Empyrean Energy Share Discussion Threads

[stewart4990] 12/5/2021 08:44

Judi,I understand but Malcy has a large following

[judijudi] 12/5/2021 08:42

stew,
Malcy 🤷‍a94;️😩
Please not just a re hash of that to the same people
That won’t do any good whatsoever
We need a lot lot more and a lot better quality of PR than that old stomping ground

[currypasty] 12/5/2021 08:41

update on Duyung would be nice

[lazarus2010] 12/5/2021 08:37

bengal112 May '21 - 08:27 - 37834 of 37837
0 2 0
Damage already done by the earlier Note. Rubbish PR.
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that's almost exactly what I said this morning to somebody and was accused of being negative!

Now we need Tom to start singing from the rooftops, he has the songsheet now!! Get on the blower to Big Malc and also Proactive and any other bloody company roadshow host!

[blueblood] 12/5/2021 08:29

Malcy likes quoting others work....

[oilforex] 12/5/2021 08:29

The problem is who will see this? Visitors to this board? The company is not exactly known for being a PR machine. I'm sure most of Cenkos existing clients already know the story or are simply not interested. Nevertheless great to see the revision for those in the know. :)

[pb01] 12/5/2021 08:27

Market not latched on to this yet as information was not via RNS. It now needs some PR from TK.

[bengal1] 12/5/2021 08:27

Damage already done by the earlier Note. Rubbish PR.

[blueblood] 12/5/2021 08:25

Cenkos need to bring new parties to the table. They have been complete disaster for EME imo

[blakieboy7] 12/5/2021 08:23

Really surprised by muted market response

[blocker2] 12/5/2021 08:08

Looks like there is still time to get in ...

[pb01] 12/5/2021 08:05

The above numbers shows the importance of getting either mako sold or alternative finance arrangements to move China forward. Current share price is just stupidly low for the reward that awaits later this year. Exciting times ahead.

[kevjames] 12/5/2021 08:01

Those numbers present a very compelling risk v reward situation - certainly at this price IMO.

[michmcd] 12/5/2021 08:00

It matters about £2m to me mate ?

[jemjem] 12/5/2021 07:48

Thanks tarz.

The bottom line is Jade needs to be drilled - and will get drilled in the upcoming window. If we have to give away 25 or 30% to do it - on those numbers, what does it matter?
Imo

[starzerus] 12/5/2021 07:42

Empyrean Energy Plc
What Could China Be Worth?

Following on from our previous report we wanted to explore the potential value of the Jade, Topaz and Pearl prospects in the event of success. We explore a potential three stage approach to the drilling of the three identified prospects within Block 29/11. Phase 1 involves success at Jade, which in the event of a commercial discovery would see our risked valuation of Jade increase from 9.7p to 41.2p. Phase 2 involves success at Topaz, which in the event of a commercial discovery would see our risked valuation of Topaz increase from 15.3p to 85.0p. Phase 3 involves success at Pearl, which in the event of a commercial discovery would see our risked valuation increase for Pearl from 0.4p to 5.9p. In reality, the impact of a discovery would be more complicated, with success at Jade significantly de-risking both Topaz and Pearl. Unrisked (the point at which there is 0% risk), our valuation of the Pmean resources at Jade, Topaz and Pearl is to 82p, 170p and 12p, respectively. All but one of the adjacent CNOOC discoveries are “filled to spill”, with in place volumes close to their P0/P10 oil in place volumes. Using the P10 oil in-place volumes increases our unrisked valuation of Jade, Topaz and Pearl to 185p, 258p and 46p, respectively. Whilst our numbers do include an assumed 51% back-in post discovery from CNOOC, they do not include any assumed dilution from a capital raise and/or farm-out as Empyrean could sell other assets (eg Mako) to fund China. Given the size of the prize, there is plenty of headroom for any dilution, whilst still generating substantial shareholder value.

In the Event of Success – As with all of the companies that we cover, we apply both a geological and commercial risking to each of Empyrean’s fields/prospects. Following Empyrean’s RNS in April 2021 we updated the GCoS for the Jade and Topaz prospects to 41% (previously 32%) and 35% (previously 30%), respectively, to mirror Empyrean’s own internal assessment (we maintain our 15% GCoS for the Pearl prospect). Our commercial chance of success includes a number of other potential risks which could hinder the commerciality of a discovery, including political risk, financing risk, timing risk, productivity risk etc, but also looks at the existing discoveries of a similar size in the basin to see the proportion which have entered commercial production. Our overall chance of success for the Jade, Topaz and Pearl prospects are a highly conservative 12%, 9% and 4%, respectively. Despite Topaz’s higher oil in place number, the overall chance of success is slightly lower than Jade due to its lower GCoS.


On discovering a commercial quantity of hydrocarbons at a particular prospect, our geological chance of success would increase to 100%, as the Company would have proven all the individual elements of a working petroleum system (source, seal, reservoir and trap). On discovery, our commercial chance of success would also increase to c50% as the financing risk on success would have been dramatically reduced.
In our hypothetical three stage approach, a commercial discovery at any one of the three prospects would increase the prospect’s GCoS to 100%, the commercial change of success to 50% and our overall chance of success to 50%. Applying this to a commercial discovery at Jade would results in a c4.2x increase to our valuation to 41.2p (from 9.7p). In the event of a commercial discovery at Topaz would result in a c5.6x increase to our Topaz valuation to 85.0p (from 15.3p). Finally, a commercial discovery at earl would increase our valuation c15x to 5.9p (from 0.4p). In reality, a commercial discovery at Jade would have a much bigger impact than just the 4.2x increase in our Jade valuation, significantly de-risking both the Topaz and Pearl prospects.

Additionally, we model the Jade, Topaz and Pearl prospects as individual, standalone developments, whereas in reality, following the commercial development of an initial discovery on Block 29/11, any subsequent discovery will be tied back to this initially discovery, significantly reducing both capital and operational expense.

Fully unrisked (the point at which there is 0% risk of the field entering commercial production), our valuation of the Pmean resources at the Jade, Topaz and Pearl prospects increases to 82p, 170p and 12p, respectively.

Table 1: Block 29/11 Valuation
Prospect Current Valuation (p)
Commercial Discovery (p)
Unrisked Valuation (p)
82.0 170.0 11.7 263.7
Jade 9.7 41.2
Topaz 15.3 Pearl 0.4 Total 25.4 Source: Cenkos Securities estimates
85.0 5.9 132.1

As we have discussed above, our models for the Jade, Topaz and Pearl prospects include an assumed 51% back-in by CNOOC post discovery (as per the Block 29/11 PSC). At present, we do not include any assumed dilution from a capital raise and/or farm-out as Empyrean could sell other assets (ie Mako) to fund China, but note that when relevant we will look to implement any proposed dilution into our model. However, given the size of the prize there is plenty of headroom for any dilution as a result of a placing and/or farm-out, whilst still generating substantial shareholder value.


A Non-Commercial Discovery – In our hypothetical three stage approach, if Jade were a technical discovery (ie it discovered all of the individual elements of a working petroleum system) but was found to be non-commercial (on a stand-alone basis), it would partially de- risk the geological chance of success of the Topaz and Pearl prospects. The impact on our valuation would vary according to the reason why the well was non-commercial eg low permeability (tight reservoir), sub-commercial resources etc. Moreover, a sub-commercial stand-alone discovery at Jade does not rule out Jade from being commercialised as a low- cost tieback in the event of a discovery at Topaz.


A Dry Well – Likewise, in our hypothetical three stage approach, if the Jade well failed to encounter hydrocarbons, the risk associated with the Topaz and Pearl prospects would increase (the risk associated with the Topaz prospect would increase by a greater proportion compared to Pearl, due to Jade and Topaz sharing the same hydrocarbon migration pathway). In this scenario, we would remove Jade from our valuation and argue that the Topaz and Pearl prospects would likely not be drilled.



Oil Price Sensitivity – We model Jade, Topaz and Pearl using the most up-to-date Brent forward curve (long-term price US$57/bbl), inflated by 2% per annum. We assume that the quality of the crude would be similar to the nearby CNOOC discoveries and as such would not receive a discount to Brent. As discussed above, using the latest Brent forward curve we
value a commercial discovery at the Jade, Topaz and Pearl prospects at 41.2p, 85.0p and 5.9p, respectively. Increasing our long-term oil price just slightly from the current forward curve (US$57/bbl) to US$60/bbl increases these valuations to 45.9, 89.1p and 8.1p, respectively. In our upside US$70/bbl case these valuations increase to 60.6p, 98.1p and 14.7p, respectively.
While it is important to analyse the upside from a rising oil price, its equally important to analyse the downside protection, with any discovery needing to be economic if oil prices do fall (such as in 2020). Importantly, even when we reduce our long-term oil price to US$40/bbl, we would value a commercial discovery at Jade and Topaz at 10.6p and 35.8p, respectively.

While Pearl is uneconomic as a standalone development at US$40/bbl, a discovery at Pearl would be economic in the event of a pre-existing discovery on the licence (either Jade or Topaz), where Pearl would be tied back to the existing facilities via a low-cost tie-back Filled to Spill – With the exception of one field (which is 90% full) all of the CNOOC discoveries situated to the southwest and along the migration pathway to the Block 29/11 prospects are “filled to spill”. In this situation, oil migrates from the source kitchen updip, filling the first structural trap, before moving further updip to the next trap and so on. As such, the CNOOC discoveries to date have often been close to their P0 or at the very least their P10 oil in-place volumes. In our model we use the Pmean volumes as per the 2018 Gaffney, Cline & Associates (GCA) oil in-place audit, but note that there is a distinct possibility that the Empyrean prospects could be “filled to spill” and are in reality closer to the P10 (GCA) oil in place numbers.

.



Additionally, we assume conservative recovery factors for the Jade, Topaz and Pearl prospects of 50%, 40% and 35% respectively. Fields within the Pearl River Mouth Basin often have strong aquifer support, negating the need for secondary enhanced oil recovery (eg water flooding). The result is a high average recovery factor of between 30-70%, with the Lufeng field in particular having a recovery factor of over 70%. To ascertain the recoverable resources for any single discovery, we multiply the recovery factor by the GCA oil in-place volumes.
Using the GCA Pmean oil in-place volumes we value a commercial discovery at Jade, Topaz and Pearl at 41.2p, 85.0p and 5.9p, respectively. Using the P10 oil in-place volumes, our valuation increases to 92.5p, 129.0p and 22.9p, respectively. Unrisked, these valuations increase to 185.0p, 258.1p and 45.9p, respectively.



Will try to post tables shortly.

[jemjem] 12/5/2021 07:28

To prove their worth, Cenkos need to get this out to Institutional clients. That's what their notes are meant for - and not for being posted on a PI bb, where they're preaching to the already converted LTH's.
Imo.
Edit: That wasn't aimed at you tarz!

[starzerus] 12/5/2021 07:27

I can post it up in about 45 mins when I am on my pc.


I expect cenkos got a good kicking for the 9.7p

[jemjem] 12/5/2021 07:20

There's also a section highlighting "filled to spill" stating that there is a distinct possibility that the traps get refilled as they are emptied and therefore the P10 numbers are likely to be achievable.Imo.

[stewart4990] 12/5/2021 07:15

Morning all Thats much better cannot read it all but what Jemjem has put up from the update is outstanding.

[currypasty] 12/5/2021 07:12

that's more like it!

[jemjem] 12/5/2021 07:10

New Cenkos note out which is entitled " What could China be worth?".There are lots of scenarios but the highest valuation for all three plays on P10 basis is just short of £5 per share.An unrisked valuation at $70 oil is around £3.40.Hold onto your hats.:-))