Empyrean Gains Significant Gas Shows at Sugarloaf in Texas

Empyrean has been advised by the operator that significant further gas shows and multiple gas flares have been encountered over approximately 2,700 feet during drilling of the horizontal section of the well in the target zone. It is important to note that the shows and flares were encountered whilst drilling with relatively heavy mud weight and that the well was observed as trying to flow naturally. This has prompted the operator to cease drilling at a measured depth of 15,100 feet prior to the planned total depth of 17,800 feet in order to carry out a natural open hole test to see if the well will flow commercially without stimulation.

The drilling rig has been released in order to bring in a workover rig to run tubing and commence testing as a natural open hole completion. Depending upon testing results the operator has advised that a water frac may then be used to enhance flow rates. If non-commercial flow rates are sustained following a water frac then it is likely the operator will bring the drilling rig back on site to continue drilling to the original planned total depth.

The testing is expected to commence shortly and a further announcement will be made when the workover rig arrives on site prior to commencing testing.

The commercial significance of the gas shows will not be known until the full results of any testing are analyzed.

Present operations are the running of 41/2" casing to tie back the 41/2" liner in the horizontal section of the well all the way back to the surface. This is being done in order to get a higher pressure rate than the previous 7" casing would allow, such that effective fracture stimulation can be carried out using a conventional gel sand frac. The 7" casing did not allow for high enough pressure to effect the fracture stimulation.

Empyrean Director Tom Kelly said, "The significant gas shows and flares from the TCEI JV Block A-3 well and the fact that the well was trying to flow whilst drilling with heavy mud are very positive developments. If the well flows naturally or with the less expensive water frac, then this is potentially a very exciting development for the potential of wells in this area. In any case this is an exciting well that has encountered several sweet spots whilst drilling and we look forward to the results of testing."