29th Apr 2016 13:50
(Correcting reserve details from the recently published resource update covering the Icewine project)
LONDON (Alliance News) - 88 Energy Ltd Friday said it expects to release a string of test results from the ongoing analysis being undertaken at its project in Alaska over the coming months and said it also anticipates the design of the second well will also be completed.
88 Energy is working on the Icewine project in Alaska and is specifically focused on the HRZ shale formation. The company has already drilled one well which marked the end of the first phase of evaluation work and is currently transitioning toward the second phase of appraisal work.
One of the two significant outcomes of the first phase of work was the update to the resource estimate for Icewine that was published earlier this month and the mitigation of the project's "Achilles' heels" by analysing brittleness, thermal maturity, pressure, permeability and the porosity of the shale formation.
The resource update at Icewine resulted in the chance of geological success at the project rising to 60% from 40%, estimating there is around 1.4 billion barrels of oil equivalent to be extracted based on current data - but 88 Energy believes there is potential for further upside.
Overall exploration and evaluation work cost the company AUD9.6 million in the first quarter of 2016, mainly accounting for the costs of drilling the Icewine-1 well and other work.
The majority of that work was funded through its AUD6.3 million credit facility from the Bank of America, such that the net cash outflow in the quarter was AUD3.3 million. Importantly, 88 Energy is expecting to full repay the costs of drilling Icewine-1 before the end of this year.
Taking other elements into account, the overall net cash outflow over the quarter was AUD2.3 million, the company said.
The next step is drilling Icewine-2, a horizontal well with a multi-stage frack, which will lead to the shale formation being production tested. Currently, 88 Energy is conducting 2D seismic work which also contributed to those exploration and evaluation costs in the first three months of 2016.
The evaluation and integration of the core taken from the shale formation at Icewine-1 is still ongoing but is focused on assisting with the "fine tuning" the second phase of work.
88 Energy said it expects to release results covering proppant embedment, fluid sensitivity and borehole stability "over the coming period", adding it is also anticipating the 2D seismic work that is underway will also be completed shortly.
A proppant is a solid material, such as sand, which is designed and used to keep fractures open and the proppant embedment results should determine what the ultimate size and type of proppant to use for Icewine-2.
The results covering fluid sensitivity will determine the best type of fluid to use to carry that proppant and the results related to borehole stability will confirm the stress direction to outline the optimal orientation of the lateral section of the well.
88 Energy is also expecting to be awarded an extra 174,000 acres of land at Icewine over the next few months after launching an application to authorities back in November.
The company ended March with AUD7.5 million of cash, but that balance will have soared as 88 Energy conducted a discounted placing in April that was oversubscribed, raising AUD25.0 million compared to its original target to only raise between AUD10.0 to AUD15.0 million.
88 Energy shares were trading down 4.9% to 2.19 pence per share on Friday afternoon.
By Joshua Warner; [email protected]; @JoshAlliance
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