REG - 88 Energy Limited - Hickory-1: BFF Maiden Contingent Resource Estimate
06/11/2023 07:00
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RNS Number : 4724S 88 Energy Limited 06 November 2023
This announcement contains inside information
6 November 2023
88 Energy Limited
Hickory-1: Confirmed Discovery
with BFF Maiden Contingent Resource Estimate
Highlights
· Maiden Independent Contingent Resource estimate completed at Project
Phoenix for the Basin Floor Fan (BFF) reservoir.
· Gross Best Estimate (2C) Contingent Resource of 250 Million Barrels
of Oil Equivalent (MMBOE) from the deepest reservoir encountered in Hickory-1,
the BFF, comprised of;
o 136 million barrels (MMbbl)* of recoverable hydrocarbon liquids (Oil and
NGL); and
o 628 billion cubic feet (BCF)* of recoverable gas.
· Independently certified Contingent Resource assessment prepared by
Netherland, Sewell & Associates, Inc. (NSAI), a leading US based
independent consultancy for the petroleum industry.
· Contingent Resources defined on the basis of multiple successful flow
tests conducted in the BFF reservoir on adjacent acreage and clear reservoir
continuity demonstrated through high quality seismic data and correlations
across Hickory-1 and Icewine-1 to the neighbouring successful wells.
· Assessment carried out by NSAI confirms discovery status for the BFF
reservoir prior to planned testing operations at Hickory-1.
· Key step towards the understanding of the hydrocarbon volumes in of
Project Phoenix prior to Hickory-1 testing operations. If successful, these
operations will allow additional contingent resources to be assigned to the
shallower SMD-B and SFS reservoirs.
88 Energy Limited (ASX:88E, AIM:88E, OTC:EEENF) (88 Energy or the Company) is
pleased to report a maiden, independently certified Contingent Resource
estimate of 136 MMbbl of hydrocarbon liquids (gross best estimate (2C)) and
628 BCF of gas, for the BFF reservoir in Project Phoenix (~75% net working
interest).
* Gross (100%) best estimate contingent resource. Natural Gas Liquids (NGL's)
are converted to oil equivalent volumes on a constant ratio basis of 1:1. Gas
is converted to oil equivalent volumes on a constant ratio basis of 5.5 BCF
per 1 MMBoe.
Managing Director, Ashley Gilbert, commented:
"This maiden Contingent Resource is a great result for 88E and its
shareholders. It represents an important milestone on the path to the possible
development of Project Phoenix, even prior to flow testing operations at
Hickory-1 this upcoming season.
We look forward to the upcoming planned Hickory-1 flow tests which, if
successful, will enable the certification of additional contingent resources
in the shallower reservoirs and move another step closer to appraising the
discovery. We remain on track for Q1 2024 operations for this exciting
project."
NSAI's maiden Independent Contingent Resource Report was completed after its
review of an extensive data suite that included seismic data, well logs from
Hickory-1 and Icewine-1 and certain data from wells in adjacent acreage
including flow test data. NSAI is a leading independent US-based expert
petroleum asset evaluation firm with significant and recent experience in
providing resource estimates globally, as well as more specifically in Alaska.
NSAI confirmed that the following requirements were met by the Company to
achieve a Contingent Resource classification for the BFF reservoir:
· Multiple successful flow tests for the same reservoir in adjacent
acreage.
· Clear reservoir continuity was demonstrated through high quality
seismic data and correlations across all four wells, Talitha-A, Theta West-1,
Hickory-1 and Icewine-1.
· Log data, petrophysical interpretations and reservoir conditions
across all four wells demonstrated sufficient similarity to confirm
producibility in Project Phoenix.
· All existing data was integrated consistently and coherently which
established the existence of a known petroleum accumulation in the BFF
reservoir in Project Phoenix.
This assessment confirms a discovery status at Hickory-1 and Icewine-1 for the
BFF reservoir in Project Phoenix and further validates 88 Energy's internal
assessments of Project Phoenix.
Further, the certification of a Contingent Resource for the BFF reservoir
allows the Company to focus the Hickory-1 flow testing on the shallower
reservoirs (SMD-B and SFS), with any further testing of the BFF reservoir
optional and contingent on JV funding and approvals.
The forward work-program to assess the viability of the commercial development
of the BFF reservoir, either in isolation or together with the shallower
reservoirs, as well as addressing each of the contingencies, will occur
subsequent to the flow testing at Hickory-1 which is scheduled for the
upcoming Alaskan winter operational season.
Contingent Resources Estimate - Basin Floor Fan, Project Phoenix
The assessed maiden Contingent Resource estimate associated with the BFF
reservoir in Project Phoenix (~75% net working interest to 88E and ~63% net
entitlement) is summarised below.
Project Phoenix: Basin Floor Fan Gross (100%) Contingent Resources (1,3)
Probabilistic Method Low (1C) Best (2C) High (3C)
Oil Million Barrels 17 44 104
NGL Million Barrels 35 91 218
Oil + NGL(2) Million Barrels 52 136 322
Gas Billion Cubic Feet 255 628 1,417
Total (2) Million Barrels of Oil Equivalent (4) 98 250 580
Project Phoenix: Basin Floor Fan Net Entitlement (~63%) Contingent Resources (1,3)
Probabilistic Method Low (1C) Best (2C) High (3C)
Oil Million Barrels 11 28 65
NGL Million Barrels 22 57 137
Oil + NGL(2) Million Barrels 33 85 202
Gas Billion Cubic Feet 160 394 890
Total (2) Million Barrels of Oil Equivalent (4) 62 157 364
1. 88 Energy net resources have been calculated using a 75.227% working
interest and a 16.5% royalty.
2. 88 Energy cautions that the reported totals for Oil+NGL and Total MMBOE are
an arithmetic sum of the individual hydrocarbon types within the BFF
reservoir. The arithmetically summed 1C estimate may be a conservative
estimate and the arithmetically summed 3C estimate may be optimistic when
compared to a statistical aggregation of probability distributions.
3. The Contingent Resource classification is not required to be adjusted for
the chance of development, as per PRMS 2018 guidance, and hence has not been
carried out in this assessment.
4. Natural Gas Liquids (NGL's) are converted to oil equivalent volumes via a
constant ratio of 1:1. Gas is converted to oil equivalent volumes via a
constant ratio of 5.5 BCF per 1 MMBoe.
Cautionary Statement:
Please refer to the disclaimers attached as Schedule 1 of this release for
more information on the contingent resource report.
About NSAI
Founded in 1961, NSAI is a worldwide leader in petroleum consulting and
advisory services. NSAI specializes in multi-disciplinary integration and
consists of experienced technical staff across a wide range of professionally
qualified engineers and geologists, who provide geoscience, reservoir,
facilities and cost engineering and economic/commercial expertise in
conventional and unconventional projects.
Updated Prospective Resources Estimate - Project Phoenix
The Prospective Resource estimate below was prepared by Lee Keeling and
Associates (LKA) as of 9 August 2022 and is prior to the drilling of
Hickory-1,and is an update from the prospective resource estimate announced on
23 August 2022 with respect to the BFF reservoir only. NSAI has not conducted
a review in relation to the prospective resources reported below. The
Prospective Resource estimate associated with 88 Energy's Project Phoenix
acreage (~75% net working interest) has been updated to reflect the
reclassification of the BFF from Prospective Resource to Contingent Resource
as of 1 November 2023, with remaining Prospective Resources summarised below.
Project Phoenix: Alaska North Slope Unrisked Gross Prospective Oil Resources (MMstb) (4,5)
Prospects (Probabilistic Method) Low (1U) Best (2U) High (3U) Mean COS (3)
Shelf Margin Delta (SMD A, B & C) 70 224 518 231 81%
Slope Fan Set (SFS) 37 134 345 141 50%
Kuparuk (KUP) 39 88 156 89 72%
Prospects Total 146 446 1,019 461 (2)
Project Phoenix: Alaska North Slope Unrisked Net Entitlement to 88E (1) Prospective Oil Resources (MMstb) (4,5)
Prospects (Probabilistic Method) Low (1U) Best (2U) High (3U) Mean COS (3)
Shelf Margin Delta (SMD A, B & C) 44 140 326 145 81%
Slope Fan Set (SFS) 24 84 217 89 50%
Kuparuk (KUP) 24 56 98 56 72%
Prospects Total 92 280 641 290 (2)
1. 88 Energy net resources have been calculated using a 75.227% working
interest and a 16.5% royalty.
2. The unrisked means, which have been arithmetically summed, are not
representative of expected total from the prospects and implies a success case
in all reservoir intervals. 88 Energy cautions that the arithmetically summed
1U estimate may be a conservative estimate and the arithmetically summed 3U
estimate may be optimistic when compared to a statistical aggregation of
probability distributions.
3. COS represents the geological chance of success as assessed by 88 Energy
and reviewed and endorsed by LKA.
4. Prospects are subject to a phase risk (oil vs gas). Chance of oil has been
assessed as 100% for all targets except for the Kuparuk Formation which has
been assessed as 70%. Phase risk has not been applied to the unrisked
numbers.
5. The Prospective Resources have not been adjusted for the chance of
development. Quantifying the chance of development (COD) requires
consideration of both economic and other contingencies, such as legal,
regulatory, market access, political, social license, internal and external
approvals and commitment to project finance and development timing. As many of
these factors are outside the knowledge of LKA they must be used with caution.
6. Prospective Resource Estimates - determined pre-drilling of Hickory-1.
7. Updated Prospective Resource Estimates reflect the removal of the resource
estimate for the Basin Floor Fan which as of 1 November 2023 has been
redetermined and classified as a Contingent Resource. No other changes have
been made to the original estimates, please refer to the ASX announcement of
23 August 2023.
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.
This announcement has been authorised by the Board.
Media and Investor Relations:
88 Energy Ltd
Ashley Gilbert, Managing Director
Tel: +61 8 9485 0990
Email: investor-relations@88energy.com
Fivemark Partners, Investor and Media Relations Tel: +61 422 602 720
Michael Vaughan
EurozHartleys Ltd Tel: + 61 8 9268 2829
Dale Bryan
Cavendish Securities Plc Tel: + 44 131 220 6939
Derrick Lee / Pearl Kellie
SCHEDULE 1
Disclaimers:
Cautionary Statement for Prospective Resource Estimates - With respect to the
Prospective Resource estimates contained within this report, it should be
noted that the estimated quantities of gas that may potentially be recovered
by the future application of a development project relate to undiscovered
accumulations. These estimates have an associated risk of discovery and risk
of development. Further exploration and appraisal is required to determine
the existence of a significant quantity of potentially moveable
hydrocarbons.
Hydrocarbon Resource Estimates - The Contingent and Prospective Resource
estimates for Project Phoenix presented in this report are prepared as at
1(st) November 2023 (LR 5.25.1). The Prospective Resource estimates remain
unchanged from the 2022 independent report by LKA and are quoted on an
unrisked basis together with the geological chance of success for each
prospect. The unrisked mean total presented in the table is not
representative of the expected total from the three prospects and assumes a
success case in all reservoir intervals. 88 Energy have considered the
chance of discovering oil over gas to be 100% for all targets except for the
Kuparuk Formation which was assessed to be 70%. Chance of development has not
been estimated. Quantifying the chance of development (COD) requires
consideration of both economic contingencies and other contingencies, such as
legal, regulatory, market access, political, social license, internal and
external approvals and commitment to project finance and development timing.
As many of these factors are outside the knowledge of LKA they must be used
with caution.
Government Royalty and Overriding Royalty Interests - The Project Phoenix
leases ("Leases") are situated in the State Lands of the North Slope of Alaska
and are administered by the Alaskan Department of Natural Resources - Oil and
Gas Division (DNR). All leases issued by DNR are subject to a royalty and
88E's Leases are subject to a 12.5% government royalty. In addition, the
Leases are subject to an overriding royalty of 4.0% payable to non-related
parties of the Company. The net economic interest to 88E has therefore been
calculated as 62.81% and the Net Entitlement Prospective Resources have been
adjusted to reflect this.
Competent Person Statement Information -Information relating to contingent
resource estimates have been supplied by NSAI, and the company has stated in
the Report that it has been prepared in accordance with the definitions and
guidelines set forth in the Petroleum Resources Management System, 2018,
approved by the Society of Petroleum Engineers and have been prepared using
probabilistic methods. Netherland, Sewell & Associates, Inc., the
independent resource reviewer engaged to assess the Basin Floor Fan reservoir,
has consented to the inclusion of information relevant to their review in the
form and context in which it appears.
References to all Prospective Resources in this announcement relate to the
2022 report compiled by Lee Keeling and Associates, Inc. These resource
estimates remain valid and no adjustments are required but will be reassessed
if and when flow test data is obtained from any of these reservoirs.
Dr Stephen Staley, who is a Non-Executive Director of the Company, has more
than 40 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.
Forward looking statements - This document may include forward looking
statements. Forward looking statements include, are not necessarily limited
to, statements concerning 88E's planned operation program and other statements
that are not historic facts. When used in this document, the words such as
"could", "plan", "estimate", "expect", "intend", "may", "potential", "should"
and similar expressions are forward looking statements. Although 88E believes
the expectations reflected in these are reasonable, such statements involve
risks and uncertainties, and no assurance can be given that actual results
will be consistent with these forward-looking statements. The entity confirms
that it is not aware of any new information or data that materially affects
the information included in this announcement and that all material
assumptions and technical parameters underpinning this announcement continue
to apply and have not materially changed.
SCHEDULE 2
Definitions and Glossary of Key Terms:
SPE definitions:
Prospective Resource
Prospective resources are estimated volumes associated with undiscovered
accumulations. These represent quantities of petroleum which are estimated, as
of a given date, to be potentially recoverable from oil and gas deposits
identified on the basis of indirect evidence but which have not yet been
drilled. This class represents a higher risk than contingent resources since
the risk of discovery is also added. For prospective resources to become
classified as contingent resources, hydrocarbons must be discovered, the
accumulations must be further evaluated and an estimate of quantities that
would be recoverable under appropriate development project(s) prepared.
Contingent Resource
Contingent Resources are those quantities of petroleum estimated, as of a
given date, to be potentially recoverable from known accumulations, by the
application of a development project not currently considered to be commercial
owing to one or more contingencies. The resources shown in this report are
contingent upon (1) acquisition of additional technical data that demonstrate
producing rates and volumes sufficient to sustain economic viability across
the acreage; (2) approval of a field development plan and regulatory permits;
(3) demonstration of viable gas and water utilization or disposal methods; (4)
demonstration of ability to market oil and natural gas liquids (NGL); (5)
establishment of a viable North Slope gas market and development of
infrastructure which is currently evolving; and (6) commitment to fund and
complete the development project. If these contingencies are successfully
addressed, some portion of the contingent resources estimated in the report
may be reclassified as reserves; the estimates have not been risked to account
for the possibility that the contingencies are not successfully addressed. The
project maturity subclass for these contingent resources is development
unclarified.
Glossary of Key Terms
1U Denotes the unrisked low estimate qualifying as Prospective Resources.
2U Denotes the unrisked best estimate qualifying as Prospective Resources
3U Denotes the unrisked high estimate qualifying as Prospective Resources
1C Denotes the low estimate qualifying as Contingent Resources
2C Denotes the best estimate qualifying as Contingent Resources
3C Denotes the high estimate qualifying as Contingent Resources
API American Petroleum Institute's Inverted scale for denoting the "lightness" or
"heaviness" of crude oils and other liquid
BOE Barrels of oil equivalent
BOPD Barrels of oil per day
Bnbbl Billion barrels of oil
Chance Chance equals 1-risk. Generally synonymous with likelihood.
Chance of Development The estimated probability that a known accumulation, once discovered, will be
commercially developed.
Entitlement That portion of future production (and thus resources) legally accruing to an
entity under the terms of the development and production contract or license.
Mean The sum of a set of numerical values divided by the number of values in the
set.
MMbbl Million barrels of oil
Prospect A project associated with a potential accumulation that is sufficiently well
defined to represent a viable drilling target.
Prospective Resources Those quantities of petroleum that are estimated, as of a given date, to be
potentially recoverable from undiscovered accumulations.
Reservoir A subsurface rock formation that contains an individual and separate natural
accumulation of petroleum that is confined by impermeable barriers, pressure
systems, or fluid regimes (conventional reservoirs), or is confined by
hydraulic fracture barriers or fluid regimes (unconventional reservoirs).
Royalty A type of entitlement interest in a resource that is free and clear of the
costs and expenses of development and production to the royalty interest
owner. A royalty is commonly retained by a resources owner (lessor/host) when
granting rights to a producer (lessee/contractor) to develop and produce that
resource. Depending on the specific terms defining the royalty, the payment
obligation may be expressed in monetary terms as a portion of the proceeds of
production or as a right to take a portion of production in-kind. The royalty
terms may also provide the option to switch between forms of payment at
discretion of the royalty owner
Working Interest An entity's equity interest in a project before reduction for royalties or
production share owed to others under the applicable fiscal terms.
BFF Contingent Resources - Disclosures under ASX Listing Rules 5.25, 5.27,
5.33 and 5.41
LR 5.25.1
The contingent resources are reported as at 1 November 2023.
LR 5.25.3, LR 5.25.4
This announcement does not contain disclosure of total petroleum
initially-in-place, discovered petroleum-initially-in-place, total resource
base, estimated ultimate recovery, remaining recoverable resources or
hydrocarbon endowment.
LR 5.25.5
The resources information in this document is reported according to the
Company's economic interest in each of the resources net of royalties.
LR 5.25.6
NSAI have used a probabilistic to estimate the contingent resources. Once all
contingencies have been successfully addressed, the probability that the
quantities of contingent resources actually recovered will equal or exceed the
estimated amounts is 90 percent for the low estimate, 50 percent for the best
estimate, and 10 percent for the high estimate.
LR 5.25.7
Natural Gas Liquids (NGL's) are converted to oil equivalent volumes via a
constant ratio of 1:1. Gas is converted to oil equivalent volumes via a
constant ratio of 5.5 BCF per 1 MMBoe.
LR 5.27.3
Totals for Oil & NGL and Total MMBOE are arithmetically summed. The
arithmetically summed 1C estimate may be a conservative estimate and the
arithmetically summed 3C estimate may be optimistic when compared to a
statistical aggregation of probability distributions.
LR 5.27.4
Contingent resources are reported for the BFF reservoir in the Project Phoenix
area only.
LR 5.33.1
The contingent resources are reported for the Project Phoenix leased area,
which includes the Toolik River Unit (refer announcement 28 February 2023 for
specific leases and lease area). The leases are State leases and have a
primary term until February 2028 under the Unit Agreement with the State of
Alaska.
LR 5.33.2
The existence of a significant quantity of potentially moveable hydrocarbons
and confirmation of a discovery is confirmed by regional data, seismic data
and well data. In particular this is supported by the recent Hickory-1 well
data, together with the historical Icewine-1 well data, and also multiple
successful flow tests for the same reservoir in adjacent acreage. As
previously reported, in 2022 successful flow tests were conducted in the BFF
reservoir in the nearby wells Talitha-A and Theta West-1. Talitha-A 'produced
high quality c. 35-39 degree API oil and averaged 73 BOPD over a three day
test period'. The Theta West-1 well 'flowed high quality, light 35.5-38.5
degree API gravity oil at rates that averaged 57 BOPD'. Further, clear
reservoir continuity was demonstrated through high quality seismic data and
correlations across all four wells, Talitha-A, Theta West-1, Hickory-1 and
Icewine-1. Log data, petrophysical interpretations and reservoir conditions
across all four wells demonstrated sufficient similarity to confirm
producibility in Project Phoenix. All existing data was integrated
consistently and coherently which established the existence of a known
petroleum accumulation in the BFF reservoir in Project Phoenix.
LR 5.33.3
NSAI conducted an independent evaluation and estimation of the Basin Floor Fan
reservoir contingent resource using the probabilistic method. The contingent
resources estimated are within the sub-class of Development Unclarified, which
is defined as a discovered accumulation where project activities are under
evaluation and where justification as a commercial development is unknown
based on available information. The Company will actively assess the
commercial viability of the project and contingencies subsequent to the flow
test of multiple reservoirs planned at Hickory-1.
LR 5.33.4
The estimates of contingent resources are not contingent on any technology
that is currently under development.
LR 5.33.5
The contingent resources do not relate to an unconventional resource.
LR 5.41
The contingent resources have been prepared in accordance with the Society of
Petroleum Engineers (SPE) 2018 Petroleum Resource Management System (PRMS) by
Zachary R. Long and Alexander V. Karpov as the qualified petroleum resource
evaluators.
LR 5.42
The contingent resources are based on, and fairly represent, information and
supporting documentation prepared by Zachary R. Long (a member of AAPG) and
Alexander V. Karpov (a member of SPE) who are employees of Netherland, Sewell
& Associates. Zachary R. Long and Alexander V. Karpov have consented to
the publication of these contingent resource estimates in the form and context
in which they appear in this announcement.
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