31 Jan 2012 12:47
31 January 2012 Red Emperor Resources NL ("Red Emperor" or "the Company") Quarterly Report for Period Ending 31 December 2011 Issued Capital 189.65 M* ASX Code RMP Closing price A$0.20* AIM Code RMP Closing Price £0.13** as at 31 December 2011
The Board of Red Emperor Resources Limited is pleased to provide the following commentary to be read in conjunction with the Appendix 5B (Quarterly Cash Flow Report) which is attached.
DECEMBER 2011 Quarter - Highlights * Spudding the first of two historic Puntland exploration wells in the Dharoor Valley * Placement completed raising approximately $6.32 million AUD * Site construction underway for second exploration well in Georgia
Puntland Projects
During the quarter Red Emperor's JV partner and operator of the Puntland Project, Horn Petroleum , commenced site preparation and subsequent drilling of the Shabeel-1 well on the Dharoor Block in Puntland. The exploration well spudded in early January 2012 targeting a depth of 3,800 metres.
Drilling operations have also commenced on the Shabeel North-1 well with the setting of 30 inch surface casing and the drilling of a 50-meter pilot hole. Red Emperor has an option over the second well where a decision to participate will be made over the coming period.
The Sakson 501 rig will be used to drill both wells, which are expected to take approximately 90 days each for drilling and evaluation. These two wells satisfy the first exploration period minimum work obligations of the Production Sharing Contracts for both the Dharoor and Nugaal Blocks. They are the first oil exploration wells to be drilled in over 20 years in the country.
The Shabeel and Shabeel North prospects are located on a Jurassic aged rift system, which is part of the same system that has proven to be highly productive in the Masila and Shabwa Basins in Yemen. These basins contain an estimated 6 billion barrels of oil. Both Shabeel and Shabeel North are very large fault block prospects with internal most likely estimates of potential oil volumes of over 300 million barrels of recoverable oil. Source rocks are expected to be rich Jurassic Kimmeridgian shales in the deep portion of the rift immediately down dip from the Shabeel prospects. Reservoirs are expected to be sandstones and carbonates of the Lower Cretaceous and Jurassic systems analogous to Yemen.
Georgia Project
During the quarter, the Mukhiani Well reached a total depth of circa 1,550m and following analysis of the re-interpretation of the seismic data supported by the Mukhiani-1 Vertical Seismic Profiling (VSP) results indicated that the well encountered previously unrecognised faults that led to possible basement being encountered far earlier than predicted.
New fault trap and stratigraphic trapping potential has been identified in the vicinity of the well and based on these findings, Red Emperor and its partners have the option to side-track and test these targets. The joint venture partners however decided that, based on its exploration schedule and the availability of the drilling rig, it would continue onto the next proposed Kursebi prospect.
The Kursebi well is targeting separate geological structures from the Vani area, with the Kursebi target having been identified using different seismic lines for interpretation purposes.
Subsequent to quarter-end, site construction commenced in readiness for the spudding of the Company's second exploration well in Georgia - the Namakhvani well (TD circa 3,500m) that is the Kursebi 6 Prospect.
Given the unexpected geological sequences encountered with the first well, joint venture partner, Range Resources Limited engaged independent technical consultants NTD Energy to undertake a fresh review of all of the seismic and geological data across the top 3 Kursebi prospects previously identified. The Kursebi-6 prospect was identified as the most robust prospect with a more clearly defined structure and indications of a significantly thicker Jurassic section, increasing chances of encountering more reservoir and mature source rocks.
Below is a best estimate of the gross prospective STOIIP resource of theprospect (100%). STOIIP (Mmbbls) P90 P50 P10 Mean K-6 Prospect - 100% 32.2 84.8 185.8 99.2
Attributable to RMP - 20% 6.44 16.96 37.16 19.84
NTD Energy will assist in the management of the Joint Venture's drilling program for the Namakhavani well along with the supervision of the proposed 2D seismic program on block VIb. NTD Energy will also assist the joint venture in looking at ways of identifying, promoting and developing the unconventional (shale) plays that are said to exist across the two licence areas through the introduction of farm-in partners.
Corporate
During the quarter the Company completed a placement raising approximately $6.32 million by issue of securities to sophisticated investors in Australia and the UK. The funds raised will be used for working capital and to progress the Company's exploration drilling activities in Puntland and Georgia.
Jillewarra Project
During the quarter the company was advised by its JV partner, Cazaly Resources that Maxtrix Metals had not exercised their option to proceed with drilling the Jillewarra Project. As a result of the obligation to spend money on the project reverting back to Red Emperor, it decided to relinquished its rights and as a result, all obligations with respect to the Jillewarra Project.
Appendix 5B Summary - Consolidated Statement of Cashflow Current Quarter Year to date $A'000 (12 months) A$'000
Cashflows related to operating activities Receipts from product sales and related - -debtors Payments for: * exploration and evaluation (2,537) (8,589) * development - - * production - - * administration (371) (851) Dividends received - -
Interest and other items or a similar nature 21 83received Interest and other costs of finance paid - -
Income taxes paid - - Other 2 2 Net operating cashflow (2,885) (9,355)
Cashflows related to investing activities Payments for the purchase of: * prospects - - * equity investments - - * investments- asset acquisition escrow acc - - Proceeds from the sale of: * prospects - - * equity investments - - Loans to other entities - -
Loans repaid by other entities 35 35
Other - - Net investing cashflows 35 35
Cashflows related to financing activities Proceeds from issue of shares, options etc. 6,180 7,580 Proceeds from sale of forfeited shares - -
Proceeds from borrowings - - Repayment of borrowings - - Dividends paid - -
Costs associated with issue of shares (400) (591)
Net financing cashflows 5,780 6,990 Net increase / (decrease) in cash held 2,930 (2,330)
Cash at the beginning of the quarter / year to 2,880 7,853date Exchange rate adjustments (4) 283 CASH AT THE END OF THE QUARTER 5,806 5,806
For further information please visit www.redemperorresources.com or contact:
Red EmperorGreg Bandy +61 8 9212 0102Rebecca Sandford +44 02 7025 7040Cairn Financial Advisers LLP (Nominated Adviser)Jo Turner +44 20 7148 7900
Tony Rawlinson
Old Park Lane Capital plc (Broker)Luca Tenuta +44 20 7493 8188Michael ParnesTavistock CommunicationsPaul Youens +44 20 7920 3150Ed Portman
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