TIDM88E
RNS Number : 9574U
88 Energy Limited
18 July 2018
18(th) July 2018
QUARTERLY REPORT
Report on Activities for the Quarter ended 30 June 2018
The Directors of 88 Energy Limited ("88 Energy" or the
"Company", ASX & AIM:88E) provide the following report for the
quarter ended 30 June 2018.
Highlights
Project Icewine
-- Icewine#2 HRZ Shale Flow Test
o Flow testing re-commenced at the Icewine#2 well, located on
the North Slope of Alaska, on June 11 to determine the productivity
of the unconventional HRZ shale, utilising a velocity string and
artificial lift
o During the period June 12 to June 30 flowback comprised
-- Gaseous hydrocarbons ranging from C1 to trace C6,
predominantly 90% methane, averaging 26mcf/day since June 12
-- 1,372 barrels of fluid interpreted as 100% stimulation
fluid
o Flowback fluids are not considered representative of the
reservoir fluid in situ
o Given the low assisted flowback rate, and that in total only
24.8% of the stimulation fluid injected has been lifted during the
entire 2017/2018 flowback operation, the Joint Venture made a
decision on June 30 to suspend the Icewine#2 well
o The Joint Venture believes that the flowback data, combined
with results to date from core and logs, demonstrates that the HRZ
is comparable to other early-stage commercial unconventional
plays
-- Icewine Western Margin Leases bid on by the Company in the
Dec'17 State of Alaska Licensing Round were formally awarded
-- Processing of the Icewine 3D seismic survey acquired Q1'18
commenced during the quarter to mature several large conventional
leads previously identified on 2D seismic
Yukon Acreage
-- Yukon Gold leases bid on by the Company in the Dec'17 State
of Alaska Licensing Round were formally awarded
-- The Yukon 3D survey, approximately 96 km(2) in area, was
completed on April 1 with initial deblending commencing during the
quarter
Western Blocks
-- Agreement Executed to Drill High Impact Oil Prospect onshore Alaska Q12019
o The Company executed a binding term sheet agreement, in
conjunction with other parties, to acquire the majority of Great
Bear Petroleum Ventures II LLC working interest in four leases
comprising the "Western Blocks" located onshore North Slope
Alaska
Project Icewine - Icewine#2 Flow Test
Flowback re-commenced on schedule on 11th June 2018 to clean-up
stimulation fluids from the Icewine#2 borehole. As per the flowback
design, nitrogen was introduced gradually to the wellbore from 13th
June, prior to installation of the coiled tube velocity string, to
artificially lift stimulation fluids in order to gain connectivity
to the reservoir.
Flowback was interrupted, as per the program, on the 15th June
to allow installation of the velocity string. Post installation,
flowback was re-established and nitrogen introduced into the
annulus between the 4.5" casing and the 1.75" velocity string. From
the 18th June to the 22nd June, adjustments were made to the
flowback system to determine the optimal settings for the nitrogen
lift operation and, consequently, production rates. During this
period, flowback rates fluctuated between an average rate of 50
barrels of water per day to 120 barrels of water per day.
The early results from the flowback were within the range of
expectations; however, the rate of returned fluid decreased,
despite optimised lift settings, and the timeline to achieve the
targeted percentage of returned fluid increased significantly.
After careful consideration, the Icewine Joint Venture made a
decision to suspend the Icewine#2 well on 30 June 2018.
The Joint Venture believes that results from the well support
the potential economic viability of the HRZ shale play and are
within the range of outcomes achieved at other early stage
unconventional plays, despite not achieving a flow rate that is
representative of the capability of the reservoir. The suspension
operation was designed to maximise flexibility for the future use
of the wellbore, including the drilling of a horizontal side-track
with a multi-stage stimulation.
Hydrocarbon gas content during the flowback period was
predominantly methane (90%) with some heavier elements up to trace
C6. Hydrocarbon rate achieved, with velocity string installed,
ranged from 5 - 113mcf/d of gas with an averagee of 26mcf/d.
Total clean up fluid returned, (net of diesel for freeze
protection and any other fluids introduced as part of the current
operation), since commencement of flowback on 12th June 2018 is
1,372 barrels interpreted as 100% stimulation fluid. Total fluid
returned for the entire Icewine#2 flowback operation, including
last year, is 6,905 barrels or 24.8% of the frac fluid injected vs
a target percentage return of at least 30%.
The Joint Venture believes that the flowback data, combined with
results to date from core and logs, demonstrates that the HRZ is
comparable to other early-stage commercial unconventional plays and
that, as per those plays, progressing to horizontal appraisal wells
is now the best use of time and money. Future evaluation of the
large potential already identified is planned to be accomplished
via farm-out and this process has already commenced.
Project Icewine - Icewine 3D
Acquisition of the Icewine 3D seismic survey, approximately 450
km2 in area and covering several large leads identified on 2D
seismic was completed on the 28th March; processing of the 3D
seismic data commenced in the quarter. Infield quality control,
overseen by head office, has ensured that the data acquired is as
clean as possible to enable fast track processing. Processing of
shipments of data from the initial areas of the acquisition
continued in the quarter and early products, namely post stack
migration, will be available in mid-2018. This will allow
confirmatory mapping of the stratigraphic / structural elements of
the leads already identified in the conventional prospectivity
portfolio.
Icewine 3D Completed: Covering Primary Conventional Targets in
Western Margin
Velocity analysis and regularization will deliver an isotropic
Kirchoff pre stack time migration product. This product will be
used to further analyse and confirm the highly encouraging
amplitude vs offset (AVO) anomalies identified on the 2D seismic.
These AVO responses are often associated with the presence of
hydrocarbons and, significantly, have already been identified at
horizons where both oil shows and good quality reservoir is
observed in regional well data.
Yukon Gold 3D
During the quarter, inhouse evaluation continued in re lation to
the recently acquired and awarded Yukon Gold leases, which contains
an historic oil discovery.
In March 2018, the Company awarded a seismic contract to
SAExploration to acquire 96km2 of 3D seismic, predominantly over
the Yukon Gold leases. Acquisition commenced on March 24 and was
completed subsequent to quarter end on April 1. The seismic data
will allow for assessment of the volumetric potential of the oil
discovery as well as to identify any additional prospectivity over
the broader lease position.
The Yukon 3D seismic survey was fast tracked to
opportunistically benefit from an available seismic crew in the
latter part of the 2018 acquisition season. Final processed
products are anticipated in Q4 2018.
Yukon Gold and Western Margin Leases Formally Awarded
88 Energy, via its subsidiaries Accumulate Energy Alaska, Inc
and Regenerate Alaska, Inc, has been formally awarded acreage it
successfully bid on in the State of Alaska North Slope Licensing
round December 2017. Lease documents have been executed and balance
of funds have been transferred to the Alaska Department of Natural
Resources.
Western Blocks - Agreement Executed to Drill High Impact Oil
Prospect in Q1 2019
The Company announced on 25(th) June, along with Otto Energy Ltd
(ASX:OEL) and Red Emperor Limited (ASX/AIM:RMP), collectively the
"Consortium Partners", that it had executed a binding term sheet
agreement with Great Bear Petroleum Ventures II LLC ("Great Bear")
to acquire the majority of Great Bear's working interest in the
four leases comprising the Western Blocks (ADL 391718; ADL 391719;
ADL 391720; ADL 391721). The leases are located immediately
adjacent to the Horseshoe#1/1A well, which discovered oil in 2017
and is considered an extension of the Pikka Unit to the North..
In consideration for acquiring the above interests in the
Western Block leases, the Consortium Partners will undertake the
following:
-- Provide a performance bond to the State of Alaska of US$3.0 million by 31 July 2018; and
-- Drill an exploration well in the Western Block leases by 31 May 2019.
The Consortium Partners will provide the following consideration
to Great Bear:
-- Free carry Great Bear for a 10% working interest in the
leases for the initial test well; including all associated costs
such as permitting, ice road access and test production
disposition;
-- Pay US$500,000 upon execution of the definitive agreements;
-- Pay US$500,000 upon receipt of final permits necessary to
drill the initial test well, in any case by no later than 31
December 2018; and
-- Provide an option for Great Bear to acquire a further 10%
working interest prior to the spud of the initial test well by
paying the pro-rata share of all costs of the initial test well,
including all associated costs, or if exercised within 6 months of
completing the initial test well by paying 200% of the pro-rata
share of all costs of the initial test well, including all
associated costs.
Technical evaluation and 3D seismic interpretation of the
Western Blocks by our Consortium Partner, Otto Energy Ltd, has
generated a a large oil prospect in the successful Nanushuk Play,
which is located approximately 4 miles east of the Horseshoe#1/1A
Nanushuk oil discovery well drilled in 2017.
Oversubscribed Placement to Raised A$17 million
On the 2(nd) May, the Company announced that it had successfully
completed a capital raise of A$17 million (before costs), with the
placement made to domestic and international institutional and
sophisticated investors through the issue of 460 million ordinary
shares at A$0.037 (equivalent to GBP0.02) per New Ordinary
Share.
Funds raised under the Placement will be used to fund the
Company's ongoing evaluation of the conventional and unconventional
propectivity of the acreage, and to enable the the Company to
identify and exploit new opportunities on the North Slope of
Alaska.
Corporate
The ASX Appendix 5B attached to this report contains the
Company's cash flow statement for the quarter. The significant cash
flows for the period were:
-- $17.0m (before costs) was received in the quarter from the capital raise;
-- Exploration and evaluation expenditure totalled A$10.3m,
primarily relating to expenditure associated with the Icewine 3D
seismic acquisition as well as the Yukon Gold 3D, lease rental
payments to the State of Alaska and also expenditure relating to
Icewine#2 operations;
-- $1.3m in expenditure in the quarter relates to lease
acquisition costs of the Yukon Gold and Western Margin leases;
-- Payments in relation to the debt facility interest totalled
A$0.5m (US$0.4m) and costs associated with the refinancing totalled
A$0.6m (US$0.5m); and
-- Administration and other operating costs A$1.2m (Mar'18 Quarter A$0.9m).
At the end of the quarter, the Company had cash reserves of
A$15.1m, including cash balances held in Joint Venture bank
accounts.
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 35
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.
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
Neil McDonald/Derrick Lee Tel: +44 131 220 6939
This announcement contains inside information.
88 Energy Alaska North Slope Assets Overview
Project Icewine
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. The current gross acreage position
is 475,000 contiguous acres (301,000 acres net to the Company).
These are marked in blue and red on the map shown in the attached
pdf.
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 Icewine#1 exploration well
(December 2015), marking the completion of Phase I of Project
Icewine. Phase II has now commenced, with drilling at the follow-up
appraisal well, Icewine#2, concluding mid 2017.
Production testing at Icewine#2 concluded on 30 June 2018 after
retrieving 24.8% of the injected stimulation fluid vs a targeted
return of at least 30%. Gas rates of up 100mcf/d were achieved
during flowback; however, these are not considered representative
due to limited reservoir connectivity. A farm-out process is
underway to fund the future work program.
Significant conventional prospectivity has also been identified
on recently acquired 2D and 3D 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.
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.
Yukon Gold
The Yukon Gold leases are located on the eastern border of the
Central North Slope of Alaska and were acquired in 2018. 88 Energy
via its subsidiary has a 100% working interest in these leases,
totalling 14,190 acres. The leases contain an historic discovery
well, Yukon Gold #1, which is currently being evaluated internally.
3D seismic was acquired in early 2018 to assist with this process
and results are expected in 4Q2018. The leases are marked in yellow
on the map shown in the attached pdf.
Western Blocks
88 Energy is earning a 36% working interest in four leases
(totalling 22,711 acres) immediately adjacent to the Horseshoe#1/1A
oil discovery well. 88 Energy, with its consortium partners Otto
Energy Ltd and Red Emperor Resources NL, will pay a US$3m
performance bond to the State of Alaska and 100% of the costs of
well, targeting a prospect with a gross mean unrisked prospective
resource volume of 400MMbbls (144MMbbls net to 88E), to be drilled
in 1Q 2019. The leases are marked in green on the map shown in the
attached pdf.
A pdf version of this announcement, including certain maps
referred to in this announcement, is available via the following
link:
http://www.rns-pdf.londonstockexchange.com/rns/9574U_1-2018-7-17.pdf
+Rule 5.5
Appendix 5B
Mining exploration entity and oil and gas exploration entity
quarterly report
Introduced 01/07/96 Origin Appendix 8 Amended 01/07/97,
01/07/98, 30/09/01, 01/06/10, 17/12/10, 01/05/13, 01/09/16
Name of entity
-------------------------------------------
88 Energy Limited
ABN Quarter ended ("current
quarter")
--------------- ------------------------
80 072 964 179 30 June 2018
------------------------
Consolidated statement Current quarter Year to date
of cash flows $A'000 (6 months)
$A'000
1. Cash flows from operating
activities
1.1 Receipts from customers - -
1.2 Payments for
(a) exploration & evaluation (11,923) (19,096)
(b) development - -
(c) production - -
(d) staff costs (602) (978)
(e) administration
and corporate costs (667) (1,224)
1.3 Dividends received - -
(see note 3)
1.4 Interest received 5 6
Interest and other
1.5 costs of finance paid (569) (1,038)
1.6 Income taxes paid - -
1.7 Research and development - -
refunds
Other (JV Partner Contributions
1.8 - Burgundy Xploration) 1,592 1,592
---------------- -------------
Net cash from / (used
1.9 in) operating activities (12,164) (20,738)
----- ---------------------------------- ---------------- -------------
2. Cash flows from investing
activities
2.1 Payments to acquire:
(a) property, plant
and equipment - -
(b) tenements (see
item 10) (1,341) (1,341)
(c) investments (410) (410)
(d) other non-current - -
assets
2.2 Proceeds from the disposal
of:
(a) property, plant
and equipment - -
(b) tenements (see - -
item 10)
(c) investments - -
(d) other non-current - -
assets
2.3 Cash flows from loans - -
to other entities
2.4 Dividends received - -
(see note 3)
2.5 Other (JV Partner Contributions - -
- Burgundy Xploration)
---------------- -------------
Net cash from / (used
2.6 in) investing activities (1,751) (1,751)
------- -------------------------------- ---------------- -------------
3. Cash flows from financing
activities
Proceeds from issues
3.1 of shares 17,050 17,050
3.2 Proceeds from issue - -
of convertible notes
Proceeds from exercise
3.3 of share options - 8,723
Transaction costs related
to issues of shares,
convertible notes or
3.4 options (1,192) (1,496)
3.5 Proceeds from borrowings - -
3.6 Repayment of borrowings - -
3.7 Transaction costs related - -
to loans and borrowings
3.8 Dividends paid - -
Other (Fees for debt
3.9 refinancing) (605) (1,127)
---------------- -------------
Net cash from / (used
3.10 in) financing activities 15,253 23,150
------- -------------------------------- ---------------- -------------
4. Net increase / (decrease)
in cash and cash equivalents
for the period
Cash and cash equivalents
4.1 at beginning of period 13,428 14,014
Net cash from / (used
in) operating activities
4.2 (item 1.9 above) (12,164) (20,738)
Net cash from / (used
in) investing activities
4.3 (item 2.6 above) (1,751) (1,751)
Net cash from / (used
in) financing activities
4.4 (item 3.10 above) 15,253 23,150
Effect of movement
in exchange rates on
4.5 cash held 317 408
---------------- -------------
Cash and cash equivalents
4.6 at end of period 15,083 15,083
------- -------------------------------- ---------------- -------------
5. Reconciliation of cash Current quarter Previous
and cash equivalents $A'000 quarter
at the end of the $A'000
quarter (as shown in
the consolidated statement
of cash flows) to the
related items in the
accounts
5.1 Bank balances 15,083 13,428
5.2 Call deposits - -
5.3 Bank overdrafts - -
5.4 Other (provide details) - -
---------------- ---------
Cash and cash equivalents
at end of quarter (should
5.5 equal item 4.6 above) 15,083 13,428
---- ---------------------------- ---------------- ---------
6. Payments to directors of the entity Current quarter
and their associates $A'000
Aggregate amount of payments to
these parties included in item
6.1 1.2 252
----------------
6.2 Aggregate amount of cash flow -
from loans to these parties included
in item 2.3
----------------
6.3 Include below any explanation necessary
to understand the transactions included
in items 6.1 and 6.2
---- --------------------------------------------------------
6.1 Payments relate to Director and consulting
fees paid to Directors. All transactions involving
directors and associates were on normal commercial
terms.
7. Payments to related entities of Current quarter
the entity and their associates $A'000
Aggregate amount of payments to
these parties included in item
7.1 1.2 20
----------------
7.2 Aggregate amount of cash flow -
from loans to these parties included
in item 2.3
----------------
7.3 Include below any explanation necessary
to understand the transactions included
in items 7.1 and 7.2
---- --------------------------------------------------------
7.1 Payments relate to consulting fees paid
to Director related entities. Consultant fees
paid to associated entities were on normal commercial
terms.
8. Financing facilities Total facility Amount drawn
available amount at at quarter
Add notes as necessary quarter end end
for an understanding $US'000 $US'000
of the position
8.1 Loan facilities 16,519 16,519
---------------- -------------
8.2 Credit standby arrangements - -
---------------- -------------
8.3 Other (please specify) - -
---------------- -------------
8.4 Include below a description of each facility
above, including the lender, interest rate
and whether it is secured or unsecured.
If any additional facilities have been entered
into or are proposed to be entered into
after quarter end, include details of those
facilities as well.
----- ---------------------------------------------------------------
* On the 23rd of March 2018, 88 Energy Lt's 100%
controlled subsidiary Accumulate Energy Alaska Inc
entered into a US$ 16.5 million debt refinancing
agreement to replace the existing Bank of America
debt facility. The key terms to the facility are
noted in the ASX announcement released on 26th of
March 2018. The facility is secured by available
Production Tax Credits.
9. Estimated cash outflows $A'000
for next quarter
9.1 Exploration and evaluation* (4,800)
9.2 Development -
9.3 Production -
9.4 Staff costs (375)
Administration and corporate
9.5 costs (420)
Other (provide details if
9.6 material)** (570)
--------
9.7 Total estimated cash outflows (6,165)
---- ------------------------------ --------
* Includes amounts relating to lease rentals, 3D seismic
processing & interpretation, G&A, G&G, expenditure on
Icewine#2 operations which are net of anticipated JV partner
contributions. Also includes expected expenditure in relation to
the Western Leases project.
** Includes amounts relating to costs associated with the Brevet
debt interest costs.
10. Changes in Tenement Nature of interest Interest Interest
tenements reference at beginning at end
(items 2.1(b) and location of quarter of quarter
and 2.2(b)
above)
10.1 Interests N/A
in mining
tenements
and petroleum
tenements
lapsed, relinquished
or reduced
----- ---------------------- -------------- ------------------- -------------- ------------
Interests
in mining
tenements
and petroleum Joint Venture
tenements North - 88 Energy
acquired Slope Net acreage
10.2 or increased Alaska interest* 286,589 318,063
----- ---------------------- -------------- ------------------- -------------- ------------
* Refer to announcement dated 18 June 2018 for leases awarded in
June 2018 in relation to the December 2017 North Slope Lease Sale.
All leases are held 100% by 88 Energy Ltd's subsidiaries.
1.1 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.
Sign here:
............................................................ Date:
.............................................
(Company Secretary)
Print name: Sarah Smith
Notes
1. The quarterly report provides a basis for informing the
market how the entity's activities have been financed for the past
quarter and the effect on its cash position. An entity that wishes
to disclose additional information is encouraged to do so, in a
note or notes included in or attached to this report.
2. If this quarterly 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 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.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
MSCSFEEEWFASEDW
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