REG-88 Energy Ltd: Operations Update <Origin Href="QuoteRef">88E.AX</Origin>

88 EnergyAnnouncement

26/06/2017 07:05

26 June 2017

88 Energy Limited

Icewine#2 Operations Update

88 Energy Limited (“88 Energy”, “the Company”, “Operator”) (ASX,
AIM: 88E) is pleased to provide an update on Project Icewine, located onshore
North Slope of Alaska.

Highlights
* Flowback continues with ~13% of stimulation fluid recovered
Icewine#2 Operations Update

Flowback commenced on the 19(th) June from stage 2 (upper zone). Approximately
8% of total stimulation fluid volume was recovered until it became apparent,
due to rate and pressure observations, that the upper zone was likely in
communication with the lower zone. Consequently, a decision was made to drill
out the plug between the upper and lower zones. No increase in pressure was
observed, confirming that the two zones are in effective communication. Trace
hydrocarbons were encountered whilst flowing back the upper zone prior to
drilling out the plug and, as expected, the flow rate returned to 100%
stimulation fluid once the two zones were flowed back together.

Flowback, currently comprising 100% stimulation fluid, is continuing.
Percentage of fluid recovered to date is ~13% of the total fluid pumped. It is
estimated that up to 30% of the stimulation fluid will need to be recovered
before hydrocarbons will be released from the reservoir.

The forward plan is to monitor pressure and flow rate and continue to draw
stimulation fluid off the reservoir. Artificial lift, using nitrogen or swab
cups, may be introduced at some stage to increase the rate of draw down of
fluid. If pressure becomes too low it is possible that operations will
necessitate a shut-in to allow fluid to ‘soak’ and pressure to build up.
This ‘soaking’ is not uncommon in other shale plays as it allows
stimulation fluid to be absorbed into the reservoir and can result in lower
required fluid flowback before onset of hydrocarbon flow.

Further updates will be made as and when appropriate throughout the testing
program.

Managing Director, Dave Wall, commented:  “We continue to monitor pressure
and flowback of stimulation fluid whilst we wait for hydrocarbons to be
released from the reservoir. Given that we are breaking new ground in relation
to the HRZ formation, we need to establish the conditions under which the
hydrocarbon cut will return and then increase.

The stimulation was executed precisely as per plan with over one million lbs
of proppant placed into the formation. A little patience is now required as we
give the rocks time to show us what they can deliver.”

Media and Investor Relations:

88 Energy Ltd
Dave Wall, Managing Director             Tel: +61 8 9485 0990
Email: admin@88energy.com

Finlay Thomson, Investor Relations       Tel: +44 7976 248471

Hartleys Ltd
Dale Bryan           Tel: + 61 8 9268 2829

Cenkos Securities       Tel: + 44 131 220 6939
Neil McDonald/Derrick Lee   

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,
Mr Brent Villemarette, who is a Non-Executive Director of the Company. Mr
Villemarette has more than 30 years' experience in the petroleum industry, is
a member of the Society of Petroleum Engineers, and a qualified Reservoir
Engineer 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. Mr Villemarette 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.

Project Icewine Overview

In November 2014, the Company entered into a binding agreement with Burgundy
Xploration (BEX) to acquire a significant working interest (87.5%, reducing to
77.5% on spud of the first well on the project) in a large acreage position on
a multiple objective, liquids rich exploration opportunity onshore Alaska,
North America, referred to as Project Icewine. In June 2016, the gross acreage
position was expanded to 271,119 contiguous acres (210,250 acres net to the
Company). In December 2016 the Company successfully bid on additional acres.
On award the Project Icewine gross acreage position will be further expanded
to ~690,000 contiguous acres (~400,000 acres net to the Company assuming all
rights are taken up).  

The Project is located on an all year operational access road with both
conventional and unconventional oil potential. The primary term for the State
leases is 10 years with no mandatory relinquishment and a low 16.5% royalty.

The HRZ liquids-rich resource play has been successfully evaluated based on
core obtained in the recently completed (December 2015) Icewine #1 exploration
well, marking the completion of Phase I of Project Icewine. Phase II has now
commenced, with drilling at the follow-up appraisal well, Icewine#2,
commencing early 2Q2017. Production testing is scheduled to occur in mid-2017.

Significant conventional prospectivity has also been identified on recently
acquired 2D seismic across the project acreage.

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.

Generous exploration incentives are provided by the State of Alaska with up to
35% of net operating loss refundable in cash.

The  primary objective is an untested, unconventional liquids-rich shale play
in a prolific source rock, the HRZ shale (Brookian Sequence), that co-sourced
the largest oil field in North America; the giant Prudhoe Bay Oil Field
Complex. Internal modelling and analysis indicates that Project Icewine is
located in a high liquids vapour phase sweetspot analogous to those
encountered in other Tier 1 shale plays e.g. the Eagle Ford, Texas.

Recently acquired 2D seismic has identified large conventional leads at
Project Icewine within the same Brookian petroleum system and shallow to the
HRZ shale, including potential high porosity channel and  turbiditic sands
associated with slope apron and deepwater fan plays. The Brookian conventional
play is proven on the North Slope; the USGS (2013) estimated the remaining oil
potential to be 2.1 billion barrels within the Brookian sequence. Two recent
discoveries in the Brookian have already exceeded these estimates, with
Armstrong/Repsol discovering 1.4 billion barrels in 2015 and Caelus announcing
a 2.5 billion barrel discovery in 2016. Additional conventional potential
exists in the Brookian delta topset play, deeper Kuparuk sands and the Ivishak
Formation.

A Prospective Resources Report by DeGolyer and MacNaughton, was commissioned
by 88 Energy to evaluate the unconventional resource potential of Project
Icewine in February 2016 and was released to the market on 6(th) April 2016.

About 88 Energy: 88 Energy has a 77.5% working interest and operatorship in
~271,000 acres onshore the prolific North Slope of Alaska (“Project
Icewine”). Gross contiguous acreage position will expand on award of
additional leases successfully bid on in the December 2016 State of Alaska
North Slope Licensing Round. The North Slope is the host to the 15 billion
barrel Prudhoe Bay oilfield complex, the largest conventional oil pool in
North America. The Company, with its Joint Venture partner Burgundy
Xploration, has identified  highly prospective play types that are likely to
exist on the Project Icewine acreage – two conventional and one
unconventional. The large unconventional resource potential of Project Icewine
was independently verified by leading international petroleum resource
consultant DeGolyer and MacNaughton. In addition to the interpreted high
prospectivity, the project is strategically located on a year-round
operational access road and only 35 miles south of Pump Station 1 where
Prudhoe Bay feeds into the Trans Alaska Pipeline System. The Company acquired
2D seismic in early 2016 to take advantage of the globally unique fiscal
system in Alaska, which allowed for up to 75% of 1H2016 exploration
expenditure to be rebated in cash. Results from the seismic mapping and
prospectivity review are encouraging, and form the basis of a conventional
prospectivity portfolio for Project Icewine. In late 2015, the Company
completed its maiden well at the project, Icewine#1, to evaluate an
unconventional source rock reservoir play which yielded excellent results from
analysis of core obtained from the HRZ shale. The follow-up well with a
multi-stage stimulation and test of the HRZ shale, Icewine#2, spud in early
2Q2017.



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