REG - 88 Energy Limited - Project Longhorn-Texas Oil & Gas Production Update

88 EnergyAnnouncement

12/04/2022 07:00

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RNS Number : 0355I  88 Energy Limited  12 April 2022

This announcement contains inside information

12 April 2022

88 Energy Limited

Project Longhorn - Texas Oil and Gas Production Update

Highlights

·    Project Longhorn production in excess of 400 BOE per day gross
(approx. 70% oil) at end of March.

·    Over 30% increase in production rates since the acquisition completed
in mid-February 2022.

·    Successful completion of first planned capital-efficient work-over in
March.

·    Second work-over currently underway and a third to be executed
immediately thereafter.

·    88 Energy benefiting from recent increases to oil price, further
strengthening the cash returns from the high-margin oil production within the
Project Longhorn portfolio.

·    First cash distribution received in March (approx. A$0.6 million net
of OPEX / CAPEX).

 

 

88 Energy Limited (ASX:88E, AIM:88E, OTC:EEENF) (88 Energy or the Company) is
pleased to provide an update on operations at its recently acquired Project
Longhorn conventional oil and gas production assets in the proven Permian
Basin, onshore Texas, U.S.  88 Energy has a circa 73% average net working
interest in these established production assets, which have independently
certified net 2P reserves of 2.05 MMBOE.

In March 2022, the Operator of the Longhorn production assets, Lonestar I,
LLC, successfully completed the first of a series of capital-efficient
work-overs planned after the completion of the Longhorn acquisition.  This
work-over was completed on time and on budget and has delivered an immediate
increase to the total oil and gas production rates of the project.

Production from the Longhorn wells exceeded 400 BOE per day gross (over ~300
BOE per day net and approx. 70% oil) at the end of March 2022. This represents
an increase of over 30% since the completion of the acquisition in
mid-February 2022. The production increase provides additional direct exposure
to the higher WTI oil price environment and accelerates pay-back on both the
acquisition of the assets and the capital investment in the work-overs.

Project Longhorn has exceptionally low operating costs (lifting costs), which
provides high margins from production.  First cash receipts from Project
Longhorn were received by 88 Energy in March 2022, which comprised a payment
of approximately A$0.6 million (net to 88 Energy and net of OPEX/CAPEX).

Project Longhorn remains on track to complete the targeted seven capital
development activities this year, which is expected to approximately double
current production rates by the end of CY2022.

The acquisition of Project Longhorn in Q1 CY2022 represents 88 Energy's first
move into producing oil and gas assets and is in line with the Company's
strategy to build a successful exploration and production company.  This
initial step has been undertaken in a measured fashion via the purchase of a
non-operated working interest with a single basin focus.  Project Longhorn
contains well understood geology with low technical risk and provides
near-term upside via low-cost field development opportunities.

88 Energy Managing Director and CEO, Ashley Gilbert, commented:

"88 Energy is pleased with the production performance at Project Longhorn,
especially in this high oil price environment.  We are also highly encouraged
by the successful delivery by the Operator of the first planned work-over, as
well as the continued progress of the agreed capital development program for
2022. This program is expected to result in strong cash flow outcomes and
further direct exposure to the current high energy prices."

"88 Energy is in a solid financial position, with zero debt and a healthy cash
balance that is expected to be further strengthened with projected cash flows
from Project Longhorn's Texas production assets."

Project Longhorn - conventional onshore oil and gas in Texas

88 Energy acquired the Project Longhorn assets in February 2022.  Longhorn is
located in the attractive and proven Permian Basin, and consists of a total
landholding exceeding 1,300 net acres.  The assets comprise 9 leases with 32
producing wells and associated infrastructure.  Lonestar I, LLC retains an
approximate 24% net working interest in the assets and, through an affiliate
will remain Operator. The remaining working interests are retained by
pre-existing joint venture partners.

As part of the acquisition, 88 Energy has agreed to a low-cost work program
for CY2022 that includes seven work-overs.  These initiatives are expected to
approximately double production rates by the end of CY2022.

The acquisition of a working interest in Project Longhorn delivers 88 Energy
immediate cashflow, as well as further low-cost capital development upside
providing appealing forecast economics:

·   Gross capital development activities costing: from US$0.7 million to
US$1.4 million depending on the type of drilling or work-over performed.

·   Target development IRRs: 75% to 400% depending on the type of drilling
or work-over performed.

·   Target capital expenditure payback: 7-18 months depending on the type
of drilling and completion performed and future oil prices.

·   Target break-even WTI oil price: US$21/bbl - US$28/bbl depending on the
type of drilling or work-over performed.

 

Gross (100%) and Net Entitlement Reserves to 88 Energy (~73% average net
working interest) have been independently assessed by Odin Reservoir
Consultants Pty Ltd as at 31 December 2021 as follows:

 

Table 1: Project Longhorn Reserves (barrels of oil equivalent; millions)

 1P    2P    3P    1P    2P    3P
 2.78  3.46  4.00  1.64  2.05  2.33

Further information related to these Reserves is provided in Appendix 1 of the
announcement notified by the Company on 21 February 2022.

Reserves Cautionary Statement

Oil and gas reserves and resource estimates are expressions of judgment based
on knowledge, experience and industry practice. Estimates that were valid when
originally calculated may alter significantly when new information or
techniques become available. Additionally, by their very nature, reserve and
resource estimates are imprecise and depend to some extent on interpretations,
which may prove to be inaccurate. As further information becomes available
through additional drilling and analysis, the estimates are likely to change.
This may result in alterations to development and production plans which may,
in turn, adversely impact the Company's operations. Reserves estimates and
estimates of future net revenues are, by nature, forward looking statements
and subject to the same risks as other forward-looking statements.

 

 

A image showing the Project Longhorn location can be viewed in the pdf version
of this announcement, which is available on the Company's website
www.88energy.com (http://www.88energy.com) :

 

 

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

 

 Glossary

 Bbl = barrels                                 Mbo/Mbbl = thousand barrels of oil

 Bcf = billion cubic feet                      MMbo/MMbbl = million barrels of oil

 Bcfg = billion cubic feet of gas              Mboe = thousand barrels of oil equivalent

 Boe = barrels of oil equivalent               MMboe = million barrels of oil equivalent

 Bopd = barrels of oil per day                 Mcf = thousand cubic feet

 Btu = British Thermal Units                   MMcf = million cubic feet

 mcfg = thousand cubic of gas                  mmbtu = million British Thermal Units

 mmcfg = million cubic feet of gas             psi = pounds per square inch

 mcfgpd = thousand cubic feet of gas per day   UoM = unit of measure

 mmcf = million cubic feet                     WTI = West Texas Intermediate crude oil price, quoted in US$ per barrel

 

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