Project Icewine Operations Update

RNS Number : 4362Q

88 Energy Limited

12 September 2017

 

88 Energy Limited 

Project Icewine Operations Update

88 Energy Limited ("88 Energy", "the Company", "Operator") (ASX, AIM: 88E) is pleased to provide an update on Project Icewine, located onshore North Slope of Alaska.

Highlights

·     Currently flowing back naturally on 8/64 choke at ~55 barrels per day frac fluid

·     Minor hydrocarbon indications via flow rate of 2-4mcf of gas per day, with a maximum rate of 8mcf of gas per day

Icewine#2 Operations Update

The Icewine#2 well was shut-in on 10^th July to allow for imbibition and pressure build up to occur within the HRZ shale. Flow testing re-commenced on 31^st August at 10:26 (AK time), and is ongoing. Results since flow testing recommenced are summarised below.

The Icewine#2 well is located on the North Slope of Alaska (ADL 392301). 88 Energy Ltd (via its wholly owned subsidiary, Accumulate Energy Alaska, Inc) has a 77.55% working interest in the well. The well was stimulated in two stages over a gross 128 foot vertical interval in the HRZ shale formation, from 10,957-11,085ft TVD, using a slickwater treatment comprising 27,837 barrels of fluid and 1,034,838 pounds of proppant.

The well was initially flowed back on a 6/64 inch choke and was reduced to a 4/64 inch choke after 26 hours to maintain pressure. Approximately 370 barrels of frac fluid had been recovered as at 1730 on 3^rd September (AK time) at an average rate of 100 barrels per day. The choke was subsequently stepped up to 8/64 inch at 1800 10^th September (AK time) as the overall declining pressure gradient versus time improved, indicating potential pressure support. To date, the cumulative amount of stimulation fluid produced from both testing periods is 5,277 barrels, 19.0% of fluids injected.

Wellhead pressure built to ~3,500psi during shut-in and has dropped to 106psi since flowback commenced and is now declining very slowly with a relatively constant flowback rate of 55 barrels per day. At 0930 9^th September (AK time), a decision was made to run the flowback through the test separator due to minor gas indications being evident. To date the rate of flow has been unstabilised at between 2 and 4 mcf per day made up of 76% hydrocarbons, 20% atmospheric gases and 4% inorganics. The produced hydrocarbons comprise 93% methane with 7% heavier fractions.

The current flowback procedure remains early stage with only 19.0% of the frac fluid retrieved. The gas observed so far is not considered representative of the potential rate or composition of hydrocarbon in the reservoir. It is interpreted that additional frac fluid needs to be removed in order to achieve a representative result. A decision will be made on the most appropriate strategy to accomplish this within the next two weeks.

Media and Investor Relations:

88 Energy Ltd

Dave Wall, Managing Director                                                    Tel: [phone]

Email: [e-mail] 

Finlay Thomson, Investor Relations                                         Tel: [phone]

Hartleys Ltd

Dale Bryan                                                                                  Tel: + 61 8 9268 2829

Cenkos Securities                                                                   Tel: + 44 131 220 6939

Neil McDonald/Derrick Lee             

Pursuant to the requirements of the ASX Listing Rules Chapter 5 and the AIM Rules for Companies, the technical information and resource reporting contained in this announcement was prepared by, or under the supervision of, Mr Brent Villemarette, who is a Non-Executive Director of the Company. Mr Villemarette has more than 35 years' experience in the petroleum industry, is a member of the Society of Petroleum Engineers, and a qualified Reservoir Engineer who has sufficient experience that is relevant to the style and nature of the oil prospects under consideration and to the activities discussed in this document. Mr Villemarette has reviewed the information and supporting documentation referred to in this announcement and considers the prospective resource estimates to be fairly represented and consents to its release in the form and context in which it appears. His academic qualifications and industry memberships appear on the Company's website and both comply with the criteria for "Competence" under clause 3.1 of the Valmin Code 2015. Terminology and standards adopted by the Society of Petroleum Engineers "Petroleum Resources Management System" have been applied in producing this document.

Project Icewine Overview

In November 2014, the Company entered into a binding agreement with Burgundy Xploration (BEX) to acquire a significant working interest (87.5%, reducing to 77.5% on spud of the first well on the project) in a large acreage position on a multiple objective, liquids rich exploration opportunity onshore Alaska, North America, referred to as Project Icewine. The current gross acreage position is 348,115 contiguous acres (259,114 acres net to the Company). In December 2016, the Company successfully bid on additional acres, some of which were awarded in July 2017. On award of the remaining acres, the Project Icewine gross acreage position may be further expanded to ~604,000 contiguous acres (368,100 acres net to the Company assuming all rights are taken up).  

The Project is located on an all year operational access road with both conventional and unconventional oil potential. The primary term for the State leases is 10 years with no mandatory relinquishment and a low 16.5% royalty.

The HRZ liquids-rich resource play has been successfully evaluated based on core obtained in the recently completed (December 2015) Icewine #1 exploration well, marking the completion of Phase I of Project Icewine. Phase II has now commenced, with drilling at the follow-up appraisal well, Icewine#2, commencing early 2Q2017. Production testing is ongoing.

Significant conventional prospectivity has also been identified on recently acquired 2D seismic across the project acreage.

Project Icewine Acreage - please see attached pdf

Cautionary Statement: The estimated quantities of petroleum that may be potentially recovered by the application of a future development project relate to undiscovered accumulations. These estimates have both an associated risk of discovery and a risk of development. Further exploration, appraisal and evaluation are required to determine the existence of a significant quantity of potentially movable hydrocarbons.

Exploration incentives provided by the State of Alaska with up to 35% of net operating loss refundable in cash were concluded for all expenditure post 30 June 2017.

The primary objective is an untested, unconventional liquids-rich shale play in a prolific source rock, the HRZ shale (Brookian Sequence), that co-sourced the largest oil field in North America; the giant Prudhoe Bay Oil Field Complex. Internal modelling and analysis indicates that Project Icewine is located in a high liquids vapour phase sweetspot analogous to those encountered in other Tier 1 shale plays e.g. the Eagle Ford, Texas.

Recently acquired 2D seismic has identified large conventional leads at Project Icewine within the same Brookian petroleum system and shallow to the HRZ shale, including potential high porosity channel and turbiditic sands associated with slope apron and deepwater fan plays. The Brookian conventional play is proven on the North Slope; the USGS (2013) estimated the remaining oil potential to be 2.1 billion barrels within the Brookian sequence. Two recent discoveries in the Brookian have already exceeded these estimates, with Armstrong/Repsol discovering 1.4 billion barrels in 2015 and Caelus announcing a 2.5 billion barrel discovery in 2016. Additional conventional potential exists in the Brookian delta topset play, deeper Kuparuk sands and the Ivishak Formation.

A Prospective Resources Report by DeGolyer and MacNaughton, was commissioned by 88 Energy to evaluate the unconventional resource potential of Project Icewine in February 2016 and was released to the market on 6^th April 2016.

About 88 Energy: 88 Energy has a 77.5% working interest and operatorship in ~325,000 acres onshore the prolific North Slope of Alaska ("Project Icewine"). Gross contiguous acreage position will expand on award of additional leases successfully bid on in the December 2016 State of Alaska North Slope Licensing Round. The North Slope is the host to the 15 billion barrel Prudhoe Bay oilfield complex, the largest conventional oil pool in North America. The Company, with its Joint Venture partner Burgundy Xploration, has identified highly prospective play types that are likely to exist on the Project Icewine acreage - two conventional and one unconventional. The large unconventional resource potential of Project Icewine was independently verified by leading international petroleum resource consultant DeGolyer and MacNaughton. In addition to the interpreted high prospectivity, the project is strategically located on a year-round operational access road and only 35 miles south of Pump Station 1 where Prudhoe Bay feeds into the Trans Alaska Pipeline System. The Company acquired 2D seismic in early 2016 to take advantage of the globally unique fiscal system in Alaska, which allowed for up to 75% of 1H2016 exploration expenditure to be rebated in cash. Results from the seismic mapping and prospectivity review are encouraging, and form the basis of a conventional prospectivity portfolio for Project Icewine. In late 2015, the Company completed its maiden well at the project, Icewine#1, to evaluate an unconventional source rock reservoir play which yielded excellent results from analysis of core obtained from the HRZ shale. The follow-up well with a multi-stage stimulation and test of the HRZ shale, Icewine#2, spud in early 2Q2017.

Click on, or paste the following link into your web browser, to view the associated PDF document.
http://www.rns-pdf.londonstockexchange.com/rns/4362Q_1-2017-9-11.pdf

 

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