TIDM88E
RNS Number : 8004Y
88 Energy Limited
18 January 2022
88 Energy Limited
QUARTERLY ACTIVITIES REPORT
For the quarter ended 31 December 2021
88 Energy Limited (ASX:88E, AIM:88E, OTC:EEENF) (88 Energy or
the Company) provides the following report for the quarter ended 31
December 2021.
Highlights
Project Peregrine (100% WI)
-- Merlin-2 targeting gross mean prospective resource of 652
million barrels(1) with 56% aggregated geological chance of
success.
-- Drilling location selected is situated east and downdip of
Merlin-1, where enhanced reservior thickness and higher
permeability/porsity of sands are expected.
-- Rig contract executed for Artic Fox to drill the Merlin-2 appraisal well.
-- Merlin-2 Permit to Drill in the final stages of review by the
Bureau of Land Management (BLM)
-- Snow road contruction underway, with commissioning of drill rig commenced in January 2022.
-- Spud of Merlin-2 appraisal well on track for February 2022.
Umiat Oil Field (100% WI)
-- Optimisation studies continue, including full field
development planning and evaluation of oil field synergies with
Project Peregrine.
Project Icewine (75% WI)
-- Assessment indicates extension of Pantheon Resources'
Talitha-A targets onto Icewine acerage.
-- Updated prospective resource estimates to be finalized in H1 2022.
Yukon Leases (100% WI)
-- Joint regional development negotiations and due dilligence
processes well advanced with nearby resource owner.
-- Future potential exploration drill planning is ongoing -
subject to farm-out and joint development negotiations.
Corporate
-- Mr Oliver Mortensen appointed Chief Financial Officer.
-- Cash of A$32.3M and no debt (as at 31 December 2021).
1. Mean unrisked prospective resource - Net Entitlement to 88
Energy. Please refer to cautionary statement on page 3
Project Peregrine (100% WI)
Merlin-2 Appraisal Well
The Merlin-2 appraisal well is scheduled for spud in February
2022 and permitted to a total depth of 8,000 feet. Merlin-2 is
targeting a net mean aggregate prospective resource of 652(1,2)
million barrels across the N20, N19 and N18 horizons. The Merlin-2
well location has been selected from the three permitted locations
and will be located east and downdip of the successful Merlin-1
well. This location is expected to encounter thicker reservoir
sections and higher permeability/porosity sands.
On 26 October 2021, 88 Energy announced the execution of a rig
contract with Doyon Drilling Inc for the Arctic Fox Rig to drill
the Merlin-2 appraisal well. The Arctic Fox rig is a fully
integrated, multi-module unit featuring a lightweight design
crucial to early drill site access. Importantly, the rig unit
allows for maximum over-the-hole drilling and with an eight-line
hook-up, the substructure is capable of simultaneous load of
281,000lbs (for pipe set back) and 337,000lbs (rotary table).
Commissioning of the rig will occur following inspection in January
2022 for immediate mobilisation to the Merlin-2 drill site. Snow
road construction commenced in December 2021 and is progressing
well.
A production testing program for the Merlin-2 was designed
during the quarter and will be on standby during initial wellsite
operations. The production test is contingent upon the wireline
program results, government approvals and subject to operational,
funding and weather considerations.
As at year end, the Permit to Drill for the Merlin-2 well was in
the final stages of review by the BLM and remains pending.
Permitting and planning for the Merlin-2 well is largely complete,
with the last major permit being the Permit to Drill, with the well
on track to spud in February 2022.
1. Mean unrisked prospective resource - Net Entitlement to 88 Energy
2. Please refer to cautionary statement on page 3.
Table 1: Project Peregrine Prospective Resource Estimate (August
2021)
PROSPECTIVE RESOURCE (MMBO, UNRISKED) (1)
Prospects Formation Low Best High Mean
Merlin-2 (N20, N19
& N18) Nanushuk 64 329 1,467 652
==================== ====================== ===== ====== ====== =======
Merlin-1A (N14S) Nanushuk 25 87 282 132
==================== ====================== ===== ====== ====== =======
Harrier Nanushuk 41 175 796 353
==================== ====================== ===== ====== ====== =======
Torok / Basin Floor
Harrier Deep Fan 35 226 1,132 486
1,624
TOTAL MEAN PROSPECTIVE OIL RESOURCE (1)
=================================================================== =======
1. Please refer to the ASX release dated 16 August 2021 for full
details with respect to the Prospective Resource estimate,
associated risking
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.
Umiat Oil Field (100% WI)
During Q1 2021, 88 Energy acquired the Umiat Oil Field. As part
of the acquisition, the Company received the Umiat data pack which
includes Umiat 3D seismic data. The Umiat 3D survey abuts the
southern edge of the Project Peregrine lease blocks. Integrating
the Linc/Malamute seismic interpretation has provided a better
understanding of the Peregrine reservoir geometries to the north as
well as enriching our petrophysical database with additional well
control (Umiat-8 and Umiat-23H).
Internal reinterpretation of modern 3D seismic is suggestive of
untested reservoirs at Umiat. Prospects have been mapped in the
footwall of the Umiat structure as well as downdip from the proven
oil zone in the hanging wall. Initial internal volumetric
calculations suggest there may be multi-million barrels of
recoverable oil combined in the hanging wall and footwall. Both
prospects are deeper than the current reserves at Umiat which
should have a positive impact on productivity.
Development studies continued in the quarter focusing on the
potential integration of Ultra Low Sulphur Diesel (ULSD) production
with previous studies. Initial screening economics suggest that
this development option adds further value to a future Umiat
development, considering the high cost of diesel (currently $5/gal)
on the North Slope of Alaska
A separate Umiat-23H well performance review was also finalised
during the quarter. This well was drilled in 2014 by a previous
owner and flowed at a sustained rate of 200 BOPD with no water, and
a maximum rate of 800 BOPD. The review concluded that this well
significantly underperformed due to poor drilling and completion
techniques. A more conventional trajectory and completion design
for a 5000 ft horizontal section was modelled to produce at
stabilised rates of between 800 and 1600 BOPD. Consequently, an
opportunity exists for the optimisation of historic subsurface
development plans.
Project Icewine (75% WI)
88 Energy was buoyed by the drilling results of the Talitha-A
well in Q1 of 2021, where multiple formations reported oil shows in
the Talitha-A well by Pantheon Resources (see AIM:PANR release
dated 19 April 2021). 88 Energy is closely monitoring activity
proximate to the northern border of its Project Icewine acreage
planned for Q1 2022.
There has been additional insight into the prospects of the
Schrader Bluff, Canning, Seabee and Kuparuk formations, highlighted
from the results of the Talitha-A program, which may have positive
implications for the same formations in 88 Energy's Icewine
acreage.
All three wells drilled by 88 Energy at Project Icewine have
encountered good quality reservoir in the Kuparuk formation, with
indications of hydrocarbons. These had previously been interpreted
as likely gas condensate or residual oil, and no mapped targets
were identified.
The results at Talitha-A are regionally highly encouraging for
all target formations, including those interpreted across Project
Icewine. Given the results from the Talitha-A well, 88 Energy's
internal geoscience team is reassessing the potential across the
acreage with an updated prospective resource estimate planned for
1H 2022.
Yukon Leases (100% WI)
The Yukon Leases contain the 82 million barrel(1) Cascade
Prospect, which was intersected peripherally by Yukon Gold-1 and
classified as a historic oil discovery.
In 2018, 88 Energy acquired 3D seismic over Cascade and, post
analysis, high-graded it from a lead to a drillable prospect. The
Yukon Leases are located adjacent to ANWR and in proximity to
recently commissioned infrastructure at Point Thompson.
Discussions advanced with nearby lease owners during the quarter
with respect to a joint development area with negotiation
agreements and due diligence underway.
1 Refer to 88 Energy release dated 7th November 2018. Note cautionary statement on page 3.
Corporate
During the quarter, Mr Oliver Mortensen joined 88 Energy in the
role of Chief Financial Officer (CFO).
On 6 December 2021, 88 Energy announced that a key contractor
involved in the Merlin-2 operations who provides snow road and
drilling management services had agreed to accept payment in new
ordinary shares in 88 Energy for payment of up to US$7,500,000
worth of invoices to be incurred in relation to services associated
with the Merlin-2 operations. This demonstrates significant support
for the Merlin-2 well proposition and broader Project Peregrine
opportunity. In consideration, 88 Energy has agreed to issue the
contractor 407,650,000 new ordinary shares ("New Shares") at a
price of A$0.026 per share to the vendor.
The New Shares will be issued as a pre-payment for services and
are to be held in escrow and subject to certain restrictions. The
New Shares will only be released from escrow following approval by
88 Energy. The vendor has the option to dispose of the New Shares,
subject to certain restrictions under the escrow arrangement,
however any proceeds will be held in trust until the associated
invoices are received and approved by 88 Energy. A reconciliation
and final payment of any outstanding invoices (in cash) is to occur
following completion of Merlin-2 drilling operations.
Finance
The ASX Appendix 5B attached to this quarterly report contains
the Company's cash flow statement for the quarter. The significant
cash flows for the period were:
-- Exploration and evaluation expenditure totalled A$3.1M
(September 2021 quarter: A$4.9M), primarily associated with
expenditure on Project Peregrine Merlin-2 well including planning,
permitting, snow road construction and securing Arctic Fox Rig
-- Lease rental payments totalled A$0.05M.
-- Cash call proceeds received from Joint Venture partners
totalled A$0.4M (September 2021 quarter A$6.7M)
-- Administration and other operating costs, totalled A$0.9M and staff costs totalled A$0.6M.
Note: Includes fees paid to Directors in the quarter of
$0.4M
At quarter end, the Company had cash reserves of A$32.3M and no
debt.
ESG
88 Energy is committed to building its credentials and making
disclosures against the World Economic Forum (WEF) ESG framework.
During the quarter, 88 Energy has made the following progress:
-- Engagement of Socialsuite technology platform to establish
ESG baseline and deliver the Company's inaugural quarterly ESG
Dashboard and tailored action plan.
-- Providing employment to local Alaskans throughout the Merlin-2 drilling program.
-- Participation in the Carbonfree(R) Business Partnership
Program, thus offsetting emissions from the Merlin-1 program and
other operating activities. In 2021 the Company reduced 6500 tonnes
of CO2 emissions through a donation to Carbonfree(R) which supports
verified projects that promote global warming solutions and help
provide cleaner air and energy. The project chosen to offset the
CO2 emissions was a U.S. based forestry conservation and carbon
sequestration project.
Table 3: Information required by ASX Listing Rule 5.4.3
Project Name Location Net Area Interest Interest
(acres) at beginning at end
of Quarter of Quarter
-------------- ------------
Project Icewine Onshore, North Slope Alaska 192,830 75% 75%
------------------- ----------------------------- --------- -------------- ------------
Yukon Leases Onshore, North Slope Alaska 38,681 100% 100%
------------------- ----------------------------- --------- -------------- ------------
Onshore, North Slope Alaska
Umiat Unit (NPR-A) 17,633 100% 100%
------------------- ----------------------------- --------- -------------- ------------
Onshore, North Slope Alaska
Project Peregrine (NPR-A) 195,373 100% 100%
------------------- ----------------------------- --------- -------------- ------------
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, Dr Stephen Staley, who is a
Non-Executive Director of the Company. Dr Staley has more than 35
years' experience in the petroleum industry, is a Fellow of the
Geological Society of London, and a qualified Geologist /
Geophysicist 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. Dr Staley 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.
This announcement has been authorised by the Board.
Images of Project Peregrine long section showing: expected
enhanced reservoir thickness to the east Wireframe; Merlin-2 well
location, facing east and reservoir sands can be viewed in the pdf
of this announcement on the Company's website; Surface attribute
map of the Lower Grandstand Unit; Shelf Margin Deltaic Extension
into Project Icewine
Media and Investor Relations:
88 Energy Ltd
Ashley Gilbert, Managing Director
Tel: +61 8 9485 0990
Email:investor-relations@88energy.com
Finlay Thomson , Investor Relations Tel: +44 7976 248471
Fivemark Partners , Investor and Media Relations Tel: +61 410 276 744
Andrew Edge / Michael Vaughan Tel: +61 422 602 720
EurozHartleys Ltd
Dale Bryan Tel: + 61 8 9268 2829
Cenkos Securities Tel: + 44 131 220 6939
Neil McDonald / Derrick Lee
Appendix 5B
Mining exploration entity or oil and gas exploration entity
quarterly cash flow report
1.1 Name of entity
---------------------------------------------------
88 Energy Limited
1.2 ABN 1.3 1.4 Quarter ended ("current
quarter")
--------------- ----------------------------
80 072 964 179 31 December 2021
----------------------------
1.5 Consolidated statement of Current quarter Year to date
cash flows (12 months)
$A'000 $A'000
1. Cash flows from operating
activities
1.1 Receipts from customers - -
1.2 Payments for
(a) exploration & evaluation - -
(b) development - -
(c) production - -
(d) staff costs (624) (1,900)
(e) administration and corporate
costs (854) (2,695)
1.3 Dividends received (see note - -
3)
1.4 Interest received - -
Interest and other costs of
1.5 finance paid - (1,053)
1.6 Income taxes paid - -
1.7 Government grants and tax - -
incentives
1.8 Other (XCD - redundancy payments) - -
---------------- -------------
Net cash from / (used in)
1.9 operating activities (1,478) (5,648)
----------------- ----------------------------------------------- ---------------- -------------
2. Cash flows from investing
activities
2.1 Payments to acquire or for:
(a) entities - -
(b) tenements (47) (6,749)
(c) property, plant and equipment - -
(d) exploration & evaluation (3,115) (35,042)
(e) investments - -
(f) other non-current assets - -
2.2 Proceeds from the disposal
of:
(a) entities - -
(b) tenements - -
(c) property, plant and equipment - -
(d) investments - -
(e) other non-current assets - -
2.3 Cash flows from loans to other - -
entities
2.4 Dividends received (see note - -
3)
2.5 Other - Joint Venture Contributions 412 20,816
* Proceeds from sale tax credits - 3,324
275 (113)
* Bonds
---------------- -------------
Net cash from / (used in)
2.6 investing activities (2,475) (17,764)
----------------- ----------------------------------------------- ---------------- -------------
3. Cash flows from financing
activities
Proceeds from issues of equity
securities (excluding convertible
3.1 debt securities) - 42,521
3.2 Proceeds from issue of convertible - -
debt securities
3.3 Proceeds from exercise of - -
options
Transaction costs related
to issues of equity securities
3.4 or convertible debt securities - (2,523)
3.5 Proceeds from borrowings - -
3.6 Repayment of borrowings - -
3.7 Transaction costs related - -
to loans and borrowings
3.8 Dividends paid - -
3.9 Other (provide details if - -
material)
---------------- -------------
Net cash from / (used in)
3.10 financing activities - 39,998
----------------- ----------------------------------------------- ---------------- -------------
4. Net increase / (decrease)
in cash and cash equivalents
for the period
Cash and cash equivalents
4.1 at beginning of period 36,083 14,847
Net cash from / (used in)
operating activities (item
4.2 1.9 above) (1,478) (5,648)
Net cash from / (used in)
investing activities (item
4.3 2.6 above) (2,475) (17,764)
Net cash from / (used in)
financing activities (item
4.4 3.10 above) - 39,998
Effect of movement in exchange
4.5 rates on cash held 187 884
---------------- -------------
Cash and cash equivalents
4.6 at end of period 32,317 32,317
----------------- ----------------------------------------------- ---------------- -------------
5. 1.6 Reconciliation of cash Current quarter Previous quarter
and cash equivalents $A'000 $A'000
at the end of the quarter
(as shown in the consolidated
statement of cash flows) to
the related items in the accounts
5.1 Bank balances 32,317 36,083
5.2 Call deposits - -
5.3 Bank overdrafts - -
5.4 Other (provide details) - -
---------------- -----------------
Cash and cash equivalents
at end of quarter (should
5.5 equal item 4.6 above) 32,317 36,083
----------------- ----------------------------------- ---------------- -----------------
(a)
6. 1.7 Payments to related parties of the entity Current quarter
and their associates $A'000
Aggregate amount of payments to related
parties and their associates included in
6.1 item 1 416
----------------
6.2 Aggregate amount of payments to related -
parties and their associates included in
item 2
----------------
Note: if any amounts are shown in items 6.1 or 6.2, your quarterly
activity report must include a description of, and an explanation
for, such payments.
6.1 Payments relate to Director and consulting fees paid to
Directors. All transactions involving directors and associates were
on normal commercial terms.
7. 1.8 Financing facilities Total facility Amount drawn
Note: the term "facility' amount at quarter at quarter end
includes all forms of financing end $US'000
arrangements available to $US'000
the entity. 1.9 Add notes
as necessary for an understanding
of the sources of finance
available to the entity.
7.1 Loan facilities - -
------------------- ----------------
7.2 Credit standby arrangements - -
------------------- ----------------
7.3 Other (please specify) - -
------------------- ----------------
7.4 Total financing facilities - -
------------------- ----------------
7.5 Unused financing facilities available at -
quarter end
----------------
7.6 Include in the box below a description of each facility
above, including the lender, interest rate, maturity date
and whether it is secured or unsecured. If any additional
financing facilities have been entered into or are proposed
to be entered into after quarter end, include a note providing
details of those facilities as well.
----------------- --------------------------------------------------------------------------
8. 1.10 Estimated cash available for future $A'000
operating activities
Net cash from / (used in) operating activities
8.1 (item 1.9) (1,478)
8.2 (Payments for exploration & evaluation classified (3,115)
as investing activities) (item 2.1(d))
8.3 Total relevant outgoings (item 8.1 + item (4,593)
8.2)
8.4 Cash and cash equivalents at quarter end 32,317
(item 4.6)
8.5 Unused finance facilities available at quarter -
end (item 7.5)
--------
8.6 Total available funding (item 8.4 + item 32,317
8.5)
--------
Estimated quarters of funding available
8.7 (item 8.6 divided by item 8.3) 7.0
--------
Note: if the entity has reported positive relevant outgoings
(ie a net cash inflow) in item 8.3, answer item 8.7 as
"N/A". Otherwise, a figure for the estimated quarters
of funding available must be included in item 8.7.
8.8 If item 8.7 is less than 2 quarters, please provide answers
to the following questions:
8.8.1 Does the entity expect that it will continue to
have the current level of net operating cash flows for
the time being and, if not, why not?
-------------------------------------------------------------------
Answer: n/a
-------------------------------------------------------------------
8.8.2 Has the entity taken any steps, or does it propose
to take any steps, to raise further cash to fund its operations
and, if so, what are those steps and how likely does it
believe that they will be successful?
-------------------------------------------------------------------
Answer: n/a
-------------------------------------------------------------------
8.8.3 Does the entity expect to be able to continue its
operations and to meet its business objectives and, if
so, on what basis?
-------------------------------------------------------------------
Answer: n/a
-------------------------------------------------------------------
Note: where item 8.7 is less than 2 quarters, all of questions
8.8.1, 8.8.2 and 8.8.3 above must be answered.
----------------- -------------------------------------------------------------------
1.11 Compliance statement
1 This statement has been prepared in accordance with accounting
standards and policies which comply with Listing Rule 19.11A.
2 This statement gives a true and fair view of the matters disclosed.
Date: 18 January 2022
Authorised by: By the Board
(Name of body or officer authorising release - see note 4)
1.12 Notes
1. This quarterly cash flow report and the accompanying activity
report provide a basis for informing the market about the entity's
activities for the past quarter, how they have been financed and
the effect this has had on its cash position. An entity that wishes
to disclose additional information over and above the minimum
required under the Listing Rules is encouraged to do so.
2. If this quarterly cash flow report has been prepared in
accordance with Australian Accounting Standards, the definitions
in, and provisions of, AASB 6: Exploration for and Evaluation of
Mineral Resources and AASB 107: Statement of Cash Flows apply to
this report. If this quarterly cash flow report has been prepared
in accordance with other accounting standards agreed by ASX
pursuant to Listing Rule 19.11A, the corresponding equivalent
standards apply to this report.
3. Dividends received may be classified either as cash flows
from operating activities or cash flows from investing activities,
depending on the accounting policy of the entity.
4. If this report has been authorised for release to the market
by your board of directors, you can insert here: "By the board". If
it has been authorised for release to the market by a committee of
your board of directors, you can insert here: "By the [name of
board committee - eg Audit and Risk Committee]". If it has been
authorised for release to the market by a disclosure committee, you
can insert here: "By the Disclosure Committee".
5. If this report has been authorised for release to the market
by your board of directors and you wish to hold yourself out as
complying with recommendation 4.2 of the ASX Corporate Governance
Council's Corporate Governance Principles and Recommendations, the
board should have received a declaration from its CEO and CFO that,
in their opinion, the financial records of the entity have been
properly maintained, that this report complies with the appropriate
accounting standards and gives a true and fair view of the cash
flows of the entity, and that their opinion has been formed on the
basis of a sound system of risk management and internal control
which is operating effectively.
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