Red Gully-1B Sands Perforation & well Test Program Update

Empire Oil & Gas has received the final approval needed to conduct the Red Gully-1 Perforation and Well Test Program in WA. The program is aimed at increasing gas sales and enabling Empire to obtain independent reserves certification at Red Gully.

Approval of the Environmental Plan from the Western Australia Department of Mines and Petroleum means Empire is set to proceed with its Red Gully-1 B Sands Perforation and Well Test Program early next month. All the gas and condensate currently processed at the Red Gully facility and sold under contract to Alcoa of Australia and BP respectively comes from the D Sands of the Red Gully-1 and Gingin West-1 wells.

The impending program will test the B Sands of Red Gully-1, which sit above the D Sands and house the bigger of the two gas pools. The objective is to establish that the B Sands contain sufficient gas to enable the EP 389 Joint Venture to supply the 15PJ to Alcoa as contained in the current Gas Supply Agreement (GSA) and to determine if there is any gas for further sales.

By ensuring gas is available to meet Tranche Two of the Alcoa GSA, the joint venture can generate significant additional cashflow. The well is also aimed at enabling Empire to gain independent reserve certification for the B Sands by production flow-testing (via the Red Gully Facility) for six to nine months.

The production performance of Red Gully-1 to date has indicated that the reserve recovery of the D Sands is likely to be lower than originally expected due to significant pressure depletion. Further down-hole pressure data will be recovered on the D Sands during the B Sands perforation operations. This bottom-hole pressure data combined with the Wannamal 3D seismic mapping will allow a more accurate estimate of recoverable reserves from the D Sands.

Empire has awarded the Contract for Services to conduct the Red Gully-1 Well Program to Expro Group Australia Pty Ltd, which is the wholly owned Australian subsidiary of Expro Group, a leading international company headquartered in the UK. With over forty years of experience in the oil and gas industry and over 5,000 employees across 50 countries, Expro operates in all the major hydrocarbon producing areas of the world.

Expro is scheduled to mobilise equipment and personnel to site by 9 June to commence the Red Gully-1 Well Program. A specialised contractor will also be on site to change-out the Red Gully-1 “Xmas Tree” by removing the current wellhead and installing the new wellhead.

The Red Gully-1 Well Program, the change-out of the Red Gully-1 well “Xmas Tree” and the associated shutdown of the Gingin West-1 well due to its close proximity to the work and the Red Gully Processing Facility is expected to last 12-15 days in total.

During this period, scheduled maintenance on the facility will be completed along with some work which will improve the operational performance of the facility. Preparation of the site has already commenced in preparation for the mobilisation of Expros’ equipment and the arrival of personnel on site. The shutdown of both wells and the facility will commence just prior to Expro mobilising to site.

Empire intends to fund its share of the cost of the Red Gully-1 Well Program and substitute the deferred condensate revenue during this shut-down period by drawing down $1m on the credit facility provided to the Company by major shareholder ERM Power. This drawdown is expected to occur before the end of May.