REG-88 Energy Ltd: Project Icewine - Phase I Successfully Completed <Origin Href="QuoteRef">88E.AX</Origin>

88 EnergyAnnouncement

17/03/2016 08:15

17 March 2016

           Phase I Complete - Icewine#1 "Achilles' Heels" Mitigated            

88 Energy Limited ("88 Energy", "the Company", "Operator") (ASX, AIM: 88E) is
pleased to report the successful completion of Phase I for Project Icewine,
resulting in substantial de-risking of the HRZ play based on results from the
Icewine#1 exploration well. Phase II has now been initiated with planning and
design underway for Icewine#2H, a horizontal appraisal well with a multi-stage
fracture stimulation.

Phase I: Highlights - All Three "Achilles' Heels" Substantially Mitigated

  * Brittleness:
   
      + Analogous to Haynesville and Marcellus plays
       
      + Highly amenable to fracture stimulation operations
       
  * Hydrocarbon Phase / Thermal Maturity:
   
      + Volatile oil vapour phase with higher liquids content than forecast
       
  * Bottom Seal / Overpressure:
   
      + Elevated pore pressure materially above hydrostatic gradient
       
  * Matrix Permeability:
   
      + Analogous to Haynesville & substantially higher than Eagle Ford
       
  * Porosity
   
      + Excellent by comparison to other successful shale plays, including
        Eagle Ford
       
The Company believes that Icewine #1 cored a new kind of hybrid resource play
that appears to have numerous similarities to reservoirs known as Low-Contrast
Low-Resistivity (LCLR), or Low Contrast Pay (LCP). These reservoirs are
characterised by production metrics and performance more commonly associated
with conventional resources (Bodnar, 2015).

Phase II: Appraisal Program for HRZ Play Initiated

  * Appraisal: Icewine#2H (Horizontal with Multi-Stage Frac) HRZ Production
    Test
   
  * Preliminary AFE and drilling design launched
   
  * Detailed core-based fraccing, completion, and production profile design in
    progress
   
  * 2D Seismic Program:
   
  * Funding approved by Bank of America
   
  * Mobilisation complete - acquisition to commence in near term
   
  * Independent Resource Report
   
      + Scheduled for release mid-April, incorporating Icewine #1 HRZ results
        and increased acreage position
       
Overview

Analysis of the core obtained from the Icewine#1 exploration well has confirmed
a strong correlation between a matrix of various rock properties in the HRZ
shale and the Marcellus and Haynesville shales. Consequently, the Company
believes that the HRZ will be highly amenable to fracture stimulation
operations. The Marcellus and Haynesville shale plays are successful plays in
their own right, achieving flow rates over 30 million cubic feet of gas per day
with comparatively low decline rates, largely due to excellent permeability.
This is highly encouraging for the flow potential at Project Icewine,
especially in the context of the thermal maturity difference, which indicates
70% liquid hydrocarbon saturation as opposed to the more gas prone Marcellus
and Haynesville shale plays.

The three main "Achilles' Heels" in Project Icewine (see Fig 1) have now all
been substantially mitigated, creating a strong platform from which to enter
the next phase of unlocking the resource potential at Prokect Icewine via the
drilling of a horizontal well with a multi-stage frac.

Fig. 1 "Achilles' Heels" - Boxes Ticked (please refer to the attached pdf
version of this announcement)

Fig. 2 HRZ at Icewine#1 vs Marcellus / Haynesville (please refer to the
attached pdf version of this announcement)

Fig. 2 and Fig. 3 both highlight the mineralogical (rock composition)
similarities between the HRZ shale and other successful shale plays. Based on
this information, the Company's assessment is that the HRZ is a siliceous
shale, most similar to the Haynesville and Marcellus, and will be highly
amenable to fracture stimulation.

Fig. 3 HRZ Mineralogy ~17 Miles North of Icewine#1 (please refer to the
attached pdf version of this announcement) Source:Tran 2014

Fig. 4 Hardness Comparison (please refer to the attached pdf version of this
announcement)

Fig. 4 shows the comparative hardness of the HRZ at the Icewine#1 location,
providing additional support for fraccability of the rock.

Forward Plan

Further analysis is now required to fine tune the frac design for the planned
Icewine#2H well, including:

  * Proppant Embedment - determines the optimal size and type of proppant
   
  * Fluid Sensitivity - determines the best fluid type for carrying proppant
    and minimising chemical interaction with the rock
   
  * Borehole Stability - determines stress direction for optimisation of
    orientation of lateral section
   
The results from these tests will be known over the next few weeks.

Additionally, results from permeability tests on the "Super Highway" zones are
expected within days.

2D seismic acquisition is scheduled to commence imminently, following recent
funding approval by Bank of America.

Progress is being made on the Independent Resource Report, which is scheduled
for release in mid-April. The report will incorporate both the HRZ evaluation
results from the Icewine#1 well and the November 2015 acreage additions.

Managing Director of 88 Energy Limited, Dave Wall commented: "The substantial
de-risking of our three main Achilles' Heels is a major milestone for Project
Icewine. The HRZ has been proven to share many characteristics that are similar
to the rocks in the Marcellus and Haynesville that give rise to exceptional
flow rates, albeit we are expecting liquids as opposed to gas. Additionally,
our view of the nature of the HRZ play, based on these characteristics, is
pushing the needle towards a possible production profile that is more akin to
conventional reservoir performance.   

Further work to fine tune frac design is now underway and we also expect
seismic acquisition to commence imminently.

The hard work within the 88E/Burgundy partnership and by our expert
consultants, leveraged off Burgundy's intellectual property, continues to yield
Tier 1 outcomes for the prospectivity of Project Icewine. These focused efforts
are ongoing, and we look forward to sharing additional results in the near
future."

Media and Investor Relations:

Australia                                      
                                               
88 Energy Ltd                                  
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As Corporate Advisor                           
Mr Dale Bryan                                  
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1953                    8900                   

Project Icewine Highlights

In November 2014, the Company entered into a binding agreement with Burgundy
Xploration (BEX) to acquire a significant working interest (87.5%, reducing to
78% 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 November 2015, the gross acreage
position was expanded by 174,240 acres (to be awarded in due process by the
State of Alaska).

Subject to final payment on the expanded acreage, 88 Energy will have a 272,422
gross contiguous acre position with 212,489 acres net to the Company. 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 planning for a horizontal well, Icewine#2H, underway.

Generous exploration incentives are provided by the State of Alaska with up to
85% of exploration expenditure in 2015 cash refundable, dropping to 75% until
mid 2016 and thereafter 35%.

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.

Conventional play potential can be found at Project Icewine within the same
Brookian petroleum system and shallow to the HRZ shale and includes high
porosity channel and deep water turbiditic sands. The Brookian conventional
play is proven on the North Slope; the USGS (2013) estimate the remaining oil
potential to be 2.1 billion barrels just within the Brookian sequence.
Additional conventional potential exists in the deeper Kuparuk sands and the
Ivashuk Formation.

Drilling in (2012), on the adjacent acreage to the north, confirmed that the
HRZ shales, along with the underlying Kingak & Shublik shales, were all within
the oil window which is extremely encouraging for the unconventional potential
at Project Icewine. In addition, a conventional oil discovery was reported in
the Kuparuk sandstones.

A Prospective Resources Report by DeGolyer and MacNaughton, was commissioned by
88 Energy to evaluate the unconventional resource potential of Project Icewine
in early December 2014 and was released to the market on 19 January 2015.

About 88 Energy: 88 Energy has a 78% working interest and operatorship in
~272,000 acres (~174,000 acres subject to formal award) onshore the prolific
North Slope of Alaska ("Project Icewine"). The North Slope is the host for 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 three highly prospective play types that are likely
to exist on the Project Icewine acreage - two conventional and one
unconventional. The large 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
TransAlaska Pipeline System. The Company plans to progress drilling and seismic
acquisition in the near term to take advantage of the globally unique fiscal
system in Alaska, which allows for up to 85% of CY2015 exploration expenditure
to be rebated in cash.



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