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88 Energy wraps drilling in Q1; Alaska spend $14.2M in quarter
Steve Sutherlin Petroleum News
88 Energy Ltd. spent $11.8 million on exploration and evaluation in Alaska during the first quarter 2021 - ending March 31 - primarily associated with expenditure on Project Peregrine Merlin 1 well drilling, the company said in its quarterly report issued April 20. It spent $ 1.5 million on the project in the previous quarter.
The company paid lease rental payments to the State of Alaska totaling $2.4 million in Q1, it said.
88 Energy has been actively raising capital in Q1, with two placements that raised a total of $14 million. In February, the company announced completion of a “heavily oversubscribed” bookbuild to domestic and international institutional and sophisticated investors to raise $9.3 million before costs through the issue of 1,500 million ordinary shares at A$0.008 (equivalent to $.0062) per new ordinary share.
On March 22, the company entered into a share subscription agreement with a major contractor for the Merlin 1 drilling operation, ELKO International LLC, to raise $5 million, the company said. Under the agreement ELKO was issued 360 million ordinary shares at A$0.018 (equivalent to $0.014), which is a 225% premium to the Feb. 12 placement. The were no fees associated with the placement.
Cash call proceeds received from joint venture partners in the quarter totaled $6 million, the company said.
88 Energy held cash and cash equivalents of $15.5 million at the end of Q1, it said, up from $11.5 million at the end of the previous quarter.
On March 23, 88 Energy’s 100% controlled subsidiary Accumulate Energy Alaska Inc. entered into a $16.5 million debt refinancing agreement to replace the existing Bank of America debt facility secured by available Alaska production tax credits, 88 Energy said. Financing facilities, consisting of all forms of financing arrangements available to 88 Energy, stand at $16 million - which was equal to the total amount drawn at the end of Q1.
Project Peregrine At the Merlin 1 well, interpretation of logging while drilling data indicated multiple potentially hydrocarbon bearing zones had been encountered in the Nanushuk formation, the company said. The results were considered encouraging, and the joint venture approved a wireline program to determine the presence of mobile hydrocarbons.
“Subsequent to period end the company announced that initial petrophysical interpretation of the wireline logging program indicates several potential pay zones in Merlin 1, however operational issues prevent hydrocarbon samples from two most prospective zones,” the company said.
88 Energy said the Nanushuk formation, which contains the primary targets for the Merlin 1 well, was encountered ~600’ low to prognosis and is interpreted to be ~500’ thicker than that encountered in the wells drilled into the Willow Oil Field to the north of the Project Peregrine acreage.
Umiat acquisition Immediately south of the Project Peregrine acreage lies the Umiat oil field, which was acquired during Q1 by 88 Energy through its wholly owned subsidiary Emerald House LLC, from Malamute Energy Inc and Renaissance Umiat LLC, 88 Energy said. The consideration for the purchase was a 4% overriding royalty interest and assumption of liability for abandonment of the Umiat 18 and Umiat 23H wells, drilled by Linc Energy in 2013-14.
In March, cement work associated with plugging and abandoning of the two historical wells at the field was executed; remedial site work will be finalized in April.
The Umiat field is covered by two leases comprising 17,633 acres, which are in a unit that was formed in September 2019 with an initial 10-year term, the company said. The current conditions of the unit stipulate a well commitment (exploration or appraisal) by the end of August 2022.
“Umiat was discovered in the mid-1940s with 11 appraisal wells drilled by 1953, several of which were tested, the company said. Umiat 5 flowed 268 barrels per day on a three-month test and Umiat 8 flowed natural gas.
Linc Energy’s Umiat 23H was tested with a maximum flow rate of 800 bpd and sustained flow of 200 bpd, 88 Energy said. Substantial engineering and environmental work were done by Linc Energy in support of a potential future development, in fact, one of the access routes to infrastructure runs directly through 88 Energy’s Project Icewine.
Project Icewine At Project Icewine, in-house analysis continued in Q1 on various commercialization options for gas condensate discovered in the Torok Formation in 2020 by 88 Energy’s Charlie 1 well, which found 1 trillion cubic feet of independently estimated gross mean prospective gas as well as associated condensate, the company said. Commercialization options include but are not limited to possible local power generation, compressed natural gas, as well as potential for conversion to hydrogen using steam methane reforming with carbon capture and storage.
During the quarter, the high impact well Talitha A was being tested by Pantheon Resources PLC on acreage adjacent to Project Icewine, 88 Energy said. Several of the prospective horizons in Talitha A are interpreted to extend into 88E acreage.
Pantheon announced that testing had commenced on the Kuparuk horizon, with the Talitha A well flaring natural gas as it cleans up, 88 Energy said. Pantheon said it is too early to make a definitive assessment as to the ultimate commerciality of the Kuparuk horizon, with further results to be announced at the conclusion of testing.
Leases owned predominantly by Burgundy Xploration LLC in the eastern portion of Project Icewine where no money has been spent were relinquished as part of a rationalization process in Q1.
Yukon leases 88 Energy, through its wholly owned subsidiary Regenerate Alaska Inc. was formally awarded lease AA095899 in the recent Arctic National Wildlife Refuge Coastal Plain lease sale, effective Jan. 1, 88 Energy said, adding that the lease is considered highly prospective for oil and gas due to several prospects on the central North Slope side of the boundary which are interpreted to extend into the area.
It is considered likely that a significant portion of these oil pools may be accessed without surface access within the Coastal Plain area, the company said. The addition of lease AA095899, which is adjacent to the existing Yukon Leases held by Regenerate Alaska Inc, is anticipated to assist in advancing continuing discussions with nearby resource owners to optimize the monetization strategy of the acreage.
The Yukon leases contain the 86 million barrel Cascade prospect, which was intersected peripherally by Yukon Gold 1, drilled in 1994, and classified as an historic oil discovery, the company said, adding that it recently acquired 3D seismic over Cascade and, on final processing and interpretation, high-graded it from a lead to a drillable prospect.
“The Yukon Leases are located adjacent to ANWR and in close proximity to recently commissioned infrastructure,” the company said. “Permitting and planning to continue ahead of a future possible drilling campaign - subject to farm-out.”
- STEVE SUTHERLIN
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