Transcription of Finance News Network Interview with Empire Oil & Gas NL (ASX:EGO) Managing Director, Craig MarshallLelde Smits: Hello I’m Lelde Smits for the Finance News Network and joining me today from West Australian explorer and producer, Empire Oil & Gas
(ASX:EGO) is its Managing Director, Craig Marshall. Craig welcome to RIU’s Good Oil Conference here in Perth.
Craig Marshall: Thank you very much.
Lelde Smits: Empire Oil & Gas has recently achieved producer status at the Red Gully processing facility in the Perth Basin. What is currently being produced and at what levels?
Craig Marshall: We’re producing at around about 10 million feet a day and around about 500 barrels of condensate a day, from two discovery wells - Gingin West-1 and Red Gully–1. Red Gully-1 floated 12 million feet a day and 832 barrels of condensate, and that’s the largest gas and condensate flow rate from an onshore well, from the Jurassic.
Lelde Smits: And could you talk us through some potential plans for ramp up and the likelihood Red Gully could expand?
Craig Marshall: The Red Gully facility has the capability of going up threefold to 30 million feet a day, and associated condensate. So when we constructed the facility, we designed it so that it can be duplicated or indeed, made greater than that by its design. So the flow line from the well to the Dampier-Bunbury pipeline, can take 30 million feet a day. So the prospects next door, immediately next door to the Red Gully facility, have the potential for 200 – additional 200 BCF of gas and 10 million barrels of condensate.
Lelde Smits: Now Empire has chosen to sell gas to Alcoa
(ASX:AAI). What are the terms of the deal and your relationship with the company?
Craig Marshall: For Alcoa to enter into a contract with ourselves to supply Perth Basin gas, is good for them and fantastic for us. So we have a great working relationship. So what we’ve done is we have sold - we’ve entered into a contract for 15,000 terajoules, or that’s 15 petajoules. Or in another language, it’s 15 billion cubic feet of gas of which a small portion was a forward gas sales contract, for $25 million. And the balance and the majority of that will be a straight forward gas sales contract. The $25 million, that was the forward gas sales component, went towards building the Red Gully facility.
Lelde Smits: And who else could you possibly sell gas to in the future?
Craig Marshall: Well considering our relationship with Alcoa, we would certainly approach them first. I think that’s sort of an unwritten thing that we would like to do and they certainly would like any additional gas that we could supply. Although we have been approached by others, including the State utilities Verve, Alinta and Synergy, and also other consumers of gas.
Lelde Smits: Looking closer at your exploration strategy now. How have you structured your drilling campaign over the next few months, where and what will you be targeting?
Craig Marshall: Oil. In the North Perth Basin, three wells - Dunnart-1 near Dongara, Charger near Three Springs and Black Arrow near Jurien Bay. All three of those are relatively shallow wells and we’re using a top drive rig, thousand metres and the size of the prize - Dunnart 3 to 5 million barrels, Black Arrow 10 million barrels and Charger 20 million barrels.
Lelde Smits: And could you talk us through your gas exploration strategy?
Craig Marshall: Well we’ll be targeting drilling prospects identified right next door to our Red Gully facility. And those amount to potential resource of 200 BCF of gas and 9.2 million barrels of condensate. So how are we going to do that? We’re going to use certain new technologies, including new drilling technologies which weren’t available in the Sixties where two wells, discovery wells were drilled - Gingin one and two which both flowed gas. So obviously we’re targeting any area where we know gas is gassy and we can recover gas, and treat it at the Red Gully facility.
Lelde Smits: So as you continue exploration, how have you structured your funding model?
Craig Marshall: Well we have revenue and we have revenue from condensate, by trucking around about 500 barrels of condensate to the refinery every day. Because that’s dependent on your dollar exchange in your pricing and we’re priced off Brent, so that’s a Brent all price. So essentially, if it is $100 that’s $50,000 a day, and then you’ve got to take off a few costs but still revenue is substantial. The other thing we want to do is accelerate our drilling programs. And the best way for us to do that is to leverage off some of the equities, high equities we have in the 11 exploration permits we have.
Lelde Smits: With production ramping up along with exploration, what do you anticipate will be the Company’s next major milestones?
Craig Marshall: Hopefully we can get a discovery out of our shallow programs that are all good shots, they’ve all been risked, they’re not deep. But of course the most important milestone is accelerating our drilling program, next door to our Red Gully production facility and that’ll be in 2014 also. So we’re looking to drill back to back wells on the lowest risk prospects that we had first, not necessarily the largest.
Lelde Smits: Craig Marshall, thank you for the update to Empire Oil & Gas.
Craig Marshall: My absolute pleasure.
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