88E raises $8M, now funded for drilling

Published 31-AUG-2023 13:00 P.M.

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Our oil & gas exploration Investment 88 Energy (ASX:88E) just completed a rights issue and shortfall placement to raise $8M at $0.006 per share.

We added to our Investment by participating in this placement.

The new shares are expected to be tradeable on market on the 7th and 8th of September.

The $8M raised adds to 88E’s existing cash balance which was $7.3M at 30 June 2023.

88E should therefore have somewhere close to ~$15.3M in cash after the capital raise.

88E in a previous presentation did put out guidance for the Hickory-1 flow test costs which would see it costing 88E between $14M to $17M (75% share of the total cost).

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We also noticed that 88E chose to part-fund its share of costs at its producing texas projects by issuing a further $4M in 88E shares.

88E called it an issuance of “capital development shares” which basically means 88E paid for its share of exploration costs by issuing shares instead of paying with cash.

All that means is that the company will have more capital freed up for its Hickory-1 flow test.

88E expects the flow test to start either in late Q4-2023 OR early Q1-2024.

Here is where 88E sits in the lead up to the flow test:

Context on 88E’s upcoming flow test:

Hickory-1 delivered a number of successes earlier this year, which sets the stage for flow testing.

Here is what we know from the Hickory-1 drill results:

✅ Fluorescence (an indicator of oil presence) - Fluorescence across multiple reservoir units.
✅ Oil in samples - Oil shows from multiple reservoir units.
✅ Mud gas readings - Elevated mud gas readings across multiple reservoir units.
✅ New reservoir unit identified (unexpected) - 88E hit a new reservoir unit that sits outside of its current prospective resource estimate.
✅ ~450 feet in net pay - 88E hit over 2,000 feet in gross pay and ~450 feet in net pay across multiple reservoir units.
✅ Average porosity of ~9-12% across all zones - At a high level, porosity measures how much oil and or gas sits inside the rocks. Highlight results came from the upper SFS and Lower SFS where porosity was between 11-16%.

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88E took a staged approach to drilling and flow testing Hickory-1 which means the company had time to design a flow test with the highest likelihood of delivering a commercial result.

By the time the flow test starts, 88E would have had almost a year to analyse the results from the Hickory-1 well and put together the flow test design.

For some context on how important the time to analyse results could be - 88E recently highlighted just how important picking the right fluid types during the flow test has on the outcome of the program.

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We are looking forward to the flow test later this year/early 2024 and will be putting out our expectations for the program once the final design has been detailed.