REG - 88 Energy Limited - Sale of Non-Core Permian Basin Interest

88 EnergyAnnouncement

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RNS Number : 6915V  88 Energy Limited  18 August 2025

 

This announcement contains inside information

18 August 2025

88 Energy Limited

 

Sale of NON-CORE PERMIAN BASIN INTEREST

88 Energy Limited (ASX:88E, AIM:88E, OTC:EEENF) (88 Energy or the Company) is
pleased to announce that it has executed a binding Securities Purchase
Agreement (SPA) with Lonestar I, LLC (Lonestar), Operator of Project Longhorn,
for the sale of its 75% non-operated working interest in the producing oil and
gas assets located in the Permian Basin, Texas, USA (Project Longhorn), held
through subsidiary Longhorn Energy Investments LLC (88E - Longhorn).

Transaction Highlights

·   Total consideration of US$3.25 million, with final consideration
subject to customary working capital and completion adjustments at the
effective date, 1 July 2025.

·   Proceeds to be redeployed into core exploration assets in Alaska and
Namibia, in line with the Company's stated growth strategy.

·   The Company elected not to participate in a new multi-well drill
program at Project Longhorn, and 88 Energy is no longer exposed to costs
associated with Project Longhorn, with an estimated gross cost of US$2 million
per well.

·   Maintains financial discipline and focus on higher-impact,
exploration-led value creation.

·   Since its acquisition in 2022, Project Longhorn has delivered
meaningful cash flow of approximately US$6.1 million, which supported
exploration and overhead costs.

·

Managing Director, Ashley Gilbert, commented:

"The divestment of our interest in Project Longhorn is consistent with our
disciplined approach to capital management and focus on assets with the
potential to deliver outsized returns. This transaction further supports our
efforts to accelerate progress across our exploration portfolio in Alaska and
Namibia, jurisdictions that we believe offer an exceptional opportunity to
generate meaningful value for our shareholders.

We thank our Project Longhorn partners and extend our best wishes for their
future drilling campaigns in the Permian Basin."

 

Transaction Overview

Following a strategic portfolio review conducted in Q1 2025, the Board
concluded that Project Longhorn's operating asset base no longer aligned with
the Company's long-term strategy, which is focused on high-impact exploration
opportunities, primarily in Alaska. This decision was informed by the
projected capital intensity of Project Longhorn's future development plans,
which would be required to maintain projected cash flows, and by 88 Energy's
objective to streamline its portfolio and redeploy capital to assets with
greater upside potential. The future development plans at Project Longhorn are
expected to involve a multi-well drill program, with an estimated gross cost
per well of ~US$2 million, and the transaction removes the Company's
obligation to future costs associated with Project Longhorn, enabling 88
Energy to deploy its resources towards higher-impact, exploration-led
opportunities.

Key terms of the transaction include:

·   Total Consideration: US$3.25 million

·   Effective Date: 1 July 2025

·   Completion Adjustments: Subject to customary reconciliation as at 30
June 2025, including adjustment for cash, receivables, crude oil inventory,
and liabilities.

A divestment process was completed for the sale of Project Longhorn, with 88
Energy initially agreeing terms under a non-binding Memorandum of
Understanding with a third party.  Subsequently, Lonestar exercised its
rights to match the offer and will now hold 100% of the assets on completion
of the transaction.

Strategic Focus

The divestment marks a significant milestone in 88 Energy's strategic
repositioning, allowing the Company to concentrate fully on its core
exploration growth pillars:

·   Alaska: Progressing near-term exploration and appraisal activity at
Project Leonis and Project Phoenix, with strong prospectivity and the
potential to deliver transformational value outcomes.

·   Namibia: Advancing early-stage exploration in PEL 93, providing
material frontier exposure within a globally prospective emerging petroleum
province, following multiple high-profile discoveries in adjacent acreage.

The Project Longhorn assets have delivered meaningful cash flow from ongoing
existing production and low-cost workovers since acquisition in 2022. This
supported corporate overheads and exploration activities over the period, with
total cash distributions of approximately US$6.1 million to the Company, net
of operating expenses and capital invested in workovers.

However, the Operator's next-phase development plan, which comprises
higher-cost, lower-margin new drilling which is required to maintain future
cash flows from Project Longhorn, does not align with 88 Energy's capital
allocation priorities.

Importantly, since acquiring its interest in Project Longhorn in 2022, the
Company's leasing costs in Alaska have been significantly reduced and combined
with overhead cost reductions in 2024 and current cash on hand. The need to
rely on production cash flows has been meaningfully reduced, enabling the
Company to dispose of its interest in Project Longhorn and bring forward
potential future cash flows from the project that otherwise would be at risk
over a three to five-year horizon

88 Energy is in a well-funded position for the next stage of growth and this
transaction frees potential future capital expenditure to pursue higher-return
opportunities across its portfolio.

 

Further Details on Project Longhorn

The Project Longhorn assets are located onshore in the Permian Basin, Texas,
with approximately 2,830 acres (net to 88 Energy). The assets consist of 19
leases with 40 producing wells and associated infrastructure.  Prior to the
transaction, Lonestar I, LLC held a ~24% net working interest in the assets
and is Operator. Recent activity on the assets includes the completion of six
workovers in 2022 and four workovers in 2024 to increase or maintain
production to combat typical decline rates, with an extensive future work
program planned to underpin future production. Net reserves to 88 Energy for
Project Longhorn at 31 December 2024 comprised 0.98 MMBOE (1P), 1.4 MMBOE (2P)
and 1.75 MMBOE (3P). The 2025 Half year financial report will reclassify the
Project Longhorn Investment to Assets Held for Sale. An impairment to bring
the carrying value to fair value less costs to sell will also be recognized,
with the impairment expected to be approximately US$10 million based on the
headline sale price (value of proved developed and producing reserves) less
anticipated sale costs, compared to the carrying value for the asset of
US$12.5 million in the Company's accounts as at 30 June 2025 (US$13.5 million
at 31 Dec 2024 audited accounts). This adjustment is reflective of the
undeveloped resources where significant investment of over US$18 million would
have been required by 88 Energy over the coming years, as well as recognition
of downward oil price movements and forecast production type curve
adjustments.  There will be a corresponding impact on the Company's net
profit/loss for the half year ended 30 June 2025 due to the impairment charge.

 

This announcement has been authorised by the Board.

 

 Media and Investor Relations
 88 Energy Ltd

 Ashley Gilbert, Managing Director

 Tel: +61 (0)8 9485 0990

 Email:investor-relations@88energy.com

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