88 Energy Ltd Operations Update
June 26 2017 - 1:00AM
UK Regulatory
TIDM88E
26 June 2017
88 Energy Limited
Icewine#2 Operations Update
88 Energy Limited ("88 Energy", "the Company", "Operator") (ASX, AIM: 88E) is
pleased to provide an update on Project Icewine, located onshore North Slope of
Alaska.
Highlights
* Flowback continues with 13% of stimulation fluid recovered
Icewine#2 Operations Update
Flowback commenced on the 19th June from stage 2 (upper zone). Approximately 8%
of total stimulation fluid volume was recovered until it became apparent, due
to rate and pressure observations, that the upper zone was likely in
communication with the lower zone. Consequently, a decision was made to drill
out the plug between the upper and lower zones. No increase in pressure was
observed, confirming that the two zones are in effective communication. Trace
hydrocarbons were encountered whilst flowing back the upper zone prior to
drilling out the plug and, as expected, the flow rate returned to 100%
stimulation fluid once the two zones were flowed back together.
Flowback, currently comprising 100% stimulation fluid, is continuing.
Percentage of fluid recovered to date is 13% of the total fluid pumped. It is
estimated that up to 30% of the stimulation fluid will need to be recovered
before hydrocarbons will be released from the reservoir.
The forward plan is to monitor pressure and flow rate and continue to draw
stimulation fluid off the reservoir. Artificial lift, using nitrogen or swab
cups, may be introduced at some stage to increase the rate of draw down of
fluid. If pressure becomes too low it is possible that operations will
necessitate a shut-in to allow fluid to 'soak' and pressure to build up. This
'soaking' is not uncommon in other shale plays as it allows stimulation fluid
to be absorbed into the reservoir and can result in lower required fluid
flowback before onset of hydrocarbon flow.
Further updates will be made as and when appropriate throughout the testing
program.
Managing Director, Dave Wall, commented: "We continue to monitor pressure and
flowback of stimulation fluid whilst we wait for hydrocarbons to be released
from the reservoir. Given that we are breaking new ground in relation to the
HRZ formation, we need to establish the conditions under which the hydrocarbon
cut will return and then increase.
The stimulation was executed precisely as per plan with over one million lbs of
proppant placed into the formation. A little patience is now required as we
give the rocks time to show us what they can deliver."
Media and Investor Relations:
88 Energy Ltd
Dave Wall, Managing Director Tel: +61 8 9485 0990
Email: admin@88energy.com
Finlay Thomson, Investor Relations Tel: +44 7976 248471
Hartleys Ltd
Dale Bryan Tel: + 61 8 9268 2829
Cenkos Securities Tel: + 44 131 220 6939
Neil McDonald/Derrick Lee
Pursuant to the requirements of the ASX Listing Rules Chapter 5 and the AIM
Rules for Companies, the technical information and resource reporting contained
in this announcement was prepared by, or under the supervision of, Mr Brent
Villemarette, who is a Non-Executive Director of the Company. Mr Villemarette
has more than 30 years' experience in the petroleum industry, is a member of
the Society of Petroleum Engineers, and a qualified Reservoir Engineer who has
sufficient experience that is relevant to the style and nature of the oil
prospects under consideration and to the activities discussed in this document.
Mr Villemarette has reviewed the information and supporting documentation
referred to in this announcement and considers the prospective resource
estimates to be fairly represented and consents to its release in the form and
context in which it appears. His academic qualifications and industry
memberships appear on the Company's website and both comply with the criteria
for "Competence" under clause 3.1 of the Valmin Code 2015. Terminology and
standards adopted by the Society of Petroleum Engineers "Petroleum Resources
Management System" have been applied in producing this document.
Project Icewine Overview
In November 2014, the Company entered into a binding agreement with Burgundy
Xploration (BEX) to acquire a significant working interest (87.5%, reducing to
77.5% on spud of the first well on the project) in a large acreage position on
a multiple objective, liquids rich exploration opportunity onshore Alaska,
North America, referred to as Project Icewine. In June 2016, the gross acreage
position was expanded to 271,119 contiguous acres (210,250 acres net to the
Company). In December 2016 the Company successfully bid on additional acres. On
award the Project Icewine gross acreage position will be further expanded to
690,000 contiguous acres (400,000 acres net to the Company assuming all
rights are taken up).
The Project is located on an all year operational access road with both
conventional and unconventional oil potential. The primary term for the State
leases is 10 years with no mandatory relinquishment and a low 16.5% royalty.
The HRZ liquids-rich resource play has been successfully evaluated based on
core obtained in the recently completed (December 2015) Icewine #1 exploration
well, marking the completion of Phase I of Project Icewine. Phase II has now
commenced, with drilling at the follow-up appraisal well, Icewine#2, commencing
early 2Q2017. Production testing is scheduled to occur in mid-2017.
Significant conventional prospectivity has also been identified on recently
acquired 2D seismic across the project acreage.
Cautionary Statement: The estimated quantities of petroleum that may be
potentially recovered by the application of a future development project relate
to undiscovered accumulations. These estimates have both an associated risk of
discovery and a risk of development. Further exploration, appraisal and
evaluation are required to determine the existence of a significant quantity of
potentially movable hydrocarbons.
Generous exploration incentives are provided by the State of Alaska with up to
35% of net operating loss refundable in cash.
The primary objective is an untested, unconventional liquids-rich shale play
in a prolific source rock, the HRZ shale (Brookian Sequence), that co-sourced
the largest oil field in North America; the giant Prudhoe Bay Oil Field
Complex. Internal modelling and analysis indicates that Project Icewine is
located in a high liquids vapour phase sweetspot analogous to those encountered
in other Tier 1 shale plays e.g. the Eagle Ford, Texas.
Recently acquired 2D seismic has identified large conventional leads at Project
Icewine within the same Brookian petroleum system and shallow to the HRZ shale,
including potential high porosity channel and turbiditic sands associated with
slope apron and deepwater fan plays. The Brookian conventional play is proven
on the North Slope; the USGS (2013) estimated the remaining oil potential to be
2.1 billion barrels within the Brookian sequence. Two recent discoveries in the
Brookian have already exceeded these estimates, with Armstrong/Repsol
discovering 1.4 billion barrels in 2015 and Caelus announcing a 2.5 billion
barrel discovery in 2016. Additional conventional potential exists in the
Brookian delta topset play, deeper Kuparuk sands and the Ivishak Formation.
A Prospective Resources Report by DeGolyer and MacNaughton, was commissioned by
88 Energy to evaluate the unconventional resource potential of Project Icewine
in February 2016 and was released to the market on 6th April 2016.
About 88 Energy: 88 Energy has a 77.5% working interest and operatorship in
271,000 acres onshore the prolific North Slope of Alaska ("Project Icewine").
Gross contiguous acreage position will expand on award of additional leases
successfully bid on in the December 2016 State of Alaska North Slope Licensing
Round. The North Slope is the host to the 15 billion barrel Prudhoe Bay
oilfield complex, the largest conventional oil pool in North America. The
Company, with its Joint Venture partner Burgundy Xploration, has identified
highly prospective play types that are likely to exist on the Project Icewine
acreage - two conventional and one unconventional. The large unconventional
resource potential of Project Icewine was independently verified by leading
international petroleum resource consultant DeGolyer and MacNaughton. In
addition to the interpreted high prospectivity, the project is strategically
located on a year-round operational access road and only 35 miles south of Pump
Station 1 where Prudhoe Bay feeds into the Trans Alaska Pipeline System. The
Company acquired 2D seismic in early 2016 to take advantage of the globally
unique fiscal system in Alaska, which allowed for up to 75% of 1H2016
exploration expenditure to be rebated in cash. Results from the seismic mapping
and prospectivity review are encouraging, and form the basis of a conventional
prospectivity portfolio for Project Icewine. In late 2015, the Company
completed its maiden well at the project, Icewine#1, to evaluate an
unconventional source rock reservoir play which yielded excellent results from
analysis of core obtained from the HRZ shale. The follow-up well with a
multi-stage stimulation and test of the HRZ shale, Icewine#2, spud in early
2Q2017.
END
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