Merlin-2 Well Reaches Total Depth

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.