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RED EMPEROR RESOURCES NL - Quarterly Report

PR Newswire

London, July 28

28 July 2015

Red Emperor Resources NL (“Red Emperor”)

Quarterly Reports

For The Period Ending 30 June 2015

The Board of Red Emperor Resources NL (“Red Emperor” or the “Company”) is pleased to provide the following commentary and Appendix 5B for the period ending 30 June 2015.

Philippines (SC55)

Red Emperor announced on 24 July 2015 that the Company had received formal notification from the Philippines Department of Energy that approval for the assignment of its 15 per cent. working interest in Block SC55 had been granted. This was the final condition precedent to be met with respect to Red Emperor’s farmin agreement with Otto Energy Ltd (ASX: OEL) ("Otto"). With all conditions satisfied, the Company confirmed that the agreement had been completed.

During the quarter the Company also announced that its Joint Venture partner and Operator of Block SC55, Otto, had executed a binding contract with Maersk Drilling to secure the Maersk Venturer ultra-deepwater drill ship to drill the Hawkeye-1 exploration well. Maersk Drilling was issued with a formal notice in respect of the mobilisation to the Hawkeye-1 location in early July 2015. Mobilisation will commence on or around 31 July 2015 and is expected to take approximately 1 to 2 days, with drilling operations to commence upon arrival of the rig on location. The well is expected to take around 23 days to drill.

The total expected cost remains within guidance of US$30 to $35 million. This cost is a dry-hole well-cost estimate. If the well encounters hydrocarbons then a more detailed evaluation, including well logging, will be undertaken. Red Emperor’s well-cost exposure is capped at US$5.625 million.

SC55 is located in the southwest Palawan Basin and covers an area of 9,880km2. It is a deep-water block in the middle of a proven regional oil and gas fairway that extends from the productive offshore Borneo region in the southwest to the offshore Philippine production assets northwest of Palawan. The Hawkeye prospect was identified on 2D seismic in 2007 and further defined with a 600km2 3D seismic acquisition in late 2009. Hawkeye contains a 'Best Estimate' STOIIP of ~480 MMbbls of oil and a 'Best Estimate' Gross Prospective Resource of 112 MMbbls (RMP net 14.3 MMbbls).

Puntland

During the quarter Red Emperor’s Joint Venture ("JV") partner and operator, Africa Energy Corp. (previously Horn Petroleum Corp.) (together "Africa Energy" or the "Operator"), gave notice to the Puntland State of Somalia advising of its intention to withdraw from the January 2007 Production Sharing Agreements (“PSAs”) which cover the Nugaal and Dharoor Blocks.

In its notice to the Puntland Petroleum and Minerals Agency, Africa Energy cited the uncertainty of the current political climate in Somalia, especially in respect of the disagreement between the Federal Government of Somalia and the regional government of Puntland, over the legitimacy of the PSAs and potential territorial claims on the Nugaal Block as the principal reasons for its decisions. 

Whilst Red Emperor is disappointed with this outcome, the Company acknowledges the political uncertainties that have existed within the country, the state and the region over the past 3 years, preventing the Joint Venture from conducting the activities required under the terms of the PSAs. Red Emperor supports the Operator in its decision to withdraw from the PSAs.

Georgia

During the quarter, the Georgian Ministry of Energy formally notified Strait Oil & Gas Limited ("Strait") that the Production Sharing Contract (PSC) over Block VIb had been terminated. The Ministry cited the non-performance of obligations, specifically the requirement to drill a well in accordance with the stipulated procedure. Red Emperor notes that this obligation has been acknowledged by its JV partner, Range Resources Limited (ASX: RRS, AIM: RRL, “Range”), both internally within JV correspondence as well as publicly. 

Red Emperor believes it fulfilled its obligations with respect to Block VIb, specifically cash contributions towards the second well of a two well program, as per its Shareholder and Subscription Agreements (the "Agreements"). The Company continues to reserve any and all legal rights under the Agreements.

This outcome does not, in any way, affect the validity of Block VIa, which remains the subject of interest from various third party participants seeking to either acquire or farmin to the block. Negotiations have yet to progress to a level that warrants disclosure, however the Company looks forward to updating the market in due course.

Corporate

During the quarter the Company announced an oversubscribed placing through its London broker, Brandon Hill Capital, and its Australian broker, 708 Capital, of 72,000,000 new ordinary shares at 4 pence (A$0.08) per share to raise £2.88 million (A$5.76 million) before expenses. Proceeds from the raise and existing cash resources will principally be used to fund the upcoming drilling and potential appraisal activities in the Philippines.

For further information please visit http://www.redemperorresources.com/ or contact:

Red Emperor Resources:

Greg Bandy +61 8 9212 0102

Grant Thornton UK LLP (Nominated Adviser):Philip Secrett, Jen Clarke, Jamie Barklem 020 7383 5100

Appendix 5B

Mining exploration entity and oil and gas exploration entity quarterly report

Introduced 01/07/96 Origin Appendix 8 Amended 01/07/97, 01/07/98, 30/09/01, 01/06/10, 17/12/10, 01/05/2013

Consolidated statement of cash flows