Empyrean has provided the following update on operations on the Sugarloaf Project which is part of the Sugarkane Gas and Condensate Field.
As mentioned in Empyrean's interim results for the 6 month period to September 30, 2008, Empyrean has had the ability to revert back to its original 6% interest in Block B if it decided. Empyrean has decided that it is in the Company's best interest to revert back to the original 6% interest in Block B effective immediately.
Empyrean will retain its interest in wells on Block A and B that have already been drilled and completed.
Empyrean will pay 6% of costs for a 6% gross interest (approximately 4.5% net interest after royalties) for all future wells on Block B that it decides to participate in and will revert to a 6% interest on the Weston well which is currently drilling. Empyrean will not be participating in further Block A wells under the present arrangement.
This strategy will dramatically reduce the Company's cost exposure with immediate effect. The Company had already drilled 7 wells out of the 16 well deal. The operator of Block B, Texas Crude Energy Inc, anticipates that if the field is successfully developed then in the range of 140 wells may be drilled on Block B (approximately 1 well per 160 acres).
Commenting today, Empyrean director Tom Kelly stated, "The decision to move back to the original 6% interest in Block B has not been made lightly. The overall potential effect on value to Empyrean is minimal and the immediate effect of reduced cost exposure is dramatic. Empyrean will however have to absorb the impact of writing off a portion of the costs associated with the Weston well that have already been incurred at the higher participating interest. The current economic climate globally is tough and the directors of Empyrean have made this decision conservatively. With revenue from already completed Block A wells coming on stream we will be in far better shape to meet our development obligations given the present market conditions."
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