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Empire Energy Group moves closer to monetisation of New York gas assets

Empire Energy Group (ASX: EEG) is likely to be encouraged by the New York State Department of Environmental Conservation’s statement last week that it is expected to finish its review of high-volume hydraulic fracturing in the State by March 2012.

The Department of Environmental Conservation’s current position is that the controversial drilling technique can be done safely, with strict regulations, which means, importantly for Empire Energy, drilling permits for hydraulic fracturing could quickly follow.

The department imposed a formal suspension on oil and gas drilling using the high-volume hydraulic fracturing method in New York in December last year.

In July, the State announced the suspension had ended following the release of recommendations for shale development and production.

At the same time it announced a 60-day public comment period starting in August. This was meant to be concluded on December 12, but will now run until January 11, 2012 as a result of the large volume of comments the Department of Environmental Conservation received on its latest draft of the report.

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.

High-volume fracturing would be permitted on privately held land under rigorous and effective controls.

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 190,000 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 Undervalued

Last month Empire Energy was the subject of a research report by a New York-based equity research firm which, by using a peer EV/2P reserve multiple, placed a price target of above A$0.52 on the company – well above the last traded price of $0.10.

With the lifting of the New York State Department of Environmental Conservation’s de facto moratorium in July, Empire Energy can now seek ways to monetise the Marcellus and Utica Shale acreage.

The company owns assets in Pennsylvania and New York and the lifting of the hydraulic fracturing moratorium could prove to be a trigger for Empire Energy and enable it to increase its natural gas resources.


Cash

At the end of the September quarter Empire Energy held US$9.38 million (A$9.22 million) in cash.