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Empyrean Energy Maintains That Its Horizontal Drilling Of the Eagle North Well-1 Well in California Is A Good If Not A Conclusive Augury For A Commercial Discovery
Share prices can be very volatile during drilling. As we never tire of saying, even with all the seismic in the world and access to previous drilling records, you never know if you have a commercial discovery until you drill. "Only Dr Drill knows" is the saying in the trade. To this should be added "you never know until you have drilled and tested a well".
In recent months a couple of large companies who should know better have announced a discoveries that were not discoveries because on further testing they turned out to be non-commercial. Some smaller companies have drilled wells, said this looks interesting, and then taken the rig away to drill something else. Admittedly there is a worldwide shortage of rigs but, as they say in opera, it's not over until the fat lady sings or, in the case of the oil and gas industry, until a well has flowed commercial quantities of oil and gas.
All this being said, it is a little surprising that the share price of Empyrean Energy saw a sharp drop when it announced there would be horizontal drilling on the Eagle North-1 well in California. The vertical well had already reached its target depth. The horizontal drilling might again turn out to be non-conclusive but, all other things being equal, it is a positive development rather than a negative one.
Empyrean, which also has assets in Germany, has the right to earn a 38.5 per cent interest in the project by funding 55 per cent of the costs of the Eagle North-1 appraisal well. The well is operated by Australian firm Victoria Petroleum, which, like Empyrean, is quoted on London's Alternative Investment Market.
For Vicpet, the Eagle North-1 well is a bit of unfinished business. The Eagle Oil Pool was discovered in 1986 by the Mary Bellocchi-1 well in which Victoria Petroleum was a participant. That hole flowed up to 223 barrels of oil per day and 0.7 million cubic feet of gas per day from the Gatchell Sandstone during testing but, at the then prevailing oil price of US$11 a barrel, was considered uneconomic.
In 2001 the Eagle-1 horizontal re-entry of Mary Bellocchi-1 found 90 metres of gross target sands in the Gatchell Sandstone reservoir before being lost due to mechanical problems. In May 2004 a 14 km seismic strike line was acquired to further define the updip extent of the Eagle Oil Pool. The Eagle North-1 appraisal was drilled 400 m north of the original Mary Bellocchi-1 well.
In February 2006, the partners announced that preliminary analysis of the wireline logs of Eagle North-1 indicated oil saturation in the target Gatchell sands over a 21 metre gross interval from 4,136 metres to 4,157 metres with net pay of 7 metres. Wireline logs also indicated that the top of the Gatchell sand drilled in Eagle North-1 was at the same level as seen in Mary Bellocchi-1, thus providing further support for the interpreted presence of a commercial Eagle Oil Pool in a potential stratigraphic trap.
Then last week, the partners announced they were preparing to drill a horizontal well towards the lower Gatchell oil sands that produced oil during testing of the Mary Bellocchi-1 well. The horizontal well will drill laterally through 300 metres (within a vertical column of 15 metres) of lower Gatchell oil sands to determine the potential horizontal flow rate.
So what does this mean exactly? In blunt terms, it means the companies are trying to shorten the odds against failure. By drilling horizontally, they are increasing the area exposed to production casing (from 21 metres to 300 metres). The Mary Bellocchi 1 well flowed at 223 bpd and there were 90 metres of gross pay in the re-entry. So, in theory, it could flow at three times that: perhaps 600 barrels of oil plus some gas. Or the well might find non-commercial amounts of oil and gas even if the partners can overcome the problems of formation damage. The horizontal drilling should take ten days that was last week so investors don't have much longer to wait.|
|simonevans: the fact that the share price has not fallen suggests to me that a deal will be done. any views?|
|simonevans: 60P is fairly pathetic, but in today's market most investor will probably think that cash is better than shares in this group. I think that the sequence of events over the last two years has all been in anticipation of today....two profit warnings althought trading has been quite good really, name change to Signature emphasising amorphous mass of restaurants and downplaying the gems in this group - Strada, Belgo, Bierodrome before you even get to Caprice and Ivy, downplay Strada continually - modest profit etc. etc. but should have been demerged into an ASK CENTRAL equivalent if genuine about shareholder value rather than Luke Johnson value, Luke appears in a TV programme and looks an idiot in a Belgo restaurant, cut the dividend to £nil when they didn't need to but brought the share price down which seemed to be the objective......I could go on, but its not worth it. One message...steer clear of this management team in the future whenever they mention shareholder value because they are more interested in their own value. One interesting thought....will we see Strada being sold or floated for more than £25m on its own in 2/3 years??? As always DYOR as these are only my personal views.|
|simonevans: Jeff H - I agree with your comments. The directors are not really interested in shareholder value if you ask me - they are more interested in "their value". I've watched this one for a while - the directors have put out lots of negative trading statements and even if parts of the group are doing well (e.g. Strada) played it down. Not surprisingly the share price has dropped...then.... wait until the London restaurant market is turning and offer a pathetic offer to other shareholders. They can sell off or float the individual bits and make more money...for themselves. Not a great deal that small shareholders can do but watch I'm afraid. Personally, I wouldn't touch Luke Johnson with a bargepole again...suggest others follow my lead!|
|nemesis: Major Shareholders ( 4 Jan 02): 41.13m 20p Ords - Kintaro Int Plc 14.01%, Littledown Nominees Ltd 10.82%, Park Place Columbia Ltd 9.00%, Chase Nominees Ltd 6.31%, RBSTB Nominees Ltd 6.10%, Nortrust Nominees Ltd 5.38%, Mellon Nom (UK) Ltd 3.73%, Christopher Corbin 3.16%, Ireland Resources Intl Ltd 3.13%, L O Johnson 4.79%, Other Dirs 0.60%.
Just been running my eye over the major shareholders.This is a very closely held stock with 67% of the company in the hands of the major shareholders.
It was interesting to see a 25k buy earlier in the week when the offer was moved down to 36p.This stock is still being accumulated by interested parties who are attempting to buy on any dips.I must admit i was seconds away from adding to my holding when the offer was 36p but was pipped by the 25k buyer.
As most of the contributors to this thread are aware SUR are inordinately cheap at this level.
When we return to more favourable times a valuation of 1.5x turnover would be a fairer estimation of their worth.This would give a market cap of £57million and an implied share price of 4x yestedays closing price.The September 11th factor is also still built into the price,although the broader market has discounted the risk and impact of this event.It is well to remember that people have very short memories and that Tourists will return to London and SUR will be a major beneficiary when they return.I suspect that a bid may come long before the share price gets to anywhere near its previous highs.Predators are circling.
Signature Rest share price data is direct from the London Stock Exchange