88 Energy Limited provides the following report for the quarter ended 31 December 2022.
Highlights
Project Phoenix (formally Icewine East, ~75% WI)
• Hickory-1 exploration well scheduled to spud on or around 1 March 2023, targeting 647 million
barrels of oil1,2
• Well location informed by extensive data suite analysis
? Located in the sweet spot of interpreted AVO anomalies
? Focused on the oil-bearing conventional reservoirs identified in adjacent acreage and during
the drilling and logging of Icewine 1
? Designed to appraise six targets within SMD, SFS, BFF and Kuparuk reservoirs
? Strategically located proximate to significant, established infrastructure
• Drilling rig contract executed with Nordic Calista for Rig-2
• Permitting and planning on schedule to be completed end of January 2023 or shortly thereafter,
with the final well cost anticipated to be lower than the previous Icewine wells on the acreage
Project Leonis (100% WI)
• Project Leonis secured as part of the North Slope Areawide 2022W Oil and Gas lease sale
• Acreage includes ten leases covering ~25,600 contiguous acres, subject to an adjudication
process, regulatory approvals and formal award expected in 1H 2023
• Project Leonis is covered by the existing Storms 3D seismic data suite and contains the historical
exploration well Hemi Springs Unit #3 (drilled by ARCO in 1985)
• A review of the Hemi Springs Unit #3 well indicated over 200 feet of logged net pay in the Upper
Schrader Bluff (USB) reservoir, with good porosity and oil shows evident over the interval
• Initial internal interpretation of the Storms 3D indicates a prospect at the USB reservoir interval
that appears to be bound by faults on three sides
Project Longhorn (~73% WI)
• Successful completion of the final two planned workovers scheduled for 2022
• Quarterly cash flow distribution of A$1.5M received in December 2022
Corporate
• Cash of A$14.1M and no debt (as at 31 December 2022)
Project Phoenix (formally Icewine East, ~75% WI)
The former Icewine East area was renamed Project Phoenix to reflect the Company’s refreshed
exploration strategy for this acreage. Since its acquisition in 2014, exploration on the acreage targeted
the unconventional HRZ play. Project Phoenix is focused on the oil-bearing conventional reservoirs
identified during the drilling and logging of Icewine-1 and recently flow tested by Pantheon Resources3.
Project Phoenix is strategically located on the Dalton Highway with the Trans-Alaska Pipeline System
running through the acreage.
The Company has received notice from the Alaska Department of Natural Resources (DNR) that a
recently submitted unit application covering the Project Phoenix acreage was open for public comment
until 31 December 2022. The DNR is expected to issue a decision no later than 1 March 2023. The unit
approval will extend the leases for Project Phoenix beyond their primary term and provide an agreed
program to assess commercialisation of the acreage and a pathway to development and production.
Hickory-1 Exploration Well
The Hickory-1 well is designed to appraise six conventional plays within the SMD, SFS, BFF and KUP
reservoirs targeting 647 million barrels of oil1,2. Spud of Hickory-1 is scheduled to occur in early March
2023 to a permitted total depth of 12,500 feet. The well has been significantly de-risked by recent
Pantheon Resources3 drilling and flow tests, interpretation of the Icewine-1 well logs and modern
Franklin Bluffs 3D seismic data (FB3D) and associated AVO analysis.
The optimised drilling location intersects and will test, the substantial potential oil volumes noted across
all mapped play fairways, particularly the SMD, SFS and BFF reservoirs.
Significant progress has been made on permitting and planning of Hickory-1 by project manager,
Fairweather, LLC. All long lead items have been secured with the tendering process nearing completion.
Further details of the drilling program will be announced by the Company in the lead-up to the scheduled
spud on or around 1 March 2023, which remains subject to relevant approvals that are anticipated to
be received by end of January 2023 or shortly thereafter.
Drilling location for Hickory-1 was
informed by analysis of an extensive data
suite and chosen to:
? Provide optimal appraisal of six
stacked reservoir targets
? Ensure closest possible position to
the Shelf Edge
? Be of a relative down-dip position
? Potentially unlock up-dip optionality
across the remaining acreage
? Within the sweet spot of interpreted
AVO anomalies relative to Icewine-1
which the FB3D data confirms was
drilled outside of interpreted AVO
anomalies at the target horizons
? Maximise the strategic location
proximate to existing infrastructure
Project Leonis (100% WI)
On the 9 November 2022, the Company’s wholly-owned subsidiary Captivate Energy Alaska, Inc. was
declared the highest bidder for select acreage offered as part of the North Slope Areawide 2022W Oil
and Gas lease sale. The Company’s new acreage will be known as Project Leonis (the Project)
comprising ten leases covering approximately 25,600 contiguous acres.
The new Project Leonis
leases remain subject to
an adjudication process,
regulatory approvals and
formal award which is
expected in 1H 2023. The
Project is superbly located
adjacent to TAPS and the
Dalton Highway,
enhancing future potential
development
commercialisation.
Project Leonis is covered by the existing, recently purchased, Storms 3D seismic data suite. The
acreage contains the historical exploration well Hemi Springs Unit #3, drilled by ARCO in 1985 to target
the deep Kuparuk and Ivishak reservoirs. At the time, these were the main producing intervals in the
giant northern fields.
An initial review of the Hemi Springs Unit #3 well indicated over 200 feet of low resistivity bypassed log
pay within the Upper Schrader Bluff (USB) reservoir, with good porosity and oil shows evident over the
interval. The USB reservoir has been successfully developed at the nearby Orion, Polaris, West Sak
and Milne Point oil fields.
A preliminary internal review
and interpretation of the
Storms 3D seismic data
reveals a strong seismic-well
tie and a clear seismic
amplitude at the USB
prospect level.
Encouragingly, the prospect
appears to be bound by
faults on three sides which
potentially serve as the
trapping mechanism. Further
analysis will determine
further potential of the
acreage and define a
possible exploration program
and timeline for the project.
Project Peregrine (100% WI)
Similarly, to Merlin-1, the Merlin-2 High Resolution Gas Chromatography side wall core results show
definitive evidence of hydrocarbons at Project Peregrine.
Results of a recent, independent basin modelling study, coupled with abundant oil shows across Merlin1 and Merlin-2, are encouraging for untested Harrier and Harrier Deep prospects to the North.
The Company is currently assessing possible forward work-programs, which will be subject to potential
future farm-out.
Project Longhorn (~73% WI)
During the quarter, the operator and ~24% net working interest partner, Lonestar I, LLC (Lonestar),
successfully completed the final two planned workovers scheduled for 2022. The workovers were
completed on time and commenced production, with plans in place to optimise oil and gas rates from
each well.
Production from the Longhorn wells averaged ~420 BOE per day gross (~70% oil) during the quarter,
peaking at 580 BOE per day gross.
Since acquisition, the Longhorn investment has resulted in net cash flow returns to 88E of A$4.3M. Net
cash flows from operations before capital investment, generated A$6.5M in 2022. The Company’s share
of capital invested in the six completed work overs for 2022 was A$9.1M of which A$2.2M was paid in
cash and the remaining A$6.9M (US$4.6M) in 88E shares1,2
Four workovers and at least six new drill targets remain on the acreage, with the forward work program
and timing for future capital investments to be determined by the Joint Venture in 2023.
Finance
The ASX Appendix 5B attached to this quarterly report contains the Company’s cash flow statement for
the quarter. The material cash flows for the period were:
? Project Longhorn quarterly cash distribution of A$1.5M
? Exploration and evaluation expenditure of A$3.3M (September 2022 quarter: A$5.7M), primarily
associated with planning, securing long lead items, and permitting for Hickory-1 exploration well
? Lease rental payments of A$0.3M, including bid deposit for Project Leonis acreage
? Fees paid to Directors and consulting fees paid to Directors of A$0.2M
? Administration, staff, and other costs of A$1.2M (incl A$0.2M director related payments)
At quarter end, the Company had cash reserves of A$14.1M and no debt.
