TIDM88E
RNS Number : 2152A
88 Energy Limited
20 January 2020
20 January 2020
88 Energy Limited
QUARTERLY REPORT
Report on Activities for the Quarter ended 31 December 2019
The Directors of 88 Energy Limited ("88 Energy" or the
"Company", ASX & AIM:88E) provide the following report for the
quarter ended 31 December 2019.
Highlights
Project Icewine
-- Farm-out with Premier Oil Plc ("Premier") finalised and
completion documents executed in the quarter;
-- The Alaska Department of Natural Resources approved the Plan
of Operations for the Charlie-1 appraisal well in November
2019;
-- Permit to Drill submitted - approval expected in January 2020; and
-- All other contracting and logistical work is proceeding as
planned ahead of the scheduled February 2020 spud date.
Yukon Acreage
-- Discussions continue with nearby resource owners to optimise
the monetisation strategy of the acreage; and
-- Permitting underway ahead of potential drilling in 2021 - subject to farm-out.
Western Blocks
-- Assessment of strategy for future of leases underway.
Project Icewine
-- Project Icewine Conventional
Farm-out Update
All conditions precedent to the farm-out agreement between 88
Energy, Premier and Burgundy Xploration, signed in August 2019,
have been satisfied. Consequently, execution of the final
agreements took place on 26(th) November 2019.
Operations Update
88 Energy, via its 100% owned subsidiary Accumulate Energy
Alaska, Inc ("Accumulate"), executed a rig contract with
Nordic-Callista Services just prior to the beginning of the
quarter, to utilise Rig-3 for the upcoming drilling of the
Charlie-1 appraisal well. 88 Energy utilised Rig-3 for the drilling
of the Winx-1 well in March 2019 and was extremely pleased with its
safe and efficient performance throughout the course of
operations.
The Alaska Department of Natural Resources approved the Plan of
Operations for the Charlie-1 appraisal well on 22(nd) November. The
Plan of Operations is one of the key major permits required for
drilling.
The Permit to Drill was submitted prior to the end of 2019, as
planned, and approval is expected towards the end of January. This
is the last major permit required prior to spud of the Charlie-1
well.
As per the farm-out agreement, initial cash call was receipted
into the Joint Venture account in December 2019.
All other contracting and logistical work is proceeding as
planned ahead of the scheduled February 2020 spud date.
About the Charlie-1 Appraisal Well
The Charlie-1 appraisal well has been designed as a step out
appraisal of a well drilled in 1991 by BP Exploration (Alaska) Inc
called Malguk-1. Malguk-1 encountered oil shows with elevated
resistivity and mud gas readings over multiple horizons during
drilling but was not tested due to complications towards the end of
operations, which resulted in lack of time before the close of the
winter drilling season. It was also drilled using vintage 2D
seismic, which was insufficient to adequately determine the extent
of any of the prospective targets encountered.
88 Energy subsequently undertook revised petrophysical analysis,
which identified what is interpreted as bypassed pay in the
Malguk-1 well. 88E also completed acquisition of modern 3D seismic
in 2018, in order to determine the extent of the discovered oil
accumulations. Charlie-1 will intersect seven stacked prospects,
four of which are interpreted as oil bearing in Malguk--1 and are
therefore considered appraisal targets. 88 Energy will operate
Charlie-1, via its 100% owned subsidiary Accumulate Energy Alaska,
Inc, with cost of the well to be funded by Premier Oil Plc up to
US$23m under the recent farm-out agreement. Drilling is scheduled
to commence in February 2020 with flow testing anticipated to
conclude in April 2020. The total Gross Mean Prospective Resource
across the seven stacked targets to be intersected by Charlie-1 is
1.6 billion barrels of oil (480 million barrels net to 88E). Refer
announcement dated 23(rd) August.
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.
-- Project Icewine Unconventional
Assessment of material from regional wells ongoing in order to
conduct additional FIB-SEM analysis to confirm improved effective
porosity and connectivity.
Additional analysis to be complimented by results from the
Charlie-1 well, with the well designed to penetrate HRZ and gather
additional data which will complement the ongoing additional
analysis being conducted.
The Joint Venture plans to conduct a formal farm-out process to
fund further appraisal.
Yukon Leases
Discussions are ongoing 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.
Permitting underway ahead of possible drilling in 2021 - subject
to farm-out.
(*) 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.
Western Blocks
Assessment of strategy for future of leases underway, ahead of
lease expiry in May 2021.
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$4.0m
(gross), primarily associated with lease rentals and expenditure
associated with the upcoming Charlie-1 appraisal well;
-- Cash call proceeds received from Joint Venture partners totalled $12.4m;
-- Payments in relation to the debt facility interest totalled A$0.6m (US$0.4m); and
-- Administration and other operating costs A$0.9m (Sept'19 Quarter A$1.1m).
At the end of the quarter, the Company had cash reserves of
A$15.9m, including cash balances held in Joint Venture bank
accounts relating to Joint Venture Partner contributions totalling
A$10.7m.
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 64% 64%(1)
Onshore, North Slope
Yukon Gold Alaska 15,235 100% 100%
Onshore, North Slope
Western Blocks Alaska 22,711 36% 36%
(1) Assignment of interest to Premier in Project Icewine Area A
completed in Q4 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.
A pdf copy of this Quarterly Report, including the following
figures and graphics, is available at
http://www.rns-pdf.londonstockexchange.com/rns/2152A_1-2020-1-17.pdf
-- Graph Showing Charlie-1: Seven Stacked Horizons
-- Table Showing Charlie-1 Targets
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 December 2019
----------------------------------
Consolidated statement of cash Current quarter Year to date
flows $A'000 (12 months)
$A'000
1. Cash flows from operating
activities
1.1 Receipts from customers - -
1.2 Payments for
(a) exploration & evaluation (4,043) (30,711)
(b) development - -
(c) production - -
(d) staff costs (465) (1,710)
(e) administration and corporate
costs (466) (1,757)
1.3 Dividends received (see note - -
3)
1.4 Interest received 1 23
Interest and other costs of
1.5 finance paid (595) (2,396)
1.6 Income taxes paid - -
1.7 Research and development refunds - -
1.8 Other (JV Partner Contributions) 12,387 23,860
---------------- -------------
Net cash from / (used in)
1.9 operating activities 6,819 (12,691)
----- ------------------------------------- ---------------- -------------
2. Cash flows from investing
activities
2.1 Payments to acquire:
(a) property, plant and equipment - -
(b) tenements (see item 10) - (52)
(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 Returned -
2.5 State of Alaska - 4,251
b) JV Partner Contribution
- Bond - (2,549)
c) Bond Paid - State of
Alaska (659) (659)
---------------- -------------
Net cash from / (used in)
2.6 investing activities (659) 991
------- ----------------------------------- ---------------- -------------
3. Cash flows from financing
activities
3.1 Proceeds from issues of shares - 6,530
3.2 Proceeds from issue of convertible - -
notes
3.3 Proceeds from exercise of - -
share options
Transaction costs related
to issues of shares, convertible
3.4 notes or options (23) (461)
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) - -
---------------- -------------
Net cash from / (used in)
3.10 financing activities (23) 6,069
------- ----------------------------------- ---------------- -------------
4. Net increase / (decrease)
in cash and cash equivalents
for the period
Cash and cash equivalents
4.1 at beginning of period 10,144 21,723
Net cash from / (used in)
operating activities (item
4.2 1.9 above) 6,819 (12,691)
Net cash from / (used in)
investing activities (item
4.3 2.6 above) (659) 991
Net cash from / (used in)
financing activities (item
4.4 3.10 above) (23) 6,069
Effect of movement in exchange
4.5 rates on cash held (378) (189)
---------------- -------------
Cash and cash equivalents
4.6 at end of period 15,903 15,903
------- ----------------------------------- ---------------- -------------
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 15,903 10,144
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) 15,903 10,144
---- ----------------------------------- ---------------- -----------------
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 24
----------------
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
$US'000
------------------- ----------------
8.1 Loan facilities 15,884 15,884
------------------- ----------------
8.2 Credit standby arrangements - -
------------------- ----------------
8.3 Other (please specify) - -
------------------- ----------------
8.4 Include below a description of each facility above, including
the lender, interest rate and whether it is secured or
unsecured. If any additional facilities have been entered
into or are proposed to be entered into after quarter
end, include details of those facilities as well.
---- -------------------------------------------------------------------------
* On the 23rd of March 2018, 88 Energy Lt's 100%
controlled subsidiary Accumulate Energy Alaska Inc
entered into a US$ 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* (565)
9.2 Development -
9.3 Production -
9.4 Staff costs (385)
9.5 Administration and corporate costs (300)
9.6 Other (provide details if material)** (595)
--------
9.7 Total estimated cash outflows (1,845)
---- -------------------------------------- --------
* 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 482,000 482,000
mining tenements Gross Gross
and petroleum acres acres
tenements lapsed,
relinquished
or reduced
----- --------------------- -------------- ------------------- -------------- ------------
10.2 Interests in N/A
mining tenements
and petroleum
tenements acquired
or increased
----- --------------------- -------------- ------------------- -------------- ------------
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: Ashley Gilbert
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
contact rns@lseg.com or visit www.rns.com.
END
MSCFLFESLLIDLII
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