88 Energy Weeks Away from Drilling One of 2020’s Biggest Oil Wells
Alaska North Slope focused oil explorer 88 Energy Limited (AIM:88E | ASX:88E) is on the verge of transformational drilling at its Charlie-1 appraisal well at Project Icewine.
The dual listed company is due to spud the Charlie-1 well in just weeks, in what could be one of the world’s biggest oil wells of the year. The company is targeting 1.6 billion barrels of gross mean prospective oil resource, of which 480MMBO is net to 88E.
88 Energy is hitting all its milestone as it approaches drilling which is on track to begin in late February.
The Permit to Drill has just been approved on 11 February and with that, all permits required for drilling are now in hand.
The ice road to the Charlie-1 location is now more than 80% complete (see map below) and is expected to be finished in the next two weeks.
Ice pad construction is due to commence shortly and 88 Energy has executed a rig contract, via its 100% owned subsidiary Accumulate Energy Alaska Inc, with Nordic-Callista Services to utilise Rig#3 for the upcoming drilling.
Mobilisation of the Nordic Rig#3 to site is anticipated to begin in approximately 10 days.
Managing Director of 88 Energy, Dave Wall, stated: "Excellent progress has been made on the ice road construction, despite extremely cold temperatures. All permits are now in hand ahead of the scheduled spud in late February.”
Here’s an overview of the opportunity present in 88E’s Charlie-1 well at Project Icewine:
While it has a long history of successful oil discoveries, Alaska’s North Slope is seeing renewed industry interest as new technology and exploration incentives have made the commercialisation of once stranded resources possible.
Recent discoveries have included the two largest conventional oil discoveries onshore North America in over 40 years: ConocoPhillips’ (NYSE: COP) Willow and Oil Search's (ASX: OSH) Pikka discoveries.
These oil discoveries have been made in a new play called the Brookian Sequence, where over the last six years, massive amounts of oil — over 4.0 billion barrels — have been discovered.
These new oil discoveries demonstrate the commercial viability of a previously speculative stratigraphic play type with vast unexplored potential.
Here are some of those discoveries along with 88E’s Project Icewine location:
Charlie-1 — Targeting 1.6 billion barrels gross prospective resource
At the Charlie-1 appraisal well, 88 Energy — along with its farm-in partner Premier Oil (LON: PMO) — is targeting 1.6 billion barrels of gross mean prospective oil resource potential, of which 480MMBO is net to 88E.
Comprised of no less than seven stacked targets in the new Brookian play, the Charlie-1 opportunity is derisked by 88E through reinterpretation of nearby well results and acquisition of modern 3D seismic.
The Charlie-1 appraisal well has been designed as a step out appraisal of a well drilled in 1991 by BP Exploration (Alaska) Inc called Malguk-1.
Malguk-1 encountered oil shows with elevated resistivity and mud gas readings over multiple horizons during drilling but was not tested due to complications towards the end of operations, which resulted in lack of time before the close of the winter drilling season. It was also drilled using vintage 2D seismic, which was insufficient to adequately determine the extent of any of the prospective targets encountered.
88 Energy subsequently undertook revised petrophysical analysis, which identified what is interpreted as bypassed pay in the Malguk-1 well.
88E also completed acquisition of modern 3D seismic in 2018, in order to determine the extent of the discovered oil accumulations.
Charlie-1 will intersect seven stacked prospects, four of which are interpreted as oil bearing in Malguk‐1 and are therefore considered appraisal targets. The total Gross Mean Prospective Resource across the seven stacked targets to be intersected by Charlie-1 is 1.6 billion barrels of oil (480 million barrels net to 88E).
These seven stacked targets that will be intersected by the Charlie-1 well have all been identified using the same modern technology used to make the most recent Brookian discoveries.
Each of these targets could be a potential standalone development in its own right and, when combined, the aggregate gross mean prospective resource potential is 1.6 billion barrels of oil, 480 million barrels of which is net to 88E's retained 30% interest.
Funding sorted for Charlie-1 well
88 Energy will operate Charlie-1 via its 100% owned subsidiary Accumulate Energy Alaska, Inc, with cost of the well to be funded by Premier Oil Plc (LON: PMO) up to US$23 million under a farm-out agreement that was executed in August 2019.
Premier Oil is a £850 million (A$1.6B) capped oil company with 80,000 barrels of oil equivalent per day in production. It will fund the appraisal well up to a total of US$23 million in exchange for 60% Working Interest (WI) in a circa 40% portion of Project Icewine’s conventional acreage in ‘Area A’, the Western Play Fairway (in orange on the map below).
To further fund its operations, on 24 January, 88 Energy completed a share placement, raising A$5 million (£2.6M) at a price of A$0.021 (equivalent to £0.011).
88 Energy intends to use the funds from the placement to fund potential costs of the Charlie-1 well above the Premier Oil carry, and fund lease rental payments, interest payments due on the debt facility, new ventures opportunities, and finance ongoing working capital and general and administrative overheads.
The optimism and momentum in heading towards the spud of Charlie-1 has seen the company share price more than double to a much as A$0.026 off its October low of A$0.012 on the ASX, and from £0.68 to £1.4 in London.
We expect the imminent spud of Charlie-1 to be a major catalyst as investors lock onto the potential of Charlie-1 and 88E’s larger Project Icewine.
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