Macquarie backs Empire Beetaloo gas vision with $65m
Empire Energy is well on its way to being the first to produce gas out of the Northern Territory’s biblical scale Beetaloo gas basin after Macquarie Bank put up a $65 million funding package for it, avoiding the need for Empire to blow out its capital structure.
The funding boost in combination with Empire’s more than $34m in cash will turbocharge the development of its Carpentaria well, in addition to the construction and refurbishment of the company’s Carpentaria gas plant that it picked up for a song some time ago.
The massive 33,000 square kilometre Beetaloo Gas Basin is considered to be potentially a gigantic gas region, with some estimates placing its gas endowment as high as 500 trillion cubic feet (Tcf) of gas.
Management says the three combined facilities totalling $65m will be applied towards the Carpentaria-5H (C-5H) well, the gas plant and all required associated infield infrastructure and construction costs for both.
The credit facilities comprise a $30m facility that represents 80 per cent of Empire’s expected research and development grants from the federal government for the 2024 and 2025 financial years.
That money will be used by Empire for exploration and development activities including the building of infrastructure needed for the project.
Macquarie will also put up a $5m performance bond facility for Empire to meet its NT environmental bond obligations and a new $30m Midstream Infrastructure facility.
The final $30m will be used by Empire to refurb its Carpentaria gas pilot plant it picked up for a song a couple of years ago that will initially become the central focus of gas production.
Repayment of the latter $30m facility will be by way of a 70 cent per gigajoule of production plus CPI by 25 terajoules a day “tolling fee”, payable from first production or January 1, 2026, whichever occurs first.
The $30m for exploration and development will be subject to an ongoing interest rate of 5.5 per cent plus the standard bank bill swap rate.
The $5m for the environmental bonds will be subject to a simple 10 per cent interest rate.
The funding package represents an extension and uplift to an existing $2.25m facility Empire has with Macquarie.
The financing package with Macquarie announced today followed an extensive competitive tender process and provides Empire with the best terms currently available in the debt market. Macquarie has been financing Empire Energy for 15 years. This financing package, along with existing cash resources, will fund the drilling, completion and flow testing of C-5H and the installation of the Carpentaria Gas Plant and associated in-field infrastructure.
The company revealed in July it has signed a long-term gas sale agreement with the NT Government for up to 25 terajoules (TJ) of gas per day for 10 years with an option to increase sales by an extra 10TJ per day if its daily production rates reach more than 100TJ per day.
Management recently announced the receipt of an Environmental Management Plan (EMP) approval that enabled the company to kick off a nine-well gas drilling program at the Carpentaria pilot project. The nine-well program will be conducted from a total of four well pads and be finished off with hydraulic fracture stimulation.
The company has also received a crucial production licence for up to 12 wells which will allow for the gas extraction before moving through the gas plant and onwards to the Territory Government controlled McArthur River Pipeline for sale to the NT government.
The next step for the company is to nail down regulatory clearance to sell its gas under the “Beneficial Use of Test Gas” rules set out in the Northern Territory Petroleum Act.
An important pre-condition of final clearance is the stakeholder consultation process with the local community. Empire has engaged with the Northern Land Council to organise a meeting for the traditional owners to have their say on the project.
The C-5H well is set to be Empire’s biggest horizontal shale well yet, targeting a massive 3000m horizontal section with around 60 fracture stimulation stages which will begin after the rig wraps up its work.
Management says C-5H has been successfully drilled and cased isolating the Cambrian limestone aquifer and is now drilling in the vertical section of the intermediate hole at a measured depth of 770m.
The well path is expected to soon turn towards the Middle Velkerri B shale target zone. When the intermediate section is drilled and cased, the company will then drill and case the horizontal section.
The $65m shot in the arm from Macquarie represents a significant milestone tick for Empire and will likely see it get a long way towards first gas production next year. If all the moons align as Empire expects them to the project can most likely handle a reasonable debt number, enabling Empire to protect its all-important capital structure as it hurtles towards the pack of big oil and gas producers in Australia.
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