Quarterly Report

RNS Number : 0580N

88 Energy Limited

27 January 2016

 

27 January 2016

QUARTERLY REPORT

Report on Activities for the Quarter ended 31 December 2015

The Directors of 88 Energy Limited ("88 Energy" or the "Company", ASX & AIM:88E) provide the following report for the quarter ended 31 December 2015. 

Highlights

·     The Icewine#1 exploration well reached planned Total Depth of 11,600' on 29^th December having achieved all primary unconventional objectives

o  Early analysis suggests that a large portion of the HRZ shale on Project Icewine is within the thermal maturity sweetspot

o  Two cores cut in HRZ and Pebble Shale Unit with recoveries of 97%

·     Conventional prospectivity high graded by results from Logging While Drilling data

o  Excellent reservoir and oil shows in shallow (4,000'-4,400') Brookian interval

o  Above expectation reservoir quality in deeper (11,262'-11,320') Kuparuk interval

·     Placement of A$3m at $0.01 per share to sophisticated investors on 20^th November 2015

·     Completion of Share Purchase Plan to raise A$4.4m at $0.01 per share on 18^th December 2015

Key Events Subsequent to the Quarter

·     Commencement of evaluation of cores taken from the Icewine#1 well

·     Oil / condensate observed leaching from HRZ core in the laboratory

·     Mass spectrometry analysis of mud gas confirms liquids rich gas throughout the HRZ shale interval

·     HRZ core samples analysed for Total Organic Carbon (TOC) all yielded values in the  range of 2.3% to 4.9% (avg 3.5% - by weight)

·     Initial results support HRZ thermal maturity as per pre-drill modelling at Icewine #1

Upcoming Events

Evaluation and integration of the core and log data from Icewine#1 is ongoing, with results expected on key variables over the coming weeks, including:

·     Permeability and porosity

·     Final thermal maturity

·     Rock mechanics and stress regime

Seismic planning and survey design continues with acquisition planned to commence in March 2016, subject to final negotiations with vendors and approval of the proposed program by Bank of America.

The ASX Appendix 5B attached to this report contains the Company's cash flow statement for the quarter.  The significant elements for the period were:

·     exploration and evaluation expenditure of A$15.811m, related to drilling costs for the Icewine#1 exploration well (September 2015 A$1.303m):

o  Borrowings of A$10.840 (Bank of America Credit Facility) were used to fund the majority of the exploration expenditure such that the net cash outflow to the Company was A$4.930m

o  These borrowings are secured against State of Alaska credit rebates and are expected to be fully repaid this calendar year with a small refund net to the Company, once the credits are issued;

·     administration and other operating costs A$0.842m (September 2015 of A$0.765m);

·     cash raised via equity issue A$7.022 (after costs);

·     a net cash inflow of A$0.548m recorded by the Company.

At the end of the quarter, the Company had net cash reserves of A$9.567 million.

Currencies held: A$2.8m; GBP£1.1m; US$3.3m.

 

Project Icewine Highlights

In November 2014, the Company entered into a binding agreement with Burgundy Xploration (BEX) to acquire a significant working interest (87.5%, reducing to 78% 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. In November 2015, the gross acreage position was expanded by 174,240 acres (to be awarded in due process by the State of Alaska).

Subject to final payment on the expanded acreage, 88 Energy will have a 272,422 gross contiguous acre position with 212,489 acres net to the Company. 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 unconventional oil play will be evaluated based on core obtained in the recently completed (December 2015) Icewine #1 exploration well.

Figure 1: Project Icewine Location (please refer to the pdf version of this announcement available from the Company's website)

Generous exploration incentives are provided by the State of Alaska with up to 85% of exploration expenditure in 2015 cash refundable, dropping to 75% until mid 2016 and thereafter 35%.

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.

Conventional play potential can be found at Project Icewine within the same Brookian petroleum system and shallow to the HRZ shale and includes high porosity channel and deep water turbiditic sands. The Brookian conventional play is proven on the North Slope; the USGS (2013) estimate the remaining oil potential to be 2.1 billion barrels just within the Brookian sequence. Additional conventional potential exists in the deeper Kuparuk sands and the Ivashuk Formation.

Drilling in (2012), on the adjacent acreage to the north, confirmed that the HRZ shales, along with the underlying Kingak & Shublik shales, were all within the oil window which is extremely encouraging for the unconventional potential at Project Icewine. In addition, a conventional oil discovery was reported in the Kuparuk sandstones.

A Prospective Resources Report by DeGolyer and MacNaughton, was commissioned by 88 Energy to evaluate the unconventional resource potential of Project Icewine in early December 2014 and was released to the market on 19 January 2015.

About 88 Energy: 88 Energy has a 78% working interest and operatorship in ~272,000 acres (~174,000 acres subject to formal award) onshore the prolific North Slope of Alaska ("Project Icewine"). The North Slope is the host for 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 three highly prospective play types that are likely to exist on the Project Icewine acreage - two conventional and one unconventional. The large 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 TransAlaska Pipeline System. The Company plans to progress drilling and seismic acquisition in the near term to take advantage of the globally unique fiscal system in Alaska, which allows for up to 85% of CY2015 exploration expenditure to be rebated in cash.

http://www.rns-pdf.londonstockexchange.com/rns/0580N_-2016-1-26.pdf

Media and Investor Relations:

Australia
88 Energy Ltd [e-mail] [phone] Hartleys Limited As Corporate Advisor Mr Dale Bryan [phone]
United Kingdom Cenkos Securities Plc As Nominated Adviser Mr Neil McDonald Mr Derrick Lee Tel: [phone] Tel: [phone]

 

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