Term Sheet Executed to Drill Large Oil Prospect 1Q 2019
88 Energy Limited (ASX: 88E) (“88 Energy” or the “Company”) is pleased to announce the following update in relation to an expansion of its projects located on the North Slope of Alaska.
Agreement to Drill High Impact Well with Consortium
88 Energy Limited (ASX/AIM:88E), along with Otto Energy Ltd (ASX:OEL) and Red Emperor Limited (ASX/AIM:RMP), collectively the “Consortium Partners”, is pleased to advise that it has executed a binding term sheet agreement with Great Bear Petroleum Ventures II LLC (“Great Bear”) to acquire the majority of Great Bear’s working interest in the four leases comprising the Western Blocks (ADL 391718; ADL 391719; ADL 391720; ADL 391721). The leases are located immediately adjacent to the Horseshoe#1/1A well, which discovered oil in 2017.
88 Energy Ltd Managing Director, Dave Wall, commented:
“The Western Blocks transaction represents a significant opportunity for 88E shareholders to gain exposure to one of the most prospective oil plays available globally, complementing our existing conventional portfolio on the North Slope.
Preparations for drilling are now underway and commencement of drilling of the exploration well is scheduled in less than 9 months.
We would like to thank Otto’s technical team for generating the prospect and Great Bear for moving quickly to reach an agreement. 88E also look forward to working with Red Emperor and welcome them to the Slope
Our Alaskan Operations team, led by Erik Opstad, will be working closely with Great Bear and the regulatory agencies in Alaska to ensure that the well is permitted and drilled on time in a safe and environmentally conscious manner.”
The relevant interests in the commercial agreements are as follows (subject to regulatory approval by the State of Alaska):
*Government royalty of 16.67%. **Currently Operator of record on leases.
In consideration for acquiring the above interests in the Western Block leases, the Consortium Partners will undertake the following:
- Provide a performance bond to the State of Alaska of US$3.0 million by 31 July 2018; and
- Drill an exploration well in the Western Block leases by 31 May 2019
The consortium partners will provide the following consideration to Great Bear:
- Free carry Great Bear for a 10% working interest in the leases for the initial test well; including all associated costs such as permitting, ice road access and test production disposition;
- Pay US$500,000 upon execution of the definitive agreements;
- Pay US$500,000 upon receipt of final permits necessary to drill the initial test well, in any case by no later than 31 December 2018; and
- Provide an option for Great Bear to acquire a further 10% working interest prior to the spud of the initial test well by paying the pro-rata share of all costs of the initial test well, including all associated costs, or if exercised within 6 months of completing the initial test well by paying 200% of the pro-rata share of all costs of the initial test well, including all associated costs.
Western Blocks Prospect, North Slope Alaska
Technical evaluation and 3D seismic interpretation of the Western Blocks by our Consortium Partner, Otto Energy Ltd, has generated an oil prospect in the successful Nanushuk play with a gross mean unrisked prospective recoverable resource volume of 400MMbbls (144MMbbls net to 88E) and a geological chance of success in the range of 25-30%.
88 Energy Limited Operations Update
88 Energy Limited (ASX: 88E) (“88 Energy” or the “Company”) is pleased to announce the following update for its projects located on the North Slope of Alaska.
Highlights
- Nitrogen lift commenced at Icewine#2
- Yukon Gold and Western Margin leases formally awarded
Project Icewine – Icewine#2 Production Testing
As at 0530 17th June (AK time), wellhead pressure was 370psi with a flowback rate of 166 barrels of water per day on a variable choke setting, in order to manage wellhead pressure (currently 28/64”).
A production log was run on 12th June and confirmed that all perforations were contributing to flow. As per the flowback design, nitrogen was then introduced gradually to the wellbore from 0845 13th June (AK time), prior to installation of the coiled tube velocity string, to artificially lift stimulation fluids in order to gain connectivity to the reservoir. The flowback rate stabilised at 200 barrels of water per day through an 8/64” choke and then steadily declined to circa 100 barrels of water per day, as per expectation.
Flowback was interrupted, as per the program, on the 15th June 08:00 (AK time) to allow installation of the velocity string. Flow was re-established on 15th June at 20:00 (AK time) with nitrogen introduced into the annulus between the 4.5” casing and the 1.75” velocity string. After displacement of fluid in the annulus, the flowback rate stabilised at 350bpwd through a variable choke to maintain a target wellhead pressure of 200-400psi. This technique decreases the backside pressure in the system and optimises lifting of fluid from the wellbore.
Flowback is now being run through the separator and gas chromatograph and is considered to be 100% stimulation fluid and gas. The gross gas rate is averaging 571mcf/d. Approximately 24.8%, or 142mcf/d, of this is estimated to be hydrocarbons with the remainder being returned nitrogen, injected as part of the artificial lift. Hydrocarbon content is mostly methane (90%) with some heavier elements up to trace C6. The composition and rate is as expected for this stage of the flowback and results are considered unrepresentative of the hydrocarbon composition in the reservoir, as the well is still in clean-up phase. Salinity measurements of the flowback fluid indicate that connectivity to the reservoir remains limited, as expected, at this early stage.
Total clean up fluid returned (net of diesel for freeze protection and any other fluids introduced as part of the current operation) since commencement of flowback on 12th June is 820 barrels (interpreted as 100% stimulation fluid). Total fluid returned for the entire flowback operation, including last year, is now 6,353 barrels or 23% of the frac fluid injected vs a target percentage return of at least 30%.
The Icewine#2 well is located on the North Slope of Alaska (ADL 392301). 88 Energy Ltd (via its wholly owned subsidiary, Accumulate Energy Alaska, Inc) has a 77.55% working interest in the well. The well was stimulated in two stages over a gross 128-foot vertical interval in the HRZ shale formation, from 10,957-11,085ft TVD, using a slickwater treatment comprising 27,837 barrels of fluid and 1,034,838 pounds of proppant.
Prior to Winter shut-in (2017) 20% of the stimulation fluids had been flowed back versus a projected minimum target of 30% to gain connectivity to the source rock reservoir.
Flowback commenced, on schedule, at 22:30 11th June 2018 (AK time) to clean-up stimulation fluids from the Icewine#2 borehole with a well head pressure of 3,000 psi and flowback rate of 253 barrels of water per day on an 8/64” choke.
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88 Energy Limited Operations Update
88 Energy Limited (ASX: 88E) (“88 Energy” or the “Company”) is pleased to announce the following update for its projects located on the North Slope of Alaska.
Highlights
- Flowback commenced at Icewine#2
Project Icewine – Icewine#2 Production Testing
Flowback commenced, on schedule, at 22:30 11th June (AK time) to clean-up stimulation fluids from the Icewine#2 borehole with a well head pressure of 3,000 psi and flowback rate of 253 barrels of water per day. As at 1230 12th June (AK time), wellhead pressure was 816 psi with a flowback rate of 160 barrels of water per day. Based on the pressures and flow rates, there is no indication of any impediment to flow through the perforations at this stage. A production log has been run to confirm this, and the results will be disclosed to the market once the report has been finalised.
At this early stage of flowback, the fluid has not been run through the separator, so the hydrocarbon rate has not been measured. Flowback through the separator and gas chromatograph is expected to commence today.
The velocity string, comprised of 1.75” coiled tubing, is ready to be installed and connected to nitrogen lift utilising a membrane unit, currently set-up on location.
The Icewine#2 well is located on the North Slope of Alaska (ADL 392301). 88 Energy Ltd (via its wholly owned subsidiary, Accumulate Energy Alaska, Inc) has a 77.55% working interest in the well. The well was stimulated in two stages over a gross 128 foot vertical interval in the HRZ shale formation, from 10,957-11,085ft TVD, using a slickwater treatment comprising 27,837 barrels of fluid and 1,034,838 pounds of proppant.
Click here to view the full announcement
88 Energy Limited Operations Update
88 Energy Limited (ASX: 88E) (“88 Energy” or the “Company”) is pleased to announce the following update for its projects located on the North Slope of Alaska.
Highlights
Pressure build-up analysis indicates no deterioration in fracture half-length
Commencement of flowback at Icewine#2 on schedule for 11th June
Project Icewine – Icewine#2 Production Testing
Post the retrieval of downhole gauges in Icewine#2 on 25th May, pressure build-up data was subsequently downloaded on the 30th May and processed. This data was then analysed and interpreted to determine whether any degradation of the fracture system created by the artificial stimulation had occurred during the shut-in period.
The analysis showed that the fracture geometries of the first pressure build-up, (July-August 2017), when compared to those from the second pressure build-up over Winter, (September 2017-June 2018), are very similar, with estimated fracture half-length of 504ft and 500ft, respectively. This is encouraging and indicates that the fracture system created has not undergone degradation. Given this, and the evidence of no build-up of debris in the wellbore, no remedial action will be required prior to commencement of flowback.
Mobilisation of equipment and personnel for the re-commencement of flowback of the Icewine#2 well, utilising artificial lift, is now in full swing and operations remain on schedule for start-up on the 11th June.
Project Icewine, Alaska
- Operator on majority of ~475,000 contiguous acres onshore Alaska in prolific oil-rich province with multiple objectives;
- ~ 301,000 acres net to 88 Energy;
- 63.4% Working Interest, 10 year leasehold, 16.5% royalty and strategically located in the heart of the play and close to infrastructure;
- Unconventional primary objective in shale complex that sourced the 13 BN barrel Prudhoe Bay Oil Field – opportunity identified by first mover in the Eagle Ford;
- Shallow secondary conventional objective is the hottest play on the North Slope with 88 Energy acreage offset by multiple recent discoveries;
- Excellent fiscal terms with cash rebates on historical exploration expenditure.
Yukon Gold, Alaska (subject to formal award)
- Recent high bidder on additional 15,520 acres (100% 88 Energy);
- Contains historic oil discovery, located nearby to recently commissioned infrastructure;
- Low cost, opportunistic acquisition;
- Internal assessment underway;
Investor Presentation
Project Icewine Latest Presentation November 2017
Project Icewine Overview Animation
Mr Michael Evans
Non-Executive Chairman
Mr Michael Evans (Non-Executive Chairman, appointed 9 April 2014). Mr Evans, a Chartered Accountant based in Perth, has extensive executive and board level experience with publicly listed companies in the natural resources sector spanning 30 years.
Mr Evans’ was the founding Executive Chairman of ASX oil and gas explorer FAR Limited, a position he held from 1995 until his resignation in April 2012. Under Mr Evans’ stewardship, FAR established and built up an extensive international oil and gas portfolio spanning Africa, North America, China and Australia with industry partners including Amoco, Shell, BHP, BP, Exxon, CNOOC, Woodside and Santos, amongst others.
Mr David Wall
Managing Director
As a leading oil and gas equity analyst for six and a half years, Mr Wall brings extensive experience with junior oil and gas exploration companies. His skillset spans asset evaluation across many fiscal regimes / play types as well as corporate advisory / M&A and equity capital markets, having led >$400m in capital raisings.
Prior to his career as an analyst, Mr Wall managed a small team at Woodside Petroleum Ltd that reported to the Executive Committee. This team was responsible for vetting reports from all departments within the business, prior to Board submission, including exploration, development, operations, commercial and M&A. The team was also responsible for generating the annual budget and providing significant input into the Five Year Plan and the Company Strategic Plan. By virtue of these experiences, Mr Wall brings strong commercial and strategic skills as well as generalist knowledge across all levels of the oil and gas industry. This is complemented by financial markets experience focussed on junior exploration companies. Mr Wall holds a Bachelor of Commerce from the University of Western Australia, majoring in Management and Finance.
Mr Brent Villemarette
Non-Executive Director
Mr Brent Villemarette is a petroleum engineer with more than 35 years experience in the oil and gas industry, both domestic and international.
His experience spans a wide range of disciplines including exploration, development, operations, marketing, acquisitions and new ventures. He was recently Chief Operations Officer for Transerv Energy, which has assets in the onshore Perth Basin in Western Australia and in Alberta Canada. He has previously been Operations Director for Latent Petroleum, a private oil and gas exploration company co-founded with a small team of industry professionals engaged in commercialising the Warro tight gas field in the northern Perth Basin. He has also held the roles of International Reservoir Engineering Manager for New Ventures with Apache Corporation based in Houston, Texas, Reservoir Engineering Manager for Apache Energy Limited based in Perth, and several senior engineering positions in the US with Apache Corporation and Oryx Energy (formerly Sun E&P). Brent holds a Bachelor of Science, majoring in Petroleum Engineering, from the Louisiana State University. Brent is a member of the Society of Petroleum Engineers.
Dr Stephen Staley
Non-Executive Director
Dr Stephen Staley ( Non-Executive Director, appointed 9 April 2014). Dr Staley has 34 years’ of management and technical experience in the European, African and Asian oil, gas and power sectors, including with Conoco and BP.
More recently Dr Staley was founding Managing Director of upstream start-ups Fastnet Oil & Gas plc and Independent Resources plc and a Non-Executive Director of Cove Energy plc. He is a Fellow of the Geological Society, holds a BSc (Hons.) in Geophysics from Edinburgh University, a PhD in Petroleum Geology from Sheffield University and an MBA from Warwick University.