REG - 88 Energy Limited - MERLIN-2 OPERATIONS UPDATE

88 EnergyAnnouncement

06/12/2021 07:00

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RNS Number : 6001U  88 Energy Limited  06 December 2021

6 December 2021

This announcement contains inside information

88 Energy Limited

Merlin-2 Operations Update

Highlights

·   Snow road construction preparations underway for Merlin-2 drilling
operations

·   Merlin-2 appraisal well permitting well advanced, with the Permit to
Drill expected to be issued around year-end

·   Commissioning of the Arctic Fox rig scheduled for January 2022

·   Spud of Merlin-2 appraisal well on track for February 2022

·   Contractor to accept pre-payment in 88E shares reflecting support for
Merlin-2 opportunity

 

88 Energy Limited (ASX:88E, AIM:88E, OTC:EEENF) ("88 Energy" or the "Company")
is pleased to provide an update on operations at 88 Energy's Project
Peregrine.  Operations remain on track for the spud of the Merlin-2 appraisal
well in February 2022, with snow road construction preparations underway and
construction expected to commence prior to the end of 2021, subject to weather
conditions.

Pre-commissioning inspection of the Arctic Fox rig is planned for early
January, with an inspection prior to contracting the rig confirming it to be
in excellent condition.  Commissioning of the rig is expected to occur
following the rig inspection in January 2022 and immediately prior to
mobilisation to the Merlin-2 drill site.

A key contractor involved in the Merlin-2 operations who provides snow road
and drilling management services including significant operational, logistic,
permitting and government liaison services, contractor management,
co-ordination of accounts payable support and payment management has agreed to
accept payment in new ordinary shares in 88 Energy for payment of up to
US$7,500,000 worth of invoices which will be incurred in relation to services
associated with the Merlin-2 operations provided by a contractor,
demonstrating support for the Merlin-2 well proposition and broader Project
Peregrine opportunity. In consideration, 88 Energy has agreed to issue the
contractor 407,650,000 new ordinary shares ("New Shares") at a price of
A$0.026 per share to the vendor.

The New Shares will be issued as a pre-payment for services and are to be held
in escrow and subject to certain restrictions.  The New Shares will only be
released from escrow following approval by 88 Energy.  The vendor has the
option to dispose of the New Shares, subject to certain restrictions under the
escrow arrangement, however any proceeds will be held in trust until the
associated invoices are received and approved by 88 Energy.  A reconciliation
and final payment of any outstanding invoices (in cash) is to occur following
completion of Merlin-2 drilling operations.

Payment of a proportion of Merlin-2 costs through the issue of the New Shares
further solidifies the Company's strong financial position ahead of
commencement of the Merlin-2 well and planned testing program.

Permitting for the Merlin-2 appraisal well remains on track for scheduled spud
in February 2022, with the Permit to Drill expected to be approved and issued
around the end of the year.

The Merlin-2 appraisal well is planned for a Total Depth of 8,000 feet, and is
targeting 652 million barrels of oil(1,2) in the highly prospective N18, N19
and N20 targets that were encountered in the successful Merlin-1 well (drilled
in March 2021 to a depth of 5,267 feet), which demonstrated the presence of
oil in these multiple stacked sequences within the Brookian Nanushuk Formation

Further details on the upcoming operations at the highly prospective Merlin-2
appraisal well, and the Company's other activities, are contained in the
Company's latest corporate presentation, which is available on 88 Energy's
website at www.88energy.com.

( )

(1 )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.

(2) Mean unrisked resource - Net Entitlement to 88 Energy. Refer announcement
released to ASX on 16 August 2021

 

The below graphics can be viewed in the pdf version of this announcement,
which is available on the Company's website www.88energy.com;

 

·    Wireframe image showing respective Merlin-1 and Merlin-2 well
locations, facing east and overlain with predicted reservoir sands
profile.

·    Project Peregrine and Recent Nanushuk Discoveries.

 

 

 

Media and Investor Relations:

 

 88 Energy Ltd

 Ashley Gilbert, Managing Director

 Tel: +61 8 9485 0990

 Email:investor-relations@88energy.com

 Finlay Thomson, Investor Relations               Tel: +44 7976 248471

 Fivemark Partners, Investor and Media Relations  Tel: +61 410 276 744

 Andrew Edge / Michael Vaughan                    Tel: +61 422 602 720

 EurozHartleys Ltd                                Tel: +61 8 9268 2829

 Dale Bryan

 Cenkos Securities                                Tel: +44 131 220 6939

 Neil McDonald / Derrick Lee

 

 

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 resource and reserve
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.

 

 

About Project Peregrine

 

Project Peregrine is located in the NPR-A region of the North Slope of Alaska
and encompasses approximately 195,000 contiguous acres. It is situated on
trend to recent discoveries in a newly successful play type in topset sands in
the Nanushuk formation. 88 Energy has a 100% working interest in the project.

 

The Merlin-1 well was spudded in March 2021 with drilling operations completed
in April 2021. Interpretation of results was completed in August 2021 with
post well evaluation successfully demonstrating the presence of oil in N20,
N19 and N18 targets, with 41 feet of net log pay across the three reservoir
intervals noted and geochemical analysis determining the oil to have an
estimated API gravity between mid-30 to low-40 API (light oil).

 

A second well, the Merlin-2 appraisal well, is planned to be drilled in Q1
2022 as a follow-up well to the Merlin-1 exploration well.  Merlin-2 is
targeting a net entitlement mean Prospective Resource of 652 million barrels
(unrisked)(1,2).

 

To view the Company's video and animated presentations of Project Peregrine,
as well as the Merlin-1 well results and details of the Merlin-2 well, please
click on the link to the 88 Energy website www.88energy.com
(http://www.88energy.com) .

 

Independent oil and gas reservoir evaluation consultancy, ERCE Australia Pty
Ltd (ERCE), conducted an updated assessment of the Project Peregrine
prospective resources post the Merlin-1 well results.  The updated
prospective resource estimates and risking assessments for Project Peregrine
are noted below.

 

Revised Project Peregrine Prospective Resources

 

 Project Peregrine: Alaska North Slope   Unrisked Net Entitlement to 88E (1, 4) Prospective Oil Resources (MMstb)
 Prospects (Probabilistic Calculations)  Low (1U)         Best (2U)        High (3U)        Mean             COS (3)
 Merlin-2 (Nanushuk - N20, N19 and N18)  64               329              1,467            652              56%
 Merlin-1A (Nanushuk - N14S)             25               87               282              132              17%
 Harrier (Nanushuk)                      41               175              796              353              24%
 Harrier Deep (Torok)                    35               226              1,132            486              20%
 Prospects Total                                                                            1,624(2)

 

1. The Prospective Resources presented here are the result of a risked
probabilistic aggregation of the individual stacked prospective layers in each
prospect; the success case estimates present the distribution of possible
outcomes in the event that at least one prospective layer is successful.

2. Unrisked mean total is not representative of the expected total from the
four prospects and assumes a success case in all four wells.

3. COS represents the geological chance of success of at least one of the
stacked layers which comprise each prospect. This excludes phase risk which
ERCE has estimated to be 70% oil (30% gas). The Prospective Resources have
also not been adjusted for the chance of development, which is estimated by 88
Energy to be 60% (including phase risk), ERCE sees this as reasonable based on
the data available. 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 out-with the knowledge of ERCE they must be used
with caution.

4. Gross Prospective Resources include off-block volumes over which 88 Energy
has no mineral rights. Net working interest Prospective Resources are based on
the on-block volumes and 88 Energy's 100% working interest. Net entitlement
Prospective Resources are the net working interest Prospective Resources less
royalties payable to others. The net entitlement interest to 88 Energy is
calculated as 84.7% of net working interest after deduction of state royalty
(12.5%) and overriding royalty interests (1.3%and 1.5%).

 

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