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88 Energy Limited

(ASX:88E)

Current Price:

$0.012

Our Investment Summary

Date of
Initial Coverage

23-Jul-20

Initial
Entry Price

$0.005

Returns from
Initial Entry

140%


What does 88E do?

88 Energy Ltd (ASX: 88E | OTC: EEENF) is an oil and gas exploration company focussed on a portfolio of assets in the North Slope of Alaska, USA.

What is the macro theme behind 88E?

The world is moving into a period of oil and gas scarcity following multiple years of underinvestment.

The demand shock caused by COVID-19 and the subsequent oil price falls lead to a destruction in activity on the supply side. With demand now recovering, the supply-side hasn't responded, which we think will lead to oil price pressures to the upside in the medium-term.


Investment Memo: 88 Energy (ASX:88E, AIM:88E)

21-Feb-2022


Why did we invest in 88E?

North Slope in Alaska

88E is exploring for oil on the North Slope in Alaska - one of the “oiliest” places on the planet. This region is home to some of the largest oil fields in the US, including Prudhoe Bay - the largest onshore oil field in North America, having produced over 12 billion barrels of oil since discovery. 88E holds multiple assets with 3.4B+ barrels of oil equivalent discovery potential.

88E generally drills once a year in high risk / high reward events

88E has drilled five wells in just over 6 years targeting large oil discoveries. We are invested in 88E because it provides exposure to a high-risk high-reward drilling program every year. The 88E share price tends to perform well as 88E goes into a new drilling program. 88E is gearing up to drill the Merlin-2 Well in March 2022 targeting 652 million barrels of oil.

Nearology to ConocoPhillips Willow Oil Field

88E’s 652 million barrel prospective resource at its Peregrine Project is analogues to the Willow Oil Field owned by ConocoPhillips, the #1 oil producer in Alaska. The Willow Oil Field has a resource between 400-750 million barrels of oil equivalent and is a planned 160k barrels/day over 30-years. 88E’s exploration at the Peregrine Project is targeting a similar discovery.

Oil out of favour

Fossil fuels are becoming increasingly shunned by investors and is leading to a lack of investment in oil and gas exploration. The transition to green energy is expected to take longer than the markets are expecting. Oil demand is expected to remain strong in the medium-term. COVID-19 demand shock shutdown a lot of barely profitable wells and as the demand-side of the equation recovers, supply is struggling to catch up.

What do we expect 88E to deliver in 2022?

THE Key Objective we want to see from 88E is to drill the Merlin-2 appraisal well at Project Peregrine.

88E will be drilling a 652 million barrels of oil equivalent target at the Merlin-2 Well in Q1-2022. The Merlin-1 well drilled in 2021 confirmed a petroleum system. Project Peregrine is analogous to ConocoPhillips Willow Oil field.

A discovery here would put 88E on the radar of the majors in the area. A lot is riding on the results of the Merlin-2 well, which is being drilled in March 2022 - the results of this well will determine what we want to see the company deliver for the rest of the year.

What could go wrong?

Drilling Risk: 88E is still in the exploration stage so big drilling events can have binary outcomes, risk needs to be managed going into these large binary outcomes.

88E’s upcoming Merlin-2 well is an appraisal well however. Whilst not an ‘exploration’ well it is still inherently high-risk. The purpose of an appraisal well is to test a previously discovered oil and gas show. There is a chance the appraisal well returns no oil and gas.

Funding Risk: Oil and gas is a fossil fuel, with commitments from countries all over the world to decarbonise. ESG mandates for capital are forcing some investors to divest or move capital away from the space, 88E is still in the exploration stage and requires financing to get its assets commercialised.

Regulatory risk: Whilst this is not part of 88E’s acreage, the Biden Administration suspended oil drilling licenses in Alaska’s Arctic National Wildlife Refuge earlier this year. ConocoPhillips are facing legal setbacks in bringing the Willow oil field project to production.

What is our investment plan?

We have observed an increase in market speculation on the outcome of 88E drilling events every year.

We are anticipating a rise in the 88E share price either just before the drilling of Merlin-2, or going into the Merlin-2 drill results.

Our plan has been to invest early, months before drilling, and hold as momentum increases in the story.

We then seek to free carry and take some profit at drilling.

We hold a portion of our position going into the Merlin-2 results. This suits our investment strategy but may not suit yours.

Always seek professional advice when investing in speculative stocks like this one.


Disclosure: The authors of this article and owners of Next Investors, S3 Consortium Pty Ltd, and associated entities, own 6,610,000 88E shares at the time of writing this investment memo. S3 Consortium Pty Ltd has been engaged by 88E to share our commentary on the progress of our investment in 88E over time.


Investment Milestones

1st Key Drilling Event - Feb 2021
✅ Initial Investment: @0.5c (
9 months before key drilling event)
✅ Increase Investment: @0.6c (6 months before key drilling event)
✅ Price increases 500% from initial entry
✅ Price increases 1000% from initial entry
🔲 Price increases 2000% from initial entry
✅ Free Carry (days before key drilling event)

✅ Take Some Profit (days before key drilling event)
✅ Hold position for key drilling event
✅ Decide New Investment Plan after results of key drilling event

2nd Key Drilling Event - Q1 2022
✅ Increase Investment: @2.5c (≈9 months before key drilling event)
🔲 Increase Investment
🔲 Increase Investment
✅ Price increases 200% from investment
🔲 Price increases 400% from investment
🔲 Price increases 600% from initial entry
✅ Free Carry (days before key drilling event)
🔲 Take Some Profit (days before key drilling event)
✅ Hold position for key drilling event
🔲 Decide New Investment Plan after results of key drilling event


Our Past Commentary on 88 Energy

Date Title
14-May-2022 $ 0.012 Small caps in a shocking market
11-Apr-2022 $ 0.016 Why we invest in IPOs and our investment approach
04-Apr-2022 $ 0.015 Investing in Early Stage, High Risk Companies in 2022
30-Mar-2022 $ 88E Fails to Hit Production-Test Worthy Reservoir Section in Alaska
05-Mar-2022 $ 0.048 Mainstream Media Catching on to the Commodities Supercycle
26-Feb-2022 $ 0.038 The War Begins, Cybersecurity, Food Security, Energy Independence and Precious Metals
22-Feb-2022 $ 652 million barrel oil drilling event starts early March
21-Feb-2022 $ 0.038 Why we invest in Oil & Gas and Precious Metals
12-Feb-2022 $ 0.000 Energy Transition Metals, Raw Materials, McKinsey, Supply and Demand Economics
22-Jan-2022 $ 0.039 Our Investment Approach, Energy Cold War, Ukraine, Supply Chain Crisis
11-Dec-2021 $ 0.026 ASX rests pre-Chrsitmas as the market trades on very low volumes
27-Nov-2021 $ 0.026 New COVID strain, Santa Rally, Market Thoughts
06-Nov-2021 $ 0.028 COP26, Battery Metals, Green Energy
04-Nov-2021 $ 88E Drill Rig Contracted - The Merlin-2 drilling event awaits…
25-Sep-2021 $ 0.030 Managing a market crash - lessons from March 2020
23-Sep-2021 $ 0.028 88E’s drilling ‘sequel’ to deliver a blockbuster result?
21-Aug-2021 $ 0.034 Market fluctuations and portfolio news and quick takes
17-Aug-2021 $ 0.044 88E’s Merlin-1 well confirms oil. Appraisal well planned early 2022
07-Aug-2021 $ 0.047 Market swings back up as small caps scramble towards the end of the year
03-Jul-2021 $ 0.037 End of Financial Year, and what happened to 88E's share price?
26-Jun-2021 $ 0.025 June tax loss selling is behind us, KNI IPO expected in August
12-Jun-2021 $ 0.021 What did our investments do this week? CPH, ONE, TMZ, 88E and more...
07-Jun-2021 $ 0.021 88E back to 100% ownership of 1.6 billion barrel project
29-May-2021 $ 0.022 Green Hydrogen in the news, Investment Milestones released, stock portfolio news
25-May-2021 $ Oil Discovery? 88E’s Lab Results Reveal More...
27-Apr-2021 $ 0.023 Our Portfolio Performance from January 1st to March 31st 2021
06-Apr-2021 $ 0.028 88 Energy ASX - What Just Happened?
29-Mar-2021 $ 0.037 Promising Results so Far… But there is Some More Work to Do…
23-Mar-2021 $ 0.020 TRIPLE DOWN ALERT - Plus 6 Hot Stocks
22-Mar-2021 $ 0.020 Best of luck 88E ASX investors - the next few days are about to get interesting...
19-Feb-2021 $ 0.008 It’s Showtime - just 2 weeks to go…. good luck everyone
01-Feb-2021 $ 0.010 88E ASX Secures Permit to Drill
11-Jan-2021 $ 0.010 Oil Strikes Back. 88E Leveraged to Exploration Success in Coming Weeks
11-Jan-2021 $ 0.010 Oil is Back: 88E is Drilling in Weeks.
07-Jan-2021 $ 0.008 Our Stock Picks for 2021
05-Dec-2020 $ 0.007 This Week’s News Makers are Riding High
04-Dec-2020 $ 0.007 88E ASX Confirms Farm in Partner: Stage is Set for February 2021 Drilling Event
04-Dec-2020 $ 0.007 Friday Stock Pick: Will it Happen Again...
19-Nov-2020 $ 0.007 88E ASX is Primed for Another Run in Lead Up to Multi-Billion Barrel Drilling Event
11-Sep-2020 $ 0.006 We Just Doubled Our Holdings in 88 Energy ASX - Find Out Why
23-Jul-2020 $ 0.005 More Shots on Goal Ahead: 88E ASX Reveals Next Multi-Billion Barrel Oil Opportunity



Investor Presentation

Project Icewine an extension of its neighbours project?

ASX:88E May 13, 2022 Announcement

This morning, our oil and gas exploration Investment 88 Energy (ASX: 88E) put out an update on its Icewine Project in Alaska, USA.

The update was a summary of an independent third party assessment to see if the reservoir units from 88E’s London listed neighbour Pantheon Resources (AIM:PANR) (Capped at ~AU$1.6 billion ) project which recently had three of its wells demonstrate commercial light oil flow rates right along the border of the tenement boundaries shares with 88E.

Pantheon recently completed flow testing across the Alkaid-1, Talitha-A and Theta West-1 wells and confirmed reservoir deliverability of light, sweet oil.

The independent third party assessment completed by consultants (Jordan & Pay) evaluated all of the publicly available drilling data released by Pantheon Resources across those three wells and all of the data that 88E from previous exploration programs.

The conclusion the consultants reached was that all of the Pantheon reservoir units extend onto the Project Icewine acreage owned by 88E.

With these learnings 88E confirmed in announcement earlier this week that it is “optimistic that a production test in the Icewine East acreage could potentially yield a similar or better result than seen during the testing of Alkaid-1”.

We have been invested in 88E through multiple high impact drilling programs over several years now and the news today looks like there is a compelling case building for another high impact exploration program across 88E’s Icewine project in the near future.

With the Merlin-2 appraisal well drilled and the well plugged and abandoned we have seen the 88E share price come down to trade at ~1.1c per share.

We are now looking to see 88E detail its forward plans after which we will look to publish a new Investment Memo detailing what we want to see 88E achieve for the rest of the year and why we continue to hold 88E in our portfolio.


Texas Oil and Gas production assets update

ASX:88E Apr 13, 2022 Announcement

Yesterday, our oil and gas investment 88 Energy (ASX:88E) put out an update on its newly acquired production assets in the Permian Basin, Texas, USA.

88E holds a ~73% non operated interest in the project meaning that the JV partner who owns the remaining ~27% of the project handles all of the operations, 88E only shares in the financial commitments for the project as well as the rewards.

In today’s announcement, 88E confirmed that the project is producing at ~300 barrels of oil equivalent per day (net to 88E), a ~30% increase in production since 88E first announced the acquisition.

At 300 barrels of oil equivalent per day (net to 88E) at the current oil price of US$95/barrel, that means ~US$28,500 in revenue per day or ~US$10.4M in revenues/year.

Given that the total cost to acquire the project was ~US$9.7M, the increased production rates will mean 88E’s payback period is improved. A first sign of this was the AU$600k in net cash received from the projects during March which is a relatively good return for less then a few months of ownership.

88E also hinted at seven capital development activities for 2022 which it expects could lead to a doubling in the current production rates by the end of CY2022.

The positive for 88E from its ownership of this project is that whilst the company is in between different exploration programs the cash flow producing assets can help to decrease cash burn in the interim periods.

We are still waiting on 88E to detail its forward plan with respect to its exploration projects. Just like we saw last year, we want to see all of the analysis and data interpretation works from the Merlin-2 appraisal well.

Once we have the final results and management interpretations from the Merlin-2 appraisal well, we will look to put together our revised Investment Memo.


Icewine resource update due soon, farm-in partners show interest

ASX:88E Apr 08, 2022 Announcement

This morning our oil and gas exploration investment 88 Energy (ASX:88E) confirmed that mapping works were almost complete and that an independent resource update for its Project Icewine acreage in Alaska was now scheduled for Q2-2022.

The company also said it is currently in discussions with potential farm-in partners that have shown interest in the acreage.

All of this comes off the back of the recent drilling program completed by 88E’s neighbour, ~£1.1 billion capped London-listed Pantheon Resources.

Three of the wells Pantheon has drilled in its acreage have confirmed reservoir deliverability oil — the main reason for 88E to be reviewing its acreage.

Only recently Pantheon completed the Talitha-1 well, ~4.5km to the north of 88E’s project boundary. That well was production tested and it looks like there is a chance that the reservoir extends directly into 88E’s grounds.

We touched on the activity of 88E’s neighbour Pantheon Resources in a previous note, which you can read here.

We suspect that farm-in interest is coming from either Pantheon Resources itself or other explorers who have been following the Pantheon story. 88E has confirmed that it is now negotiating terms with these parties, so we expect to see some more news in the near future.


Wireline logging program unsuccessful at the Merlin-2 well

ASX:88E Mar 30, 2022

88E put out an update with respect to its wireline logging program which is now nearing completion.

The wireline program was designed to test reservoir quality and ultimately would be the final step of testing before a production test could be done over the Merlin-2 appraisal well.

Unfortunately this morning 88E confirmed that provisional analysis of the wireline logging program showed that the reservoir quality was insufficient and would not be enough to warrant a production testing program.

… so we don’t even reach the starting line where the company runs a production test to assess the oil flow rates.

88E has now confirmed that the Merlin-2 well would be plugged and abandoned before a detailed evaluation of all the drilling data can be obtained.

As further analysis is released by the company we will reset our investment plan for 88E for the next 12 months, also taking into account today’s news.

The announcement went live on the London exchange overnight (Aus time), with the share down ~65% from £0.02 (3.5c AUD) to now trade around the £0.007 (1.2c AUD) mark.

At the time of writing this, the ASX has reacted in a similar fashion with the share price touching 1.3c at the open before settling around ~1.6c where it is trading now.

After big binary drilling events which lead to a disappointing result, we often see a market sell off that assumes the company has no other projects or assets…

This is not the position 88E is in, as it also has the recently acquired portfolio of production assets in Texas, USA, multiple other projects in Alaska (Project Icewine and the Yukon assets), plus other drilling prospects over its Project Peregrine acreage.

We have a well documented investment strategy when it comes to big binary drilling events with our oil & gas exploration investments. In our 2022 88E Investment Memo we set out and followed a clear investment strategy for 88E, like we do for all our investments.

We also recorded in the risks section of our 2022 Investment Memo that there was a scenario where the Merlin-2 well returned no commercial oil discovery.

We always like to record the risks to an investment so that announcements like today don’t come as a surprise. Of course we hope our portfolio companies are successful but with high risk investing it is important to cut out the emotion and focus on facts.

Below is a screenshot of the risks section from our 2022 Investment Memo for 88E, unfortunately in this drill campaign one of the key risks materialised:

Although 88E did in fact find oil and gas in the Merlin-2 appraisal well, it was not of high enough quality to warrant a production test which is still a failure in terms of the overall outcome.

As recorded in our investment plan for 88E (in our memo here) we held a de-risked position into the drill result (in case it WAS a success) and now expect the company to detail its forward plan for the rest of the year across its exploration assets in Alaska, as well as its newly acquired production assets in Texas, USA, at which point we will reassess our investment plan.


Merlin-2 reaches total depth. Wireline testing commenced.

ASX:88E Mar 29, 2022

Over the weekend we saw this video posted on the 88E Youtube channel which shows that the wireline testing program has commenced at the Merlin-2 appraisal well.

Click on the image below to see the video:

In our last note right before the drilling program began, we set some expectations for the drilling program for what we thought a great result from the drilling program would look like.

Below are those expectations - remember these are our expectations as investors - not 88E’s expectations:

  1. Net oil paying zones (thickness) across the three reservoirs >41 feet (Merlin-1 result was 41 feet).
  2. Drilling program is successful enough to warrant production testing.
  3. Production tests confirm light oil and high flow rates.

So far 88E has confirmed drilling has intersected reservoirs thicker than the Merlin-1 well, and have observed oil shows (which we covered in a previous QuickTake).

The wireline program is designed to confirm reservoir quality and to establish if mobile hydrocarbons are present which 88E have said should take ~7-10 days to complete. If successful, 88E can then move into production testing the well in order to see flow rates from the well.

What’s Next: we will be watching to see whether or not the results from the wireline program deem the well suitable for production testing.

To see why we continue to hold 88E, the key risks to our investment and what we expect the company to achieve in 2022 check out our 2022 88E Investment Memo here.


Merlin-2 Well Reaches Total Depth

ASX:88E Mar 23, 2022

Our oil exploration investment, 88 Energy (ASX:88E) has reached its targeted total depth at its Merlin-2 well of 7,334 feet.

To get a sense for the scale of this project, there’s a very cool drone video on 88E’s LinkedIn page (pictured above).

Being an appraisal well, Merlin-2 was targeting the N18,N19,N20 reservoir targets which we have written about extensively in our previous notes.

During the Merlin-1 drilling program 88E intersected ~41 feet of oil bearing structures across those three targets which we set as a baseline for what we wanted to see 88E achieve with Merlin-2.

Although we are yet to have it confirmed, in today’s announcement 88E did say that “initial observations collected throughout the drilling operations revealed target intervals thicker than those encountered in Merlin-1 with oil shows noted under white light across the three target reservoirs”.

We set the following expectations in our last note for what we wanted to see from the Merlin-2 appraisal well:

  • Net oil paying zones (Thickness) across the three reservoirs >41 feet (this is the reservoir thickness intercepted in the Merlin-1 well - so we want to see the same or better).
  • Drilling program is successful enough to warrant production testing.
  • Production tests confirm light oil and high flow rates.

With today’s announcement we have a sneak peek into the first of these potentially being achieved, and with 88E saying there are “oil shows” noted under white light in the three reservoirs we now know there is oil there.

The next step will be for 88E to test the reservoir quality and on that front, 88E Managing Director, Ashley Gilbert says that in 7-10 days results from the wireline program will be out.

Wireline logging is basically running a set of sensors down the drill hole to find out if there’s oil there. Think of this as the precursor to running a full production testing program.

A great result now would be for the wireline programs showing the well is IS suitable for production testing which 88E have previously said could take ~10 days to complete once started. If we see production testing commence then 88E can move towards announcing a maiden reserve figure over its project Peregrine.

This is high-risk, high-reward investing for us and there are a number of key risks - including the possibility that the drilling returns nothing.

Here is why we invested in 88E, key risks and what we expect them to achieve in 2022.


Drilling program going to plan on Alaskan North Slope

ASX:88E Mar 18, 2022

88 Energy has updated the market on the drilling progress at its Merlin-2 well at Project Peregrine on the Alaskan North Slope.

Drilling this well was our key objective that we wanted to see 88E achieve in 2022, as outlined in our 2022 88E Investment Memo.

So far, the oil and gas junior has successfully drilled the Merlin-2 surface hole to 2,005 feet. 88E anticipates that all target zones will be intersected prior to reaching the permitted Total Depth (TD) of approximately 8,000 feet, which it expects to reach in two weeks time.

The company confirmed that operations are progressing as planned with the Arctic Fox rig scheduled to commence drilling ahead to the reservoir targets imminently.

Initial indications as to the prospectivity of the target zones at the Merlin-2 location will come from logging while drilling and mudlogging that’s being completed during the current drilling phase.

Further updates will be available after 88E reaches total depth, after which a sophisticated wireline logging program will be run, spanning a further 5-7 days.

As we mentioned in our Investment Memo, the reason that drilling Merlin-2 is our single key objective for 88E this year is that a discovery here would be a potential company maker, and put 88E on the radar of oil and gas majors in the area.

Keep in mind that 88E’s 652 million barrel prospective resource at Peregrine is analogues to the Willow Oil Field that is owned by Alaska’s leading oil producer, ConocoPhillips.

Drilling was completed at Merlin-1 in April 2021, demonstrating the presence of oil in multiple targets in the Nanushuk Formation. The Merlin-2 well was designed to appraise primary targets that were encountered in Merlin-1.

While the placement of the Merlin-1 well was suboptimal with respect to reservoir development, it is anticipated that Merlin-2 will reveal thicker and higher porosity/permeability formations.

There is a lot riding on the results here, plus they will help us determine what we want to see the company deliver for the rest of the year.


Merlin-2 oil well spudded

ASX:88E Mar 10, 2022

88E has commenced the Merlin-2 drilling program, targeting 652 million barrels of oil with a planned Total Depth of ~8,000 feet. With the US and the UK sanctioning Russian oil imports, 88E seems to have perfectly timed the drilling program at its Merlin-2 well in Alaska.

While not suggesting this will be the case, we do note that last time 88E completed a drilling program its share price moved higher by over 1,000%. And since then, amid the Ukraine/Russia conflict, the price of oil has reached ~US$128/barrel.

88E expects it to take approximately four weeks to reach the targeted depth of ~8,000 feet. It then plans to conduct production testing to see if the flow rates from the well can be considered commercial.

88E is targeting a prospective resource of 652 million barrels of oil and assuming a successful drilling program, is aiming to convert the prospective resource into reserves.

A new large-scale discovery in Alaska right now could be viewed as strategically important to the USA and to its allies who need to fill in the gap left by Russian oil bans.

In our last note, which you can read here, we set the scene for the upcoming drilling program, highlighting the regional significance of the Merlin-2 well and what it could mean not only for 88E but the majors on the Alaskan North Slope.

With the drilling of the Merlin-2 appraisal well, 88E will meet our key (and single) objective for the company for the year. To see our full 2022 Investment Memo click here.


Company Project Update

ASX:88E Mar 04, 2022

88E closed out the week by providing an update on the exploration work its neighbour (London listed Pantheon Resources - currently capped at £1 billion) has been doing.

In Q2021, Pantheon drilled the “Talitha-A” well, ~4.5km to the north of 88E’s Project Icewine permit boundary.

Pantheon recently re-entered that same well and completed a production testing program - confirming light oil flows over a 3 day testing period.

For us the key takeaway from the work Pantheon did at Talitha-1 was Pantheon's commentary around the formations from which the light oil was recovered all extending down into 88E’s Project Icewine.

88E also confirmed that it would use the data Pantheon had gathered to put together a prospective resource for Project Icewine, focused on the eastern parts of the permits, before the end of the June quarter.

In our latest note we mentioned that once the drilling at Merlin-2 was completed that we would expect 88E to go back into its Project Icewine some time this year. With Pantheon’s share price going from 35p to now £1.40, clearly there is market interest for exploration in and around 88E’s Project Icewine permits.

We haven't included Project Icewine in our 2022 Investment Memo as yet because all of our focus for the time being is on the Merlin-2 appraisal well which 88E expects to be spudding next week. After Merlin-2 is drilled we will look to update our investment memo based on the results.

With the oil price trading at near 10 year highs of US$110/barrel, 88E could not have picked a better time to take a swing for the fences on a potential company making oil and gas discovery. Click here to read our latest note which sets the scene for the Merlin-2 well.


Drill rig mobilised on site at the Merlin-2 appraisal well

ASX:88E Mar 01, 2022

On Tuesday, 88E announced that the mobilisation of the Arctic Fox drill rig had been completed ahead of the Merlin-2 appraisal well’s anticipated spud date next week.

The Merlin-2 appraisal well is fully permitted to a total depth of ~8,000 feet which 88E expects will take ~4-5 weeks.

88E also confirmed it would have production testing equipment on stand-by should the drilling program successfully intercept oil paying zones.

With drilling now only ~1 week away, our recent update note is worth reading as it sets the scene for what Merlin-2 could mean for 88E and our expectations from the drilling program.

We think success with the Merlin-2 appraisal well would look something like:

  1. Net oil paying zones (Thickness) across the three reservoirs >41 feet (this is the reservoir thickness intercepted in the Merlin-1 well - so we want to see the same or better).
  2. Drilling program is successful enough to warrant production testing.
  3. Production tests confirm light oil and high flow rates.

One or all of the above is what we would like to see from the Merlin-2 drilling, and that would deem Merlin-2 a success.