Quarterly Activities Report
Sydney, July 30, 2024 AEST (ABN Newswire) - After Quarter-end, Empire Energy Group Limited (
ASX:EEG) (EEGUF:OTCMKTS) announced it had signed a binding long-term Gas Sales Agreement ("GSA") to supply the Northern Territory Government ("Buyer"):
- up to 25 Terajoules (TJ) of gas per day for 10 years (~75 Petajoules total, 100% Empire) from Empire's Beetaloo Basin properties commencing in 2025 ("Initial Supply"); and
- an additional 10 TJ+ per day for up to 10 years at the option of the Buyer to be made available by Empire if production levels from the Carpentaria project exceed 100 TJ per day ("Option Supply").
Gas will be delivered to the Power and Water Corporation ("PWC") operated McArthur River Pipeline ("MRP") on an ex-field take-or-pay basis at market competitive gas prices, escalating at 100% of the Consumer Price Index. The Option Supply would be at a slightly lower price than the Initial Supply, providing the potential for long-term affordable energy supply for the people of the Northern Territory if larger scale development occurs.
The binding GSA is conditional on customary conditions for an agreement of this nature including Empire reaching a final investment decision for the Carpentaria Pilot Project and receipt of Northern Territory regulatory approvals for the installation of the Carpentaria Pilot Gas Plant and sale of gas under the Beneficial Use of Test Gas provisions of the NT Petroleum Act. These regulatory approval processes are already well advanced.
In announcing the GSA, the Northern Territory Government stated that "Developing the Beetaloo Basin and boosting our on-shore gas industry will create thousands of work opportunities for Territorians and boost the economy by $17 billion."
The Chief Minister of the Northern Territory, Hon. Eva Lawler MLA said:
"This gas deal with Empire is another example of my team backing the industries that get the Territory working. These gas agreements will contribute to a broad gas portfolio that diversifies and secures supply while also supporting the development of the Beetaloo."
"My common sense plan will make sure the Northern Territory continues to have secure and more affordable power for years to come."
The Northern Territory Minister for Mining, Hon. Mark Monaghan MLA said:
"The Lawler Labor Government is backing industry and our energy supply well into the future." "Investors are starting to make more and more moves within the Beetaloo - which supports local businesses and working opportunities."
Carpentaria Pilot Project Update
Empire is advancing its plans for the drilling, stimulation and ultimate tie-in to production of the Carpentaria-5H ("C-5H") well with the expected spud date during Q4 2024. The well is a planned horizontal development well with a three-kilometre long stimulated section targeting the Velkerri B Shale. This is the same shale target as the previous Carpentaria-2H ("C-2H") and Carpentaria-3H ("C3H") wells. C-5H will be drilled from the existing C-2H/3H well pad. Learnings from C-2H and C-3H will be incorporated into C-5H focusing on productivity enhancement. These include completion with a larger 51/2" casing (previous wells used 41/2") and utilisation of greater stimulation horsepower to maximise pumping rates. A focused stimulation strategy utilising a single optimised fluid system as opposed to multiple types is expected to be employed. Choke and soak strategies will focus on well productivity.
Long lead items such as casing and wellhead have been ordered and the procurement of rig, stimulation and other third party services is advancing.
Regulatory approvals specific to the Carpentaria Pilot Project ("Pilot") are progressing, coupled with the benefit of the continuation of prior regulatory approvals from past campaigns. Empire already has regulatory approvals in place for the drilling, stimulation, completion and flow testing of C-5H.
In May, PWC installed a connection to the McArthur River Pipeline at the proposed Pilot site.
Other Corporate News
Appointment of Chief Operating Officer
After Quarter-end, Empire announced the appointment of Mr. Chris White as its Chief Operating Officer. Chris has joined Empire from Origin Energy Limited (ASX:ORG) where he served in a number of positions including General Manager Upstream Growth, General Manager Exploration and New Ventures, Group Manager Field Development Optimisation, Production Optimisation Manager and Petroleum Engineering Team Leader. Chris' skills and experience are valuable to accelerate the Company's transition from explorer to producer as it moves at pace to a final investment decision for the Carpentaria Pilot Project.
Chris has a Bachelor of Engineering (Petroleum) degree from the University of New South Wales.
Capital Raise
On 6 June 2024, Empire completed a $46.8 million capital raise cornerstoned by Bryan Sheffield and Liberty Energy Inc (NYSE:LBRT). The capital raise comprised two parts:
- Strongly supported two-tranche placement to existing and new institutional and sophisticated investors to raise $39.0 million (before costs). Bryan Sheffield and Liberty Energy Inc ("Liberty Energy") demonstrated their support for Empire with each investing ~$7.7 million in the placement; and
- Daly Waters, a subsidiary of Formentera Partners (a US based private equity firm founded by Bryan Sheffield) and Liberty Energy each independently acquired a 2.25% royalty interest in EP187 for US$2.5 million (~$3.9 million) raising an additional US$5 million.
Sale of US Assets
On 12 April 2024, Empire completed the sale of its Empire Energy E&P LLC ("Empire E&P") subsidiary to PPP Future Development Inc for up to US$9.1 million. Empire E&P was the operating entity for all of Empire's US oil & gas assets. PPP is a privately owned, existing producer of oil & gas in New York State.
The total sale proceeds, payable in cash, are comprised of:
- Upfront Cash Payment: US$5.9 million;
- Contingent Deferred Payments: Up to US$2.3 million, depending on future gas prices; and
- Deferred Solar Payments: US$0.9 million.
Empire has also retained a 3.75% carried working interest in all formations below the base of theMedina Sandstone formations which includes prospective shale gas formations. Empire has not produced oil & gas from these formations to date.
Following completion of the sale, upfront proceeds of US$5.9 million were received by Empire and the US Macquarie Bank loan of ~US$4.6 million was repaid in full.
US Deferred Solar Payment Received
As part of the transaction consideration for the US sale, Empire retained Deferred Solar payments to be received under its Mutual Use Agreement ("MUA") with Connect Gen, a developer and operator of renewable energy projects across the United States for the use of surface rights over 2,056 acres of land which Empire holds oil & gas leases in Chautauqua County, New York State (the South Ripley Solar Project).
On 14 June 2024, Empire received US$200,000 in cash under the MUA.
Empire expects to receive a further US$700,000 under the MUA comprising:
- US$200,000 by 13 September 2024; and
- US$500,000 on the earlier of commencement of commerical operations or 1 June 2026.
Comments from Managing Director Alex Underwood:
"The Empire team had an outstanding Quarter, focused on bringing our Beetaloo Basin assets into production commencing in mid-2025.
Empire sold its US assets during the Quarter, becoming a Beetaloo / McArthur Basin focused pure play.
The sale allowed the company to pay off all of its US debt and, following a successful capital raise, we are now in the strongest financial position we have ever been, with $51.6 million cash at Quarter end.
The execution of a major gas sales agreement with the NT Government last week provides us with a high-quality customer for all pilot production gas while supporting the long-term energy security of the NT.
With a gas sales agreement now in place, Empire's financing options for the pilot project have been enhanced.
During the Quarter, the Australian Government released its Future Gas Strategy, which underscores the critical role of gas in Australia's energy system to 2050 and beyond. With the Australian Energy Market Operator continuing to warn of immediate and enduring gas supply shortage threats, the development of the Beetaloo is, in my opinion, becoming increasingly critical to the energy security of Australia in the years and decades ahead. The Empire team remains committed to playing its role in achieving this objective."
*To view the full quarterly report, please visit:
https://abnnewswire.net/lnk/34ILFCV0
About Empire Energy Group Ltd
Empire Energy (ASX:EEG) (OTCMKTS:EEGUF) is a Sydney based Australian oil and gas company holding 100%-owned and operated assets with unconventional targets in the Northern Territory Beetaloo Sub-basin and central trough of the McArthur Basin.
Empire is an active Beetaloo Sub-basin operator, focused on maturing its assets to production. Following the successful appraisal drilling and flow testing of the Carpentaria-2H and 3H wells in Empire's EP187, Empire is targeting first gas flow in H1 2025 at its Carpentaria Pilot Project. The Pilot has a targeted sales gas rate of up to 25 TJ per day utilising the existing McArthur River Pipeline.
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