weighted average number of shares on issue being 431,260,240
(2018: 413,995,110). For the current financial period, exercise
of options on issue is anti-dilutive and as such the diluted
earnings per share is the same as the basic loss per share.
Details of potentially issuable shares that could dilute earnings
per share in future periods are set out in Note 6.
Earnings per share from continuing
operations
Profit after taxation from
continuing operations US$888,000 US$630,000 US$145,000
Earnings per share - basic 0.21c 0.15c 0.03c
Profit after taxation from
continuing operations adjusted US$888,000 US$630,000 US$145,000
for dilutive effects
Earnings per share - diluted 0.21c 0.15c 0.03c
6 months 6 months Year ended
to 30 September to 30 September 31 March
2019 (unaudited) 2018 (unaudited) 2019
(audited)
3. Oil and gas properties: exploration
and evaluation
Balance brought forward 9,075 7,820 7,820
Additions(a) 323 821 1,302
Impairment (47) (51) (47)
Net book value 9,351 8,590 9,075
================== ==================== =============
(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.
The initial contractual term is for two years with a work programme
commitment of acquisition, processing and interpretation of 580km2
of 3D seismic data. In May 2017 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 Alvarez (EME 25%)
and also further identified follow up prospects along the Dempsey
trend (EME 30%).
4. Investments 6 months 6 months Year ended
to 30 September to 30 September 31 March
2019 (unaudited) 2018 (unaudited) 2019
(audited)
Balance brought forward 3,200 2,572 2,572
Additions(a)(b) 36 294 530
Fair value revaluation(c) 30 - 98
Net book value 3,266 2,866 3,200
================== ================== ===========
(a) The Company acquired a 10% working interest in the Duyung
PSC, Indonesia during the 2018 financial year. For further
information, please refer to the Operational Review. In April 2019
the Company also acquired shares in AIM listed Coro valued at
US$185,000 as part of the purchase agreement detailed in Note 4(b)
below.
(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 (currently
recorded as Prepayments Received in Trade and Other Payables until
transaction is completed) 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% once the
transaction is completed (currently only subject to government and
regulatory approval).
(c) The Company's interest in the Duyung PSC is classified under
IFRS 9 as a financial asset at fair value through profit or loss,
due to the 10% shareholding and lack of significant influence over
operations. Financial assets designated as fair value through
profit or loss are measured at fair value through profit or loss at
the point of initial recognition and subsequently revalued at each
reporting date. The purchase agreement detailed in Note 4(b) above
has formed the basis for the fair value assessment at 30 September
2019 and 31 March 2019.
6 months 6 months Year ended
to 30 September to 30 September 31 March
2019 (unaudited) 2018 (unaudited) 2019
(audited)
5. Derivative financial liabilities
Opening balance 1,349 2,463 2,463
Fair value movement (1,349) (1,145) (1,114)
Net book value - 1,318 1,349
=================== ================ ===============
Derivative financial liabilities represented the fair value of
15,000,000 options granted to Macquarie Bank and linked to the
extension of a now repaid loan facility held with Macquarie Bank.
As announced on 13 March 2017, the options were owned by Apnea
Holdings Pty Ltd, a company which is wholly owned by Tom Kelly, CEO
of Empyrean. Apnea Holdings Pty Ltd exercised the options on 9 July
2019, thereby extinguishing the derivative financial liability.
The options were granted on 27 July 2015 and are referred to as
the Tranche 4 options. At the date of grant these were considered
to fall outside of the scope of IFRS 2 and unlike Tranches 1-3 were
not accounted for as a share-based payment. The Macquarie Bank loan
facility was repaid in 2016 but the options did not expire at that
point.
During a prior financial year, the Company modified the exercise
price of the options. This was deemed to be a substantial
modification under IAS 32 and IAS 39. The value of the derivative
financial liability was extinguished at that point and the fair
value of the modified options recognised at the date that they were
granted. As a financial liability at fair value through the profit
or loss these were revalued at period end. The fair value was
measured using a Black-Scholes Model with the following inputs:
Fair value of share options and assumptions
30 September 2019 30 September 2018 31 March 2019
Grant date - 27 July 2015 27 July 2015
Expiry date - 26 July 2019 26 July 2019
Share price - GBP0.0875 GBP0.09
Exercise price - GBP0.02 GBP0.02
Volatility - 82% 77%
Option life - 0.83 0.33
Expected dividends - - -
Risk-free interest rate (based on national government bonds) - 0.81% 0.76%
Expected volatility was determined by calculating the historical
volatility of the Company's share price over the expected remaining
life of the options.
6. Called up share capital 6 months 6 months Year ended
to 30 September to 30 September 31 March
2019 (unaudited) 2018 (unaudited) 2019
(audited)
Issued and fully paid
442,930,910 (2018: 413,995,110) US$1,278 US$1,205 US$1,232
ordinary shares of 0.2p each
Opening balance (number: 424,275,110) 1,232 1,205 1,205
Placement (number: 3,655,800) 9 - -
Exercise of options (number: 37 - -
15,000,000)
Placement (number: 10,580,000) - - 27
Closing balance (number: 442,930,910) 1,278 1,205 1,232
==================== ==================== ===============
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.
Share options and warrants
The following equity instruments have been issued by the Company
and have not been exercised at 30 September 2019:
Option Class Employee Options Employee Options(a)
Grant Date 20 January 2018 17 September 2019
----------------------------- ----------------------------------
Options awarded 2,500,000 2,500,000
----------------------------- ----------------------------------
Exercise price (GBP) GBP0.17 GBP0.125
----------------------------- ----------------------------------
Expiry date 20 January 2021 30 September 2022
----------------------------- ----------------------------------
(a) On 17 September 2019, 2,500,000 unlisted options were issued to the Company Secretary,
Jonathan Whyte. The options have an exercise price of GBP0.125, expire on 30 September 2022
and have a vesting date of 17 September 2020. The options are being expensed over the life
of the options.
7. Events after the reporting date
During October and November 2019, the operator conducted a successful appraisal drilling campaign
in the Duyung PSC, comprising two wells. Both wells appraised the intra-Muda sands of the
Mako gas field with one of those wells also designed to test the deeper Tambak prospect in
the Lower Gabus interval. For further information, please refer to the Operational Review.
There were no other significant events post reporting date.
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
IR VZLBLKLFEFBZ
(END) Dow Jones Newswires
December 24, 2019 04:03 ET (09:03 GMT)
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