88 Energy Limited (88E) is an oil and gas exploration company focused on the world-renowned hydrocarbon field on the Central North Slope in Alaska. 88E holds a 77.5% working interest and operatorship of Project Icewine and has the objective of unlocking a new unconventional play with gross mean unrisked recoverable hydrocarbon liquids of 2.6Bbbl. An equivalent conventional target of 758MMbbl has also been identified. 88E’s maiden well, Icewine #1, was completed in December 2015 and successfully confirmed the unconventional potential of the project. The success prompted the decision to proceed with appraisal well Icewine #2, with spud date expected in early April 2017. 88E’s joint venture partner in Project Icewine (22.5%) is Burgundy Xploration, headed by former ConocoPhillips Eagle Ford pioneer Paul Basinski.
88E is seeking to raise $10 million to $15 million via the issue of circa
270 million to 405 million fully paid ordinary shares at an issue price of
$0.037 per Share. Placement Shares will be issued immediately under the Company’s current placement capacity pursuant to ASX Listing Rule 7.1 and 7.1A. The Company accepts the right to accept over-subscriptions for a further $2 million to raise a total of $17 million.
DJ Carmichael Pty Limited is acting as Co-Manager to a share placement being undertaken by 88 Energy Limited.
Investment Highlights
Spud of Icewine #2 appraisal well imminent - Placement participants will be leveraged to the drill program.
Rig contracted - Arctic Fox is a premier North Slope rig estimated to commence mobilisation to Project Icewine #2 location towards the end of March 2017 with an anticipated spud date in early April 2017.
Flow test result from Icewine #2 expected mid-2017.
Material strategic acreage position on the North Slope - 88E holds a 77.5% working interest and operatorship of Project Icewine, situated on the Central North Slope in Alaska. The project consists of 271,119 gross, contiguous acres strategically located along the Dalton Highway and the Trans-Alaskan Pipeline System. The acreage is highly prospective for both unconventional and conventional oil and gas accumulations however 88E’s main focus is the regionally extensive HRZ shale, the source for the giant Prudhoe Bay oil field 56km to the north of Project Icewine. 88E’s joint venture partner is Burgundy Xploration (22.5%), led by ex-ConocoPhillips Eagle Ford pioneer Paul Basinski. Mr Basinski was responsible for originally identifying Project Icewine.
Significantly de-risked - 88E has completed the analysis of core taken from the maiden well, Icewine #1. Analysis has confirmed the unconventional potential of the project with much of the acreage lying within the thermal maturity ‘sweet spot’. TOC and hydrocarbon saturation is equal with other world-class shale plays while permeability and effective porosity is superior to those of the Eagle Ford formation. An effective bottom seal and elevated pore pressure gradient increases chances of commercial production.
The interpretation of the 2D seismic, both acquired in H1 2016, has been largely completed and will de-risk future drilling as well as identifying large conventional leads and prospective areas that may warrant future 3D seismic coverage.
Exciting upcoming work program - The appraisal well, Icewine #2, is expected to spud in early April 2017 and the expected cost of USD$17.7m (USD$14.0m net to 88E) is sufficiently covered including a substantial contingency following completion of the current round of funding. The drill pad is located on the Dalton Highway with year round access. The well program
entails:
Single stage, multi-perforation cluster stimulation and
production test to test two horizons (HRZ and basal Hue Shale)
Estimated 30-45-day drill time
Main stimulation refined over 1-2-week period before execution
Flow test results expected by mid-2017
Major interest - In the event that the Icewine #2 appraisal well is commercially successful, the potential resource size and subsequent scope of commercial development would attract the attention of all the oil majors.
This would place 88E in a strong negotiating position and result in a significant elevation in the Company’s valuation.
The next 6 months
April 2017 - Spud Icewine #2 appraisal well
May 2017 - Fracture stimulate and production test 2 horizons
H2 2017 - Drilling results from conventional prospects in nearby
Great Bear acreage
Ongoing - Potential asset sale or farm-in on projects
Funds raised via the Placement will be allocated towards drilling, stimulation and production testing of the Icewine #2 well and for general working capital purposes.
The attached Term Sheet contains further details on the Company and Placement.
An indicative timetable for the Placement is set out below. Please note that the Company reserves the right to close the book early.
Event
2017
Commitment bids due
9.00am AWST Friday 3 March
Acceptances due
Friday 3 March
Placement settlement date
8.00am AWST Thursday 9 March
Issue of Placement Shares
On or around Monday 13 March
If you have any interest in this offer please get back to me by 9am Friday
3rd March.
88E Price at posting:
4.2¢ Sentiment: Buy Disclosure: Held
(20min delay)