a short little interview with eme by an recently started internet investment magazine..
thanks saf for posting it.. i have edited to fit...
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 Empyrean’s 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 Empyrean’s projects and their prospects. In our conversation I learned just how key Empyrean’s 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 company’s 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 company’s 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
Empyrean’s 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 (what’s 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. Empyrean’s actual interest ranges from 7.5% to 18% - see the RNS here from May 2007 for more details of Empyrean’s 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 world’s best-kept secret.
Although Empyrean’s 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 broker’s 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 Empyrean’s 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 (what’s 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
2. Eagle Project, California .
3. Margarita, Texas -
Aimzine will provide updates on Empyrean over the coming months."
http://www.aimzine.co.uk/aimzine/1008/1008_b3/1008_b3.htm