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Tuesday, September 27, 2022

88 Energy Limited (ASX:88E, AIM:88E, OTC:EEENF) Under Accumulation as Recent Tests Near Project Icewine Confirm Light, Sweet Oil from Multiple Reservoirs

88 Energy Limited (ASX:88E, AIM:88E, OTC:EEENF) is currently trading right at historical support levels and is under accumulation at these levels. Recently the Company reported that recent exploration and third-party mapping near its Icewine leases on Alaska’s North Slope suggest that 3 different targets extend into the Project Icewine leases. Tests from Pantheon Resources have confirmed light, sweet oil from multiple reservoirs. The Company has also confirmed that “internal 88E data, including Icewine 1 and Icewine 2 well logs and existing 2D seismic, indicates that all play fairways extend into the Project Icewine lease holding. 

88 Energy has recently indicated they are in discussions in relation to a potential farm-out of the Project Icewine acreage. Due diligence activities and negotiations are advancing with a third party, including the related work program terms and structure. Execution and completion of the potential transaction is not guaranteed and remains subject to all documentation being agreed and due diligence completed. There is no guarantee that negotiations will lead to a binding agreement or a completed transaction. This has created a special situation for 88 Energy as the stock was way oversold on the Merlin 2 plug; the Company is in a strong financial position, with zero debt, $32 million in the treasury and total oil prospects for their wells targeting at least 1.638 billion barrels of oil in the Permian Basin. Management expects the Company’s financial position will be further strengthened with projected cash flows from recently acquired portfolio of Texas production assets, Project Longhorn. 

88 Energy Limited (ASX:88E, AIM:88E, OTC:EEENF) is an Alaska-focused oil exploration and appraisal company across ~440,000 net acres on the Alaskan Central North Slope and NPR-A regions, with a diversified portfolio of four highly prospective project areas: Project Icewine, Yukon Leases, Project Peregrine and the Umiat oil field. The company is the Operator across all of its portfolio of world class exploration and appraisal assets. 88 Energy’s drilling programs maintain adherence to the strict environmental regulations that exist in the State of Alaska. It’s drilling programs also provide significant job opportunities to local Alaskans. 88 Energy’s purpose is to build a successful exploration and production company that delivers material returns to its shareholders and contributes to stakeholders and development of the regions in which it operates in. 88 Energy has adopted the World Economic Forum Environment, Social, Governance (ESG) reporting framework to report against key sustainability metrics including governance, ethical behavior, carbon emissions, water consumption, diversity and inclusion. In our last article on 88 Energy we wrote more about the Company’s projects; Project Icewine, Yukon Acreage, Project Peregrine and the Umiat Oil Field. Project Icewine map is featured below.

The results of Pantheon’s Talitha-A well, combined with its earlier Alkaid-1 (2019) well, have been considered as part of a re-evaluation of 88 Energy’s Icewine-1 well data. Subsequent and independent comparisons of the zone that was tested and flowed light oil in Alkaid-1 at “80-100 BOPD light oil” (see Pantheon release of 25 March 2019) against the Icewine-1 well, have revealed the porosity and resistivity of a similar 110 ft net section in Icewine-1 well to be higher. Higher porosity is indicative of better reservoir quality and higher resistivity is an indicator that greater amounts of hydrocarbons are present. Given the favorable petrophysical comparison between Icewine-1 and Alkaid-1, the Company is optimistic that a production test in the Eastern Icewine acreage could yield a similar or better result than seen during the testing of Alkaid-1. 

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Following the successful testing at Talitha-A, Pantheon moved to test the BFF fan prospect in their Theta West well, reporting “light 35.5-38.5 degree API gravity oil at rates that averaged over 57 barrels of oil per day” (see Pantheon release of 24 March 2022). All reported Pantheon tests to date have been performed on vertical, stimulated wells. 

Following the recent results from the Talitha-A and Theta West-1 wells drilled by Pantheon, 88 Energy has a positive view of the potential of the SMD, SFS and BFF play fairways that extend onto the Icewine acreage. In particular, the Company notes the relative consistency of results over a large area to the north, suggestive of reasonably homogeneous reservoirs that potentially extend into 88 Energy’s acreage. The Company also notes Pantheon’s planned development wells are expected to produce at rates of over 1,000 BOPD per well via long horizontal wells with multi-stage hydraulic fracturing technology (see Pantheon release of 24 January 2022). 

88 Energy is in the process of finalizing mapping of the SFS and BFF play fairways onto the Icewine acreage and expects this work to be completed in April 2022. Once complete, the combined mapping of the three prospects (SMD, SFS and BFF) is set to form the basis of an updated resource estimate at Project Icewine, scheduled for completion in Q2 2022. 

88 Energy advises that it is in ongoing discussions in relation to a potential farm-out of the Project Icewine acreage. Due diligence activities and negotiations are advancing with regard to the potential farm-in by a third party and the related work program terms and structure. Execution and completion of the potential transaction is not guaranteed and remains subject to all final documentation being agreed and due diligence completed. There is no guarantee that negotiations will lead to a binding agreement or a completed transaction. 

In its ASX April 8 announcement, 88 Energy summed up the good news in the following highlights: 

  • Preliminary third-party mapping of the Shelf Margin Delta play indicates extension of the SMD play fairway, where neighbor Pantheon Resources has had significant success in recent months, onto 88E’s Project Icewine leases.
  • Mapping of Seabee Lower Basin Floor Fan (BFF) and Slope Fan System (SFS) approaching finalization.
  • Completion of independent resource update for Project Icewine scheduled for Q2 2022.
  • Discussions and negotiations with potential Project Icewine farm-in parties ongoing.
  • Development of forward work program to assess the potential of the SMD, SFS and BFF play fairways on the Project Icewine acreage is progressing.

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Currently trading at a $150 million market valuation 88 Energy has 14,811,076,196 shares outstanding, is 100% debt free and has $32 million in the treasury. Whie the recent Merlin 2 plug decimated the share price, it also created a major buying opportunity; the Company is stronger than ever currently targeting at least 1.638 billion barrels of oil in the Permian Basin and a healthy cash balance that will be further strengthened with projected cash flows from recently acquired portfolio of Texas production assets, Project Longhorn. And now recent exploration and third-party mapping near its Icewine leases on Alaska’s North Slope suggest that 3 different targets extend into the Project Icewine leases. Tests from Pantheon Resources have confirmed light, sweet oil from multiple reservoirs. This is big news for 88 Energy and should have a significant impact on trading over the coming week. We will be updating on 88E when more details emerge so make sure you are subscribed to Microcapdaily so you know what’s going on with 88E.

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Disclosure: we hold no position in 88E either long or short and we have not been compensated for this article

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