15th Dec 2015 11:21
LONDON (Alliance News) - 88 Energy Ltd Tuesday provided its usual regular update on the Icewine-1 well in Alaska as the company hit its primary target and said it has received "outstanding support" from its shareholders through its recently closed share purchase plan.
88 Energy shares were down 14% to 0.539 pence per share on Tuesday morning.
88 Energy's Australian shares were suspended on Monday after the company reached a "critical juncture" in its drilling work on the Icewine-1 well.
On Tuesday, the company said it has intersected its primary target, the HRZ shale formation, and is currently preparing to cut core samples from the target. The rig is currently pulling out of the drill hole to pick up a core barrel and core of the primary target.
However, a blowout preventer test, which ensures the equipment that prevents oil leaking or bursting out from the well is up to scratch, is needed before those coring operations can be completed, it said.
As of Monday, the company had drilled the well to a depth of 11,075 feet and intersected the top of the primary HRZ shale formation target, where the company made the decision to commence coring operations.
The company made that decision because the company observed visible bleeding out of gas from most of the larger cuttings retrieved from the HRZ shale formation at that depth.
"This is indicative of strong hydrocarbon saturation and is considered favourable for certain other critical parameters, which will be the subject of further analysis," said 88 Energy.
Oil shows compromising of a range of streaming yellow to orange fluorescence were also associated with the transition of drilling into the HRZ shale formation from 10,970 feet to that 11,075 foot depth.
The HRZ shale formation is characterised by a high gamma ray reading, which is concurrent with a decrease in resistivity (how strong a material opposes the flow of electric current) and provides confidence that it was the right depth to begin coring operations. The company also observed an increase in black organic shale in cuttings at that depth.
Black organic shale is the source rock that oil and gas companies look for as it usually contains organic material that sometimes breaks down to form natural gas or oil.
88 Energy said the HRZ shale formation was deeper than originally expected, but said it will have "little bearing" on its thermal maturity model. The company added that gas ratios (heavy to light) in the well "remain favourable for the thermal maturity model."
Importantly, the company said based on its analysis to date, the stratigraphy of the Icewine-1 well is more similar to the historic Bush Federal-1 well that is located on the same lease as Icewine, to the south-west of the Icewine-1 well, than the Pipeline States-1 well which lies north of Icewine-1.
Stratigraphy is a branch of geology which studies rock layers and layering. It is primarily used in the study of sedimentary and layered volcanic rocks.
"The original stratigraphic interpretation indicated that Icewine-1 would be a hybrid of Bush Federal-1 and Pipeline States-1; however, due to the lack of seismic data, and the region being under-explored, this always had a level of uncertainty," said 88 Energy.
"Whist the present day depth of the HRZ at Bush Federal-1 and Icewine-1 are similar, this is not representative of the historic burial depths at these locations, which are interpreted to be different," it added.
Managing Director Dave Wall added: "The present day depth of the HRZ shale at Icewine-1 does not reflect it's burial history through geological time. As burial history is the key driver of thermal maturity, we interpret minimal impact, if any, to the thermal maturity model, which continues to be supported at Icewine-1 by the gas ratios observed."
"The oil shows and visible bleeding of gas from rock chip samples provides further encouragement to that previously seen during drilling," he added.
Overall, 88 Energy said it will take "several months" to complete the definitive testing of the HRZ shale potential.
Although 88 Energy is waiting to begin coring operations at the primary target, it has taken a core from the Hue formation with a 99% recovery, and the core will undergo processing and laboratory analysis in tandem with the core taken from the HRZ shale formation.
As well as coring operations, 88 energy will continue to drill further down to test other conventional zones in the well, "subject to hole conditions," it said.
The well is expected to be drilled to a total depth of 11,600 feet, meaning 88 Energy plans to drill down a further 525 feet from where it is now. It expects to reach that target depth within the next 30 days.
The other conventional zones thought to lie deeper in Icewine-1 includes the shallower Brookian horizon and deeper Kuparuk horizon - but these are both secondary targets.
The drilling of Icewine -1 will deliver first insight to the conventional prospectivity of 88 Energy's acreage to be matured up by the potential acquisition of 3D seismic in the "near term".
In addition, 88 Energy said it has received "outstanding support" from shareholders through the share purchase plan announced back in November.
On November 20, 88 Energy launched a share purchase plan to try and raise more funds after raising USD3.0 million from a placing to back the acquisition of new acreage at the Icewine project through the issue of 300.0 million new shares at USD0.01 per share.
On Tuesday, 88 Energy said it received applications for 475.5 million shares, which would have raised a total of AUD4.75 million on its own and AUD7.75 million when combined with the placing. However, 88 Energy could only raise a maximum of AUD4.42 million from the share purchase plan, meaning it had to scale back.
"Owing to differences between the UK and Australian process for receiving applications it was not possible to execute the first come, first served strategy without penalising UK shareholders in an inequitable fashion and the Company has decided to effect an approximate 6% scale back in respect of all applications," said 88 Energy.
Wall added: "The outstanding takeup of the Share Purchase Plan is a testament to the support from our shareholders, to whom we extend our thanks. The additional funds place the company in a strong position from which to progress the project on multiple fronts and deliver increased value for investors."
By Joshua Warner; [email protected]; @JoshAlliance
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