REG - 88 Energy Limited - Quarterly Activities Report and Appendix 5B
18/01/2022 08:25
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RNS Number : 8004Y 88 Energy Limited 18 January 2022
88 Energy Limited
QUARTERLY ACTIVITIES REPORT
For the quarter ended 31 December 2021
88 Energy Limited (ASX:88E, AIM:88E, OTC:EEENF) (88 Energy or the Company)
provides the following report for the quarter ended 31 December 2021.
Highlights
Project Peregrine (100% WI)
· Merlin-2 targeting gross mean prospective resource of 652 million
barrels(1) with 56% aggregated geological chance of success.
· Drilling location selected is situated east and downdip of
Merlin-1, where enhanced reservior thickness and higher permeability/porsity
of sands are expected.
· Rig contract executed for Artic Fox to drill the Merlin-2
appraisal well.
· Merlin-2 Permit to Drill in the final stages of review by the
Bureau of Land Management (BLM)
· Snow road contruction underway, with commissioning of drill rig
commenced in January 2022.
· Spud of Merlin-2 appraisal well on track for February 2022.
Umiat Oil Field (100% WI)
· Optimisation studies continue, including full field development
planning and evaluation of oil field synergies with Project Peregrine.
Project Icewine (75% WI)
· Assessment indicates extension of Pantheon Resources' Talitha-A
targets onto Icewine acerage.
· Updated prospective resource estimates to be finalized in H1
2022.
Yukon Leases (100% WI)
· Joint regional development negotiations and due dilligence
processes well advanced with nearby resource owner.
· Future potential exploration drill planning is ongoing - subject
to farm-out and joint development negotiations.
Corporate
· Mr Oliver Mortensen appointed Chief Financial Officer.
· Cash of A$32.3M and no debt (as at 31 December 2021).
1. Mean unrisked prospective resource - Net Entitlement to 88 Energy.
Please refer to cautionary statement on page 3
Project Peregrine (100% WI)
Merlin-2 Appraisal Well
The Merlin-2 appraisal well is scheduled for spud in February 2022 and
permitted to a total depth of 8,000 feet. Merlin-2 is targeting a net mean
aggregate prospective resource of 652(1,2) million barrels across the N20, N19
and N18 horizons. The Merlin-2 well location has been selected from the three
permitted locations and will be located east and downdip of the successful
Merlin-1 well. This location is expected to encounter thicker reservoir
sections and higher permeability/porosity sands.
On 26 October 2021, 88 Energy announced the execution of a rig contract with
Doyon Drilling Inc for the Arctic Fox Rig to drill the Merlin-2 appraisal
well. The Arctic Fox rig is a fully integrated, multi-module unit featuring a
lightweight design crucial to early drill site access. Importantly, the rig
unit allows for maximum over-the-hole drilling and with an eight-line hook-up,
the substructure is capable of simultaneous load of 281,000lbs (for pipe set
back) and 337,000lbs (rotary table). Commissioning of the rig will occur
following inspection in January 2022 for immediate mobilisation to the
Merlin-2 drill site. Snow road construction commenced in December 2021 and is
progressing well.
A production testing program for the Merlin-2 was designed during the quarter
and will be on standby during initial wellsite operations. The production test
is contingent upon the wireline program results, government approvals and
subject to operational, funding and weather considerations.
As at year end, the Permit to Drill for the Merlin-2 well was in the final
stages of review by the BLM and remains pending. Permitting and planning for
the Merlin-2 well is largely complete, with the last major permit being the
Permit to Drill, with the well on track to spud in February 2022.
1. Mean unrisked prospective resource - Net Entitlement to 88 Energy
2. Please refer to cautionary statement on page 3.
Table 1: Project Peregrine Prospective Resource Estimate (August 2021)
PROSPECTIVE RESOURCE (MMBO, UNRISKED)( 1)
Prospects Formation Low Best High Mean
Merlin-2 (N20, N19 & N18) Nanushuk 64 329 1,467 652
Merlin-1A (N14S) Nanushuk 25 87 282 132
Harrier Nanushuk 41 175 796 353
Harrier Deep Torok / Basin Floor Fan 35 226 1,132 486
TOTAL MEAN PROSPECTIVE OIL RESOURCE 1,624(1)
1. Please refer to the ASX release dated 16 August 2021 for full details with
respect to the Prospective Resource estimate, associated risking
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.
Umiat Oil Field (100% WI)
During Q1 2021, 88 Energy acquired the Umiat Oil Field. As part of the
acquisition, the Company received the Umiat data pack which includes Umiat 3D
seismic data. The Umiat 3D survey abuts the southern edge of the Project
Peregrine lease blocks. Integrating the Linc/Malamute seismic interpretation
has provided a better understanding of the Peregrine reservoir geometries to
the north as well as enriching our petrophysical database with additional well
control (Umiat-8 and Umiat-23H).
Internal reinterpretation of modern 3D seismic is suggestive of untested
reservoirs at Umiat. Prospects have been mapped in the footwall of the Umiat
structure as well as downdip from the proven oil zone in the hanging wall.
Initial internal volumetric calculations suggest there may be multi-million
barrels of recoverable oil combined in the hanging wall and footwall. Both
prospects are deeper than the current reserves at Umiat which should have a
positive impact on productivity.
Development studies continued in the quarter focusing on the potential
integration of Ultra Low Sulphur Diesel (ULSD) production with previous
studies. Initial screening economics suggest that this development option adds
further value to a future Umiat development, considering the high cost of
diesel (currently ~$5/gal) on the North Slope of Alaska
A separate Umiat-23H well performance review was also finalised during the
quarter. This well was drilled in 2014 by a previous owner and flowed at a
sustained rate of 200 BOPD with no water, and a maximum rate of 800 BOPD. The
review concluded that this well significantly underperformed due to poor
drilling and completion techniques. A more conventional trajectory and
completion design for a 5000 ft horizontal section was modelled to produce at
stabilised rates of between 800 and 1600 BOPD. Consequently, an opportunity
exists for the optimisation of historic subsurface development plans.
Project Icewine (75% WI)
88 Energy was buoyed by the drilling results of the Talitha-A well in Q1 of
2021, where multiple formations reported oil shows in the Talitha-A well by
Pantheon Resources (see AIM:PANR release dated 19 April 2021). 88 Energy is
closely monitoring activity proximate to the northern border of its Project
Icewine acreage planned for Q1 2022.
There has been additional insight into the prospects of the Schrader Bluff,
Canning, Seabee and Kuparuk formations, highlighted from the results of the
Talitha-A program, which may have positive implications for the same
formations in 88 Energy's Icewine acreage.
All three wells drilled by 88 Energy at Project Icewine have encountered good
quality reservoir in the Kuparuk formation, with indications of hydrocarbons.
These had previously been interpreted as likely gas condensate or residual
oil, and no mapped targets were identified.
The results at Talitha-A are regionally highly encouraging for all target
formations, including those interpreted across Project Icewine. Given the
results from the Talitha-A well, 88 Energy's internal geoscience team is
reassessing the potential across the acreage with an updated prospective
resource estimate planned for 1H 2022.
Yukon Leases (100% WI)
The Yukon Leases contain the 82 million barrel(1) Cascade Prospect, which was
intersected peripherally by Yukon Gold-1 and classified as a historic oil
discovery.
In 2018, 88 Energy acquired 3D seismic over Cascade and, post analysis,
high-graded it from a lead to a drillable prospect. The Yukon Leases are
located adjacent to ANWR and in proximity to recently commissioned
infrastructure at Point Thompson.
Discussions advanced with nearby lease owners during the quarter with respect
to a joint development area with negotiation agreements and due diligence
underway.
1 Refer to 88 Energy release dated 7th November 2018. Note
cautionary statement on page 3.
Corporate
During the quarter, Mr Oliver Mortensen joined 88 Energy in the role of Chief
Financial Officer (CFO).
On 6 December 2021, 88 Energy announced that a key contractor involved in the
Merlin-2 operations who provides snow road and drilling management services
had agreed to accept payment in new ordinary shares in 88 Energy for payment
of up to US$7,500,000 worth of invoices to be incurred in relation to services
associated with the Merlin-2 operations. This demonstrates significant 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.
Finance
The ASX Appendix 5B attached to this quarterly report contains the Company's
cash flow statement for the quarter. The significant cash flows for the
period were:
· Exploration and evaluation expenditure totalled A$3.1M (September
2021 quarter: A$4.9M), primarily associated with expenditure on Project
Peregrine Merlin-2 well including planning, permitting, snow road construction
and securing Arctic Fox Rig
· Lease rental payments totalled A$0.05M.
· Cash call proceeds received from Joint Venture partners totalled
A$0.4M (September 2021 quarter A$6.7M)
· Administration and other operating costs, totalled A$0.9M and
staff costs totalled A$0.6M.
Note: Includes fees paid to Directors in the quarter of $0.4M
At quarter end, the Company had cash reserves of A$32.3M and no debt.
ESG
88 Energy is committed to building its credentials and making disclosures
against the World Economic Forum (WEF) ESG framework. During the quarter, 88
Energy has made the following progress:
· Engagement of Socialsuite technology platform to establish ESG
baseline and deliver the Company's inaugural quarterly ESG Dashboard and
tailored action plan.
· Providing employment to local Alaskans throughout the Merlin-2
drilling program.
· Participation in the Carbonfree® Business Partnership Program,
thus offsetting emissions from the Merlin-1 program and other operating
activities. In 2021 the Company reduced 6500 tonnes of CO2 emissions through a
donation to Carbonfree® which supports verified projects that promote global
warming solutions and help provide cleaner air and energy. The project chosen
to offset the CO2 emissions was a U.S. based forestry conservation and carbon
sequestration project.
Table 3: Information required by ASX Listing Rule 5.4.3
Project Name Location Net Area (acres) Interest at beginning of Quarter Interest at end of Quarter
Project Icewine Onshore, North Slope Alaska 192,830 ~75% ~75%
Yukon Leases Onshore, North Slope Alaska 38,681 100% 100%
Umiat Unit Onshore, North Slope Alaska (NPR-A) 17,633 100% 100%
Project Peregrine Onshore, North Slope Alaska (NPR-A) 195,373 100% 100%
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 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.
This announcement has been authorised by the Board.
Images of Project Peregrine long section showing: expected enhanced reservoir
thickness to the east Wireframe; Merlin-2 well location, facing east and
reservoir sands can be viewed in the pdf of this announcement on the Company's
website; Surface attribute map of the Lower Grandstand Unit; Shelf Margin
Deltaic Extension into Project Icewine
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
Dale
Bryan
Tel: + 61 8 9268 2829
Cenkos
Securities
Tel: + 44 131 220 6939
Neil McDonald / Derrick Lee
Appendix 5B
Mining exploration entity or oil and gas exploration entity
quarterly cash flow report
1.1 Name of entity
88 Energy Limited
1.2 ABN 1.3 1.4 Quarter ended ("current quarter")
80 072 964 179 31 December 2021
1.5 Consolidated statement of cash flows Current quarter Year to date (12 months)
$A'000
$A'000
1. Cash flows from operating activities - -
1.1 Receipts from customers
1.2 Payments for - -
(a) exploration & evaluation
(b) development - -
(c) production - -
(d) staff costs (624) (1,900)
(e) administration and corporate costs (854) (2,695)
1.3 Dividends received (see note 3) - -
1.4 Interest received - -
1.5 Interest and other costs of finance paid - (1,053)
1.6 Income taxes paid - -
1.7 Government grants and tax incentives - -
1.8 Other (XCD - redundancy payments) - -
1.9 Net cash from / (used in) operating activities (1,478) (5,648)
2. Cash flows from investing activities - -
2.1 Payments to acquire or for:
(a) entities
(b) tenements (47) (6,749)
(c) property, plant and equipment - -
(d) exploration & evaluation (3,115) (35,042)
(e) investments - -
(f) other non-current assets - -
2.2 Proceeds from the disposal of: - -
(a) entities
(b) tenements - -
(c) property, plant and equipment - -
(d) investments - -
(e) other non-current assets - -
2.3 Cash flows from loans to other entities - -
2.4 Dividends received (see note 3) - -
2.5 Other - Joint Venture Contributions 412 20,816
- Proceeds from sale tax credits - 3,324
- Bonds 275 (113)
2.6 Net cash from / (used in) investing activities (2,475) (17,764)
3. Cash flows from financing activities - 42,521
3.1 Proceeds from issues of equity securities (excluding convertible debt
securities)
3.2 Proceeds from issue of convertible debt securities - -
3.3 Proceeds from exercise of options - -
3.4 Transaction costs related to issues of equity securities or convertible debt - (2,523)
securities
3.5 Proceeds from borrowings - -
3.6 Repayment of borrowings - -
3.7 Transaction costs related to loans and borrowings - -
3.8 Dividends paid - -
3.9 Other (provide details if material) - -
3.10 Net cash from / (used in) financing activities - 39,998
4. Net increase / (decrease) in cash and cash equivalents for the period
4.1 Cash and cash equivalents at beginning of period 36,083 14,847
4.2 Net cash from / (used in) operating activities (item 1.9 above) (1,478) (5,648)
4.3 Net cash from / (used in) investing activities (item 2.6 above) (2,475) (17,764)
4.4 Net cash from / (used in) financing activities (item 3.10 above) - 39,998
4.5 Effect of movement in exchange rates on cash held 187 884
4.6 Cash and cash equivalents at end of period 32,317 32,317
5. 1.6 Reconciliation of cash and cash equivalents Current quarter Previous quarter
at the end of the quarter (as shown in the consolidated statement of cash flows) to the related items in the accounts
$A'000
$A'000
5.1 Bank balances 32,317 36,083
5.2 Call deposits - -
5.3 Bank overdrafts - -
5.4 Other (provide details) - -
5.5 Cash and cash equivalents at end of quarter (should equal item 4.6 above) 32,317 36,083
(a)
6. 1.7 Payments to related parties of the entity and their associates Current quarter
$A'000
6.1 Aggregate amount of payments to related parties and their associates included 416
in item 1
6.2 Aggregate amount of payments to related parties and their associates included -
in item 2
Note: if any amounts are shown in items 6.1 or 6.2, your quarterly activity
report must include a description of, and an explanation for, such payments.
6.1 Payments relate to Director and consulting fees paid to
Directors. All transactions involving directors and associates were on normal
commercial terms.
7. 1.8 Financing facilities Total facility amount at quarter end Amount drawn at quarter end
Note: the term "facility' includes all forms of financing arrangements available to the entity.
$US'000
$US'000
1.9 Add notes as necessary for an understanding of the sources of finance available to the entity.
7.1 Loan facilities - -
7.2 Credit standby arrangements - -
7.3 Other (please specify) - -
7.4 Total financing facilities - -
7.5 Unused financing facilities available at quarter end -
7.6 Include in the box below a description of each facility above, including the
lender, interest rate, maturity date and whether it is secured or unsecured.
If any additional financing facilities have been entered into or are proposed
to be entered into after quarter end, include a note providing details of
those facilities as well.
8. 1.10 Estimated cash available for future operating activities $A'000
8.1 Net cash from / (used in) operating activities (item 1.9) (1,478)
8.2 (Payments for exploration & evaluation classified as investing activities) (3,115)
(item 2.1(d))
8.3 Total relevant outgoings (item 8.1 + item 8.2) (4,593)
8.4 Cash and cash equivalents at quarter end (item 4.6) 32,317
8.5 Unused finance facilities available at quarter end (item 7.5) -
8.6 Total available funding (item 8.4 + item 8.5) 32,317
8.7 Estimated quarters of funding available (item 8.6 divided by item 8.3) 7.0
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8.8 If item 8.7 is less than 2 quarters, please provide answers to the following
questions:
8.8.1 Does the entity expect that it will continue to have the current
level of net operating cash flows for the time being and, if not, why not?
Answer: n/a
8.8.2 Has the entity taken any steps, or does it propose to take any
steps, to raise further cash to fund its operations and, if so, what are those
steps and how likely does it believe that they will be successful?
Answer: n/a
8.8.3 Does the entity expect to be able to continue its operations and
to meet its business objectives and, if so, on what basis?
Answer: n/a
Note: where item 8.7 is less than 2 quarters, all of questions 8.8.1, 8.8.2
and 8.8.3 above must be answered.
1.11 Compliance statement
1 This statement has been prepared in accordance with accounting
standards and policies which comply with Listing Rule 19.11A.
2 This statement gives a true and fair view of the matters
disclosed.
Date: 18 January 2022
Authorised by: By the Board
(Name of body or officer authorising release - see note 4)
1.12 Notes
1. This quarterly cash flow report and the accompanying
activity report provide a basis for informing the market about the entity's
activities for the past quarter, how they have been financed and the effect
this has had on its cash position. An entity that wishes to disclose
additional information over and above the minimum required under the Listing
Rules is encouraged to do so.
2. If this quarterly cash flow report has been prepared in
accordance with Australian Accounting Standards, the definitions in, and
provisions of, AASB 6: Exploration for and Evaluation of Mineral Resources and
AASB 107: Statement of Cash Flows apply to this report. If this quarterly cash
flow report has been prepared in accordance with other accounting standards
agreed by ASX pursuant to Listing Rule 19.11A, the corresponding equivalent
standards apply to this report.
3. Dividends received may be classified either as cash flows
from operating activities or cash flows from investing activities, depending
on the accounting policy of the entity.
4. If this report has been authorised for release to the
market by your board of directors, you can insert here: "By the board". If it
has been authorised for release to the market by a committee of your board of
directors, you can insert here: "By the [name of board committee - eg Audit
and Risk Committee]". If it has been authorised for release to the market by a
disclosure committee, you can insert here: "By the Disclosure Committee".
5. If this report has been authorised for release to the
market by your board of directors and you wish to hold yourself out as
complying with recommendation 4.2 of the ASX Corporate Governance Council's
Corporate Governance Principles and Recommendations, the board should have
received a declaration from its CEO and CFO that, in their opinion, the
financial records of the entity have been properly maintained, that this
report complies with the appropriate accounting standards and gives a true and
fair view of the cash flows of the entity, and that their opinion has been
formed on the basis of a sound system of risk management and internal control
which is operating effectively.
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