Level 7, 151 Macquarie Street
Sydney NSW 2000
Ph: 9251 1846
Fax: 9251 0244 (ASX: EEG) (OTCQX: EEGNY)
www.empireenergygroup.net
Quarterly Report - For the period ending 30 September 2016
21 October 2016
3rd QUARTER OVERVIEW
The Directors wish to provide the following update on the Company's operations:
-
Estimated revenues US$3.5 million (2Q2016: US$3.5 million).
-
Gross production
o Oil: 48,530 Bbl (2Q2016: 49,766) -2.5%
o Gas: 587,421 Mcf (2Q2016: 559,764) +4.9%
-
Unaudited Operating EBITDAX US$1.7 million (2Q2016: US$1.5 million).
-
Estimated Group EBITDAX for the period was US$0.88 million (2Q2016: US$0.47 million).
-
In the Northern Territory, an ongoing work program continues to define the Tawallah Group resource (Wollogorang and McDermott Formations) in EP 184 and EP 187 increasing prospective P50 resource to more than 2 billion barrels of oil equivalent.
OPERATING REVIEW
-
EMPIRE ENERGY USA, LLC (100%)
The Company's USA operations are in the Mid-Con (oil) and the Appalachian Basin (oil & gas). The Company remains focused on reducing operating costs and overheads.
-
Appalachia (Western New York and Pennsylvania)
The Company is continuing to work with smaller producers with pipeline systems that will allow Empire to move gas from sales points with high transportation charges to points without these charges. Objectives are to gain up to $0.50/Mcf. A recent review of operations by the DEC confirm no modifications to our oil producing facilities are required.
-
Mid-Continent (Kansas and Oklahoma):
-
Production for the third quarter of 2016 was 553 barrels of oil equivalent per day (BOED), a decrease of 51 BOED compared with the same period a year ago. The decrease was the result of normal field decline and planned production curtailment partly offset by improved well performance. A flat to slightly increasing production curve for the year was realized. A concerted effort to reduce lifting costs continued, resulting in a 12% decrease year over 2015. Capital expenditures remained nil for the quarter and rebounding oil and gas prices, coupled with lower service costs, are making drilling and recompletion activities more attractive. Acquisition opportunities continue to be evaluated.
Production:
|
3 months to
|
3 months to
|
Year-to-Date
|
Year-to-Date
|
|
Description
|
30/09/2016
|
30/09/2015
|
30/09/2016
|
30/09/2015
|
|
Gross Production:
|
|
Oil (Bbls)
|
48,530
|
55,084
|
146,665
|
167,042
|
|
Natural gas (Mcf)
|
587,421
|
594,221
|
1,744,891
|
1,691,859
|
|
Net Production by Region:
|
|
Oil (Bbls)
|
|
Appalachia
|
695
|
1,539
|
2,369
|
3,166
|
|
Mid-Con
|
30,590
|
34,091
|
90,262
|
104,645
|
|
Total Oil
|
31,285
|
35,630
|
92,631
|
107,811
|
|
Weighted Avg Sales Price ($/Bbl)
|
|
Before Hedge
|
38.80
|
41.31
|
36.21
|
45.57
|
|
After Hedge
|
60.88
|
71.32
|
61.46
|
72.20
|
|
Natural gas (Mcf)
|
|
Appalachia
|
456,704
|
470,204
|
1,380,746
|
1,334,612
|
|
Mid-Con
|
2,872
|
1,289
|
10,884
|
7,990
|
|
Total Natural Gas
|
459,576
|
471,493
|
1,391,630
|
1,342,602
|
|
Weighted Avg Sales Price ($/Mcf)
|
|
Before Hedge
|
2.19
|
1.83
|
1.65
|
1.94
|
|
After Hedge
|
3.30
|
3.65
|
3.07
|
3.83
|
|
Oil Equivalent (Boe):
|
|
Appalachia
|
76,812
|
79,907
|
232,493
|
225,602
|
|
Mid-Con
|
31,069
|
34,306
|
92,076
|
105,977
|
|
Total
|
107,881
|
114,213
|
324,569
|
331,579
|
|
Boe/d
|
1,173
|
1,241
|
1,185
|
1,210
|
|
Weighted Avg Sales Price ($/Boe)
|
|
Before Hedge
|
20.58
|
20.46
|
17.42
|
22.69
|
|
After Hedge
|
31.73
|
37.30
|
30.72
|
38.98
|
|
Lifting Costs (incl. taxes):
|
|
Oil - Midcon (/Bbl)
|
22.84
|
23.05
|
22.03
|
24.53
|
|
Natural gas - Appalachian (/Mcf)
|
1.94
|
2.15
|
1.95
|
2.20
|
|
Oil Equivalent (/BOE)
|
14.88
|
16.05
|
14.64
|
16.89
|
|
Net Back ($/Boe)
|
16.85
|
21.25
|
16.08
|
22.09
|
Financials:
|
3 months to
|
3 months to
|
Year-to-Date
|
Year-to-Date
|
|
Description
|
30/09/2016
|
30/09/2015
|
30/09/2016
|
30/09/2015
|
|
Net Revenue:
|
|
Oil Sales
|
1,904,695
|
2,541,083
|
5,693,046
|
7,783,847
|
|
Natural Gas Sales
|
1,516,583
|
1,716,389
|
4,270,888
|
5,131,601
|
|
Working Interest
|
2,095
|
2,263
|
5,278
|
8,956
|
|
Net Admin Income
|
88,437
|
87,216
|
282,137
|
262,801
|
|
Other Income
|
33,630
|
22,504
|
88,469
|
39,479
|
|
Total Revenue
|
3,545,440
|
4,369,455
|
10,339,818
|
13,226,684
|
|
Production costs:
|
|
Lease operating expenses - Oil
|
672,360
|
822,909
|
1,890,129
|
2,496,505
|
|
Lease operating expenses - Gas
|
747,676
|
850,775
|
2,258,700
|
2,390,063
|
|
Taxes - Oil
|
43,027
|
30,224
|
121,762
|
180,037
|
|
Taxes - Natural Gas
|
44,626
|
28,183
|
119,572
|
196,304
|
|
Total
|
1,507,689
|
1,732,091
|
4,390,163
|
5,262,909
|
|
Field EBITDAX
|
2,037,751
|
2,637,364
|
5,949,655
|
7,963,775
|
|
Less:
|
|
Inventory adjustment
|
(16,049)
|
(94,744)
|
45,132
|
124,990
|
|
Reserve Enhancements
|
11,000
|
14,343
|
21,606
|
14,841
|
|
Nonrecurring expenses
|
129,481
|
142,679
|
620,471
|
637,782
|
|
G & G Costs
|
486
|
573
|
19,795
|
41,396
|
|
Field Overhead
|
223,000
|
204,000
|
709,000
|
584,000
|
|
Total
|
347,918
|
266,851
|
1,416,004
|
1,403,008
|
|
Operating EBITDAX
|
1,689,833
|
2,370,513
|
4,533,651
|
6,560,767
|
|
Less:
|
|
Field G & A
|
196,608
|
187,330
|
552,997
|
634,551
|
|
Corporate G & A
|
364,207
|
376,004
|
1,243,160
|
1,203,794
|
|
Delay rental payments
|
29,313
|
12,764
|
130,405
|
62,676
|
|
Land Overhead & Non-leasing costs
|
-
|
8,299
|
4,345
|
1,504
|
|
Dry hole expenses
|
-
|
-
|
-
|
-
|
|
Total
|
590,128
|
584,397
|
1,930,907
|
1,902,525
|
|
EBITDAX
|
1,099,705
|
1,786,116
|
2,602,744
|
4,658,242
|
Revenue estimates have been made for the last 2 production months of the quarter under review due to customer payment/invoice cycles. As such, there may be changes to production, revenues and operating ratios for the previous quarter as final production statements are received.
Exploration/Acquisition Expenses:
|
3 months to
|
3 months to
|
Year-to-Date
|
Year-to-Date
|
|
Description
|
30/09/2016
|
30/09/2015
|
30/09/2016
|
30/09/2015
|
|
EBITDAX
|
1,099,705
|
1,786,116
|
2,602,744
|
4,658,242
|
|
Less:
|
|
Geological Services
|
3,900
|
21,056
|
16,611
|
37,794
|
|
Acquisition related expenses
|
1,500
|
54,645
|
54,960
|
156,076
|
|
Capital raise expenses
|
-
|
-
|
30,214
|
17,115
|
|
Total
|
5,400
|
75,701
|
101,785
|
210,985
|
|
EBITDA
|
1,094,305
|
1,710,415
|
2,500,959
|
4,447,257
|
Net Earnings:
Unaudited earnings for the period are shown below:
|
3 months to
|
3 months to
|
Year-to-Date
|
Year-to-Date
|
|
Description
|
30/09/2016
|
30/09/2015
|
30/09/2016
|
30/09/2015
|
|
EBITDA
|
1,094,305
|
1,710,415
|
2,500,959
|
4,447,257
|
|
Less:
|
|
Depn, Depl, Amort & ARO
|
706,546
|
1,497,144
|
2,170,997
|
4,504,094
|
|
Interest
|
668,719
|
499,074
|
1,681,918
|
1,509,427
|
|
(Gain) loss on sale of assets
|
-
|
(1,200)
|
-
|
617,491
|
|
P&A vs. ARO
|
-
|
-
|
-
|
143,278
|
|
Bad debts
|
-
|
11,638
|
-
|
11,638
|
|
Non-Cash & Interest Expenses
|
1,375,265
|
2,006,656
|
3,852,915
|
6,785,928
|
|
Earnings before Tax
|
(280,960)
|
(296,241)
|
(1,351,956)
|
(2,338,671)
|
|
EBITDA/Interest (times)
|
1.64
|
3.43
|
1.49
|
2.95
|
Capital Expenditure/Asset Sales:
|
3 months to
|
3 months to
|
Year-to-Date
|
Year-to-Date
|
|
Description
|
30/09/2016
|
30/09/2015
|
30/09/2016
|
30/09/2015
|
|
Capital Expenditures
|
|
Acquisition Capital
|
-
|
(1,234)
|
49,034
|
50,253
|
|
New Wells - IDC
|
(3,520)
|
(7,624)
|
592,424
|
92,857
|
|
New Wells - Capital
|
271
|
(41,219)
|
16,555
|
22,078
|
|
Undeveloped Leases
|
305
|
53,305
|
31,663
|
445,711
|
|
Capital Expenditures
|
(2,944)
|
3,228
|
689,676
|
610,899
|
Credit Facilities:
At the end of the quarter the Company had US$40.5 million drawn at an average cost of LIBOR + 6.5%. Empire Energy retains Credit Facility availability of US$159.5 million, which can be utilized for acquisitions and development drilling subject to normal energy borrowing base requirements.
|
Drawdown End of Qtr
|
Interest Rate
|
|
US$M
|
LIBOR +
|
|
Term
|
$37,503
|
4.50%
|
|
Revolver
|
$3,000
|
2.50%
|
|
$40,503
|
4.35%
|