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US heavyweights pile into $46.8m Empire Energy cash raise

Empire Energy Group is raising $46.8 million to fuel the exploration of its Carpentaria pilot project in the Northern Territory’s Beetaloo Sub-basin.

Empire Energy Group (ASX: EEG) says it has received binding commitments to raise a hulking $46.8 million from new and existing institutional shareholders – including existing company backer, wealthy American businessman and oil and gas entrepreneur Bryan Sheffield.

Management today confirmed that Sheffield and New York stock exchange (NYSE)-listed Liberty Energy, which has a massive market cap of US$3.5 billion (AU$5.5 billion), will both tip in US$5 million (AU$7.7 million) as part of a two-tranche placement to help fuel the company’s mission to produce the first commercial gas from the Northern Territory’s Beetaloo Sub-basin.

It is evidence that the two renowned US oil and gas heavyweights have plenty of faith in the Beetaloo basin’s potential to produce much-needed gas supply. Liberty and a subsidiary of a private equity firm founded by Sheffield have also stumped up a further US$2.5 million (AU$3.9 million) each in exchange for a 2.25 per cent royalty interest in Empire’s exploration permit “EP187”.

Empire recently offloaded its US oil and gas assets in the Appalachian region for about $14 million. Coupled with the latest raise, its bank balance will be enough to make any junior mining company envious.

The Beetaloo Basin is rapidly approaching a key inflection point, which I believe will create substantial value for shareholders.
Empire Energy Group managing director Alex Underwood

And in a further show of support for the company, its directors have also agreed to join the party and have committed to contribute an additional $325,000 in the raise.

Management says the bulk of the funds will be used to drill a 3km-long fracture-stimulated horizontal pilot development well on its EP187 ground in the Beetaloo basin.

The Beetaloo Basin is rapidly approaching a key inflection point, which I believe will create substantial value for shareholders. We are now well-funded to drill, stimulate and flow test our first pilot development well and to progress our field development plans as we aim to commence gas sales in 2025 into the undersupplied Northern Territory market.
Empire Energy Group managing director Alex Underwood

Underwood also said Liberty is one of the biggest providers of hydraulic fracture stimulation services in the US shale market and the company planned to soon send a significant collection of hydraulic fracturing equipment and machinery to Australia to service the budding Beetaloo Sub-basin with use of state-of-the-art equipment.

He said working with Liberty will facilitate improved well productivity and cost efficiency as Empire moves from the exploration phase into production.

As part of the fundraising campaign, the company plans to secure $39 million via a two-tranche placement at 16c per share. The initial tranche next week will raise about $30 million, while the balance will be subject to shareholder approval at a meeting to take place late next month.

The 16c share price is a 13.5 per cent discount to Empire’s closing share price last Friday and just a 9.3 per cent discount to its 15-day volume-weighted average price (VWAP) prior to a trading halt.

The company’s Carpentaria pilot project sits about 500km south-east of Darwin. Its 100 per cent-owned subsidiary Imperial Oil & Gas holds the biggest acreage position in the Beetaloo, with more than 113,000 square kilometres of ground.

Management’s key focus is on developing its Beetaloo contingent gas resource that already sits at a total of 1.63 trillion cubic feet (Tcf) of gas and 3.5 million barrels (MMbbls) of liquids for the mid-case.

The Beetaloo is a shale gas play, meaning the gas is hosted within shales instead of sandstone, such as in conventional operations. Shale has low primary porosity and permeability, so the company will “stimulate” the reservoir to induce microscopic-scale fractures extending away from the wells to facilitate gas flow up to the surface.

Empire is looking to sell gas into the NT, before tackling a chronic supply shortage on the east coast and its ultimate aim is to begin exporting.

The NT Government-owned Power and Water Corporation (PWC) supplies gas to the Top End and has had a long-standing contract with Italy’s ENI, which produces gas at its Blacktip field in the Joseph Bonaparte Gulf, south-west of Darwin. Blacktip is well-known to have struggled in recent times with its gas output, potentially opening the door for another local gas producer to step in and fill the void.

With a gas-market screaming for product all over the place, Empire could find itself in a commanding position should its Beetaloo-based project hit it big.

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