Empyrean Energy

Web site : http://www.empyreanenergy.com

Sugarloaf Prospect, ('Sugarloaf'), Block B, Texas USA

Empyrean Energy Plc, the oil and gas explorer and producer with assets in Germany and the USA provides the following update on operations on Block B which is part of the Sugarkane Gas and Condensate Field:

Kowalik #1H Well

Empyrean has been advised by the operator, Texas Crude Energy Inc ('TCEI'), that at 06:00hrs on the 23/09/08 (US CST) the well had reached a measured depth of 14,385 ft, which equates to approximately 2,500 ft of the planned 6,000 ft of horizontal section within the Austin Chalk.

The well has continued to produce gas whilst drilling, which has led to sustained flaring activity. In addition, when routine operations such as connections reduce the down hole pressure, larger flares have been observed on surface, indicating a response to drawdown. Elevated gas readings of approximately 1500 units have been consistently measured during the drilling of this portion of the horizontal section.

Whilst encouraging the commercial significance of these gas shows and flares will not be known until the well has been flow tested.

The horizontal section is targeting the upper pay interval that has been reported as successfully producing gas and condensate in Block A (TCEI JV Block A-1 and A-3 wells).

Empyrean has an 18% working interest in this well.

cyril

A more througher report by an aussie jv

UPDATE ON OPERATIONS AT KOWALIK-1H
Adelphi Exploration Limited (Adelphi) is pleased to provide the market with an update on
operations at the Kowalik -1H well within the Sugarloaf AMI.
Kowalik-1H
Adelphi has been advised by the operator, Texas Crude Energy Inc (TCEI), that at 6am
Texas time on the 23 September, 2008 the well had reached a measured depth of 14,385
feet, which equates to approximately 2,500 feet of the planned 6,000 feet of horizontal
section within the Austin Chalk.
The well has continued to produce gas whilst drilling, which has led to sustained flaring
activity. In addition, when routine operations such as connections reduce the downhole
pressure, larger flares have been observed on surface, indicating a response to
drawdown**. Elevated gas readings of approximately 1,500 units have been consistently
measured during the drilling of this portion of the horizontal section.
Whilst encouraging the commercial significance of these gas shows and flares will not be
known until the well has been flow tested.
The horizontal section is targeting the upper pay interval that has been reported as
successfully producing gas and condensate in three wells in the adjacent acreage.
** in essence, this means that when operations such as the addition of drillpipe require the
circulation to be stopped, this temporarily reduces the pressure downhole and causes
additional gas to influx into the well bore which ultimately produces the larger flares at
surface.
The Joint Venture is working towards this being the first in a continuous sequence of 4
wells and preparations are presently underway for the next well location.

cyril

Can't see anything other than a normal situation re the increased gas on connections.

Just updating the board on latest progress reports.

Al, if your interested COP have a vacancy for someone to oversee the whole project, 3 year term.
cyril

Just passed a rig over to CoP. How strange is that? ;-)

Seriously, I cannot see the point of releasing that kind of info other than to rmap things up a bit. It happens day in, day out, cyril, and even more so when they're drilling in what appears to be an underbalanced situation.

Al; much of the news released is via the ASX which requires weekly updates on
progress, so is out of the hands of EME.
cyril

Cheers cyril. Wish they'd find something useful to report, though. ;-)

Al; here's one,

Cote D Or Exploration Geologist - 005WE

Description

Company Overview

ConocoPhillips is an international, integrated energy company with operations in nearly 40 countries. As the third-largest integrated energy company in the United States and fifth-largest refiner in the world, ConocoPhillips' goal is to deliver energy in a safe, environmentally and socially responsible manner. Approximately 32,600 ConocoPhillips employees work worldwide to consistently deliver top performance and value to maintain the company's global market position. Employees' individual talents and strengths combine to create a diverse and energized workforce within ConocoPhillips. Headquartered in Houston, Texas, the company had $178 billion of assets as of December 31, 2007.


Description

General Responsibilites:


Responsible for participating and leading our company's exploration efforts within the Lower 48 Region's Cote d'Or carbonate-dominated resource play. This play is one of ConocoPhillips' largest global exploration projects, with planned 2008 investment in excess of $100 MM. The Cote d'Or Exploration Geologist (or Reservoir Engineer, depending on posting) with spend the majority of time creatively assisting the exploration drilling campaign, employing multi-discipline and state of the art technologies, to test the commerciality of the quarter million acres of land we have already acquired to date, and also direct where additional leasing and opportunities should occur. The successful candidate will hard-line report to the Cote d'Or Exploration Manager and the Manager of the Cote d'Or Project.
cyril

Cote d'Or is the name given to S/Loaf/S/Kane project. As far as news releases are concerned, the weekly updates from our aussie jv's are for Block B only, with EME issuing news from Block A wells, as no aussie involvement.
cyril

Cote d'Or is the name given to S/Loaf/Kane projects. As far as news releases are concerned, the weekly updates from our aussie jv's are for Block B only, with EME issuing news from Block A wells, as no aussie involvement.
cyril

would rather have the top growth burgundies than a slab of shares in EME

CoP's recent Q3/08 presentation stated that 40%of their buget is in N/America.

Copied from another board with regards to,

40% of total exploration spend catches the eye....how big the play....how hard to fully understand it

--------------------------------
The above is North America in totol which includes Canada & Alaska. COPs capital expenditures & operating budget for 2008 in the lower 48 states is $5.5 billion so $100m for 2008 is small beer by comparison. However as COP has stated that This play ( Cote Dor ) is one of ConocoPhillips' largest global exploration projects it indicates that they have already earmarked considerably increased funds in their 2009 budget & beyond. 75% of COPs global drilling & exploration activity is in the Lower 48 mainly as a result of the purchase of Burlington in 2006.
Food for thought?
While still we wait for positive flow rates, which are the key to success. A picture is unfolding which imo derisks the project, but only time will tell?
cyril

cyril

From Aimzine. Written by Michael Crockett. Includes an interview with Tom.

"Empyrean Energy

If you are looking for an exciting investment you need look no further than the Oil & Gas exploration companies listed on AIM. However, with nearly 100 of these companies listed, there are quite a few to choose from.We have selected Empyrean Energy for our analysis this month. We believe that the company is particularly worthy of further investigation for a number of reasons - not least of which is the company's Sugarloaf project.


If you are looking for an exciting investment you need look no further than the Oil & Gas exploration companies listed on AIM. However, with nearly 100 of these companies listed, there are quite a few to choose from.

We have selected Empyrean Energy for our analysis this month. We believe that the company is particularly worthy of further investigation for a number of reasons:-
The company is having significant drilling success at their Sugarloaf project
There will be a steady flow of news to interest investors for months and years to come
All of Empyreans four major projects are in politically stable countries (3 in the USA and 1 in Germany)
...and all four are onshore
I spoke to Tom Kelly, Director and Co-Founder of Empyrean, by telephone - Tom was in Perth, Western Australia. We discussed Empyreans projects and their prospects. In our conversation I learned just how key Empyreans Sugarloaf project could be for the company and its shareholders. Unlike some projects Sugarloaf is not a short term thing. Forecasts are indicating the potential for over 40 years of production here. Before I expand on the Sugarloaf project I will firstly say a little about the companys brief history.

Change of Focus
Empyrean (meaning: The highest heaven, where the pure element of fire was supposed by the ancients to subsist) was first listed on AIM just over 3 years ago. At that time the company raised 2.1 million in a placing at 35p per share. These funds were raised to progress the companys German gas project located near Frankfurt. As can be seen from the graph below, the shares have had a number of upward spikes. They even reached 1.60 within their first year of trading but today the shares are not far from the price of the initial placing


Unfortunately, the first Glantal-1 well at the German prospect did not encounter commercial quantities of gas and subsequently the project has been put on the back burner perhaps an apt place for a gas prospect to be! Nonetheless, Empyrean still believe that this project has a lot of potential.

Empyreans focus has subsequently switched to the USA and it is one of the three US projects, namely Sugarloaf, where the current excitement around Empyrean lies. Sugarloaf is an oil and gas project in the Gulf Coast Basin of Texas.

Sugarloaf
The company refer to Sugarloaf as a multi Trillion cubic feet gas prospect and that is an awful lot of gas. To date, all 7 of the wells that have been drilled have encountered gas in varying quantities. Most of the wells have been fracture stimulated (whats that? see here) with varying results. As yet, very little gas is being produced, but some of the wells are likely to be significant producers. Sugarloaf has the advantage of a nearby gas pipeline infrastructure so it will be easy to sell the gas once the wells are producing.

Empyrean has a working interest in a 16 well program that commenced in 2007. Empyreans actual interest ranges from 7.5% to 18% - see the RNS here from May 2007 for more details of Empyreans interest in this area. This RNS is also useful in understanding the split of Sugarloaf into 2 Blocks (A & B) with differing operators. One of the operators is a major international oil and gas company whose name is undisclosed for confidentiality purposes and to preserve and protect competitive advantage the company is named on numerous different bulletin boards worldwide and as such is not the worlds best-kept secret.
Although Empyreans interest is small in percentage terms, the potential rewards are considerable for a small company (market cap 20m at 34p) . It is almost exactly 2 years ago since the company reported the encouraging gas shows from a 92 feet gas pay in the first Sugarloaf well. To see a current status of the 7 wells drilled to date we would recommend the ADVFN Long Term Investors Thread bulletin board see here (if you are not already registered for advfn, click the link anyway and then select cancel you will then be able to register for advfn for free).
The vertical wells drilled at Sugarloaf have encountered 3 potential pay zones referred to as the upper, middle and lower zones. To date, results from the upper zone have been by far the most encouraging. However, the company is hopeful that the lower zones will eventually prove to be commercial.
In a brokers note dated 23 May 2008, Hoodless Brennan placed an estimated value on Sugarloaf at 74p per share. They say that the figure is based on conservative estimates and is in line with Empyreans internal Net Present Value estimate. At this stage, estimates are extremely early stage. Not only do we not know how much oil and gas is down there, the volatility of the dollar as well as oil and gas prices make long term forecasting even less reliable than usual. Tom Kelly indicated that their new brokers, Blue Oar, are currently working on a new detailed research note.

Prospects at Sugarloaf
The immediate interest at Sugarloaf is the on-going drilling of the Kowalik 1 Horizontal Well. This well is drilling horizontally through a 6000 foot of the upper pay zone. The company reported on September 24 that the well had drilled 'approximately 2,500 ft of the planned 6,000 ft of horizontal section within the Austin Chalk. The company also reported sustained gas flaring during drilling. However the company cautioned that: whilst encouraging, the commercial significance of these gas shows and flares will not be known until the well has been flow tested. To read the 24 September RNS statement click here. We shall be looking out for the flow test results in a few weeks time. This well is particularly important for Empyrean as they have an 18% interest in the well.

I asked Tom Kelly when we would see production begin in earnest at Sugarloaf. Tom was unable to give an exact timetable as there are too many variables, but he indicated that the operator is working as quickly as possible to get the first two Block A wells into production. Tom explained that Empyrean are fortunate that wells at Sugarloaf have produced a good deal of gas condensate (whats that? read about condensate on Wikipedia). The advantage of condensate is that it will be financially rewarding with its price being close to that of oil. Also, condensate is easy to store and transport by truck. Permanent production facilities for gas/condensate separation are currently being built.

As yet the middle and lower pay zones have not been proved to be commercial. However, Tom believes that there is tremendous potential for the middle and lower pay zones to produce at commercially attractive flow rates and he suspects that it will not be long before further work will be undertaken in this regard.

Other Projects
Sugarloaf has been taking centre stage over recent months, but Empyrean's three remaining projects have all got potential:-

1. Glantal, Germany The first well in 2006 did not find commercial quantities of gas. Empyrean, who have a 52% interest, reported in February 2008 that they are working with the operator to finalise plans for a seismic program to assist in the definition of further drill targets. The timing here will depend on the availability of a seismic team. The company still believe that there could be a very large opportunity gas field here.
2. Eagle Project, California A well was drilled here in 2005/6 and oil was encountered, but due to technical difficulties the well was abandoned. In a February 2008 RNS the company reported:

The operator, ASX Listed, Victoria Petroleum Ltd ('VicPet') has been attempting to farm down their interest in this project and attract a new locally based (USA) operator in to operate.

We are aware that the project was showcased in Houston during the last fortnight at a major US oil conference and that there has been significant interest in the project.

Empyrean currently maintains their 38.5% interest in this project and keenly awaits news of any negotiations with the operator such that a new well can be drilled on this project as early as possible.

Given there has been little activity here for a while you could be forgiven for thinking that the prospects cannot be too exciting. However, Hoodless Brennan in their May note attribute a value of 67p per share to this project.
3. Margarita, Texas - Six shallow wells were drilled here in 2007. Three of these found commercial quantities of oil and gas and are now providing useful cash flow for Empyrean. The quantities here are not that significant and Hoodless Brennan put a value of 5.9p per share on Margarita.

Finances
In June 2008 Empyrean raised just over 4 million in a placing at 50p per share. This was said to be for funding development at Sugarloaf. With the high cost of drilling and fracture stimulation work at Sugarloaf these funds could be spent fairly quickly and Empyrean will be keen to see some significant production revenue soon.

It is interesting to note that a new Broker and Nomad in Blue Oar were appointed in August 2008. Also, a new Non-Executive Finance Director was appointed in the same month.

Investment case
Investment in small Oil & Gas exploration companies can be extremely risky. The rewards can be huge but so can the potential for losses. Having said that, where an exploration company can successfully transform itself from an explorer to a producer there can be considerable potential for share price improvement.

The risks of investing in exploration companies have increased recently because of the credit crunch and the difficulty in raising capital. This factor and the fall in oil prices in recent weeks have caused considerable weakness in the share prices of junior oil & gas exploration companies. For example, despite drilling successes, Empyreans share price has fallen by nearly 50% from its 2008 high at the end of May this year.

You could argue that the spot price of oil today should have little impact on the average price that Empyrean will receive for its Gas and Oil over many years of production. However, the share price and sentiment around companies such as Empyrean are greatly influenced by the oil price. If you believe that oil and gas prices have significantly further to fall in the short to medium term then you may be best to avoid this sector completely for a while.

Empyrean are certainly involved in a very significant project with Sugarloaf and it could be huge. Exactly how big it will be is uncertain and the delay in finalising development of some of the more successful exploration wells does not help investors in their understanding of the potential here. A new detailed research note is expected shortly from Blue Oar and it is hoped that this will help investors to gain a better understanding of the potential value in Sugarloaf.

A cautious investor may wish to see positive cash flow and more evidence of the potential of Sugarloaf before considering investment here. However, waiting for this could mean paying a much higher price for shares. Empyrean is an actively traded share and the share price can be volatile when drilling news is expected and released. In the weak market conditions recently, the share price has tended to fall back once the excitement of drilling news has faded.

Aimzine will provide updates on Empyrean over the coming months."

http://www.aimzine.co.uk/aimzine/1008/1008_b3/1008_b3.htm
cyril

Kowalik-1H

Adelphi has been advised by the operator, Texas Crude Energy Inc (TCEI), that at 6am Texas time on the 30 September, 2008 the well had reached a measured depth of 15,239 feet, which equates to approximately 3,500 feet of horizontal section within the Austin Chalk. The current operation is pulling out of hole to assess the drilling assembly.

Since the last report the well has continued to produce gas intermittently while drilling, with larger flares observed following periods of shut in when tripping to change components of the drilling assembly. The surface gas readings have averaged 2,000 units during this section. More significant gas flares including a 50 foot flare were observed while drilling the horizontal section prior to pulling out of hole.
A more comprehensive account of the project can be found on
ASX/AUT

cyril

Confirmation by EME,

Kowalik #1H Well

Empyrean has been advised by the operator, Texas Crude Energy Inc ('TCEI'), that at 06:00hrs on the 30/09/08 (US CST) the well had been drilled to a measured depth of 15,239 ft, which equates to approximately 3,500 ft of horizontal section within the Austin Chalk. The operator is currently tripping out of hole to assess the drilling assembly.

Since the last report the well has produced gas intermittently when drilling, with larger flares observed following periods of shut in when tripping to change components of the drilling assembly. The surface gas readings have averaged 1,500 units during this section. More significant gas flares including a 45-55 ft flare have been observed while drilling prior to pulling out of the hole.

Whilst encouraging the commercial significance of these gas shows and flares will not be known until the well has been flow tested.

The horizontal section is targeting the upper pay interval that has been reported as successfully producing gas and condensate in Block A (TCEI JV Block A-1 and A-3 wells).

Empyrean has a working interest of 18% in this well.
cyril

That RNS seemed rather guarded - anyone else get that impression?

Yes my thoughts,a more conservative note perhaps? Al's thoughts on the gas flares would be appreicated.They achieved just under 900 ft in the last week so a possible 3 more weeks if they decide to continue after some checks which i would expect them to carry out once the drill has been removed? Also noticed theirs a difference in gas readings 2000 or 1500 average from the two reports?
cyril

.

despite all the positive noises that certain members continue to make about this (flakey) E&P outfit, the market fails to find the company remotely inspiring ..... the market sometimes gets it wrong, but in this instance, i think not

TCEI JV Block A-5 Well

Empyrean has been advised by Texas Crude Energy Inc ('TCEI') that the TCEI JV Block A-5 well commenced drilling on the 29 September 2008.

The well is designed as a vertical well that will target all three potential pay zones (Upper, Middle & Lower) identified on the Sugarkane Gas and Condensate Field. The 'Upper' zone has two wells that Empyrean has previously reported as successfully flowing commercial quantities of gas and condensate on test (Block A-1 & A-3 wells).

Empyrean has a working interest of 7.5% in this well.

cyril