REG - 88 Energy Limited - Quarterly Report and Appendix 5B
26/04/2023 07:00
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RNS Number : 4234X 88 Energy Limited 26 April 2023
QUARTERLY ACTIVITIES REPORT
For the quarter ended 31 March 2023
88 Energy Limited (ASX:88E, AIM:88E, OTC:EEENF) (88 Energy or the Company)
provides the following report for the quarter ended 31 March 2023.
Highlights
Project Phoenix (~75% WI)
· Hickory-1 exploration well spudded on 9 March 2023 and was
drilled to Total Depth (TD) of 10,650 feet with completion of a succesful
wireline and coring program. Initial summary of results include:
Ø Initial petrophysical interpretation confirmed presence of multiple
hydrocarbon-bearing pay zones across all pre-drill targets
Ø New Upper SFS reservoir identified, not previously intersected by nearby
wells and with abundant oil shows in cuttings
Ø Estimated net pay calculated from wireline data of approximately 450 feet
over all pay zones
Ø Total porosity across all pay zones averaged 9-12%, including key zones
identified for potential testing in the Upper and Lower SFS with 11-16% total
porosity
Ø Pre-drill expectations met or exceeded:
ü Reservoir quality (higher porosity in SFS and BFF)
ü Thickness (higher total gross and net reservoir, higher total net pay)
· Formation of the Toolik River Unit over the western and central
zones of Project Phoenix lease area was approved by the the Alaskan Department
of Natural Resources
· Subsequent to quarter end, activities in relation to Hickory-1:
Ø Hickory-1 was cased and suspended with planning for 2023/2024 winter season
flow testing commencing as well as post-well analysis of cores and wireline
data
Ø All samples have been transported to labs for further investigation and
analysis.
Ø Nordic Calista Rig-2 has been demobilised with operations completed on
budget.
Project Leonis (100% WI)
· Subsequent to quarter end, the adjudication process was completed
and formal award notices issued to 88 Energy by the Alaskan Department of
Natural Resources (DNR) covering the entire Project Leonis lease area
· Integrated petrophysical and seismic study underway including
reprocessing of Storms 3D data
Project Longhorn (~73% WI)
· Production over the quarter averaged 425 BOE per day gross (~72%
oil)
· Quarterly cash flow distribution of A$0.3M received in March 2023
which was net of final CAPEX payments for the two workovers completed in Q4
2022
Corporate
· Share placement completed on 6 February 2023, raising gross
proceeds of A$17.5M
· Cash balance of A$26.3M and zero debt (as at 31 March 2023)
Project Phoenix (~75% WI)
Project Phoenix is focused on the oil-bearing conventional reservoirs
identified during the drilling and logging of Icewine-1 and recently flow
tested by Pantheon Resources. Project Phoenix is strategically located on the
Dalton Highway as seen on the image adjacent, with the Trans-Alaskan Pipeline
System running through the acreage.
Figure 1: Project Phoenix' Hickory-1 well adjacent to Dalton Highway
Hickory-1 Exploration Well
The Hickory-1 well was designed to appraise up to six conventional reservoirs
within the SMD, SFS, BFF and KUP plays, targeting pre-well estimated 647
million barrels of oil(1).
Hickory-1 spud on 9 March 2023, was drilled to a Total Depth (TD) of 10,650
feet and, after quarter end, successfully completed the wireline and coring
program to achieve all primary and secondary target pre-drill objectives:
ü Validated the presence of multiple hydrocarbon-bearing zones accross all
pre-drill targets;
ü Obtained data to optimally design and plan a targeted flow test of
Hickory-1 next season; and
ü In addtion, new Upper SFS Reservoir was identified with oil shows in
cuttings and core.
Wireline program results:
Ø Pre-drill expectations were met or exceeded:
· Reservoir quality (higher porosity in SFS and BFF); and
· Thickness (higher total gross and net reservoir and higher total
net pay);
Ø Estimated gross pay of over 2,000 feet;
Ø Calculated net pay of approximately 450 feet over all zones; and
Ø Average total porosity across all pay zones of 9-12%, including key zones
identified for potential testing in the SFS and Upper SFS with porosity of
11-16%.
Figure 2: SWC sample retrieved from Hickory-1 showing fluorescence
Subsequent to quarter end, Hickory-1 exploration well operations concluded for
the current winter season. Hickory-1 was cased and suspended in mid-April 2023
in preparation for undertaking the planned flow test program in the 2023/2024
winter season and Nordic Calista Rig-2 was demobilised after a successful
drilling campaign. The first phase of Hickory-1, the drilling and wireline
program has met or exceeded the Company's targeted pre-drill outcomes and was
completed on budget.
The Company will undertake a detailed evaluation of all data obtained from the
Hickory-1 drilling and wireline program to optimally plan and design Phase 2,
the flow test of up to 4 reservoirs. Initial planning suggests a 'work-over'
rig will be required to complete these operations with discussions underway to
secure a rig for the 2023/24 season. The Company will provide further analysis
and updates, as well as details of the flow testing program, when this
information is available over the coming months.
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.
1. Mean unrisked resource - Net Entitlement to 88 Energy. Refer
announcement released to ASX on 23 August 2022
Toolik River Unit Approval
On 7 December 2022, 88 Energy announced that the Project Phoenix Joint Venture
("JV") had put forward a Unit application covering leases within the Project
Phoenix acreage area. Following consideration of the Unit application, the DNR
confirmed its decision to approve the formation of the Toolik River Unit
covering leases in the western and central areas of Project Phoenix (refer to
88E ASX announcement dated 28 February 2023). The Unit approval has extended
those leases beyond their primary term, with the Unit Plan of Exploration
through to February 2028. Unitisation provides an efficient, integrated
approach to exploration, delineation, and development of the numerous
identified and potential reservoirs.
Project Leonis (100% WI)
On 9 November 2022, 88 Energy's wholly-owned subsidiary, Captivate Energy
Alaska, Inc. (Captivate), was declared the highest bidder for select acreage
offered as part of the North Slope Areawide 2022 Oil and Gas lease sale. The
Company's new acreage will be known as Project Leonis (the Project) comprising
ten leases covering approximately 25,430 contiguous acres.
Figure 3: New Acreage awarded, named Project Leonis in relation to exiting 88E
acreage
After quarter end, the DNR, Oil and Gas Division, completed its adjudication
process and formally issued award notices to Captivate covering the entire
Project Leonis lease area. The Project is superbly located adjacent to TAPS,
the Dalton Highway, and close to services at Deadhorse and Prudhoe Bay,
enhancing future potential development and commercialisation.
The Project Leonis lease area is fully covered by the Storms 3D seismic data
suite and contains the exploration well, Hemi Springs Unit #3 (drilled by ARCO
in 1985). Historical drilling targeted the deep Kuparuk and Ivishak
reservoirs, the main producing intervals in the giant northern fields at that
time. Review of the Hemi Springs Unit #3 well indicated over 200 feet (net)
of low resistivity bypassed log pay within the USB reservoir, with good
porosity and oil shows observed across the zone. Nearby oil fields - Orion,
Polaris, West Sak and Milne Point - readily demonstrate successful development
of the USB reservoir.
Integrated petrophysical and seismic study has commenced including
reprocessing of Storms 3D data.
Project Peregrine (100% WI)
In March 2023, 88 Energy completed a strategic review of the Project Peregrine
acreage and made the decision to relinquish six blocks that were considered to
have limited prospectivity, providing an annual saving of approximately
A$320,000.
The Project Peregrine resources are split across 3 prospects: Merlin (Nanushuk
Topset), Harrier (Nanushuk Topsets) and Harrier Deep (Torok Bottomsets). The
focus at Project Peregrine moving forward will be on the untested Harrier
prospect (N14 and N15 targets) and the N14 south reservoir target. The N14
corresponds with ConocoPhillips' Harpoon prospect 15 miles to the north of the
Project Peregrine leases. The N14 south target is the remaining target in the
Merlin prospect and may be accessible from the Merlin-1 location. The northern
leases are modelled to have better porosity and permeability and are closer to
infrastructure.
An update to the Peregrine prospective resources is ongoing and expected to be
completed around mid-2023.
The Company is also currently assessing possible forward work-programs,
subject to potential farm-out.
Figure 4: Project Peregrine Acreage and proximity to Umiat leases
Yukon (100% WI)
88 Energy is currently conducting a strategic review of the prospectivity and
commerciality of the Yukon acreage that sits on the boundary of Federal and
State lands, below Point Thomson. The Yukon acreage is considered non-core
within 88 Energy's Alaskan portfolio, given the lower potential size of the
resources, relatively high cost to explore, and anticipated cost to develop.
The review will include an assessment of near-acreage opportunities that are
currently being considered by adjacent leaseholders.
Project Longhorn (~73% WI)
Production from the Longhorn wells averaged ~425 BOE per day gross (~72% oil)
during the quarter, peaking at 620 BOE per day gross.
Received a quarterly cash distribution from Project Longhorn in March of
A$0.3M, which was net of CAPEX payments for the two workovers completed in Q4
2022.
Four workovers and at least five new drilling targets remain on the acreage,
with the forward work programme and timing for future capital investments to
be determined by the Joint Venture in Q2 2023.
Corporate
On 6 February 2023, 88 Energy successfully raised A$17.5M (c.£10.1M) before
costs from domestic and international institutional and sophisticated
investors (the Placement). This was achieved through the issue of
1,842,105,263 fully paid ordinary shares in the Company at an issue price of
A$0.0095 (£0.0055) per new ordinary share.
Funds raised under the Placement, coupled with existing cash reserves, are for
use towards Project Phoenix Hickory-1 exploration well costs, Project Leonis
acreage payment, portfolio expansion opportunities and ongoing working capital
and general and administration overheads.
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 Hartleys Limited, Inyati
Capital Pty Ltd and Cenkos Securities Plc. In addition, the Company issued
75,000,000 Unlisted Options in total to the Placement managers (exercisable at
A$0.02 on or before the date which is 3 years from the date of issue)
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:
§ Exploration and evaluation expenditure of A$4.8M (December 2022 quarter:
A$3.3M), primarily associated with the Hickory-1 exploration well.
o JV partners provided contributions of A$1.5M towards Hickory-1.
§ Lease rental payments of A$0.6M, primarily related to renewal of Project
Peregrine leases.
§ Administration, staff, and other costs of A$1.5M.
o Including fees paid to Directors and consulting fees paid to Directors of
A$0.3M.
§ Project Longhorn quarterly cash distribution receipt of A$0.3M, which
included final CAPEX payments for the two workovers completed in Q4 2022.
§ Refund of the Alaska State bond related to Merlin-2 of A$0.6M.
At quarter end, the Company had cash reserves of A$26.3M and zero debt
(excluding typical trade creditors).
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 Phoenix Onshore, North Slope Alaska 62,324 ~75% ~75%
Project Icewine West Onshore, North Slope Alaska 121,996 ~75% ~75%
Project Peregrine Onshore, North Slope Alaska (NPR-A) 125,735 100% 100%
Project Longhorn Onshore, Permian Basin Texas 964 ~73% ~73%
Project Leonis Onshore, North Slope Alaska 25,431 100% 100%
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.
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
EurozHartleys Ltd
Dale Bryan Tel: + 61 8 9268 2829
Cenkos Securities Plc Tel: +44 (0)20 7397 8900
Derrick Lee Tel: +44 (0)131 220 6939
Pearl Kellie Tel: +44 (0)131 220 9775
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 31 March 2023
Consolidated statement of cash flows Current quarter Year to date (3 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 (884) (884)
(e) administration and corporate costs (573) (573)
1.3 Dividends received (see note 3) - -
1.4 Interest received 17 17
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 (1,440) (1,440)
2. Cash flows from investing activities - -
2.1 Payments to acquire or for:
(a) entities
(b) tenements (602) (602)
(c) property, plant and equipment - -
(d) exploration & evaluation (4,775) (4,775)
(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 1,462 1,462
Other - Distribution from Project Longhorn 329 329
Other - Return of Bond 585 585
2.6 Net cash from / (used in) investing activities (3,001) (3,001)
3. Cash flows from financing activities 17,500 17,500
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 (1,160) (1,160)
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 16,340 16,340
4. Net increase / (decrease) in cash and cash equivalents for the period
4.1 Cash and cash equivalents at beginning of period 14,123 14,123
4.2 Net cash from / (used in) operating activities (item 1.9 above) (1,440) (1,440)
4.3 Net cash from / (used in) investing activities (item 2.6 above) (3,001) (3,001)
4.4 Net cash from / (used in) financing activities (item 3.10 above) 16,340 16,340
4.5 Effect of movement in exchange rates on cash held 288 288
4.6 Cash and cash equivalents at end of period 26,310 26,310
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 26,310 26,310
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) 26,310 26,310
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 310
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. Financing facilities Total facility amount at quarter end Amount drawn at quarter end
Note: the term "facility' includes all forms of financing arrangements
$US'000
$US'000
available to the entity.
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) (1,440)
8.2 (Payments for exploration & evaluation classified as investing activities) (4,775)
(item 2.1(d))
8.3 Total relevant outgoings (item 8.1 + item 8.2) (6,215)
8.4 Cash and cash equivalents at quarter end (item 4.6) 26,310
8.5 Unused finance facilities available at quarter end (item 7.5) -
8.6 Total available funding (item 8.4 + item 8.5) 26,310
8.7 Estimated quarters of funding available (item 8.6 divided by item 8.3) 4.2
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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:
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: 26 April 2023
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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