Questions and Answers from Dave Wall received 16th Jan 2017...

Questions and Answers from Dave Wall received 16th Jan 2017

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0	Question	Answer from DW
1	Jeremy McCammon: State of Alaska rebates. Are any outstanding for 88e? If so, how much is 88e owed and has any been paid back yet. Also what is the States timings for payback?	Yes – US$18.2m outstanding Timing is likely part this year and the remainder next year. If this is the case, then 88 will incur no additional interest liability above the prepaid interest already paid.
2	MikeMike: 1/   Moic; Will it have an impact on the sp at point of take over. I would suspect that the price at takeover would already have MOIC included as a potential buyer will treat this as a liability to be offset. 2/ Should ice 2 not be able to prove a commercial flow, will there be sufficient funds or interest to raise funds for a jv for the conventional?, if so how fast. 3/ Should ice 2 prove to be a success for both Unconventional and conventional if Alpha is successfully spud from there :- a/ Will SOA be more amenable to allow use of the existing ice pad for upside purposes. On the understanding that AE build a new ice pad for storage purposes from funds received from a successful well? b/ Will this be a jumping off point to lay pipeline to pump 2, 12 miles away, what is linear cost of pipeline for such a distance..guesstimate is fine!!	Yes. Our modelling shows that this is not material under base case scenarios – if we hit our stretch targets it may increase to ~15% but the value will increase by more than that. Depends on market conditions – my guess would be yes, given the size of the conventional prize and the recent discoveries in the Brookian by others. Farm-out is also an option. Ice2 is not testing the conventional from the initial well bore. Alpha is ~9000ft away from the planned bottom hole location and the HRZ remains the primary target – to be delivered on budget. This is an ongoing discussion but we can see no reason why this should not be the case – DNR is mandated to do what is in the best interests of the State / Alaskans. Typical pipeline cost in lower 48 are US$1m per mile. AK will be higher than that but the cost will not be material in the grand scheme of things if we have success. Initial production will be trucked to PS1.
3	Gareth Smith: Is there a new timeline? In particular could we still expect a JV in 2017 or before the Mar 2018 options expire? Might the conventional be sold off, some cash retained for unconventional development and a dividend paid? And most importantly - when will the actual permit to drill be granted?	JV now dependent on Ice2 results – we are funded and have taken the dilutionary hit for the drilling so farm-out at this point decrease upside exposure for shareholders. Yes but given the maturity of the portfolio, I would say that this is unlikely in the current environment. PTD typically takes around 10 days to get approved, once submitted. No risk to timeline.
4	Julian Vance: In layman’s terms, why is the HRZ sweet spot in the wave formation across the acreage and what are some of the reasons that support that theory?Can you explain the difference in the HUE from the HRZ ?Can the horizontal be drilled straight after the vertical Testing has been completed? What is the reason for waiting for 2018 (as per the permit)? I assume we will need a different rig? Can we horizontally test multiple horizons from ice2V?or will we need another permit.Can we prove up the existence of the sweet spot over the whole acreage with vertical wells making it cheaper, quicker and less risky ? How hard is it to get drill rigs and equipment out into the middle and far parts of our acreage? Will we need to make roads etc and Will it be a long and hard process to get those permits? What are the costs of roads and infrastructure and do they need to be constructed at certain times of the year?Can we get multiple rigs in at once to prove the sweet spot of the HRZ over large portions of the acreage quicker? And if we have plenty of money in the bank, can the verticals be drilled all year round?Will a horizontal sidetrack from icewine2V into Alpha be enough to prove up that entire prospect? Or will further work need to be done?Hypothetically, and ball park figure what would a proved up alpha be worth to a farm in partner? $1 million? $10 million? $100million? Would there be any advantage listing in the USA and does he see any benefit from doing so	This is largely driven by historic burial depth – which drives the present day maturity. We interpret the sweetspot as being in the thermal maturity window that gives rise to volatile oil – lowest viscosity with highest liquids content. Different depositional history – HRZ is condensed marine section at bottom of HUE. Richer source rock, different kerogen Yes – timing is to allow for proper production testing from the vertical. Will need a bigger rig. Can drill multiple horizons. We have confidence in the mapping so if Ice2 is successful we would move to drill multiple horizontals to delineate the resource. Won’t take longer but will be more expensive – offset by larger value creation. Not hard. Common practice for 95% of the wells drilled on the North Slope. What we have done so far is the exception rather than the norm. We have based our assumptions on the costs for the Kuparuk / Alpine fields. Here is some helpful info http://www.bp.com/content/dam/bp-country/en_us/PDF/2015-BP-in-AK-facts-and-figures.pdf Yes. Once a development plan is approved then we will be able to build gravel roads connecting the pads and drill all year round. Yes. Pre drilling, the value is indeterminate as it is subjective. A 100mmbbl+ field that close to the road should be worth >US$5/bbl if oil price is >US$65 Yes – on success.
5	Colin Joblin: Thanks for the opportunity to put some questions forward. Firstly trying to get 100% clear on what super critical phase in the HRZ means. Quote Edman 2012 “High pressure reservoir with the right gas-oil ratio (GOR) results in lower viscosity (super critical phase) and thus higher deliverability – ‘sweetspot vapour phase’ ” I have estimated the HRZ to be at 4900 psi and 85°C so would only expect the methane to be in gas phase? Please correct my estimates to actual numbers from the IW1 data set? Is 40% pore over pressure 40 % greater than hydrostatic of say 3500psi so 4900psi? What are the formation floor and ceiling depths on Alpha, Bravo and the stacked plays N/E of Bravo? Did the two historic wells intersect with the new stacked play N/E of Bravo, if so is there an indication on the height of reservoir and the type of hydro carbons encountered?	Means when the liquids exist in gaseous form in the reservoir – lower viscosity and can flow at higher rates. https://en.wikipedia.org/wiki/Supercritical_fluid Spot on Not sure how you came up with those numbers but that is not consistent with our view. We have not released these publicly but may do so now that we have the play stitched up. http://www.drillingformulas.com/hydrostatic-pressure-calculation/ We have not released this publicly but will likely do so in future. They are in the Brookian above the HRZ and the play types have been described so you can figure out where they sit in the depositional sequence and make a guess. Intersected the edges of the leads – poor log quality due to issues with drilling unfortunately so we can only infer data. Excellent oil shows on the mudlogs provides good encouragement.
6	Paul Woodroff: Can you confirm beyond doubt that 88 are fully funded for Icewine 2? What can you share with us about his thinking now for the conventional, what is the likely way forward?	Yes. Quarterly will be out shortly and we will also provide guidance on the well cost in the coming weeks as major vendors are selected. If Ice2 is unsuccessful we will look to mature one or more leads and either farmout or raise funds to drill. If Ice2 is successful then the delineation wells for the HRZ will be designed to intersect conventional targets also.
7	Matthew Wood: You have previously mentioned a 60p buyout figure for 2017. However this was before the additional land purchase and the confirmation of 1.5bn conventional oil being in place. Therefore do you now have a revised target?	Never mentioned 60p buy out figure – nor a forecast that this would happen in 2017… The value potential is in the billions of dollars on success.
8	Ian Gardiner: Will you be on site during SPUD?	Erik will be! Spud is not very exciting so more likely that I will go for the production test. The other technical people will be there at various times throughout the operation.
9	Nick Hewett: Are they still doing analysis of the seismic data they have? Are they expecting further announcements on conventional? Are they thinking of buying further seismic data for the new land areas that have been leased in the last round? When they are drilling Icewine2V will they be considering ALSO doing drilling to confirm the conventional oil at the same site? Are they planning further drilling to confirm the conventional OR to investigate further the extent of the unconventional? With Burgundy buying land separately are there any issues or tensions in Accumulate? Or was it planned together? What is the news from Great Bear? Are they progressing? Any implications for 88e/Accumulate?	Conventional is pretty much done for now. Always work being done in the background tho. There is some data available – question of cost vs quality. What was being asked was more than we were willing to pay for the value it will add. That may change. We have announced late Q1 spud. Alpha is 9000ft away so will not be tested by the initial well bore. HRZ is primary target. May be tested in a subsequent sidetrack depending on HRZ results. HRZ is primary target – to be tested by Ice2 as above. Additional drilling is dependent on results. There is a 500,000 acre cap so this was more strategic to capture as much land as possible in the JV within our respective budgets.  All very amicable. Hard to say what they are up to. They keep deferring their plans to drill. They are owed a lot by the State so are probably waiting to see some of that money back before they make their next move.
10	Warren Taylor: What is the total amount of oil found so far not including new Acreage? Conventional and Unconventional.	We have released our internal estimates for both based on the pre-existing acreage. We have not released an updated resource for the HRZ including the new acreage.  What we have released is plenty big.
11	Les Fry: Brilliant recent news regarding extra leases obtained and the updated seismic. What is now planned in respect of land to the West and what are the timescales and potential funding issues related to that?	All depends on results from Ice2 and many other conditions – market, oil price etc
12	John Tweedie: There have been comparisons with the Eagle Ford field and Icewine . Is the drill Icewine 2 equivalent to an early drill on Eagle Ford and if so was there an anticipated flow rate, what was it and was it achieved/ exceeded?	Yes  - google Kunde-1
13	Ropoh: Will the Ice 2v drill in a success case (achieve / exceed expectations) lead to a declaration of contingent resource? If a successful outcome but answer is no, what else will be needed to get to a contingent and or proven resource?	Yes.
14	Dion Smith: As the potential of oil in place and recoverable is so vast on 88e's acreage, have any approaches been made as yet by a 3rd party oil company seeking either more information/data and/or seeking formal/informal discussions in relation to a potential jv?	Confidential
15	Rob Paipa: Will we be informed that JV discussions or deals are in negotiation and as shareholders will we be able to vote on these deals? Can you elaborate on what offers have been put forward already?	No – confidential until announced. When you invest in a company it is like voting for the Board. You have to believe that we will do what is in the best interests of shareholders. No – confidential until they are deemed complete and likely to be approved by the Board.
16	Derrick Fewings: My understanding is that the recently announced results from the analysis of seismic data covered predominantly the area 88E had leases for prior to the recent extension. The results also covered that part of the recently acquired land for which some seismic data was available. Roughly what proportion of the additional area recently acquired by Accumulate was covered by the published results? Similarly, what proportion of the area recently acquired by Burgundy was covered by the published results?	The seismic only covered 2/3 of the pre existing acreage and 10% of the acreage to the West. None of the BEX (88E 30% option) leases are covered by the recent 2D seismic. They were leased for HRZ only (which is not to say that conventional potential does not exist – we just do not have seismic there to define it)
17	Jason Hare: Have there been any inquiries regarding a farm out of any type? Will you look at going into production? What is your plan for proving up the new acreage? And how will you fund it? Would you consider releasing further announcements with the LSE as the focus seeing as the ASX hasn’t really run with any positive news? Do you think more media may help the SP take off?	We have stated that there have been discussions in this regard – the fact that nothing has been announced tells you that these discussions did not mature to a point where we consider the potential deals to be accretive. Yes. Why not? If Ice2 is successful then we will technically be in production! Depends on results from Ice2 – farmout, debt, equity – the same mix available to all companies. We will choose the path that adds most value to shareholders. Both markets are trading released news down – this has been tested and proven. Maybe – in the past the media has not played a major part in share price appreciation (like the post Ice1 results – this was largely passed over by the media. They picked up on resource increases etc but this news was sold down by the market).
18	Alex Amodio: The latest RNS gave us an update on the prospective conventional, whilst outlining that the HRZ remains the main focus. Are there any short term plan for the conventional prospects?	Depends on results from Ice2 – HRZ is primary focus for near term.
19	Chris Ashford: How do we think President Trump will affect the exploration and production of oil in Alaska and is he likely to extend or conceive any financial incentives to generate small companies like 88e to take up a position in the area? It’s been mentioned that this year will be transformational for 88e.  I also note that you intended on getting maximum value for shareholders and not give away our acreage piecemeal.  If ICE2 is hugely successful, would this mean a Farm Out would be off the cards or would you only consider a Farm in/JV?	North Slope is State regulated so no direct impact for us. If he opens up ANWR, which is federal, then this should lead to more services, rigs etc and increased competition / better infrastructure and lower costs. Everything depends on what is most accretive – for example: if we believe that Ice2 has proven the commercial potential of the play but we are getting low ball offers from industry then we would look to raise equity (and later debt) to fund activity and keep all the acres until we have delineated a reserve, which is less subjective in terms of valuation. If the market is low balling (via the share price) then we would look to industry to farm-out.
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