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  • Empire Oil And Gas Raising Up To $6.2M To Fund Finalisation Of Red Gully Gas Plant 0 comments
    Apr 19, 2013 2:54 AM

    Empire Oil and Gas (ASX: EGO) is raising up to $6.19 million to meet the final cost of the Red Gully Gas and Condensate Processing Facility in the North Perth Basin, which is estimated at $34.87 million.

    The funds will be raised through a non-renounceable entitlement issue to existing shareholders of one share for every nine shares held as of 1 May 2013. The new shares are priced at $0.01 each

    Of the funds raise, $5.23 million will be used to pay for Empire's share of the difference in the final cost of the Red Gully facility ($34.87 million) and the $29.1 million estimate given on 20 August 2012.

    The remaining proceeds will be used for the Wannamal 3D Seismic Survey, working capital and the costs of the issue.

    The directors reserve the right to place any shortfall in the offer at their discretion within three months of its close on 20 May 2013.

    Final costs for the Red Gully plant were up by about $5.7 million due to increased construction and commissioning costs including the cost of skilled trades personnel.

    Additionally, as a result of Wharf Resources Plc default, Wharf's 10% share of the ifference for the EP389 costs will be covered by Empire and ERM Gas Pty Ltd. Empire's total share of the difference and of Wharf Resources share is $5,230,547.

    Wharf's default has also increased Empire's share in the EP 389 Joint Venture to 76.39%.

    The final estimate consists of construction costs of about $32.93 million, commissioning costs that are expected to be about $1.34 million and start-up costs of $596,647.

    Start-up costs were not included in the initial estimate.

    Alcoa (NYSE: AA), which is buying gas produced at the facility in two separate tranches, has funded $25 million of the total costs.

    Red Gully

    The Red Gully Gas and Condensate Processing Facility planned construction completion is 1 May, 2013. This will be followed by commissioning carried out by Oceaneering Services Pty Ltd.

    The Facility will produce gas and condensate from the Red Gully-1 and Gingin West-1 wells. Commissioning and early production will be carried out to provide the optimal production rates to maximise condensate yields from the two wells.

    The current discovery wells are very high in condensate, producing between 50 to 80 barrels of condensate (light crude oil) per 1 million cubic feet of gas.

    Gingin West-1 flowed 7.5 million cubic feet (MMcf) of gas and 375 barrels of condensate per day during testing while Red Gully-1 flowed 12MMcf of gas and 832 barrels of condensate during testing.

    The EP389 Joint Venture has a Gas Sales Agreement with Alcoa of Australia, which consists of two tranches.

    The first tranche contains the Forward Gas Sales component under which Alcoa agreed to pay $25 million for the costs of constructing the Red Gully Facility.

    The second tranche, which makes up the majority of the agreement, is a separate and normal Gas Sales Agreement whereby Empire will sell 15,000 terajoules of gas.

    Condensate will be treated to the specification required by the BP Kwinana Refinery. The contract for this is still being finalised.

    Most major components of the facility are now either complete or in their final stages with ongoing testing underway to check the integrity of equipment, piping and electrics.

    Empire has a 76.39% interest in the joint venture while ERM Gas, a subsidiary of EPM Power (ASX: EPW), holds 23.61%.

    Proactive Investors Australia is the market leader in producing news, articles and research reports on ASX "Small and Mid-cap" stocks with distribution in Australia, UK, North America and Hong Kong / China.

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