- 88 Energy Limited has made substantial progress across the Merlin-1 well since its spud in early March 2021.
- Talitha-A, a well nearby to the Project Icewine, has shown early encouraging results with potential for extension into 88E lease.
- 88E is continuing permitting and planning for upcoming prospective exploration drilling of the Yukon Leases.
- The Company concluded the final condition for the acquisition of the Umiat Oil Field and also concluded two capital raises in the quarter.
88 Energy Limited (ASX:88E) has made all-round progress during the quarter ended 31 March 2021 with significant exploration activities undertaken across the Merlin-1 well at the Project Peregrine, arranging finance through issue of shares and signing a share subscription agreement, acquisition of an oil field.
Project Peregrine and Recent Nanushuk Discoveries (Source: ASX Announcement 23 February 2021)
Let us discuss these developments in detail.
Drilling commenced at Merlin–1 Well
88E had been looking to spud the Merlin-1 well for quite some time, and for this purpose, the Company commenced snow road construction to the Merlin-1 location after mid-December 2020.
Later, in early January 2021, the Company commenced rig commissioning and mobilisation of snow road and pad construction equipment to the Merlin-1 drill site.
Merlin-1 on-trend to large Willow oil field (Source: ASX Announcement 23 February 2021)
88E received approval for the Permit to Drill for the Merlin–1 well by the Alaska Bureau of Land Management and the Deputy Assistant Secretary for Land and Minerals Management towards the end of January 2021, before the anticipated approval date of 12 February.
Further, 88E commenced mobilisation of Rig-111 to the Merlin-1 drilling location in January 2021, and Rig-111 commenced drilling of the Merlin–1 well on 10 March 2021. Initially, the Merlin-1 surface hole was drilled to 1,512’ as planned and was further drilled to a Total Depth of 5,267’ towards the end of March 2021.
Several potentially hydrocarbon-bearing zones encountered
88E encountered the Nanushuk Formation containing the primary targets for the Merlin-1 well ~600’ low to prognosis. Another encouraging discovery was the indication of the existence of more sand packages as compared to the Analogue Wells. Moreover, these sand packages in Merlin-1 are usually cleaner in nature.
Additionally, the interpretation of logging while drilling data showed several potentially hydrocarbon-bearing zones encountered in the Nanushuk Formation while drilling Merlin-1 well. The Company believes that the results were encouraging, and the Joint Venture (JV) approved a wireline program to establish the existence of mobile hydrocarbons.
Fluorescence and Cut Observed over Multiple Intervals (Source: Company Announcement 29 March 2021)
Later to the quarter end, 88E found that the preliminary petrophysical interpretation of the wireline logging program highlights multiple prospective pay zones in Merlin-1. However, the Company encountered some operational issues due to which hydrocarbon samples from a couple of most prospective zones were not gathered.
Wireline Program across Merlin-1 well
88E’s first run of the wireline program was designed to discover possible reservoir and resistivity while providing an estimate of the mobility of the fluid present. The Company identified several prospective zones, and the NMR tool suggested good mobility throughout the majority of these zones.
Later, 88E designed the second run of the program to collect samples throughout these zones, where preliminary observations suggested the occurrence of an oil signature in the fluid.
Further, the Company’s intent to focus on the prospective zone indicating good oil shows and petrophysical features was prevented due to wellbore condition issues as the tool got stuck and was later freed. However, the Company was of the view that there was a high risk in returning to that zone.
Prospective zone identified at Project Peregrine
Another significant consideration for 88E is one of the zones that is believed to be a new prospective horizon within the Nanushuk Formation, while the other zone is interpreted to be common with one of the zones in the Harrier prospect.
Multiple samples were collected in zones interpreted to be less potent and shall be sent to a lab for testing. The Company believes that the existence of hydrocarbons here is reassuring for local prospectivity but is inadequate to represent a finding due to the low saturation levels.
It was very late in the season when the JV considered commencing flow testing operations, and the future schedule shall comprise plugging the well. If necessary, 88E may re-enter the well in the future to drill a sidetrack and perform a flow test.
IMPORTANT UPDATE: 88 Energy (ASX:88E) Completes Initial 1,512ft drilling at Merlin-1
Testing of Talitha-A well at Project Icewine
88E took notice of the high impact well, Talitha-A, that was being tested by Pantheon Resources PLC on acreage adjacent to 88E’s Project Icewine during the quarter. Multiple prospective horizons in Talitha-A are interpreted to continue into 88E acreage and was slated to be flow tested over several horizons following positive log results.
Although Pantheon declared the beginning of testing on the Kupurak horizon, with the Talitha #A well flaring natural gas as it cleans up, it was too early to make a definitive assessment regarding the ultimate commerciality of the Kupurak horizon.
Moreover, 88E continued in-house analysis on different commercialisation alternatives for the gas condensate uncovered in the Torok Formation by 88E’s Charlie-1 well in the past year.
As part of a rationalisation process, leases that are mainly owned by Burgundy Xploration LLC in the eastern portion of the Project Icewine area were also relinquished during the quarter.
Prospective Yukon Leases granted
With effect from 1 January 2021, 88E was formally granted the lease sale on Lease AA095899 in the recent Coastal Plain through Regenerate Alaska Inc., a wholly-owned subsidiary of 88E. The lease is believed to have a high potential for oil and gas and that a substantial part of these oil pools may be retrieved with no surface access within the Coastal Plain area.
Further, 88E shall continue permitting and planning before an upcoming potential drilling campaign, subject to farm-out.
Acquisition of Umiat Oil Field completed
Another significant development for 88E was the Sale and Purchase Agreement to acquire the Umiat Oil Field in early January 2021. 88E completed the last condition related to the acquisition of the Umiat Oil Field.
Umiat Oil Field Location (Source: 88E Announcement 20 April 2021)
Moreover, the cement work related to plugging and abandoning two historical wells at the field has been conducted, while the remaining work shall be concluded in April 2021.
The Umiat Oil Field has witnessed significant engineering and environmental work conducted by y Linc Energy to back a prospective upcoming advancement.
Fund raising and financial position
On the funding front, 88E concluded a heavily oversubscribed bookbuild to raise AUD12.0 million. For this purpose, 88E issued 1,500 million ordinary shares at a per New Ordinary Share price of AUD0.008.
Furthermore, the Company inked a share subscription agreement with ELKO International LLC that helped in raising AUD6.48 million through the issue of 360 million ordinary shares at AUD 0.018. ELKO is one of the key contractors for the Merlin-1 drilling operation.
At the quarter-end, 88E held cash reserves of AUD20.06 million.
On 20 April 2021, 88E stock traded at AUD 0.022.