As funding woes derail drilling timeline, oil & gas firm asks for more time to spud offshore prospect

AIM-listed oil and gas exploration company Empyrean Energy is seeking an extension to meet its requirements in Block 29/11 located in the prolific Pearl River Mouth Basin, offshore China, approximately 200 km southeast of Hong Kong. A high-impact prospect was supposed to be drilled at the block in June 2024, but funding challenges prevented the firm from doing so.

Following the Jade well drilling program, Empyrean Energy disclosed its intention to embark on the second phase of exploration drilling in Block 29/11 offshore China with plans to drill the Topaz high-impact prospect. While the company holds a 100% stake in Block 29/11 during the exploration phase, its partner, CNOOC, may assume a 51% participating interest in the development and production phase, if a commercial discovery is made.

To move forward with the second exploration phase on Block 29/11, the AIM-listed firm committed to spud the Topaz project by June 12, 2024. As the drilling did not begin within the set timeframe, the firm failed to meet the requirements to continue the cooperation on Block 29/11 with CNOOC.

Tom Kelly, Empyrean CEO, commented: “Empyrean continues to enjoy a very professional and cooperative working relationship with CNOOC on Block 29/11. We will do everything within our control to continue this working relationship.

“Empyrean acknowledges that negotiating GSA’s involving governments and government bodies are often protracted in their negotiation timelines and these delays have impacted Empyrean’s ability to fund its objectives in China in a timely fashion.”

According to Empyrean, LAB Energy Advisors were engaged to broaden the reach for possible risk-sharing alternatives and farm-out opportunities for the Topaz prospect. However, no farm-out deal has been reached to date, despite what the firm describes as a “strong” interest in the technical merit of the Topaz prospect.

As a result, the company has asked CNOOC for an extension on Block 29/11 and is awaiting the Chinese energy giant’s response. Meanwhile, Empyrean plans to maximize the value of its 8.5% interest in the Mako gas field discovery located in Indonesia’s Duyung permit.

Conrad Asia Energy’s West Natuna Exploration (operator of Duyung PSC with a 76.5% participating interest) is said to be engaged in coordinating the sale-down process through Jefferies International Bank. The other partners in the asset are Coro Energy (15%) and Empyrean, which sees a binding gas sales agreement (GSA) as a likely requirement or precursor to the completion of any sell-down transaction.

To this end, heads of agreement (HOA) deals have been reached for domestic gas into Indonesia, subject to transportation pipelines being built, and gas sales for most of Mako gas into Singapore. Empyrean expects both of these HOAs to be converted to binding GSAs soon. The first gas from the field is currently scheduled for 2025.

“In any case, we will continue to work towards maximising the substantial value from our Mako discovery in Indonesia in order to move forward with our plans to create value for shareholders. By making the submission for an extension in China, we plan to have options in addition to the existing projects in the Sacramento Basin,” highlighted Kelly.

“We are also being proactive in identifying additional low risk/high impact opportunities that will complement our portfolio as we monetise Mako.”