31 Jul 2012 10:38
31 July 2012 Red Emperor Resources NL Quarterly Report for the Period Ending 30 June 2012 Issued Capital: 266M * ASX Code: RMP Closing price: A$0.145* AIM Code: RMP Closing Price: £0.088** as at 30 July 2012
The Board of Red Emperor Resources NL (Red Emperor or the Company) is pleased to provide the following commentary and to be read in conjunction with the Appendix 5B (Quarterly Cash Flow Report) which is attached.
Highlights
* Successful completion of landmark first well in Puntland, Somalia in over 20 years (Shabeel 1) * Raised £6.24m (A$9.4m) to sophisticated investors in the UK and Australia * Completion of strategic review of Georgia resulting in revised development strategy * Successful spudding of second well in Puntland (Shabeel North) * Max Capital underwrites options (A$0.30; 30 June 2012)
Puntland Projects
During the quarter Red Emperor's JV partner and operator of its Puntland Project, Horn Petroleum Corp , completed drilling of the landmark Shabeel-1 well on the highly prospective Dharoor Block. This was the first well drilled in Somalia in over 20 years and the first drilled in the Dharoor Basin in over 50 years. The Shabeel-1 well reached a total depth of 3,470 meters and encountered metamorphic basement at a depth of 3,430 meters. In addition to the previously announced 12 - 20m zone of significant hydrocarbon pay in the Upper Cretaceous Jesomma Formation, the well encountered additional potential net pay sands in the Jurassic Adigrat Formation at a depth of 3,246 to 3,430 meters, several of which exhibited oil and gas shows. Petrophysical analysis of the well log data indicated up to 3 meters of potential hydrocarbon pay in several thin sand units.
The drill rig then moved to the Shabeel North location, 3.5 kilometres to the north, where drilling operations commenced in June. The Shabeel North well was targeting the Upper Cretaceous Jesomma sands, which had good oil and gas shows in the Shabeel-1. On the 22nd May, Red Emperor announced the exercise of its option to participate in the Shabeel North well and therefore earn its 20% interest in the two blocks, Dharoor and Nugaal.
Subsequent to the quarter end, the operator conducted an open hole Drill Stem Test over a 50 meter gross interval (between 1,910m - 1,960m) at Shabeel North which contained several sands in the upper portion of the primary Jesomma Formation which had oil shows. The test recovered fresh water (1200 ppm Cl-) without any traces of oil. The well continued drilling through the entire Jesomma reservoir section to reach a depth of 2,200 meters. The section contained several additional sands with oil and gas shows and a full set of electrical logs was run to determine if these sands contained potential oil zones which would warrant further testing. The analysis of these logs indicated that the most prospective looking zone in the well was the upper Jesomma sand interval that had already been confirmed by testing to contain fresh water and thus no further testing could be justified. Based on the positive evidence of oil shows and the presence of good quality reservoir in the Jesomma, the partnership have now decided to deepen the well in order to evaluate the potential of the Lower Cretaceous and Jurassic sections. The current revised total depth is now approximately 3,400 meters. The Jurassic section in the nearby Shabeel 1 well had thin reservoir sands with oil and gas shows, but this section was determined to be not thick enough to warrant testing. These sands are expected to thicken basinward towards Shabeel North. There was also evidence that there may have been faulting in the well which could have cut out a significant portion of the basal reservoir section, which is not expected in Shabeel North.
Georgia Project
During the quarter the joint venture announced a revised development strategy in respect of Blocks VIa and VIb of the Georgia Project. The revised strategy will focus on low-cost, shallow appraisal drilling of the contingent resources around the Tkibuli-Shaori ("Tkibuli") coal deposit, which straddles the central sections of the Company's two blocks.
Tkibuli has been estimated by Advanced Resources International to contain recoverable gas resources of at least 0.4 trillion cubic feet of coal-bed methane ("CBM"). Sand horizons have also been identified around the coal beds, which could add additional, conventional hydrocarbon resources to those estimated for CBM at Tkibuli alone.
By prioritising exploration around the productive coal seams, the Company has the opportunity to make early discoveries, add proven reserves and look to provide revenue potential from the Tkibuli CBM play within 18 months from commencement of development, in conjunction with satisfying its PSA commitments. The joint venture estimates that the pilot programme may commence with a 3 well programme in the fourth quarter of 2012 following initial appraisal programmes.
Agreements have been signed with the Georgian Industrial Group ("GIG") who will look at the joint development of the project alongside the current partners as well as taking 100% of the gas produced from the project under the offtake agreement.
Corporate
During the quarter ended 30 June 2012, the Company successfully completed a placement raising approximately £6.24 million (A$9.4 million) by issue of securities to sophisticated investors in the UK and Australia. In addition a total of 2,474,275 ordinary shares were issued on exercise of unlisted options.
Subsequent to the end of the quarter, the Company issued a further 7,500,000 fully paid ordinary shares to raise gross proceeds of A$2.25 million in respect of underwritten unlisted options exercisable at A$0.30 which expired on the 30 June 2012.
Appendix 5B Summary - Consolidated Statement of Cashflow
Current Year to Date Quarter (12 months) $A'000 $A'000 Cash flows related to operating activities Receipts from product sales and related debtors - - Payments for: * exploration and evaluation (4,197) (18,813) * development - - * production - - * administration (258) (1,369) Dividends received - - Interest and other items or a similar nature 41 154received Interest and other costs of finance paid - - Income taxes paid - - Other Receipts (refunds) - - Net operating Cash Flows (4,414) (20,026) Cashflows related to investing activities Payments for the purchase of: * prospects - - * equity investments - - * investments - - Proceeds from the sale of: * prospects - - * equity investments - - * investments asset acquisition escrow acc - 961 Loans to other entities - - Loans repaid by other entities - 35 Proceeds from underwriting - - Net investing cash flows - 996 Cash flows related to financing activities Proceeds from raisings 11,314 31,210 Proceeds from sale of forfeited shares - - Proceeds from borrowings - - Repayment of borrowings - - Dividends paid - - Costs associated with issue of shares (1,131) (1,981) Net financing cash flows 10,183 29,229 Net increase / (decrease) in cash held 5,769 10,199 Cash at the beginning of the quarter / year to 12,428 7,853date Exchange rate adjustments (153) (8) CASH AT THE END OF THE QUARTER 18,044 18,044For further information please visit www.redemperorresources.com or contact:Red EmperorGreg Bandy +61 8 9225 2826Rebecca Sandford +44 20 7025 7040
Fox-Davies Capital Limited (Nominated Adviser and Joint Broker) Susan Walker
+44 20 3463 5000
Daniel Fox-Davies / Richard Hail +44 20 3463 5000
Old Park Lane Capital plc (Joint Broker)Luca Tenuta / Michael Parnes +44 20 7493 8188Tavistock CommunicationsLydia Eades / Ed Portman +44 20 7920 3150Background
Red Emperor Resources NL is a natural resources exploration company with interests in the frontier state of Puntland, Somalia and the Republic of Georgia.
* In Puntland, Red Emperor holds a 20% working interest in two licences encompassing the highly prospective Dharoor and Nugaal valleys. These two exploration areas cover over 36,000km2. Horn Petroleum, the operator and 60% interest holder, has completed drilling the first well (Shabeel-1) in a two well program and is currently drilling the second well (Shabeel North). Shabeel 1 was drilled to a final depth of 3,470m having encountered a 12-20m zone of potential net pay in the Upper Cretaceous Jesomma Formation. The second well spud in early June 2012 with an original target depth of 2,400m. The Joint Venture has now decided to deepen the well in order to evaluate the potential of the Lower Cretaceous and Jurassic sections. * In the Republic of Georgia, Red Emperor has a 20% working interest in onshore blocks VIa and VIb, covering approx. 6,500km2. Joint Venture partner Range Resources Limited previously funded a 410km 2D seismic program with independent consultants RPS Energy identifying 68 potential structures containing an estimated 2.045 billion barrels of undiscovered oilâ€"inâ€"place (on a mean 100% basis) with the first of two conventional exploration wells (Mukhiani-1) having spudded in July 2011. The Joint Venture is now focussing on a revised development strategy that will target low-cost, shallow appraisal drilling of the contingent resources around the Tkibuli-Shaori ("Tkibuli") coal deposit, which straddles the central sections of the two blocks.
All of the technical information, including information in relation to reserves and resources that is contained in this document has been reviewed internally by the Company's technical consultant, Mr Mark Patterson. Mr Patterson is a geophysicist who is a suitably qualified person with over 25 years' experience in assessing hydrocarbon reserves and has reviewed the release and consents to the inclusion of the technical information.
XLON