88e Long Term Investors Group - Questions for Friday, page-98

Great post as normal Laz, thanks.

Having thought more myself about the change from the Horiz to the Vertical Ice2, I now understand how we can actually benefit more from the multi fracced Vert well, than we could from a single fracced Horiz. The benefits how I see it are :

1. Financial : Existing funds fully cover the well cost. No pressure to accept less than favourable terms for any farm out or institutional investor. Allows 88E to maintain a stronger position in any future funding negotiations. On the success case for Ice2V, we will have a higher SP if a Cap Raise happens, or we will have a very strong position with Farminee negotiations.

2. Well Completion Risk : The vertical well will be simpler in design and as we have been told, there are more available rigs and crews to choose from. Less chance (not zero, but significantly less) of having a stuck drill in the Vert well and eliminates the chance of stuck drill in the now abandoned Horiz section. Vert well still allows for future Horiz side tracks for testing or if future production is permitted from Franklins Bluff pad.

3. Multi Stage Frac : We are now back to a multi stage frac with less risk and within our existing finances. We also get to test the full vertical extent of the HRZ plus the HUE now. As it is being done in 3-4 stages, the different stages will be independently flow tested to determine which section of the payzone will provide best flow rates. This is better than trying to choose the best landingzone and most prolific flowrate zone from the seismics alone. We now get to physically test and engineer the best landing zone for future Horiz test and production wells.

4. Flowrate Test : The flowback test will also give us the flow information that we would have achieved from a Horiz well, but instead of extrapolating a 1,000' Horiz flow rate to what an equivalent 10,000' long Horiz well would flow, we now will extrapolate likely 100' Vert sections to determine what an equivalent 10,000' long Horiz well in the same layer would achieve. So if DW told the London crew he expects a flowback rate of 100-150 BOPD from the Vert section, then extrapolate that out from say a 300' Vert section to a 10,000' long Horiz section and it equates approx to 3,300 to 5,000 BOPD for a fully fracced Horiz well. Interesting that this now seems to be a higher flow rate than we have previously been advised of being in the range of 2,500 to 3,000 BOPD.

So in summary, I think some very prudent revisions to the plans that reduces financial and technical risks and still provides the outcomes that were looking to be achieved and more. This will now give us a detailed view of the overall payzone and where best to target future production wells. The abandoning of the recently proposed IRR is no biggy either, as we werent expecting it and it will be the results of Ice2 that have more of an impact in bringing D&M around to PB's view of Icewine rather than seismics anyhow. Although in saying that, I still believe the seismic results will influence investor sentiment one way or the other. Taking longer than estimated but rathe right be right than rushed.

All in all fantastic news from how I see it

cheers
Chilly