TIDM88E
RNS Number : 3276H
88 Energy Limited
31 July 2019
31(st) July 2019
88 Energy Limited
Quarterly Report
Report on Activities for the Quarter ended 30 June 2019
The Directors of 88 Energy Limited ("88 Energy" or the
"Company", ASX & AIM:88E) provide the following report for the
quarter ended 30 June 2019.
Highlights
Project Icewine
-- Project Icewine Conventional: farm-out process continued in Q2 with preferred bidder;
o Third party due diligence process completed in the
quarter;
o Farminee internal approvals complete prior to end of June
2019.
-- Project Icewine Unconventional: advanced FIB-SEM and HAWK
analysis undertaken during the quarter which significantly advanced
the understanding of the HRZ shale play;
o Majority of acreage remains within revised prospectivity
fairway;
o Additional application of FIB-SEM underway to validate fairway
revision;
o Franklin Bluffs (Icewine#2 location) considered to be
marginally outside revised fairway;
o Formal farm-out process deferred to 2H 2019 - soft farm-out
underway with continued third party interest.a
A more detailed update on the conventional farm-out will be
provided in early August.
Yukon Acreage
-- Discussions underway with nearby resource owners to optimise
the monetisation strategy of the acreage.
Western Blocks - Winx-1
-- The aggregation of additional data ongoing in Q2, with tender
for reprocessing work to occur 3Q 2019;
-- Final Winx-1 well cost $14.3 million, $0.5 million under budget.
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 progressed to the next stage at the end of
Q1 with a preferred bidder selected with negotiations ongoing in
quarter, with indicative terms agreed and due diligence
completed.
Farminee internal approvals were complete at the end of June
2019.
-- Project Icewine Unconventional
Finalisation of advanced analysis using state-of-the-art
technology has significantly advanced the Joint Venture
understanding of the nature of the HRZ play. This analysis has
confirmed that the HRZ is an excellent source rock with good
potential as an economic shale play.
The nature of the dominant kerogen in the HRZ has been
demonstrated to be prone to more rapid transformation into
hydrocarbons than other shales initially used for comparison. This
means that the thermal maturity window for volatile oil in the HRZ
is at lower temperature than that typically seen in other plays. As
a result, the Franklin Bluffs location (where both Icewine wells
were drilled) is considered to be just outside the fairway. The
kerogen in the HRZ at Franklin Bluffs has been converted largely to
solid bitumen, with sub optimal intraparticle porosity and
connectivity. The total porosity of the formation remains excellent
- the effective kerogen porosity (pathways between the particles
that contain the hydrocarbon); however, is lower than ideal. At
slightly lower thermal maturity, it is prognosed that
porosity/connectivity will be significantly improved.
The expansive leasing strategy employed by the Joint Venture
means that the majority of the revised fairway for the play remains
captured within the Project Icewine leasehold, with greater than
50% of the acres under lease considered prospective.
The forward program consists of accessing material from regional
wells in order to conduct additional FIB-SEM analysis to confirm
improved effective porosity and connectivity. Consequently, the
formal farm-out process will be deferred until 2H 2019 to allow for
this work to be completed. The Joint Venture continues to field
unsolicited third party interest in the HRZ shale play and an
informal farm-out process is underway.
Western Blocks
Good progress was made in the quarter on integration of the
Winx-1 well results into the existing 3D seismic volume. Additional
data, that will aid in the evaluation process for the Western
Blocks, has been identified. The forward program will be to access
this data and reprocess and reinterpret the 3D seismic. It is
anticipated that the evaluation work will be completed towards the
end of CY2019.
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 (US$1.2
million net to 88E) to the State of Alaska in July 2018, which was
refunded by the Department of Natural Resources, Division of Oil
and Gas in the quarter having fulfilled the requirement of drilling
an exploration well by May 31 2019.
Yukon Leases
Discussions have been initiated by the Company with nearby lease
owners to optimise the monetisation strategy for existing
discovered resources located in the vicinity of the Yukon Leases.
The Yukon Leases contain the 86 million barrel Cascade Prospect#,
which was intersected peripherally by Yukon Gold 1, drilled in
1994, and classified as an historic oil discovery. 88 Energy
recently acquired 3D seismic (2018) over Cascade and, on final
processing and interpretation, high-graded it from a lead to a
drillable prospect. The Yukon Leases are located adjacent to ANWR
and in close proximity to recently commissioned infrastructure.
# Refer announcement 7th November 2018
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.
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$14.5m
(gross), primarily associated with the Winx-1 drilling operations
and Icewine lease rentals;
-- Payments in relation to the debt facility interest totalled A$0.6m (US$0.4m); and
-- Administration and other operating costs A$0.8m (Mar'19 Quarter A$0.6m).
At the end of the quarter, the Company had cash reserves of
A$6.7m, including cash balances held in Joint Venture bank accounts
relating to Joint Venture Partner contributions totalling
$0.4m.
Appointment of Joint Company Secretary
The Board is please to announce the appointment of Mr Ashley
Gilbert as Joint Company Secretary, effective 1 August 2019,
together with Ms Sarah Smith who will continue as Company
Secretary. Mr Gilbert is also the Chief Financial Officer of 88
Energy Limited and has significant financial, compliance and
corporate governance experience.
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 482,000 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 (received July 2019)
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.
+Rule 5.5
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 30 June 2019
----------------------------------
Consolidated statement of cash Current quarter Year to date
flows $A'000 (6 months)
$A'000
1. Cash flows from operating
activities
1.1 Receipts from customers - -
1.2 Payments for
(a) exploration & evaluation (14,573) (22,846)
(b) development - -
(c) production - -
(d) staff costs (356) (685)
(e) administration and corporate
costs (423) (685)
1.3 Dividends received (see note - -
3)
1.4 Interest received 12 19
Interest and other costs of
1.5 finance paid (589) (1,199)
1.6 Income taxes paid - -
1.7 Research and development refunds - -
1.8 Other (JV Partner Contributions) 1,238 8,600
---------------- -------------
Net cash from / (used in)
1.9 operating activities (14,691) (16,796)
----- ------------------------------------- ---------------- -------------
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)
Other: a) Bond - State of
2.5 Alaska 4,251 4,251
b) JV Partner Contribution
- Bond (2,549) (2,549)
---------------- -------------
Net cash from / (used in)
2.6 investing activities 1,702 1,702
------- ----------------------------------- ---------------- -------------
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 19,596 21,723
Net cash from / (used in)
operating activities (item
4.2 1.9 above) (14,691) (16,796)
Net cash from / (used in)
investing activities (item
4.3 2.6 above) 1,702 1,702
4.4 Net cash from / (used in) - -
financing activities (item
3.10 above)
Effect of movement in exchange
4.5 rates on cash held 67 45
---------------- -------------
Cash and cash equivalents
4.6 at end of period 6,674 6,674
------- ----------------------------------- ---------------- -------------
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 6,674 19,596
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) 6,674 19,596
---- ----------------------------------- ---------------- -----------------
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
$US'000
8.1 Loan facilities 15,526 15,526
------------------- ----------------
8.2 Credit standby arrangements - -
------------------- ----------------
8.3 Other (please specify) - -
------------------- ----------------
8.4 Include below a description of each facility above, including
the lender, interest rate and whether it is secured or
unsecured. If any additional facilities have been entered
into or are proposed to be entered into after quarter
end, include details of those facilities as well.
---- -------------------------------------------------------------------------
* On the 23rd of March 2018, 88 Energy Lt's 100%
controlled subsidiary Accumulate Energy Alaska Inc
entered into a US$ 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* (1,895)
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)** (600)
--------
9.7 Total estimated cash outflows (3,225)
---- -------------------------------------- --------
* Includes amounts relating to lease rentals, G&A, G&G,
which are net of anticipated JV partner contributions.
** 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 Project Icewine 528,000 482,000
mining tenements leases relinquished Gross Gross
and petroleum totalling 45,480 acres acres
tenements lapsed, acres
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
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
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END
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