88 Energy (88E ) intends to raise up to A$12m at a price of A$0.008 to support its ongoing evaluation of the conventional and unconventional prospectivity of its existing assets, as well as to enable it to identify and exploit new opportunities on the North Slope of Alaska.
The Alaskan-focused exploration company’s price per placing share of A$0.008 is equivalent to a discount of 27% to the closing price of the Company's shares on ASX on Tuesday.
88E told investors that the placing is being conducted through a book building process which is being managed by Cenkos Securities in the UK and EurozHartleys Ltd in Australia.
The raise of proceeds follows the company’s announcement at the start of the month which detailed that the group had been granted a drilling permit for the Merlin-1 well in Alaska.
"After a brief hiatus in activity, it is now back to full operations with ramp up towards the spud of Merlin-1, which is expected in around four weeks,” 88E told investors last week.
The Spud of Merlin-1 is now expected in late February / early March 2021 and is targeting 645 million barrels of gross mean prospective resource. Subject to successful funding, the Group plans to conduct a flow test of the Merlin-1 well at a cost of around $2m net to 88E.
In the event of a successful discovery and, if scheduling and permit approvals allow, 88E will drill a second well, Harrier-1, after completing the drilling and testing at Merlin-1.
The funds will also be used to fund operations at the newly acquired Umiat oil field which lies immediately south of Project Peregrine and is host to several wells. 88E will undertake a full field review to determine at what oil price Umiat may be commercial as a stand-alone development and whether optimisation of the previous development plan is possible.
In the event of a discovery at Project Peregrine, where drilling is imminent, it is expected that Umiat would contribute significant value to any development, 88 Energy highlighted.
Today’s funds will also allow 88E to identify new opportunities on the North Slope of Alaska. Meanwhile, the Company also announced this morning that 88E’s Managing Director, Dave Wall, has tendered his resignation and will leave the company in May 2021.
The Company has said it will transition the role of Managing Director to Mr Ashley Gilbert, the Company's current CFO and Company Secretary, who will initially take on the role on an acting basis prior to Mr Wall's departure, ‘ensuring that an appropriate handover occurs.’
Today’s placing is also expected to strengthen 88E’s balance sheet and to provide the Company with sufficient capital to finance its ongoing working capital requirements. As at 31 December 2020, 88E held cash reserves of A$14.8m, including cash balances held in Joint Venture bank accounts relating to Joint Venture Partner contributions totalling A$5.2m.
Following the successful farm-out of the Project Peregrine acreage in December 2020, the Joint Venture partners have revised the phasing of spending and contributions in relation to operations in preparation for drilling at Merlin-1 and these changes have resulted in a marginal increase in the Company's short-term working capital requirements, 88E noted.
As part of the annual review of leases, the Company and its joint venture partners at Project Icewine have determined that several leases at Project Icewine are no longer considered prospective and, consequently, a decision has been made since to not renew these leases.
The Company explained that these leases represented approximately 25% of the gross lease position, resulting in a 231,000 net acreage position for 88E in the Central North Slope.
The Company has raised sufficient funds to cover near-term costs and reassured as the shares continue to trade above the equivalent placing price of 0.45p per new ordinary share. The crucial information for investors is looking at how the net proceeds will be deployed to generate further shareholder value. The use of funds is specifically targeted at near-term opportunities including covering the Company's share of any potential cost overruns associated with the drilling of the Merlin-1 well at Project Peregrine, the P&A costs associated with the recently-acquired Umiat Oil Field and costs associated with drilling the Harrier-1 well at Project Peregrine. All three activities represent significant near-term re-rating opportunities for the Company should they be successful. Shares in 88E have increased by nearly 30% in value since the beginning of October 2020 but retreated to above the p[lacing price at 0.465p in early morning trading.
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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