🕐20.05.14 - 09:54 Uhr

CENKOS RESEARCH- EMPYREAN ENERGY (EME.L) RESERVES UPGRADE - BUY - UPGRADED TP TO 31P - 24% INCREASE



Good morning Cenkos has increased its price target for Empyrean Energy by 24% to 31p (from 25p) on the back of a major increase in its Reserves and Resources at the Marathon Oil operated Sugarloaf AMI project, Texas, in which Empyrean has a 3% Working Interest.

The reserves figure includes a maiden 2C Contingent Resources figure which reflect the recent drilling of new appraisal wells targeting the Austin Chalk which Marathon has announced its intention to drill. Cenkos analyst Ashley Kelty describes how the drilling of this formation, which lies directly above the Eagle Ford Shale, offers transformational upside in the short term as 2014 plans from Marathon to drill the formation will provide near term scope to upgrade the contingent resources to reserves.

There are also aggressive plans to drill further wells on the Eagle Ford Shale this year. Please find the press release and the full note attached.

The share price is currently up 2.36% to 16.25p. Best Lizzie
[cid:image002.png@01CECBDD.61F8A860] Elisabeth Cowell St Brides Media & Finance Ltd 3 St Michael’s Alley, London, EC3V 9DS www.stbridesmedia.co.uk Tel: 0207 236 1177 | Mob: 07900248213 | Twitter: @StBrides1
[Description: Description: Description: Cenkos] [Description: Description: Description: Cenkos] Empyrean Energy (EME.L) Reserves Upgrade BUY Price at COB 19 May 2014 15.5p Market Cap £m 34.20
Empyrean announced an upgrade to its reserves following the publication of an updated Competent Persons Report by DeGolyer & McNaughton on its Sugarloaf asset onshore Texas.

Reserves net to Empyrean are now assessed as follows: n 1P 3.54mmboe – up 53% from 2.32mmboe n 2P 6.52mmboe – up 48% from 4.40mmboe n 2C 3.87mmboe – new resources added for the Austin Chalk interval The increase is reflective of the number of new producing wells across the Sugarloaf AMI, along with optimisation initiatives including well down spacing and improved fraccing techniques.

The most notable addition to the resource base is the inclusion of 2C contingent resource for the Austin Chalk interval (which overlies the Eagle Ford Shale), which operator Marathon has indicated that it will co-develop across the acreage alongside the Eagle Ford shale.

Marathon plans to drill around 100 wells at Sugarloaf in 2014, and these will be a combination of wells targeting the Eagle Ford and Austin Chalk formations.

The Austin Chalk offers transformational upside for Empyrean across the acreage and, in the event of further success from the Austin Chalk, we anticipate an increase in both production and reserves. The anticipated full development of the Sugarloaf AMI envisages around 500 Eagle Ford Wells (at 40 acre spacing) and 260 Austin Chalk wells (at 60 acre spacing). With the material growth in production over the last year set to continue, coupled with transformational upside from the Austin Chalk, we believe Empyrean offers a low cost entry to investors seeking exposure to the US shale play. We have upgraded our price target to 31p (from 25p) to reflect the addition of the 2C resource for the Austin Chalk and maintain a BUY recommendation. Forecasts and Ratios
Year End March
2012A
2013A
2014E
2015E
2016E
Oil/Gas Production (boe/d))
170
374
750
937
1,125
Revenue (£m)
2.7
5.9
10.1
11.9
14.5
EBITDA
1.8
3.8
7.4
8.8
10.9
PBT (£m)
0.7
2
5.7
6.1
7.7
P/E
22.9x
7.7x
4.3x
4.0x
3.6x
EV/DACF
8.1x
4.6x
2.1x
1.8x
1.6x
EPS (p)
0.31
0.91
2.59
2.76
3.03
Source: Cenkos Securities
Ashley Kelty Analyst Natural Resources & Energy | Cenkos Securities plc Tel : 0131 220 9775 Mob : 07920 786 233 Fax : 0131 220 0501 Email : [Description: Description: Description: logo] 66 Hanover Street 6.7.8 Tokenhouse Yard Edinburgh EH2 1EL London EC2R 7AS Tel: 0131 220 6939 0207 397 8900 Fax: 0131 220 2051 0207 397 8901 Please visit our website : www.cenkos.com Please consider the environment before printing this email Cenkos Securities plc is a public limited company registered in England & Wales. Company Registration No.

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