REG - 88 Energy Limited - Quarterly Activities Report and Appendix 5B
24/10/2022 08:00
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RNS Number : 8445D 88 Energy Limited 24 October 2022
88 Energy Limited
Quarterly Activities Report
For the quarter ended 30 September 2022
88 Energy Limited (ASX:88E, AIM:88E, OTC:EEENF) (88 Energy or the Company)
provides the following report for the quarter ended 30 September 2022.
Highlights
Project Icewine (~75% WI)
· Maiden Independent Prospective Resource estimate reported at
Project Icewine East;
Ø Total estimated Prospective Resource of gross 1.03 billion barrels (Bnbbls)
of oil(1,2) recoverable from multiple reservoir zones (total unrisked net mean
entitlement prospective oil resource to 88 Energy of 647 MMbbls of oil(2))
Ø Substantial oil volumes noted across all mapped play fairways, in
particular the Seabee - Lower Basin Floor (BFF) and the Shelf Margin Delta
(SMD) reservoirs
· Interpretation of the recently licensed Franklin Bluffs 3D
seismic survey data (FB3D) completed, covering a significant area over the
Icewine East leases;
Ø Amplitude Variation with Offset (AVO) analysis used to define 'sweet spots'
for each play to identify location for the planned 1H 2023 exploration well
("Hickory-1").
Ø The Fluid Factor attribute has identified areas of anomalous AVO behaviour
within the FB3D area which could indicate hydrocarbon content and/or superior
pore volume
Ø Good correlation also observed between AVO signature, RMS amplitude and the
geological model at Icewine East
· Drilling location selected for Hickory-1;
Ø Hickory-1 set to test the SMD, SFS, BFF and Kuparuk reservoir units
Ø Planning and permitting for drilling of Hickory-1 underway
Project Peregrine (100% WI)
· Encouraging results returned from the completion of an
independent basin modelling study for the untested Harrier and Harrier Deep
prospects
· Definitive evidence of hydrocarbons indicated from High
Resolution Gas Chromatography performed on Merlin-2 side wall cores
Project Longhorn (~73% WI)
· Successful completion of the fourth planned work-over (of seven
scheduled in 2022), and production commenced end of August 2022
· Quarterly cash flow distribution of A$0.9M received in September
2022
Corporate
· Share placement completed on 22 August 2022, raised gross
proceeds of A$14.9M (net A$13.9M)
· Cash of A$17.5M and no debt (as at 30 Sept 2022)
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.
Project Icewine (~75% WI)
During the quarter, 88 Energy made significant progress across the Icewine
East acreage.
In August 2022, the Company reported a maiden, independently certified
Prospective Resource estimate for Project Icewine East (~75% net WI) of a
total 1.03 Bbbls of oil(1,2) gross mean unrisked (total unrisked net mean
entitlement prospective oil resource to 88 Energy of 647 MMbbls of oil(2)).
The maiden Independent Prospective Resource Report was completed by Lee
Keeling and Associates, Inc. (LKA).
Significant prospective resources have been estimated across all the recently
mapped Shelf Margin Delta (SMD), Slope Fan System (SFS), Basin Floor Fan (BFF)
and Kuparuk (KUP) play fairways on the Icewine East acreage. Importantly,
these are mapped as the same Brookian / Beaufortian reservoirs that nearby
Pantheon wells - Alkaid-1, Talitha-A and Theta West-1 - have flowed 35⁰ to
40⁰ API oil(3).
In September, the Company selected the drilling location in Icewine East for
the planned Hickory-1 exploration well scheduled for 1H 2023, following
completion of the interpretation of the recently licenced FB3D seismic data
set which covers a significant area of the Project Icewine East leases.
Results from this analysis and interpretation have been used to define 'sweet
spots' for each of the mapped Shelf Margin Delta (SMD), Slope Fan System
(SFS), Basin Floor Fan (BFF) and Kuparuk (KUP) play fairways. This analysis
has played a key role in identifying the drilling location for the planned
2023 exploration well, Hickory-1, which is designed to intersect and test all
four key play fairways.
Interpretation of the FB3D data included AVO analysis, where a comprehensive
study of the FB3D seismic gathers across all offsets, ultimately produced a
series of AVO attributes (such as fluid factor). These attributes can be used
to further enhance existing 2D and 3D interpretation and reservoir
understanding, as well as improve the probability of geological success and
refine selection of target drilling locations. Significantly, it was observed
that the Fluid Factor attribute has identified areas of anomalous AVO
behaviour within the FB3D area, which could indicate hydrocarbon content
and/or superior pore volume (reservoir quality). It was also observed that
good correlation existed between AVO signatures, RMS amplitude and the
geological model at Icewine East.
1. Gross mean total unrisked prospective resource.
2. Refer to the ASX release dated 23 August 2022 for full
details with respect to the Prospective Resource estimate, associated risking
and applicable Cautionary Statement on page 2.
3. Refer to Pantheon Resources AIM releases 7 February, 21
February and 24 March 2022 for details in relation to flow tests
Hickory-1 Exploration Well
The Hickory-1 exploration well is currently being planned and permitted to be
drilled during 2023(1) and has been designed as a vertical well to be drilled
to approximately 12,500 feet to intersect and test all four key reservoirs.
Using the results from the initial analysis and interpretation of the FB3D, in
combination with Icewine-1 well logs, 88 Energy has identified an optimal
drilling location for Hickory-1, located adjacent to the Dalton Highway.
This location intersects and will test the substantial potential oil volumes
noted across all mapped play fairways, and in particular the SMD and BFF
reservoirs. The well location is subject to permitting, as well as Joint
Venture (88E 75.2% WI) and Government approvals.
Drilling location for Hickory-1 chosen to:
ü provide optimal appraisal of 6 stacked reservoir targets
ü ensure closest possible position to the Shelf Edge
ü be of a relative down-dip position within Icewine East acreage
ü potentially unlock up-dip optionality across the remaining Icewine East
acreage
ü be within the sweet spot of interpreted AVO anomalies relative to Icewine-1
which, from post-well analysis, was found to have been drilled outside of
interpreted AVO anomalies
ü maximise the strategic location proximate to infrastructure:
§ Deadhorse - North Slope services hub
§ Dalton Highway and Trans-Alaska pipeline
§ Immediate export route
§ Expediting future development
§ Minimising costs and environmental impact
Project Peregrine (100% WI)
The Company has finalised detailed analysis of all data obtained from the
Merlin-2 drilling program.
During the quarter, the Company completed an independent NPRA basin modelling
study to further improve 88 Energy's understanding of the geological history
and how it pertains to the Nanushuk reservoir quality across Project
Peregrine. The study highlighted:
§ Marked predicted improvement of reservoir quality North of Merlin 1 & 2
§ Depth of Burial (DMax) alone does not account for the poor reservoir
quality as all Dmax models in the Post Well basin modelling study predict both
porosity and permeability at this location to be higher than observed
§ Thin section and scanning electron microscope (SEM) comparisons between
Merlin-1 and Merlin-2 suggest proximity to the Umiat structure may play a
factor in reservoir degradation along the southern margin of Project Peregrine
§ The N18-N20 sequences intersected in the Merlin wells appear to have been
deposited in a lower energy environment than originally anticipated, also
contributing to lower reservoir quality
Results of the independent basin modelling study, coupled with abundant oil
shows across Merlin-1 and Merlin-2, are encouraging for untested Harrier
(comprising the N14 and N15 Nanushuk sequences) and Harrier Deep (Torok
sequences) prospects to the North.
Project Longhorn (~73% WI)
During the quarter, the operator and ~24% net working interest partner,
Lonestar I, LLC (Lonestar), successfully completed the fourth of seven planned
capital-efficient work-overs scheduled in 2022. In line with the previous
three work-overs, the fourth was completed on time and has delivered immediate
production, averaging ~85 BOE per day gross over September 2022 after first
production at the end of August 2022.
Post quarter end, Lonestar successful completed the fifth work-over, with
first production achieved in October 2022. It is unlikely that the Company
will proceed with the sixth workover after preliminary wellbore integrity
investigations revealed that operations were likely to exceed its AFE and not
be risk free. The seventh workover is progressing as planned and expected to
be completed in November.
Production from the Longhorn wells was delivering ~450 BOE per day gross (~70%
oil) at the end of September 2022, which represents an overall output increase
of ~60% since the completion of the acquisition in mid-February 2022. The
investment has resulted in net cash flow returns to 88E of A$2.8M since the
acquisition. The Company expects production to reach over 500 BOE per day by
end of 2022, given the impact of the decision to not proceed with the planned
sixth work-over. Further work-overs are planned in 2023 to increase production
levels, with the Joint Venture planning to agree a 2023 work-program prior to
year-end.
Corporate
On 22 August 2022, the Company successfully raised A$14.9M before costs from
domestic and international institutional investors (the Placement). This was
achieved through the issue of 1,655,555,556 fully paid ordinary shares in the
Company at an issue price of A$0.009 (equivalent to £0.0052 per New Ordinary
Share).
Funds raised under the Placement are to be used to fund the planned Icewine
East, Hickory-1 well long lead, pre-planning and permitting activities
including planning for a flow test program, contingencies and working capital.
Euroz Hartleys Limited acted as Sole Lead Manager and Sole Bookrunner to the
Placement. Cenkos Securities Plc acted as 88 Energy's Nominated Adviser and
Sole Broker to the Placement in the United Kingdom. Inyati Capital Pty Ltd
(Inyati) acted as Co-Manager to the Placement. Commission for the Placement
was 6% (plus GST) of total funds raised across Euroz Harleys Limited, Inyati
Capital Pty Ltd and Cenkos Securities Plc. In addition, the Company issued
90,000,000 Unlisted Options (exercisable at $0.02 on or before the date which
is 3 years from the date of issue) in total to the managers of the Placement.
The Broker Options will be subject to shareholder approval at the November
2022 EGM.
Finance
The ASX Appendix 5B attached to this quarterly report contains the Company's
cash flow statement for the quarter. The material cash flows for the period
were:
§ Net Proceeds from oversubscribed capital raise of A$13.9M
§ Project Longhorn quarterly cash distribution of A$0.9M
§ Exploration and evaluation expenditure of A$5.7M (June 2022 quarter:
A$23.8M), primarily associated with final Merlin-2 activities. At quarter end,
there was approximately A$0.6M of remaining costs that were paid in October to
close out the program.
§ Lease rental payments of A$1.7M, offset by Project Icewine joint venture
contributions of A$0.2M.
§ Fees paid to Directors and consulting fees paid to Directors of A$0.2M
§ Administration, staff, and other costs of A$0.6M (incl A$0.2M director
related payments)
At quarter end, the Company had cash reserves of A$17.5M and no debt.
Information required by ASX Listing Rule 5.4.3
Project Name Location Interest at beginning of Quarter Interest at end of Quarter
Net Area (acres)
Project Icewine Onshore, North Slope Alaska 184,320 ~75% ~75%
Project Peregrine Onshore, North Slope Alaska (NPR-A) 195,373 100% 100%
Project Longhorn Onshore, Permian Basin Texas 964 ~73% ~73%
Umiat Unit Onshore, North Slope Alaska (NPR-A) 17,633 100% 100%
Yukon Leases Onshore, North Slope Alaska 15,235 100% 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.
The graphics below can be viewed in the pdf version of this announcement,
which is available on the Company's website www.88energy.com:
· Icewine East lease area, including mapped play fairways and planned
Hickory-1 well location
· Hickory-1 Drilling Location map
· Project Peregrine (Merlin) data charts
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
Michael Vaughan
Tel: +61 422 602 720
Finlay Thomson, Investor Relations
Tel: +44 797 624 8471
EurozHartleys Ltd
Dale
Bryan
Tel: + 61 8 9268 2829
Cenkos
Securities
Neil McDonald
Tel: + 44 131 220 9771
Derrick
Lee
Tel: + 44 131 220 9100
Appendix 5B
Mining exploration entity or oil and gas exploration entity
quarterly cash flow report
Name of entity
88 Energy Limited
ABN Quarter ended ("current quarter")
80 072 964 179 30 September 2022
Consolidated statement of cash flows Current quarter Year to date (9 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 (501) (1,827)
(e) administration and corporate costs (146) (1,901)
1.3 Dividends received (see note 3) - -
1.4 Interest received 5 7
1.5 Interest and other costs of finance paid - -
1.6 Income taxes paid - -
1.7 Government grants and tax incentives - -
1.8 Other - -
1.9 Net cash from / (used in) operating activities (642) (3,721)
2. Cash flows from investing activities - (10,694)
2.1 Payments to acquire or for:
(a) entities
(b) tenements (1,732) (3,043)
(c) property, plant and equipment - -
(d) exploration & evaluation (5,688) (45,933)
(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 229 1,060
Other - Distribution from Project Longhorn 896 2,817
Other - Return of Bond 138 138
2.6 Net cash from / (used in) investing activities (6,157) (55,655)
3. Cash flows from financing activities 14,900 47,053
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 (998) (3,150)
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 13,902 43,903
4. Net increase / (decrease) in cash and cash equivalents for the period
4.1 Cash and cash equivalents at beginning of period 10,469 32,317
4.2 Net cash from / (used in) operating activities (item 1.9 above) (642) (3,721)
4.3 Net cash from / (used in) investing activities (item 2.6 above) (6,157) (55,655)
4.4 Net cash from / (used in) financing activities (item 3.10 above) 13,902 43,903
4.5 Effect of movement in exchange rates on cash held (47) 681
4.6 Cash and cash equivalents at end of period 17,525 17,525
5. 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 17,525 10,469
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) 17,525 10,469
6. 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 197
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.
Payments relate to Director and consulting fees paid to Directors. All
transactions involving directors and associates were on normal commercial
terms.
7. 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
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. Estimated cash available for future operating activities $A'000
8.1 Net cash from / (used in) operating activities (item 1.9) (642)
8.2 (Payments for exploration & evaluation classified as investing activities) (5,688)
(item 2.1(d))
8.3 Total relevant outgoings (item 8.1 + item 8.2) (6,330)
8.4 Cash and cash equivalents at quarter end (item 4.6) 17,525
8.5 Unused finance facilities available at quarter end (item 7.5) -
8.6 Total available funding (item 8.4 + item 8.5) 17,525
8.7 Estimated quarters of funding available (item 8.6 divided by item 8.3) 2.8
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7.
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:
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:
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:
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.
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: 24 October 2022
Authorised by: By the Board
(Name of body or officer authorising release - see note 4)
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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