29.10.2007 Empyrean Energy Gets Some Encouraging If Inconclusive News From Its Kennedy-1 Well On Its Sugarloaf Prospect In Texas. The latest drilling report from London AIM-listed Empyrean energy concerns its Kennedy-1 exploration well on the Sugarloaf prospect in Texas, US. The well is drilling ahead at a measured depth of 13,481 feet. The planned measured depth of this well is 17,570 feet.
Since its previous report casing was successfully run and cemented at a depth of 12,719 feet followed by the start of drilling the horizontal section within the target Austin Chalk upper zone. There are background gas levels broadly consistent with those found in shallower zones.
The re-frac of the deepest of the three zones of gas shows, and log interpreted potential gas play in the Cretaceous age Austin Chalk formation, was undertaken, with all of the Frac protant injected into the formation as per the programme. The lack of significant hydrocarbon recovery and the flow pressures seen, to date indicate that this deepest zone of the Austin Chalk is unlikely to be commercially productive at this location.
In other words, there looks as if there is gas in the shallower zones but we do not know how much at this point. Empyrean has assets in Germany but it is focused in the US, like other small independents from the UK and Australia, because the high prices available for gas and the good infrastructure make it worthwhile revisiting low risk discoveries which were not deemed worth exploiting by the companies which originally discovered them. The low cost nature of the assets means that even the most junior of companies can quickly build up a good cash flow business.
Sugarloaf is important to Empyrean because it represents a potential step up from the modest developments the company has achieved on Project Margarita, also in Texas. You are talking about the difference between hundreds of thousand of cubic feet a day to possibly millions of cubic feet a day from individual wells.
The Sugarloaf prospect covers 60 sq km in the prolific Gulf Coast Basin of Texas and lies just 6.6 km east of the producing Sugarkane gas-condensate field. Empyrean has a 6 per cent working interest in the Texas Crude Energy operated project which was first drilled in 2006 when Sugarloaf-1 found tight reservoir sands in the primary Cretaceous-aged Hosston formation.
This was a disappointment but the compensation was that there was at least 92 feet of potential gas play in a shallower secondary target, the age Carbonates. So the shallower zones looked prospective if the deeper ones don’t.
On the basis of past drilling Empyrean extended its interests. It has farmed into a 12 well programme (Kennedy-1 is the first well) over Sugarloaf Block A and Block B. Empyrean will earn a 7.5 per cent interest in Block A by paying 12.5 per cent of the pre-production costs. The first well here, a horizontal appraisal of a putative gas reservoir, encountered encouraging gas shows.
Empyrean also has an 18 per cent working interest in Block B, where, as part of the programme, the Kennedy-1 well is taking place. It is early days but it is suggested there could be a multi-tcf gas target to be exploited.
There is also movement on Project Margarita, the other Texas asset. A six well drilling programme has meant output of around 2 million cubic feet of gas a day and some 60 barrels a day of oil. Empyrean has 44 per cent of this acreage, and at current prices for both oil and gas there is good cash flow.
But it was always agreed that if the shallow low cost/low risk wells came good, the partners would graduate to three deeper, high impact wells on Project Margarita. The first proposed prospect is a potential gas accumulation of between 15 and 48 billion cubic feet.
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