PROJECTS: MARGARITA, TEXAS USA
(EME Interest 44%)

On 5 December 2006 Empyrean entered into an agreement with the Wandoo Joint Venture to earn a 44% working interest in Project Margarita, South Texas onshore. The agreement involved participation in the drilling of six shallow gas prospects then three, deep, high impact gas prospects.

The shallow programme commenced in December 2006 and resulted in commercial successes for three of the six wells drilled (with a fourth watering out prematurely after successfully flowing gas in the early stages). Of the three producing wells, Agavero also has the potential to flow oil in time and the most prolific well, Dona Carlota, has measured a calculated absolute potential flow rate of 20.5 million cubic feet of gas per day.

The option to participate in the drilling of a "Deep Prospect" under the same Margarita farm-in terms has not been exercised to date.

• El Viejito Well

El Viejito flowed gas at 210 mscfd during a 24 hour test period. High vertical permeability caused eventual water influx from below the well-defined gas-bearing interval and the gas flow was finally choked because of the water accumulating in the production string. The well was suspended to be used for a water disposal for other joint venture wells in the area.

• Milagro Well

Milagro, the second well drilled at Margarita was connected to a gas sales line on 3 April 2007, with gas production peaking at 532 mcfgpd ("thousand cubic feet of gas per day") with 2 bopd ("barrels of oil per day"), up from an initial rate of 350 mcfgpd. In September 2007 production from this well became oil dominant peaking at 135 bopd with 62 mcfgpd.

Since the end of October 2007 it has been producing oil only and production has been choked back to approximately 40 bopd and 25 bwpd ("barrels of water per day").

• Dos Dedos Well

Dos Dedos the third well is also a gas producer. Connection to a gas sales line was completed on 26 April 2007 and production commenced at 151,000 scfd and and reached a peak of 420 mcfgpd during the following month when problems began to arise.

In June 2007 the well had watered out prematurely having produced only 2.1 million cft ("cubic feet") of gas.

• Dona Carlota Well

Dona Carlota was drilled to a total depth 1,524m and showed a net gas pay of 5.6m in the primary target Frio sands. On completion and cleanup the well flowed 1.024 mmcfgpd ("million cubic feet of gas per day") with no water. A calculated Absolute Open Flow Rate of 20.5 mmcfgpd day attests the excellent gas deliverability potential of the reservoir.

The well is at present producing approximately 900 mcfgpd.

• Agavero Well

Agavero was drilled to a total depth of 1,341m and intercepted gas filled Frio sands over a 5.5m interval. On completion and clean up the well flowed 707 mcfgpd with no water and was then shut in awaiting permission for a tie in pipeline.

Gas production commenced on 4 October 2007 at 375 mcfgpd and is at present producing approximately 300 mcfgpd.

• Climaco Well

Climaco reached a total depth of 1,858m and despite having good gas shows in the primary objective, was plugged and abandoned as a non-commercial gas well.

  

Summary

PARTNER

• Wandoo Energy LLC

Wandoo is a private company based in the USA.

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