"The calculated recoverable gas in place is 414 bcf with an internal rate of return (IRR) of 51% and a net present value (NPV) - factoring in a discount of 10% - of $220 million. That is using a conservative gas price , spending $137 million for a full field development, an effective field life of 20 years and a payout in 4 years.
"We've used a 15% decline rate for the field and we've used a plateau rate for the field of 70 per million standard cubic feet per day (mmscf/day)." He said these parameters of this economic model are conservative and well within industry standards.
Marshall estimates the operating costs being around 7 cents per mmscf/day.
The recent share issue undertaken by Empire means there are now 230 million shares on offer.
"On the success of Eclipse alone - without factoring in any success at the Eclipse West (266bcf) and Yeal (186bcf) Prospects which lie along the Turtle Dove Transfer trend - the NPV would equate to 40 cents per share. On a cash flow basis that would equate to around $1.40 per share."
Marshall said realistically one could expect the share price to finish up somewhere between the NPV and the cash flow basis. Currently Empire are farming down their equity from 59% to a less risky 40%.
After the Eclipse well, Empire plan to move further south in the Perth Basin, to drill the Leschenault prospect, just to the north of the port and industrial town of Bunbury. Also nearby is the Kemerton Industrial Estate, the site of a proposed aluminium smelter.
"It is a different reservoir target - the Lesueur Sandstone. Structurally it is also a four way dip closure. If one can drill four way dip closed structures, especially in the Perth Basin, it means you are ahead of the game in minimising risk on structural style.
"It is large -13 km of areal extent with 80m of vertical relief. Porosities of the Lesueur Sandstone can be seen from other wells and is very healthy at 28% and the permeabilities are around 250 millidarcies. It could certainly flow liquids without too many problems.
"It is a shallow well at 850m and the well costs would be around $750,000 - maybe less. The potential gas in place ranges from 100-180bcf which is a substantial objective. There is potential also for oil in place - as seen in the nearby Rutile-1 well and is in the range of 109-200 million barrels of oil (mmbo).
"We intend farming down to 1/3 for ¼, meaning we would be introducing new partners who would pay 33% of the costs to achieve 25% equity. We could use the cheap rig we used on the Exmouth program and be looking to drill later in 2002.
Empire Oil ... at a glance
9 O'Beirne St, Claremont WA 6010
Ph: (08) 9385 3810 Fax: (08) 9385 3821
Email: empire@empireoil.com.au Website: www.empireoil.com.au
Directors: Craig Marshall, Mark Hagan, Neil Joyce, David Williams
Market Capitalisation: $6.8m
