88 Energy (88E ) has acquired a non-operated working interest in the leases and wells in onshore production assets within the Permian Basin of Texas located in the United States.
The Alaskan-focused explorer has entered into a binding securities purchase agreement to acquire an around 73% average net working interest in the oil and gas production assets.
The assets of Project Longhorn are located in the Permian Basin, with over around 1,300 net acres. The assets consist of 9 leases with 32 producing wells and associated infrastructure while most of the existing production wells have been in operation for several years.
Production from Project Longhorn in FY21 totalled approximately 110,000 BOE, which returned an estimated attributable net profit before tax for the project of US$1.6m.
Meanwhile, current average production is approximately 300 BOE per day (88 Energy’s net working interest: ~220 BOE per day), of which approximately 70% is oil, the company noted.
The oil and gas production assets, collectively known as Project Longhorn, are located in the Permian Basin and contain independently certified net 2P reserves of 2.1 mmboe, it noted.
The purchase price for the acquisition is $9.7m, comprising $7.2m cash and US$2.5m in 88 Energy shares (approximately 98.1 million shares at an issue price of A$0.035 per share).
The acquisition is expected to deliver immediate cash flows, with current gross production from Project Longhorn of around 300 BOE per day (approximately 70% oil), 88E explained.
The Company highlighted to investors that near-term capital-efficient production upside exists from seven planned work-overs, which are scheduled to commence in March 2022 and that these initiatives are targeted to approximately double current output rates by late 2022.
88 Energy said the acquisition represents a first move into producing oil and gas assets and is in line with the Company’s strategy to build a successful exploration and production company.
The company added that Project Longhorn contains ‘well understood geology with low technical risk and provides near-term upside via low-cost field development opportunities.’
MD and CEO, Ashley Gilbert, said the acquisition provides 88 Energy “with immediate cash flow and direct exposure to any further strengthening in energy prices” while it also delivers “optionality for incremental, low-capital, rapid payback reinvestment in the region.”
The acquisition of Project Longhorn provides 88 Energy with immediate cash flows, as well as further low-cost capital development upside providing appealing forecast economics, it stated.
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