Monday, 6 February 2012

Empire Energy Group hits oil production milestone in Appalachia

Empire Energy Group (ASX:EEG) has reached a production milestone in northern Appalachia, U.S., after flowing oil a rate of 80 barrels per day (bpd) from the first well in a planned workover program.

Besides increasing Empire Energy’s oil production by just over 10%, the flow of oil is also a big boost to its Appalachian production, which had previously averaged about 7 million cubic feet of gas and 7 barrels of oil per day.

At current oil prices average about US$97 a barrel, the new production could also add gross revenue of about US$700,000 per quarter if production is maintained at this rate.

Empire Energy had reported oil production of 71,032 barrels for the quarter ending 31 December 2011, or about 772 bpd.
Reservoir pressure continues to increase with the Bass Island Trend formation well flowing under natural pressure. No water is being produced and the company is upgrading onsite oil storage facilities.

The success of the well is a strong indicator that the remaining wells in the workover program could lead to further production increases for Empire Energy.

The Bass Island Trend formations are fractured carbonate reservoirs of relatively high porosity which runs through Chautauqua, Cattaraugus and Erie Counties, New York State, where a large portion of the Company’s oil and gas leases are held.

The Bass Island Trend is a known oil producer that has been difficult to target though modern 3D seismic technology has improved the ability to achieve success.

Empire Energy said the workover program of existing wells is part of a review of more than 2000 wells in its Appalachian assets that produce mainly from the Clinton/Media and Queenston formations.

These formations cover more than 300,000 acres in Pennsylvania and New York States between the Marcellus and Utica shale formations.

The Appalachian Basin holds the distinctions of being where the first U.S. oil discovery was made along with being one of the most active drilling areas in the country.

It contains a large number of potentially-productive formations that give it a 97% success rate for gas wells.

Shale plays

Further production growth could come from Empire Energy’s Marcellus and Utica shale plays in New York, with the State’s Department of Environmental Conservation possibly issuing permits for high volume hydraulic fracturing before mid-year.

While the moratorium on fraccing was lifted in July last year, no new permits will be issued until a review is completed.

The department is currently reviewing comments submitted during the 60-day public comment period of its recommendations for shale development and production.

This process is expected to be completed by spring 2012 though the department’s current position is that drilling fracture stimulation can be done safely as long as strict regulations are followed.

About 85% of the Marcellus Shale, where Empire Energy holds a 220,000 gross acreage position, would be accessible to natural gas extraction under the new recommendations.

Empire Energy’s Marcellus Shale acreage contains an estimated P50 gas Resource of 49.5 billion cubic feet and potential oil Resource of 70.3 million barrels.

The company also has 180,000 gross acres in the Utica Shale, which is also covered by the hydraulic fracturing review and new recommendations.

Here Empire Energy has discovered shale thicknesses of between 150 and 300 feet. The acreage has a P50 gas Resource of 5 trillion cubic feet.


Empire Energy remains well placed to continue with its operations.

Besides reporting revenue of US$7.17 million in the December 2011 quarter, the company also retains US$91.9 million in its credit facility from Macquarie Bank.

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