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Saturday, September 24, 2022

88 Energy Ltd (OTCMKTS: EEENF) Powerful Reversal Northbound Brewing as Oil Operator Moves On From Merlin-2 to Focus on Portfolio in Alaska North Slope & Newly Acquired Project Longhorn

88 Energy Limited (ASX:88E, AIM:88E, OTC:EEENF) is down big after the Company reported provisional analysis of the wireline logging program indicates reservoir quality at this location is insufficient to warrant a production test and the Company will now plug the well. This has resulted in a very significant and fast drop to well below a penny with EEENF hitting lows of $0.0065. While the plugging of the Merlin 2 represents a significant short-term setback, long term 88 Energy is still in good shape, the Company owns other valuable oil fields and remains in a strong financial position, post the Merlin-2 well, with zero debt and a healthy cash balance that will be further strengthened with projected cash flows from recently acquired portfolio of Texas production assets, Project Longhorn.” 

Penny stock speculators are accumulating EEENF at a penny and looking forward to a rebound as the drop has been more significant than the news was bad. 88 Energy is the operator of over 440,000 net acres in total across the Alaskan regions over four highly prospective project areas: Project Icewine, Yukon Leases and Project Peregrine and the Umiat oil fields. As oil continues to rise quickly recently surpassing $100 per barrel, it’s easy to see why EEENF is getting noticed by investors; the Company has been making some big moves behind the scenes including increasing their ownership in the Peregrine mine to 100%, Extinguishing all of their debt, and beefing up their management team with a new petroleum engineer and a petroleum Geologist in Philip Byrne and Robert Benkovic. The Company is very well funded moving forward with $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. 

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88 Energy Ltd (OTCMKTS: EEENF) is an Alaska-focused oil exploration and appraisal company across ~440,000 net acres targeting the world class North Slope of Alaska estimated by the USGS in 2005 to hold more than 50 billion bbl of oil and natural-gas liquids and 227 trillion cubic feet of gas. 88 Energy owns 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. 

EEENF holdings include: Project Icewine; – In-house analysis will continue to assess various commercialization options for the gas condensate discovered in the Torok Formation by 88E’s Charlie-1 well in 2020. The discovered resource comprises over 1 TCF of independently estimated gross mean prospective gas as well as associated condensate. The commercialization options include, but are not limited to, possible local power generation, compressed natural gas as well as potential for conversion to hydrogen using steam methane reforming (SMR) with carbon capture and storage (CCS) processes. It is expected that this work will move to a formal feasibility stage during 2021. Farm-out of Project Icewine is ongoing, with a deal targeted in 3Q 2021. Further evaluation will continue on the Project Icewine HRZ liquids-rich unconventional resource play. 

Yukon Acreage; – The Yukon Gold leases are located on the eastern border of the Central North Slope of Alaska and were acquired in 2018 and 2019. 88 Energy via its subsidiary Regenerate Energy Alaska Inc. has a 100% working interest in these leases, totaling 15,235 acres. The leases contain an historic discovery well, Yukon Gold #1, which will continue to be evaluated internally. Discussions are ongoing with nearby lease owners to optimize the monetization strategy for existing discovered resources located in the vicinity of the Yukon Leases. 

Project Peregrine; – The Merlin-1 and Harrier-1 wells will be drilled and tested in Q1 2022, with Alaska Peregrine Development Company LLC under the terms of the SPA paying the full costs of an appraisal wells up to a total of US$10 million with both wells planned for drilling to a Total Depth of ~6,000’ in order to intersect the prospective Nanushuk topset horizons that are located on trend to existing discoveries to the north of the project area. 

Umiat Oil Field; – Subsequent to year-end on 8th January, 88 Energy, via its wholly owned subsidiary Emerald House LLC, entered into a Sale and Purchase Agreement with Malamute Energy, Inc and Renaissance Umiat LLC (Sellers) to acquire the Umiat Oil Field. The consideration for the purchase was a 4% ORRI and assumption of the liability for the abandonment of the Umiat-18 and Umiat-23H wells, drilled by Linc Energy in 2013/2014. The estimated cost to abandon the two wells is approximately US$1m and planned to occur in the first half of 2021. 

88Energy also just recently completed the acquisition of stablished conventional oil and gas production assets in the proven Permian Basin, collectively known as Project Longhorn with independently certified net 2P reserves of 2.1 MMBOE. The acquisition delivers immediate cash flows, with current gross production from Project Longhorn of approximately 300 BOE per day (approximately 70% oil).    

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EEENF

On March 29 EEENF announced the Merlin-2 wireline logging program is nearing completion with the final run-in progress. The wireline program was designed to evaluate and quantify the reservoir potential associated with the oil shows and elevated mud gas readings noted across the target zones in the LWD data. The primary objective of the Merlin-2 well was to collect hydrocarbon samples from the target zones. Unfortunately, this was unable to be achieved using Schlumberger’s MDT (Modular-Formation Dynamics Testing) tool due to the tightness of the formation at this location. Whilst observations of LWD logs and drill cuttings collected throughout the Merlin-2 drilling operations revealed target intervals are thicker than those encountered in Merlin-1, and preliminary analysis of the LWD data indicated sufficient permeability / porosity to obtain a hydrocarbon sample, results from the wireline program have demonstrated target zones to have lower than anticipated porosity / permeability resulting in difficulty obtaining fluid samples of any significance. 

The results of Merlin-2 are largely consistent with the initial Merlin-1 exploration well drilled in Project Peregrine in 2021, with strong fluorescence, oil sheen, petroliferous odour and cut noted in the drilling cuttings, elevated C2-C5 mud gas readings over the target zones with total gas significantly above background gas readings and also evidence from the reservoir sampling tool of movable hydrocarbons. The pre-drill expectation from depositional modelling and nearby analogues was that superior thickness and reservoir quality would be encountered to the east of Merlin-1. Whilst thicker target intervals were noted at Merlin-2, the porosity / permeability appear to be largely consistent with those observed at Merlin-1.  Both Merlin wells were drilled on sparse, vintage 2D seismic data, which provides a narrow field of view of the reservoir and limited optionality on drilling locations.  88 Energy will now assess the merits of a future 3D seismic acquisition program to better identify with modern processing of data future drilling locations to optimally test and determine the potential commerciality of the Peregrine acreage. Forward operations for the Merlin-2 well will now focus on plugging and abandoning the well and commencing demobilisation from the drilling location. 88 Energy will undertake a detailed evaluation of all the data obtained from the Merlin-2 drilling program and evaluate the potential future appraisal activities within the Project Peregrine acreage, which includes additional independent drilling locations such as the Harrier-1 prospect to test the N-14 and N-15. 88 Energy expects to provide further post well testing and analysis updates, as well as the future work program for Project Peregrine, when this information is available. 

Managing Director, Ashley Gilbert, commented: “Whilst the initial results from the Merlin-2 well were encouraging, results from the wireline program have demonstrated target zones to have lower than anticipated porosity and permeability resulting in difficulty obtaining fluid samples. The initial assessment of results of the Merlin-2 well are largely consistent with the Merlin-1 exploration well drilled in Project Peregrine in 2021, with fluorescence and cut noted in the drilling cuttings, elevated mud gas readings over the target zones with total gas above background gas readings and also evidence from the reservoir sampling tool of movable hydrocarbons. We appreciate that this result will be disappointing news for shareholders, in particular that we were again unable to obtain a fluid sample at surface or perform a flow test. However, we will now take the necessary time to fully analyse the data from the Merlin-2 well. This will provide a basis upon which the company can provide further updates on the future potential appraisal program for the Project Peregrine acreage. 88 Energy remains in a strong financial position, post the Merlin-2 well, with zero debt and a healthy cash balance that will be further strengthened with projected cash flows from the recently acquired portfolio of Texas production assets, Project Longhorn. We are well placed to continue reviewing and progressing opportunities within the Alaskan portfolio and particularly encouraged by the results to the north of Project Icewine and look forward to providing updates in relation to this project over the coming months.” 

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Currently trading at a $400 million market valuation EEENF has 14,811,076,196 shares outstanding and is in excellent financial position with zero debt and a healthy cash balance that will be further strengthened with projected cash flows from the recently acquired portfolio of Texas production assets, Project Longhorn. EEENF is well placed to continue reviewing and progressing opportunities within the Alaskan portfolio and particularly encouraged by the results to the north of Project Icewine and look forward to providing updates in relation to this project over the coming months. The stock was down big after the Company reported provisional analysis of the wireline logging program indicates reservoir quality at this location is insufficient to warrant a production test and the Company will now plug the well. This has resulted in a very significant and fast drop to well below a penny with EEENF hitting lows of $0.0065 however investors are heavily accumulating at these levels as the drop has been more significant than the news was bad. The Company is very well funded moving forward with $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.   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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