TIDM88E
RNS Number : 5052W
88 Energy Limited
18 April 2019
18(th) April 2019
QUARTERLY REPORT AND APPIX 5B
Report on Activities for the Quarter ended 31 March 2019
The Directors of 88 Energy Limited ("88 Energy" or the
"Company", ASX & AIM:88E) provide the following report for the
quarter ended 31 March 2019.
Highlights
Project Icewine
-- The Conventional farm-out campaign continued in the quarter,
with the deadline for bids extended to end January due to demand
from multiple parties. After consideration, a preferred bidder was
selected by the Company in March 2019;
-- Subject to the negotiation of terms and conditions, the
Conventional portfolio farm-out deal is targeted in Q2 2019, with
the intention to drill an exploration / appraisal well in 2020;
and
-- Unconventional portfolio evaluation work continued in Q1,
with a farm-out launch planned mid 2019.
Western Blocks - Winx-1
-- The Permit to Drill for the Winx-1 exploration well was
approved by the Alaska Oil and Gas Conservation Commission (AOGCC)
on the 16th January;
-- The Winx-1 exploration well spudded on schedule on 15th
February, with the well intersecting all the of the pre-drill
targets safely and efficiently;
-- Total Depth of 6,800' was reached on the 3rd March 2019,
having intersected all targets, including the primary Nanushuk
Formation Topset objective;
-- Petrophysical analysis of the wireline logging program
indicated low oil saturations in both the primary Nanushuk Topset
objectives and the Torok objective, with testing and fluid sampling
indicating that reservoir quality and fluid mobility at this
location are considered insufficient to warrant production
testing;
-- The Winx-1 well was successfully plugged and abandoned on the 18(th) March,2019 (AK time);
-- Both the Nordic#3 rig and associated services were fully
demobilised prior to the end of the quarter; and
-- Drilling operations were completed on time and without
incident, and it is anticipated that well costs will be on or
slightly under budget.
Yukon Acreage
-- Processing of the Yukon 3D seismic is complete, with
interpretation and resource evaluation currently underway on the
inversion product.
Project Icewine
-- Project Icewine Conventional
A fast track farm-out campaign commenced in August 2018, whilst
processing of newly acquired 3D seismic (March 2018) was still
underway. Processing was finalised in October 2018, including
inversion, marking the first time that potential farminees could
comprehensively assess the mapped conventional resource potential
on the Western Play Fairway at Project Icewine. Consequently,
requests were made by potential farminees for more time to evaluate
the opportunity, which the Company granted.
The farm-out process has now progressed to the next stage, with
a preferred bidder selected and discussions underway. The Company
advises that there is no guarantee that the parties will agree
terms and close out the transaction. A further announcement will be
made in due course on the outcome of the ongoing negotiations,
which are currently confidential in nature.
-- Exploration/transactional activity near Icewine highlights potential of the acreage
The last 18 months have seen a significant increase in interest
in the acreage to the west of Project Icewine and on the same
latitude, marking a southerly trend in exploration focus.
ConocoPhillips acquired 3D seismic in 2018, 15 miles west of the
Project Icewine Western Margin Leases. The Company is also aware of
a multi-client 3D seismic acquisition planned immediately to the
west of, and adjacent to, the Project Icewine acreage.
Additional near term transactional activity by others is
expected associated with the on sale of an option acquired by Oil
Search in 2017. This option expires in June 2019 and includes
acreage immediately to the south of the Western Blocks (where
Winx-1 was recently drilled) and immediately west of Project
Icewine (where the multi-client 3D seismic acquisition is
planned).
-- Project Icewine Unconventional
Baker Hughes and the United States Geological Society (USGS)
continue to apply advanced evaluation techniques to the HRZ shale
play, including additional tests on both core and cuttings obtained
from the drilling of the Icewine-1 and Icewine-2 wells.
The Company continues to receive third party interest in the HRZ
shale project and anticipates being able to integrate the data from
the current evaluation into a dataroom by mid-2019 in order to
commence a formal farm-out process.
-- Purchase of Outstanding Tax Credits and an Additional Tax Credit Certificate Granted
On the 9th of January the Alaskan Department of Revenue ("DoR")
informed the Company of the purchase of US$1.57 million in tax
credits, with the funds received directly applied against the
Brevet debt facility. Debt outstanding at the end of the quarter
totalled US$15.4 million.
Further, on the 26th of March, the Company was informed by the
Alaska DoR that it had issued a Credit Certificate to Accumulate
Energy Alaska Inc., (100% owned subsidiary of 88 Energy Ltd), for
US$2.35m related to CY2016 2D seismic expenditure. The total
expected cashable credits owed by the State to 88E at quarter end
was US$19.1 million, which is far in excess of debt outstanding of
US$15.4 million.
Western Blocks
-- Operations
The Permit to Drill for the Winx-1 exploration well was approved
by the Alaska Oil and Gas Conservation Commission (AOGCC) on the
16(th) January 2019, and with the completion of the construction of
the 11 mile ice road in late January the Nordic#3 rig was mobilised
and arrived at the drill site location as planned on the 7th
February.
Spud of the Winx-1 exploration well occurred on schedule on 15th
February 2019, with the well intersecting all the of the pre-drill
targets safely and efficiently. Total Depth of 6,800' was reached
on the 3rd March 2019, with multiple potential pay zones identified
in the Nanushuk Formation Topset Play (primary targets) and Torok
Formation (secondary targets).
The Winx-1 well was plugged and abandoned on the 18(th) March
2019, with the rig and associated services fully demobilised prior
to the end of the quarter. Drilling operations were completed on
time and without incident, and it is anticipated that well costs
have come in on or slightly under budget
-- Winx-1 Results
Petrophysical interpretation of the LWD data at Winx-1 indicated
elevated resistivities associated with increased mud gas ratios (C1
- C5) in the distinctive Nanushuk Topset sequence, comparable with
other successful neighbouring wells in the Nanushuk play fairway.
Early indications were encouraging and, on this basis, a
comprehensive wireline program was undertaken to further evaluate
the interval of interest.
The wireline program was designed to fully evaluate and quantify
the reservoir potential and associated shows in the Nanushuk
Topsets. The suite comprised specialist logging tools capable of
quantifying laminated pay zones, including nuclear magnetic
resonance; a triaxial induction tool that measures both horizontal
and vertical resistivity, and an MDT program to determine pressure
gradients and sample fluids from the zones of interest.
Wireline results indicate low oil saturations in the Nanushuk
Topsets not conducive to successfully flowing the formation, as
borne out by the MDT sampling results, which did not retrieve
hydrocarbon samples. Reservoir properties appear to be compromised
by dispersed clay in the matrix at Winx-1. This clay is often
present in other successful Nanushuk wells but in discrete
laminations with decent quality, high resistivity, oil saturated
sandstones in between. The dispersed clay in the Nanushuk at Winx
impacts both fluid mobility and oil saturations. The clay serves to
bind much of the fluid present in place so that it cannot flow. It
also occupies pore space within the formation, resulting in a lower
relative hydrocarbon saturation. This means that, whilst oil is
present in the reservoir, there is less of it and it is not mobile.
Further evaluation will be undertaken post drill to fully
understand the implications of the petrophysical results
The reservoir performance in the Torok Channel Sequence was
better than the Nanushuk in the Winx-1 well, as evidenced by
relatively faster influx of fluid during MDT sampling. On
completion of the wireline logging program it is apparent that the
oil saturations in the Torok zone of interest are also low and not
conducive to hydrocarbon flow. The oil saturations are evidence of
an active petroleum system / charge and further work is required to
determine whether there is an effective trapping mechanism at this
location or elsewhere on the leases.
-- Performance Bond
In consideration for acquiring a working interest from Great
Bear Petroleum in the Western Blocks the Company, and Consortium
partners, provided a US$3.0 million Performance Bond to the State
of Alaska in July 2018 as part of the commitment to drilling an
exploration well by May 31 2019.
On satisfying the requirement of drilling an exploration well on
the acreage 88 Energy have earnt the rights to a 36% working
interest on the acreage. Well data was submitted to the Department
of Natural Resources, Division of Oil and Gas in March to initiate
the release of the US$3.0 million performance bond, (US$1.2 million
net to 88E), having fulfilled the requirement of drilling an
exploration well by May 31 2019.
-- Forward Plan
The forward plan is to further evaluate and integrate the
valuable data acquired at Winx-1, reprocess the Nanuq 3D seismic
(2004) in order to evaluate the remaining prospectivity on the
Western Leases including the Nanushuk Fairway potential.
Yukon Leases
Final processing of the Yukon 3D seismic was completed in the
quarter, with interpretation and resource evaluation currently
underway on the inversion product. As previously reported, a number
of prospective horizons have been identified on the acreage,
including the Cascade lead, which was intersected peripherally by
Yukon Gold-1, drilled in 1994, and classified as an historic oil
discovery. The Yukon Leases are located adjacent to ANWR and in
close proximity to existing infrastructure.
Corporate
The ASX Appendix 5B attached to this 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$8.3m
(gross), primarily associated with the Winx-1 drilling
operations;
-- Payments in relation to the debt facility interest totalled A$0.6m (US$0.6m); and
-- Administration and other operating costs A$0.6m (Dec'18 Quarter A$1.0m).
At the end of the quarter, the Company had cash reserves of
A$19.6m, including cash balances held in Joint Venture bank
accounts relating to Joint Venture Partner contributions totalling
$7.0m.
Information required by ASX Listing Rule 5.4.3:
Project Name Location Area (acres)
-------------- ----------------
Interest at
beginning of Interest at
Quarter end of Quarter
----------------- ---------------------- ------------- -------------- ----------------
Onshore, North Slope
Project Icewine Alaska 528,000 66% 66%
Onshore, North Slope
Yukon Gold Alaska 15,312(1) 100% 100%
Onshore, North Slope
Western Blocks Alaska 22,711 0% 36%
(1) 1,118 acres subject to formal award
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.
Media and Investor Relations:
88 Energy Ltd
Dave Wall, Managing Director Tel: +61 8 9485 0990
Email: admin@88energy.com
Finlay Thomson, Investor Relations Tel: +44 7976 248471
Hartleys Ltd
Dale Bryan Tel: + 61 8 9268 2829
Cenkos Securities
Neil McDonald/Derrick Lee Tel: +44 131 220 6939
This announcement contains inside information.
Appendix 5B
Mining exploration entity and oil and gas exploration entity
quarterly report
Introduced 01/07/96 Origin Appendix 8 Amended 01/07/97,
01/07/98, 30/09/01, 01/06/10, 17/12/10, 01/05/13, 01/09/16
Name of entity
-----------------------------------------------------
88 Energy Limited
ABN Quarter ended ("current quarter")
--------------- ----------------------------------
80 072 964 179 31 March 2019
----------------------------------
Consolidated statement of cash Current quarter Year to date
flows $A'000 (3 months)
$A'000
1. Cash flows from operating
activities
1.1 Receipts from customers - -
1.2 Payments for
(a) exploration & evaluation (8,273) (8,273)
(b) development - -
(c) production - -
(d) staff costs (329) (329)
(e) administration and corporate
costs (262) (262)
1.3 Dividends received (see note - -
3)
1.4 Interest received 7 7
Interest and other costs of
1.5 finance paid (610) (610)
1.6 Income taxes paid - -
1.7 Research and development refunds - -
1.8 Other (JV Partner Contributions) 7,362 7,362
---------------- -------------
Net cash from / (used in)
1.9 operating activities (2,105) (2,105)
----- ------------------------------------- ---------------- -------------
2. Cash flows from investing
activities
2.1 Payments to acquire:
(a) property, plant and equipment - -
(b) tenements (see item 10) - -
(c) investments - -
(d) other non-current assets - -
2.2 Proceeds from the disposal
of:
(a) property, plant and equipment - -
(b) tenements (see item 10) - -
(c) investments - -
(d) other non-current assets - -
2.3 Cash flows from loans to - -
other entities
2.4 Dividends received (see note - -
3)
2.5 Other: a) Bond - State of - -
Alaska - -
b) JV Partner Contribution
- Bond
---------------- -------------
2.6 Net cash from / (used in) - -
investing activities
------- ----------------------------------- ---------------- -------------
3. Cash flows from financing
activities
3.1 Proceeds from issues of shares - -
3.2 Proceeds from issue of convertible - -
notes
3.3 Proceeds from exercise of - -
share options
3.4 Transaction costs related - -
to issues of shares, convertible
notes or options
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 (Fees for debt refinancing) - -
---------------- -------------
3.10 Net cash from / (used in) - -
financing activities
------- ----------------------------------- ---------------- -------------
4. Net increase / (decrease)
in cash and cash equivalents
for the period
Cash and cash equivalents
4.1 at beginning of period 21,723 21,723
Net cash from / (used in)
operating activities (item
4.2 1.9 above) (2,105) (2,105)
4.3 Net cash from / (used in) - -
investing activities (item
2.6 above)
4.4 Net cash from / (used in) - -
financing activities (item
3.10 above)
Effect of movement in exchange
4.5 rates on cash held (22) (22)
---------------- -------------
Cash and cash equivalents
4.6 at end of period 19,596 19,596
------- ----------------------------------- ---------------- -------------
5. Reconciliation of cash and Current quarter Previous quarter
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 19,596 21,723
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) 19,596 21,723
---- ----------------------------------- ---------------- -----------------
6. Payments to directors of the entity and Current quarter
their associates $A'000
Aggregate amount of payments to these parties
6.1 included in item 1.2 170
----------------
6.2 Aggregate amount of cash flow from loans -
to these parties included in item 2.3
----------------
6.3 Include below any explanation necessary to understand
the transactions included in items 6.1 and 6.2
----- -----------------------------------------------------------------
6.1 Payments relate to Director and consulting fees paid to
Directors. All transactions involving directors and associates
were on normal commercial terms.
7. Payments to related entities of the entity Current quarter
and their associates $A'000
Aggregate amount of payments to these parties
7.1 included in item 1.2 13
----------------
7.2 Aggregate amount of cash flow from loans -
to these parties included in item 2.3
----------------
7.3 Include below any explanation necessary to understand
the transactions included in items 7.1 and 7.2
----- -----------------------------------------------------------------
7.1 Payments relate to consulting fees paid to Director related
entities. Consultant fees paid to associated entities were
on normal commercial terms.
8. Financing facilities available Total facility Amount drawn
Add notes as necessary for amount at quarter at quarter end
an understanding of the position end $US'000
$US'000
8.1 Loan facilities 15,405 15,405
------------------- ----------------
8.2 Credit standby arrangements - -
------------------- ----------------
8.3 Other (please specify) - -
------------------- ----------------
8.4 Include below a description of each facility above, including
the lender, interest rate and whether it is secured or
unsecured. If any additional facilities have been entered
into or are proposed to be entered into after quarter
end, include details of those facilities as well.
---- -------------------------------------------------------------------------
* On the 23rd of March 2018, 88 Energy Lt's 100%
controlled subsidiary Accumulate Energy Alaska Inc
entered into a US$ 16.5 million debt refinancing
agreement to replace the existing Bank of America
debt facility. The key terms to the facility are
noted in the ASX announcement released on 26th of
March 2018. The facility is secured by available
Production Tax Credits.
9. Estimated cash outflows for next $A'000
quarter
9.1 Exploration and evaluation* (5,700)
9.2 Development -
9.3 Production -
9.4 Staff costs (350)
9.5 Administration and corporate costs (380)
9.6 Other (provide details if material)** (550)
--------
9.7 Total estimated cash outflows (6,980)
---- -------------------------------------- --------
* Includes amounts relating to lease rentals, 3D seismic
inversion, G&A, G&G, expenditure on Winx-1 drilling
operations which are net of anticipated JV partner contributions
and return of the Alaskan DnR Bond.
** Includes amounts relating to costs associated with the Brevet
debt interest costs.
10. Changes in tenements Tenement Nature of interest Interest Interest
(items 2.1(b) reference at beginning at end
and 2.2(b) above) and location of quarter of quarter
10.1 Interests in N/A
mining tenements
and petroleum
tenements lapsed,
relinquished
or reduced
----- --------------------- -------------- ------------------- -------------- ------------
10.2 Interests in N/A
mining tenements
and petroleum
tenements acquired
or increased
----- --------------------- -------------- ------------------- -------------- ------------
1.1 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.
Sign here: ............................................................ Date: .............................................
(Company Secretary)
Print name: Sarah Smith
Notes
1. The quarterly report provides a basis for informing the
market how the entity's activities have been financed for the past
quarter and the effect on its cash position. An entity that wishes
to disclose additional information is encouraged to do so, in a
note or notes included in or attached to this report.
2. If this quarterly 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 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.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
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Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
DRLGMGMDVRMGLZG
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