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Empyrean Energy boosted as Marathon reveals Sugarloaf plans

Last updated: 18:51 13 Dec 2013 AEDT, First published: 19:51 13 Dec 2013 AEDT

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AIM quoted Empyrean Energy (LON:EME) reckons it is set for improved production and reserves as Marathon Oil, the operator of the Sugarloaf project in the Eagle Ford play, accelerates the pace of drilling.

Empyrean relayed details from a Marathon analyst presentation, delivered earlier this week, the highlights of which are that pilot ‘spacing’ wells that are located closer together delivered higher production.

As a result, the American major will now increase the pace of drilling, focusing on ‘downspacing’ and optimisation.

Marathon also said that the first pilot of the Austin Chalk, the other play type at Sugarloaf, was successful and delivered similar volumes to a typical Eagle Ford production curve, over 90 days.

There is, as a result, a commitment by Marathon to co-develop the Austin Chalk along with the Eagle Ford, which will allow them to leverage existing infrastructure. As such, it plans to further delineate the Austin Chalk and the upper Eagle Ford play in the first half of next year.

"Marathon's operational performance has been excellent and it continues to deliver greater efficiency and is committed to replacing and growing reserves through downspacing, optimisation and the co-development of other horizons such as the Austin Chalk,” said chief executive Tom Kelly.

“The importance of the downspacing pilot results and the potential impact on recoveries, reserves and value needs to be emphasised.

“Empyrean believes that the results of the Austin Chalk pilots and the stated objective to aggressively pursue co-development plays, coupled with the ability to leverage off of existing infrastructure, is becoming the most exciting value driver for the Sugarloaf project.

“The Austin Chalk is not currently reflected in Empyrean's reserves and Marathon's commitment to and planning of further wells in 2014, designed to delineate this play, can have a significant and positive impact on reserves and value in the near term.

He adds: “Empyrean believes that an accelerated drilling pace, in conjunction with the tighter spacing regime, will have a positive impact on reserves and production especially if Marathon is able to achieve their stated completed well cost targets."

"To have a low risk, liquids rich Eagle Ford Shale development play with a high calibre operator such as Marathon delivering operational efficiencies, reserves growth, optimisation and value is exceptional and we can also benefit from a low risk bolt-on co-development play in the Austin Chalk that can potentially deliver significant reserves and value growth in the near term."

Empyrean has a 3% working interest in 24,300 acres of the Sugarloaf project, in the central liquids rich area.

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