Empyrean Regulatory News (EME)

1 May 2007 14:45

Empyrean Energy PLC01 May 2007 Empyrean Energy PLC ("Empyrean" or the "Company"; Ticker: (EME)) Final Results ------------- For the period 1 April 2006 to 31 March 2007 -------------------------------------------- • Net cash position £4.9 million following successful placing with institutional investors in January 2007 • Two further project acquisitions in the USA made during the period • During the period Empyrean makes its first modest discovery and goes into production from two wells Chairman's Statement It is with pleasure that I am able to report on a successful second year ofoperations for Empyrean Energy Plc ("Empyrean" or "the Company"). Since the last Annual General Meeting, we have continued to seek additionalprojects that fit our strategy of investing in energy projects withinpolitically stable regions. We have also undertaken an additional capitalraising to assist the Company with the development of its existing portfolio ofprojects and to provide the capacity to invest in additional opportunities asthey are identified. It is important to note that since our AIM listing, less than two years ago,Empyrean has participated in the drilling of six wells, with a further fivewells already scheduled for the remainder of calendar year 2007. All six wellsdrilled to date have encountered hydrocarbons, with two at Project Margaritacurrently in production and a third at Sugarloaf yet to be tested forhydrocarbon shows in the shallower Cretaceous carbonates and chalks that gave agood log response. Last December the Company acquired an interest in Project Margarita, whichconsists of a number of deep prospects and also a number of lower risk smallershallow prospects. Empyrean has already drilled three of the six planned wellsto test the shallow prospects before moving onto the three higher impact deep 30to 200 bcf gas prospects. Two of the first three shallow wells have become producers, with the Milagrowell connected to a gas sales line on 3 April 2007, and the Dos Dedos well beenconnected to the sales line on 26 April 2007. A further three shallow wells willnow be drilled before a decision is made concerning moving on to the deeperprospects. Although modest, this production marks a significant milestone forEmpyrean, which has been achieved within two years of listing on AIM. At our Glantal Project in Germany, no commercial discovery was made from thetesting of our first well, however results proved the existence of a seal (oneof the greater pre-drill risks), the presence of fractures as a major componentof reservoir effectiveness and the presence of gas. Having confirmed thegeological characteristics of the formation, a seismic programme will beimplemented prior to a decision about the position for the next well. At the Eagle Oil Pool Development Project in California, the Eagle North-1 wellencountered promising oil shows whilst drilling. An attempt to perforate andtest a promising zone in the horizontal part of the well proved far morechallenging and it has been concluded that the perforating guns did not fire. Anattempt to retrieve the guns and production valve failed. A post mortem on theoperations has concluded the best way forward, given the oil shows whilstdrilling, is to drill a new well with a wider diameter horizontal completion.This is potentially a key production asset for Empyrean and we expect that plansto drill the new well will commence in the near term. The Sugarloaf well in Texas had two potential targets, and initial effortsconcentrated on testing the most prospective intervals below 19,000 feet wheredrilling had encountered intermittent gas shows. These proved uncommercial, anda testing programme for the shallower Cretaceous carbonates and chalks iscurrently being finalised and it is anticipated that operations will recommencein the near future. In January 2007, the Company successfully raised additional capital, anachievement that strongly confirmed the market's confidence in the Company'sstrategy, and in the balance of risk and reward which has been achieved with itswide portfolio of projects. The Board intends to continue actively looking foradditional attractive opportunities to complement this portfolio further. Patrick CrossChairman30 April 2007 Operations Report The Company has substantially increased its operational activities over the lasttwelve months. In addition to the ongoing Glantal Gas Project, the Eagle OilPool Development Project and the Sugarloaf Hosston Project, Empyrean has alsoacquired a working interest in the Margarita Project in the Gulf Coast, TexasUSA. Glantal Gas Project Electric logs indicate that at least 20 intervals showing porosity andpermeability have been intercepted during drilling and therefore had thepossibility of being gas-filled reservoirs. Of these, six intervals wereidentified as the most likely to produce a positive result on testing. It wasdecided that the testing programme would investigate all six intervals only ifthe lowermost four intervals gave encouraging results. Testing operations were carried out and completed during the month of July 2006using the Koller workover rig. All tests were deemed to have been valid. Theresults were as follows: Interval Depth Details Interval 1 1445-1455m A light blow at the surface and 212 litres of fluid were recovered in the drill string.Interval 2 1355-1379m Similar results with no detection of gas and only recovery of formation water.Interval 3 1228-1249m This was the zone that showed the best permeability and over a 4 hour flow period produced only 348 litres of connate water and no significant gas.Interval 4 1205-1220m This interval yielded only a small quantity of flammable gas to surface with no discernible formation water. The permeability appeared to be poor. Since these four intervals were considered to be the most likely to flow gas,the results confirmed that no further testing of Glantal-1 was warranted and thewell was consequently plugged and abandoned. Despite the test results, the prospectively of the project still remains high.Glantal-1 results proved the existence of seal (one of the greater pre-drillrisks), the presence of fractures as a major component of reservoireffectiveness and the presence of gas during drilling and in the drill stem testnumber four. The Glantal Prospect is located in the south western portion of the massivePfalzer Anticline. And within the 60km2, the prospect can be divided into twodistinct structural elements, the Poltzberg Anticline and the Ulmet-WelchweilerHorst. Glantal-1 well was located on the relatively low western flank of thePoltzberg and a structurally higher position for the next well would be an idealfollow up to test the porous intervals already drilled. However, prior to any further drilling, new seismic data will be required tofurther define the nature of faulting and compartmentalisation of the variousstructural elements. A small but adequate programme of 63 km has been designedwhich may be extended to approximately 100km. As with drilling rigs, seismiccrews are difficult to acquire particularly when the programme is small, as inthe case of Glantal. Preparations for the seismic campaign are under way anddata acquisition will commence as soon as a contract is finalised. Eagle Oil Pool Development Project Due to technical breakdowns and unconsolidated nature of the reservoir, theoriginal programme of using a 2 3/8" slotted liner when testing the oil- filledsandstone had to be revised. The programme involved the testing of 72 metres ofLower Bellocchi Gatchell oil sand cased behind the 4 1/2" liner plus 105 metresof open hole (barefoot completion) beyond the base of the 4 1/2" liner set at4,386 metres, a total of 177 metres. This procedure required using a tubing- conveyed perforation gun, as well as acoiled tubing unit and a less expensive completion rig. The larger drilling rigwas released on 20th May 2006 and testing operations were not resumed untilsometime later. Technical faults continued to plague the testing operation. Not only did thecasing guns malfunction, but fishing operations to retrieve both the productionvalve, seal assembly and casing guns in the horizontal well proved to beunsuccessful. Finally on 17th October 2006 it was announced that all partners had consideredit no longer cost effective to continue the workover operation. It was agreedthat the money would be better spent on a future re-entry and side track fromthe current cased Eagle North-1 well bore. The possibility of drilling anotherwell is still being considered. If re-entry and sidetrack is decided, the targetwill remain the 177 metres of Lower Mary Bellocchi Gatchell oil sand in thehorizontal well bore over the interval 4,209 - 4,386 metres. It should berecalled that that these sands have produced at rates of up to 223 barrels ofoil and 0.7 mcf from a 12 metre interval in the same sands of the Mary Bellocchivertical well located 366 metres to the southeast. Production from the proposedhorizontal interval should increase the oil production rate fourfold at least. Planning has commenced for the future drilling operation, although the exacttiming of recommencement depends on the availability of rigs, personnel andequipment. Sugarloaf Hosston Project This attractive farmin agreement with Texas Crude Energy Inc. was announced byEmpyrean on 6th April 2006 and mentioned briefly in the last Annual Report. TheFarmin Agreement by which Empyrean would be earning a 7.5% interest beforepayout (reverting then to a 6% working interest) involved participating in thedrilling and testing of a 21,000 feet well. The primary objective was theCretaceous Hosston sandstone reservoir and the four way closure over an area ofat least 20,000 acres was estimated to have an upside potential of severaltrillion cubic feet of gas. The mean reserves potential had been calculated at800 bcf of gas. Drilling commenced on 17th August 2006. First significant gas shows wererecorded at 11,895' in the secondary objective, the Cretaceous chalk andlimestone. These shows continued to 12,240' where they abruptly ended.Preliminary log estimates show 92' gross column of gas with a reservoir porosityof between 4 -10 %. As planned, 9 5/8" casing was set at 14,480' and a 7 5/8" liner cemented at17,000'. Significant gas shows reappeared at 18,190' following the interception of theprimary objective, the Hosston sandstones at 17,950'. These gas shows continuedintermittently throughout the sequence until the total depth (T.D.) of 20,896'was reached on the 28th November 2006. The logs run at TD show a net pay ofbetween 90 - 140' over an interval 1,700' (19,700' - 18,000') using a 6%porosity cut-off. The most prospective sand was 17' thick showing a calculatedporosity of 9%. Based on these log results and gas shows during drilling, the operator proposedsetting pipe at 19,000'. Perforations over 10 separate intervals between 19'630'- 18'973' in the lower Hosston sands were successfully executed but no gas flowresulted. The well was cemented up to 18,900', and perforations were then made over 7higher intervals between 18,199' - 18,689' where significant gas peaks had beenencountered during drilling. These fine-grained sandstone intervals were thensubjected to a fraccing procedure. On 12th March it was announced that thefraccing had achieved only minor gas recovery at a rate too small to measure.There are several reasons which can explain the absence of significant gas flow,despite the shows during drilling. The most likely explanation is the lack ofsufficient permeability due to the fine-grained nature of the sandstones. Thedeleterious effects of using heavy mud weight (15.6 lbs/gal) by necessity couldalso have played a role in impeding gas flow. The next operation will be to test the much shallower Cretaceous chalk andlimestone which provided good gas shows and encouraging electric log response. Adefinitive testing programme is being finalised and it is anticipated thatoperations will recommence in the near future. Project Margarita, Gulf Coast Texas, USA In the November of 2006, Empyrean entered into a farmin agreement where it wouldearn a 44% Working Interest in six shallow prospects located in a prolificgas-producing area of Southeast Texas, USA. Under the terms offered, Empyreanwould also have the opportunity to participate in any of the shallow prospectsdrilled after the initial six well programme. There also exists the option toparticipate, under the same farmin terms, in three "Deep Prospects" (30 - 200bcf of gas) planned to be drilled in the second-third quarter of 2007. All of the shallow prospects are analogues of well documented Frio and Vicksburgsands production in the project area and have been identified using provensophisticated geophysical techniques. Drilling of the first of the shallow wellscommenced on 20th December 2006 and to date all three wells, El Viejito, Milagroand Dos Dedos, have encountered hydrocarbons. 1. El Viejito El Viejito flowed gas at 210 mscfd during a 24 hour test period. High verticalpermeability caused eventual water influx from below the well-definedgas-bearing interval and the gas flow was finally choked because of the wateraccumulating in the production string. The well was suspended to be used for awater disposal for other joint venture wells in the area. 2. Milagro Milagro, the second well drilled at Margarita and had good shows while beingdrilled and was connected to a gas sales line on the 3rd April, 2007. On 26thApril 2007 it was producing at 451,000 scfd with minor amounts of oil. It hasbeen producing at rates of up to 384,000 scfd with minor amounts of oil.Side-wall cores and log interpretation would seem to indicate that the reservoiris actually oil- bearing with a high gas-oil ratio. In a nearby well initialflow was almost entirely gas before oil eventually flowed, which could be thecase at Milagro. Further production data is required before reserves canaccurately be determined. If the initial engineering calculation ofapproximately 150,000 barrels of oil gross is correct, there is a stronglikelihood that two wells will be required to exploit the accumulation. 3. Dos Dedos Dos Dedos the third well is also a gas producer. Connection to a gas sales linewas completed on 26th April 2007 and production commenced at 151,000 scfd andwill gradually be increased. Probable reserves for the producing sand are in thevicinity of 0.35 bcf gross, but again production and pressure data are requiredfor a more accurate reserve determination. The remainder of the six well programmes will commence mid-May 2007 and becompleted by the end of July 2007. The wells will be drilled to depths ofbetween 1,340 and 1980 metres. The total mean reserves have been calculated at alittle over 3.1 bcf. Should Empyrean elect to participate in the "Deep Wells programme" following the"Shallow Wells", it will have the opportunity to share in the drilling of farlarger gas prospects which have the potential of holding between 30 to 200 bcf.The reservoir targets will be the Cook Mountain and Wilcox formations anddrilling is expected to commence late September 2007. FJ Brophy BSc (Hons)Technical Director30 April 2007 Income Statement for the year ended 31 March 2007 Notes 2007 2006 £'000 £'000Administrative expenses (866) (760) ----------- -----------Operating loss 2 (866) (760)Interest received 3 75 71 ----------- -----------Loss on ordinary activities before taxation (791) (689)Taxation on loss on ordinary activities 6 - - ----------- -----------Loss for the financial year (791) (689) ----------- ----------- Loss per share expressed in pence per share- Basic 7 (2.1)p (2.5)p A separate Statement of Recognised Income and Expense is not required. Balance Sheet as at 31 March 2007 Notes 2007 2006 £'000 £'000AssetsNon-current assetsIntangible assets 8 6,443 3,860Plant and equipment 9 4 7 ----------- ----------- 6,447 3,867 Current assetsOther receivables 10 237 239Cash and cash equivalents 4,889 3,210 ----------- ----------- 5,126 3,449 ----------- -----------LiabilitiesCurrent liabilitiesOther payables 11 (27) (123) ----------- ----------- (27) (123) ----------- -----------Net current assets 5,099 3,326 ----------- -----------Net assets 11,546 7,193 ----------- ----------- Shareholders' equityShare capital 13 99 70Share premium 12,486 7,665Other reserves 441 147Retained loss (1,480) (689) ----------- -----------Total equity 11,546 7,193 ----------- ----------- Cash Flow Statement for the year ended 31 March 2007 Notes 2007 2006 £'000 £'000 Net cash outflow from operating activities 12 (644) (769) ----------- -----------Return on InvestmentsInterest received 75 71 ----------- -----------Net cash inflow from returns on investments 75 71 ----------- ----------- Capital expenditurePurchase of tangible fixed assets (3) (12)Purchase of intangible fixed assets (2,583) (3,854)Proceeds from the sale of intangible fixed 3 -assets ----------- -----------Net cash inflow for capital expenditure (2,583) (3,866) ----------- ----------- FinancingIssue of ordinary share capital 5,095 8,146Expenses relating to share issues (264) (372) ----------- -----------Net cash inflow from financing 4,831 7,774 ----------- ----------- Increase in net cash 1,679 3,210Cash and cash equivalents at the start of the 3,210 -year ----------- -----------Cash and cash equivalents at end of the year 4,889 3,210 =========== =========== Statement of Changes in Equity for the year ended 31 March 2007 Share Share Other Retained Total capital premium reserve loss equity account reserve £'000 £'000 £'000 £'000 £'000 As at 1 April 2005Share capital issued 70 8,076 - - 8,146Cost of share issue - (411) - - (411)Share based payments - - 147 - 147Loss for the year - - - (689) (689) As at 31 March 2006 70 7,665 147 (689) 7,193 Share capital issued 29 5,066 - - 5,095Cost of share issue - (245) - - (245)Share based payments - - 294 - 294Loss for the year - - - (791) (791) As at 31 March 2007 99 12,486 441 (1,480) 11,546 Statement of Accounting Policies for the year ended 31 March 2007 The financial statements of Empyrean Energy plc for the year ended 31 March 2007were authorised for issue by the board on 30 April 2007 and the balance sheetssigned on the board's behalf by Mr Patrick Cross and Mr Frank Brophy. The Company's financial statements have been prepared in accordance withInternational Financial Reporting Standards ("IFRS"). The principal accountingpolicies are summarised below. They have all been applied consistentlythroughout the year. Basis of accountingThese financial statements have been prepared under the historical costconvention in accordance with International Financial Reporting Standards andIFRIC interpretations and with those parts of the Companies Act, 1985 applicableto companies reporting under IFRS. The financial report is presented in Sterling and all values are shown in pounds(£). TurnoverThe Company had no turnover during the year. Finance RevenueFinance Revenue is recognised as interest accrues. Cash and cash equivalentsCash and short-term deposits in the balance sheet comprise cash at bank and inhand and short-term deposits with an original maturity of three months or less. For the purposes of the Cash Flow Statement, cash and cash equivalents consistof cash and cash equivalents as defined above, net of outstanding bankoverdrafts. Deferred taxCurrent tax assets and liabilities for the current and prior periods aremeasured at the amount expected to be recovered from or paid to the taxationauthorities. The tax rates and tax laws used to compute the amount are thosethat are enacted or substantially enacted by the balance sheet date. No deferred tax asset has been recognised because there is insufficient evidenceof the timing of suitable future profits against which they can be recovered. Foreign currenciesTransactions denominated in foreign currencies are translated into sterling atcontracted rates or, where no contract exists, at average monthly rates.Monetary assets and liabilities denominated in foreign currencies which are heldat the year-end are translated into sterling at year-end exchange rates.Exchange differences on monetary items are taken to the Income Statement. Trade and other receivablesTrade receivables, which generally have 30 day terms, are recognised and carriedat original invoice amount less any allowance for any uncollectible amounts. Trade and other payablesTrade payables and other payables are carried at amortised cost and representliabilities for goods and services provided to the company prior to the end ofthe financial year that are unpaid and arise when the company becomes obliged tomake future payments in respect of the purchase of these goods and services. Exploration and development expenditureExploration, evaluation and development expenditure incurred is accumulated inrespect of each identifiable area of interest. These costs are only carriedforward to the extent that they are expected to be recouped through thesuccessful development of the area or where activities in the area have not yetreached a stage which permits reasonable assessment of the existence ofeconomically recoverable reserves. Accumulated costs in relation to an abandoned area are written off in fullagainst the profit in the year in which the decision to abandon the area ismade. A regular review is undertaken of each area of interest to determine theappropriateness of continuing to carry forward costs in relation to that area ofinterest. Restoration, rehabilitation and environmental costs necessitated by explorationand evaluation activities are expensed as incurred and treated as explorationand evaluation expenditure. Judgements and estimatesThe Group makes judgements and assumptions concerning the future that impact theapplication of policies and reported amounts. The resulting accounting estimatescalculated using these judgements and assumptions will, by definition, seldomequal the related actual results but are based on historical experience andexpectations of future events. The judgements and key sources of estimationuncertainty that have a significant effect on the amounts recognised in thefinancial statements are discussed below. Impairment of assetsFinancial and non-financial assets are subject to impairment reviews based onwhether current or future events and circumstances suggest that theirrecoverable amount may be less than their carrying value. Recoverable amount isbased on a calculation of expected future cash flows which includes managementassumptions and estimates of future performance. Share-based paymentsCertain Directors of the Company receive remuneration in the form ofequity-settled share-based payment transactions, whereby services are renderedin exchange for rights over shares ("equity-settled transactions"). The cost of equity-settled transactions with employees is measured by referenceto the fair value at the date at which they are granted. The fair value isdetermined using the Black-Scholes pricing model, further details of which aregiven in note 5 to the Financial Statements. The cost of equity-settled transactions with parties other than employees ismeasured at the fair value of the services received at the date of receipt, witha corresponding increase in equity. Going concernThe financial statements have been prepared on a going concern basis. Notes to the Financial Statements for the year ended 31 March 2007 1. Turnover and Segmental AnalysisThe Company had no turnover during the year. All the administration costs were incurred by the Company in the United Kingdom. Capitalised exploration, evaluation and development expenditure can be analysedby the following geographical segments: 2007 2006 £'000 £'000 Continental Europe 2,644 2,027North America 3,799 1,833 ----------- ----------- 6,443 3,860 =========== =========== 2. Operating LossThe operating loss is stated after charging: 2007 2006 £'000 £'000 Auditors' remuneration - audit services 8 5 - other services 3 3Depreciation (note 9) 5 3Directors' emoluments (note 5) 116 88Directors' share based payments (note 5) 261 127 =========== =========== Auditors' remuneration for non-audit services provided during the year amountingto £2,500 relates to the provision of review and taxation services. 3. Interest Receivable 2007 2006 £'000 £'000 Bank interest received 75 71 =========== =========== 4. Staff Costs (including Directors) The Company had no employees during the year, other than Directors 2007 2006 £'000 £'000 Equity-settled share-based payments 294 127 =========== =========== The Company's equity-settled share based payments comprise incentive optionsgranted to the Company's Directors. The amount and details of share optionssubject to equity-settled share based payments are set out in note 13. The fair value of these options has been fully expensed during the year, basedon a Black-Scholes model, assuming a risk free rate of 4.7% and expectedvolatility of 60%. The value per option ranges from 8 pence to 9 pence. Thereare no performance measures attached to the options. 5. Directors' Emoluments Executive Salary Options Issued 2007 2006 2007 2006 £'000 £'000 £'000 £'000 Non-Executive Directors:Patrick Cross (1) 33 24 - 41Malcolm James 24 16 - - Executive Directors:Frank Brophy (2) 36 24 130 86Thomas Kelly (3) 36 24 131 -Christopher Lambert (4) 16 40 - -(Resigned 4 October 2006) ---------- ---------- ---------- ----------Total 145 128 261 127 ========== ========== ========== ==========Capitalised to Intangible Assets 26 40 - - ---------- ---------- ---------- ----------Expensed to Income Statement 119 88 261 127 ---------- ---------- ---------- ---------- 1) Services provided includes £5,000 paid to HFH Associates Ltd2) Services provided by F J Brophy Pty Ltd3) Services provided by Apnea Holdings Pty Ltd4) Services provided by Walkerton Plc No pension benefits are provided for any Director. The Executive Directors are remunerated for consultancy services provided to theCompany in relation to its exploration operations as disclosed above. Thesepayments are capitalised to licences and deferred exploration costs (note 8). Malcolm James is a director of Claridge House Services Limited, for which thereis a contract for the provision of administrative and office services to theCompany. Directors' Share Options On 31 October 2006, Frank Brophy and Thomas Kelly were allocated options over1,000,000 shares each at an exercise price of 50 pence per share with an expirydate of 31 October 2009. 6. Taxation 2007 2006 £'000 £'000 Current year taxationUK corporation tax at 30% on profits for the year - - ----------- ----------- Factors affecting the tax charge for the yearLoss on ordinary activities before tax (791) (689) ----------- ----------- Loss on ordinary activities at the UK standard rate of (237) (207)30%Effect of tax benefit of loss carried forward 237 207 ----------- -----------Current year taxation - - =========== =========== No deferred tax asset has been recognised because there is insufficient evidenceof the timing of suitable future profits against which they can be recovered. Tax losses of approximately £1,480,000 are available to be claimed goingforward. 7. Loss Per Share The basic loss per share is derived by dividing the loss for the yearattributable to ordinary shareholders by the weighted average number of sharesin issue. 2007 2006 Loss for the year £(791,542) £(689,000)Weighted average number of Ordinary shares of £0.002in issue 37,833,661 27,310,455Loss per share - basic (2.1) pence (2.5) penceWeighted average number of Ordinary shares of £0.002in issue inclusive of outstanding options 39,006,994 27,917,129 As the inclusion of the potential ordinary shares would result in a decrease inthe loss per share they are considered to be antidilutive and, as such, adiluted loss per share is not included. 8. Intangible Assets Licences and deferred exploration 2007 2006 £'000 £'000 CostBalance brought forward 3,860 -Additions 2,583 3,860 ----------- -----------At 31 March 6,443 3,860 =========== ===========Amortisation - - ----------- -----------Net Book ValueAt 31 March 6,443 3,860 =========== =========== At 31 March 2007 the Directors undertook an impairment review of the licencesand deferred exploration costs, as a result of which, no provisions were deemedto be required. Exploration Expenditure by Project Area 2007 2006 £'000 £'000 Glantal, Germany 2,644 2,027Eagle Oil, USA 2,723 1,833Sugarloaf Hosston, USA 528 -Margarita, USA 548 - ----------- -----------Total Licences and deferred exploration 6,443 3,860 =========== =========== 9. Plant and Equipment Office Equipment 2007 2006 £'000 £'000 CostBalance brought forward 12 -Additions 3 10Disposal (3) - ----------- -----------At 31 March 12 10 ----------- ----------- DepreciationBalance brought forward 3 -Charge for the year 5 3 ----------- -----------At 31 March 2007 8 3 ----------- ----------- Net Book ValueAt 31 March 4 7 =========== =========== 10. Other Receivables 2007 2006 £'000 £'000 VAT receivables 237 239 =========== =========== 11. Other Payables 2007 2006 £'000 £'000 Accounts Payable 10 -Accruals 17 123 ----------- -----------Total Payables 27 123 =========== =========== 12. Reconciliation of Operating Loss to Operating Cash Flows 2007 2006 £'000 £'000 Operating loss (866) (760)Increase / (decrease) in debtors 2 (243)Increase / (decrease) in accrued liabilities (88) 104Other non-cash charges 294 127Depreciation 5 3Increase in accounts payable 9 - ----------- -----------Net cash outflow from operating activities (644) (769) =========== =========== 13. Called Up Share Capital The authorised share capital of the Company and the called up and fully paidamounts at 31 March 2007 were as follows:- 2007 2006Authorised1,000,000,000 ordinary shares of 0.2p each 2,000,000 2,000,000 Issued and fully paid49,596,767 (2006: 35,038,671) ordinary shares of 0.2peach 99,194 70,077 On 26 April 2006 a further 267,619 shares were allotted for cash on exercise ofwarrants over ordinary shares of 0.2p at a price of 35p per share. On 24 November 2006 a further 4,762 shares were allotted for cash on exercise ofwarrants over ordinary shares of 0.2p at a price of 35p per share. On 26 January 2007 a placement for a further 14,285,715 ordinary shares of 0.2pwere allotted for cash at a price of 35p per share. Share Options and Warrants The following equity instruments have been issued by the Company and have notbeen exercised at 31 March 2007: Number of ordinary shares Exercise price Expires IPO Warrants 1,173,333 35 pence 27 July 2007Incentive options 1,250,000 35 pence 31 December 2008Incentive options 250,000 40 pence 31 December 2008Incentive options 2,250,000 50 pence 31 October 2009 14. Commitments As at 31 March 2007, the Company had no material capital commitments. 15. Related Party Transactions Other than those disclosed in note 5 there were no other related partytransactions during the year. 16. Post Balance Date Events Production has commenced from the shallow well programme at the Margaritaproject at both the Milagro and Dos Dedos wells. Milagro the second well drilledhad good shows and was connected to a gas sales line on the 3 April 2007. On 26April 2007 it was producing at 451,000 scfd with minor amounts of oil. Furtherproduction data is required before reserves can accurately be determined. Dos Dedos the third well drilled in the shallow well programme at Margarita. DosDedos is also a gas producer and connection to a gas sales line was completed on26 April 2007, with production commencing at 151,000 scfd. Production andpressure data is required before the reserves can accurately be determination. On 24 April 2007, the Company announced that the Joint Venture had extended theland acquisition programme for the Sugarloaf Project area, increasing the areaover which the Joint Venture has rights to approximately 19,500 acres to date. For further informationLaurence Read/ Ed PortmanConduit PRTel: +44 (0) 207 429 6605/ +44 (0) 7979955923 Empyrean Energy plcTel: +44(0) 207 182 1746 Rod Venables/ Cecil JordaanHB CorporateTel: +44(0) 207 510 8600 This information is provided by RNS The company news service from the London Stock Exchange