TIDM88E
RNS Number : 3388J
88 Energy Limited
09 April 2020
88 Energy Limited
QUARTERLY REPORT
Report on Activities for the Quarter ended 31 March 2020
The Directors of 88 Energy Limited ("88 Energy" or the
"Company", ASX & AIM:88E) provide the following report for the
quarter ended 31 March 2020.
Highlights
Project Icewine
-- The Permit to Drill for the Charlie-1 exploration well was
approved by the Alaska Oil and Gas Conservation Commission (AOGCC)
on the 11 February 2020;
-- The Charlie-1 exploration well spudded on 2 March 2020, with
the well intersecting all the of the pre-drill targets safely and
efficiently;
-- Total Depth of 11,112' was reached on the 30 March 2020,
having drilled through and logged all of the targets in the well,
including the HRZ;
-- Results from the Logging While Drilling (LWD) program were
largely consistent with those seen in the nearby Malguk-1 well,
with shows and elevated log response recorded over several
horizons; and
-- The wireline logging program commenced shortly after reaching
Total Depth, with the Company announcing subsequent to quarter end
a confirmed condensate discovery in the Torok Formation.
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.
Corporate
-- Successful completion of a capital raise of A$5 million (before costs).
Project Icewine
-- Project Icewine Conventional
Charlie-1 Exploration Well
The Permit to Drill which was submitted prior to the end of
2019, as planned, was approved by the Alaska Oil and Gas
Conservation Commission (AOGCC) on the 11 February 2020.
Construction of the ice road which commenced in late December
2019 was fully completed together with the ice pad at the Charlie-1
drilling location, by mid-February 2020. Mobilisation of the Nordic
Rig#3 to site began shortly after completion of the ice road and
the Charlie-1 well was spudded on 2 March 2020.
The Charlie-1 well reached its Total Depth of 11,112' (TVD) on
30th March 2020, having drilled through and logged all of the
targets in the well, including the HRZ. Results from the Logging
While Drilling program are largely consistent with those seen in
the nearby Malguk-1 well, drilled by BP in 1991, with shows and
elevated log response recorded over several horizons. The
significance of the similarities, and differences, to Malguk-1 will
not be known until after the more detailed wireline logging program
has been executed and analysis completed.
The wireline logging program commenced shortly after Total Depth
was reached, and concluded on 6 April 2020.
Subsequent to quarter end the Company announced on 7 April 2020
that the Charlie-1 appraisal well had proved the presence of mobile
hydrocarbons, in the form of condensate gas, in the Torok Formation
in both the Middle Stellar and Lower Stellar targets. Hydrocarbons
were successfully recovered to surface from both targets using a
state-of-the-art downhole sampling tool (Ora). Further analysis to
confirm the composition and gas to liquid ratio will now be
undertaken. Upper Stellar was not tested due to the sub optimal
location that it was intersected by the well.
Sampling was also successfully completed in the Schrader Bluffs
Formation from the Indigo target, which was found to be water
bearing. The Charlie target was found to be poorly developed and
was not sampled. Oil shows in this interval are deemed to be
related to residual oil that is not trapped in the system.
In the Seabee Formation, an attempt was made to take a sample
from the Lower Lima target, being the better of the two Lima
targets. This attempt was unsuccessful due to insufficient
reservoir quality; however, given that these targets were not
intersected optimally, there still may be potential for higher
quality reservoir at a different location. Excellent Vertical
Seismic Profile ("VSP") data was obtained in the well, which will
now be used in conjunction with other log data and the existing 3D
seismic, to remap these targets. Sidewall core analysis will also
assist with determining where improved reservoir is likely to
exist. Mud gas, observed while drilling, in the Seabee indicated
that the hydrocarbons at this horizon are heavier than those in the
Torok and this is the horizon where "live oil" was observed across
the shakers in the nearby Malguk-1 well.
Premier Oil has informed the Joint Venture that it intends to
withdraw from the project, as the well did not meet its pre-drill
expectations. On withdrawal the Company's working interest will
increase to 75% in Area A including the confirmed condensate
discovery in the Torok Formation.
The cost of the well remains within the expected budget and 88E
does not expect to incur any costs in relation to the drilling,
with Premier Oil having been cash called and already paid into the
Joint Venture bank account US$23 million in relation to the
drilling costs of the Charlie-1 well.
The well will now be plugged and abandoned ("P&A") in line
with standard industry practice.
The announcement released by the Company on 7 April 2020
provides further details of the results from the Charlie-1
well.
-- Project Icewine Unconventional
Detailed logs and sidewall cores were also acquired in the HRZ
formation during drilling of the Charlie-1 well, which will now be
analysed over the coming months
The HRZ remains a viable target and options to commercialise
this potentially large resource continue to be pursued.
The Joint Venture plans to conduct a formal farm-out process to
fund further appraisal.
Yukon Leases
Discussions continued during the quarter 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 7 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 continued during the
quarter, ahead of lease expiry in May 2021.
Placement to Raise A$5 million
On the 24 January 2020, the Company announced that it had
successfully completed a capital raise of A$5 million (before
costs), with the placement made to domestic and international
institutional and sophisticated investors through the issue of 238
million ordinary shares at A$0.021 (equivalent to GBP0.011) per New
Ordinary Share.
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:
-- Proceeds from capital raise before costs of A$5.0m;
-- Exploration and evaluation expenditure totalled A$15.1m gross
(Dec'19 Quarter A$4.0m);, primarily associated with expenditure on
the Charlie-1 appraisal well;
-- Cash call proceeds received from Joint Venture partners in
the quarter totalled A$21.9m (Dec'19 Quarter A$12.4m);
-- Payments in relation to the debt facility interest totalled A$0.6m (US$0.4m); and
-- Administration and other operating costs A$0.6m (Dec'19 Quarter A$0.9m).
At the end of the quarter, the Company had cash reserves of
A$28.1m, including cash balances held in Joint Venture bank
accounts relating to Joint Venture Partner contributions totalling
A$19.4m.
In light of the current low oil price environment and
uncertainties related to the COVID-19 pandemic, the Company has
implemented prudent cost cutting measures, including salary
reductions.
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%
Onshore, North Slope
Yukon Gold Alaska 15,235 100% 100%
Onshore, North Slope
Western Blocks Alaska 22,711 36% 36%
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 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 March 2020
----------------------------
1.5 Consolidated statement of Current quarter Year to date
cash flows ( 3 months)
$A'000 $A'000
1. Cash flows from operating
activities
1.1 Receipts from customers - -
1.2 Payments for
(a) exploration & evaluation
(if expensed) - -
(b) development - -
(c) production - -
(d) staff costs (351) (351)
(e) administration and corporate
costs (269) (269)
1.3 Dividends received (see note - -
3)
1.4 Interest received 1 1
Interest and other costs of
1.5 finance paid (606) (606)
1.6 Income taxes paid - -
1.7 Government grants and tax - -
incentives
1.8 Other (provide details if - -
material)
---------------- -------------
Net cash from / (used in)
1.9 operating activities (1,225) (1,225)
----------------- ------------------------------------ ---------------- -------------
2. Cash flows from investing
activities
2.1 Payments to acquire:
(a) entities - -
(b) tenements (44) (44)
(c) property, plant and equipment - -
(d) exploration & evaluation
(if capitalised) (15,113) (15,113)
(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 21,944 21,944
---------------- -------------
Net cash from / (used in)
2.6 investing activities 6,787 6,787
----------------- ------------------------------------ ---------------- -------------
3. Cash flows from financing
activities
Proceeds from issues of equity
securities (excluding convertible
3.1 debt securities) 5,000 5,000
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 (362) (362)
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 4,638 4,638
----------------- ------------------------------------ ---------------- -------------
4. Net increase / (decrease)
in cash and cash equivalents
for the period
Cash and cash equivalents
4.1 at beginning of period 15,903 15,903
Net cash from / (used in)
operating activities (item
4.2 1.9 above) (1,225) (1,225)
Net cash from / (used in)
investing activities (item
4.3 2.6 above) 6,787 6,787
Net cash from / (used in)
financing activities (item
4.4 3.10 above) 4,638 4,638
Effect of movement in exchange
4.5 rates on cash held 2,011 2,011
---------------- -------------
Cash and cash equivalents
4.6 at end of period 28,114 28,114
----------------- ------------------------------------ ---------------- -------------
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 28,114 15,903
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) 28,114 15,903
----------------- ----------------------------------- ---------------- -----------------
(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 16
----------------
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 $US'000
the entity. 1.9 Add notes
as necessary for an understanding
of the sources of finance
available to the entity.
7.1 Loan facilities 16,005 16,005
------------------- ----------------
7.2 Credit standby arrangements - -
------------------- ----------------
7.3 Other (please specify) - -
------------------- ----------------
7.4 Total financing facilities 16,005 16,005
------------------- ----------------
7.5 Unused financing facilities available at -
quarter end
----------------
7.6 Include in the box below a description of each facility
above, including the lender, interest rate, maturity date
and whether it is secured or unsecured. If any additional
financing facilities have been entered into or are proposed
to be entered into after quarter end, include a note providing
details of those facilities as well.
----------------- --------------------------------------------------------------------------
On the 23rd of March 2018, 88 Energy Lt's 100% controlled subsidiary
Accumulate Energy Alaska Inc entered into a US$ 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.
8. 1.10 Estimated cash available for future $A'000
operating activities
Net cash from / (used in) operating activities
8.1 (Item 1.9) (1,225)
8.2 Capitalised exploration & evaluation (Item (15,113)
2.1(d))
8.3 Total relevant outgoings (Item 8.1 + Item (16,338)
8.2)
8.4 Cash and cash equivalents at quarter end 28,114
(Item 4.6)
8.5 Unused finance facilities available at quarter -
end (Item 7.5)
8.6 Total available funding (Item 8.4 + Item 28,114
8.5)
Estimated quarters of funding available
8.7 (Item 8.6 divided by Item 8.3) 1.7
----------------- ------------------------------------------------------------
8.8 If Item 8.7 is less than 2 quarters, please provide answers
to the following questions:
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: 8.2 relates to costs associated with the Charlie-1,
which are fully covered by funds received from the farm-out
to Premier Oil and 88E does not expect to incur any costs
in relation to this item.
Net of JV cash, 88E has A$8.9m in cash and has expected
total outgoings for the remainder of the year of A$7.0m
(including both operating and investing cashflows), which
are more than covered by the current net cash position.
-------------------------------------------------------------------------
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: No, there is no requirement to raise further cash
based on the anticipated future expenditure as noted in
8.8 (1).
-------------------------------------------------------------------------
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: Yes, refer to response at 8.8 (1).
-------------------------------------------------------------------------
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: 9 April 2020
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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END
DOCFIFIRSFIAIII
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