Shares in 88 Energy (88E ) jumped on Wednesday after the firm confirmed to investors that it has been granted a two-year extension for its obligations at the Umiat oil field in Alaska.
In an update, the Alaskan-focused exploration company said further studies in conjunction with post well testing at its Merlin-1 well has identified additional upside at the oil field.
Addressing shareholders in regard to this additional upside at the Umiat oil field, 88E stated:
‘Preliminary pressure analysis suggests there is potential for bypassed pay in the footwall of the Umiat structure. The Umiat footwall has only been penetrated by one well, which was drilled in 1952 with a crude logging and testing program. Seismic attribute analysis suggests there is potential for additional reservoir sands in the footwall of the Umiat structure.’
88E said the extension will allow it to optimise a full field development plan, which will include evaluating potential synergies with plans associated with its Project Peregrine.
In addition, it will also enable it to use the knowledge gained from drilling the Merlin-1 well to plan an efficient operational program to maximise the chance of success at Umiat.
88E highlighted to investors that it will continue to study the historical development plans proposed in 2H21, as well as consider alternative development options which may also include development in conjunction with the nearby Project Peregrine on the North Slope.
The Company explained that a discovery at Project Peregrine, where future appraisal drilling is planned, would contribute ‘significant value’ to any development at the Umiat oil field.
88 Energy plans to utilise the next 24 months to investigate previous scoping studies and explore possible alternative development scenarios to improve the economics of Umiat.
It said this includes synergies with 88 Energy's existing acreage (Project Peregrine and Project Icewine) as well as possible synergies with nearby leaseholders (such as the Willow oil field, noting that the Biden administration has provided support to develop this field).
88E plans to update and perform revised sensitivity analysis around project development scenarios, thereby incorporating knowledge gained from the drilling of Merlin-1. In addition, it will consider the potential for a tie-in to the nearby Willow oil field development.
In addition, 88 Energy said it intends to develop a detailed understanding of the potential environmental impacts of further exploration and development in the region, identify and map potential future drilling locations and engage with local communities for its plans at Umiat.
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Last month, shares in 88E jumped after it told investors that it had completed the sale of the Alaskan Oil and Gas Tax Credits, thereby allowing the group to fully repay its existing debt.
In June 2021, it entered into an agreement that would facilitate the sale of all these assets which were held by Accumulate Energy Alaska, Inc., a 100% owned subsidiary of 88 Energy.
The deal accelerates the timeframe of 88E’s value realisation from the Tax Credits, which under current estimates would not have been fully paid out by the Alaskan state until 2026.
Following the confirmation of the transaction in July 2021, 88 Energy remains debt free (other than typical trade creditors) and held cash of A$14.8 million (unaudited) as at 30 June 2021.
The Merlin-1 well was spudded in March 2021 and targeted 645 million barrels of gross mean prospective resource. With drilling now complete, and the interpretation of the results underway, a second well, Harrier-1, targeting 417m barrels is planned to be drilled in 2022.
Drilling at the Merlin-1 well follows the Crude Oil WTI Index reaching its highest level since October 2018 in June 2021, with the commodity reaching highs of $67.98 per barrel.
Shares in 88 Energy have seen an over five-fold increase in value since the beginning of 2021. The stock was trading 16.74% higher this morning at 2.825p following the news.
Reasons to FOLLOW 88E
Project Portfolio Across Alaska’s North Slope
The Alaskan explorer completed its acquisition of XCD Energy, which holds a 100% Working Interest in the highly prospective Alaskan North Slope, back in August 2020. The merged entity has formed a diversified portfolio of exploration projects on Alaska’s North Slope.
The combined company will have increased scale, market presence along with higher funding capability and trading liquidity across the ASX and London AIM exchanges.
The three key projects include Project Icewine, Yukon leases and Project Peregrine with the assets at various stages of development, the company previously outlined this summer.
In late 2020, 88E was also formally re-assigned the "Area A" leases at Project Icewine meaning its working interest in around 40% of the project has increased from 30% to 75%.
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