Empire Energy Group's exploration grants, rescinded by the Federal Court of Australia in late 2021, have been reinstated by the Australian Government and will provide almost $20 million in funding to Beetaloo Basin exploration.
The funding equates to having a partner pay 25 per cent of the costs, without Empire having to give up any equity from its 100 per cent owned swathe of Beetaloo Basin acreage.
The Federal Court delivered an untimely Christmas message to Empire on December 24 when it declared void $21m in exploration funding for its planned drilling and fracking program, saying the funds should not have been granted whilst a related court challenge by green groups was still being played out.
The Environment Centre NT and the Environmental Defenders Office filed legal action in July 2021 against the Federal Minister for Resources and Water, Keith Pitt, alleging he did not consider the potential risk to climate change or Australia's obligations under the Paris Agreement in his bid to expedite gas exploration in the Beetaloo Basin.
The funds covered by the court’s decision were yet to be disbursed and therefore Empire was not obliged to repay any cash.
Putting the legal stoush in the rear-view mirror, Empire’s wholly owned subsidiary, Imperial Oil & Gas, has executed three new grant agreements with the Australian Federal Government under the Beetaloo Cooperative Drilling Program on materially similar terms to the previous agreements.
The $19.4m package will cover 25 per cent of the cost of seismic acquisition in addition to the drilling, fracture stimulation and flow testing of three horizontal appraisal wells in its tenement in the Northern Territory.
The grants are in three tranches covering activities relating to the existing Carpentaria-2H operations and for two follow-up Carpentaria wells.
Some of the activities including the Charlotte 2D seismic survey and the drilling of Carpentaria-2H are eligible for back costs.
Empire noted there were some activities excluded from the grant budgets relating to Carpentaria-2H however the total grant amount of $6.5m still covers almost half of the $11m drilling costs incurred to date.
The funding allows Empire to maintain its 100 per cent equity position whilst offsetting some of the financial risks that often drive operators into joint venture structures.
The company is currently waiting for ground conditions to dry out following the NT wet season so it can carry out the fracking and flow testing of the C2H well.
A commercial result from C2H could be quickly commercialised with the McArthur Rover gas pipeline running through Empire’s acreage. It has already inked distribution deals with infrastructure player APA and with the NT Government’s Power and Water Authority.
To get to this point, Empire drilled the initial, vertical Carpentaria 1 discovery well, intersecting and testing four significant sections of the targeted Velkerri Formation, or “Fm”.
The company then stepped northward several kilometres and drilled the vertical section of C2H. Once verifying the Velkerri was present as anticipated, Empire kicked out and drilled the 1,345m horizontal section in the Velkerri B shale Fm.
That success allowed the company to book a maiden contingent resource and significantly lifted all other estimates for its Beetaloo Basin assets.
Independent consultant Netherland, Sewell and Associates conservatively calculated a 1C low estimate, the most conservative grading, giving resources of 81 billion cubic feet of gas, or “bcf” for the tenement.
The standout headline number was the upgraded, mid-range 2C best estimate figure of 396bcf, up 866 per cent from the previously modest 41bcf.
Oilfield contingent reserves figures usually range between three parameters: 1C being the most conservative estimate; 2C being a mid-range, ‘probable’ figure and 3C being the ‘blue sky’ high case estimate.
Like many operations in the central and east coast of Australia at present, Empire is waiting for the ground to dry out so it can get back to work. The company has shareholder money in the bank, government funding on the way and 1,300 metres of a horizontally cased well to frack and flow test. It will be an interesting half year for Empire as it seeks to commercialise its vast 43 trillion cubic feet of prospective Beetaloo Basin gas.
Is your ASX-listed company doing something interesting? Contact: matt.birney@businessnews.com.au
By Matt Birney
