Empyrean provided the following update on operations at the Sugarloaf Project ("the Project"), an Eagle Ford Shale liquids rich producing field within the Sugarkane Gas & Condensate Field, Texas.
Empyrean holds a 3% working interest in the Project where 24 wells are currently in production within contiguous leases covering an area of approximately 24,000 acres. This area is considered to be one of the premium shale plays in North America.
Marathon Oil Corporation ("Marathon"), the new operator of the Sugarloaf Project, has advised that an accelerated drilling program has been proposed for the Sugarloaf Project during 2012.
The accelerated program is expected to result in a significant increase in the number of wells drilled during 2012 compared with the previous operator's proposed program and the assumptions included in the upgraded reserves estimate prepared by Netherland Sewell and Associates Inc. ("NSAI") and announced October 28, 2011.
The proposed program is expected to involve continuous drilling over the year using multiple rigs and is currently scheduled to commence during the first Quarter of 2012.
As well as targeting a significant increase in 1P reserves and production rates, Marathon's proposed program will include the evaluation of optimum well spacing which will be used to optimize the overall development plan, capital allocation and value realization of the field. The Operator is also considering the appraisal of additional potential production horizons within the Project acreage in 2012.
The board of Empyrean views Marathon's approach to the Sugarloaf development very positively in terms of the capacity for accelerating production and enhancing the overall value of the asset.
In light of this anticipated increase in drilling activity, Empyrean is independently progressing discussions with a number of institutions regarding a reserves-based debt funding facility to allow the Company to participate in all future wells in Marathon's accelerated drilling program for 2012. Empyrean will update the market in due course.
Commenting on the developments, Empyrean CEO, Tom Kelly said, "An accelerated rate of development should increase the Internal Rate of Return for the Project. There will be increased news flow as a result this year and there will be a number of initiatives that, if successful will be very positive for the project as a whole. An exciting year ahead."
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