TIDM88E
RNS Number : 3933R
88 Energy Limited
21 September 2017
88 Energy Limited
Project Icewine 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
-- Shut-in on 18(th) September (AK time) ahead of suspension for 2017/2018 winter season
-- Continued gas flow of 2mcf/d with a trend of increasing heavy components since last update
-- Forward plan to install narrower tubing and execute
artificial lift in April/May 2018 to remove frac fluid
Icewine#2 Operations Update
The Icewine#2 well was shut-in on 10(th) July to allow for
imbibition and pressure build up to occur within the HRZ shale.
Flow testing re-commenced on 31(st) August at 10:26 (AK time), and
was suspended on 18(th) September (AK time).
The Joint Venture having assessed the current rate of fluid
recovery and, despite several encouraging trends, made the decision
to shut-in for the Winter period due to logistical reasons
associated with ongoing testing in Arctic conditions. The main
issue is that of freezing of the borehole fluid, predominantly
fresh water from the frac, over the 1,300ft permafrost zone due to
the low rates of fluid flow observed towards the end of the current
test phase. Additionally, winterized equipment deemed suitable for
executing efficient artificial lift of the frac fluid is currently
unavailable. The forward plan is to optimise and re-initiate the
flow testing, utilising artificial lift, in April/May 2018 when
weather conditions are more favourable.
Regarding the encouraging trends observed, a summary is included
below:
-- Decrease in C1 (most recent average <91% vs 93%
previously) and increase in C2+ components as a percentage of the
gas flow, potentially trending towards the interpreted phase of
hydrocarbon in the reservoir
-- Increase in the gas / water ratio such that as the water flow
rate has decreased over time, the gas rate has remained relatively
constant. It is still interpreted that additional fluid is required
to be lifted off the formation before effective connectivity to the
reservoir can be achieved with representative flowback.
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.
The well was initially flowed back on a 6/64 inch choke and was
reduced to a 4/64 inch choke after 26 hours to maintain pressure.
Approximately 370 barrels of frac fluid had been recovered as at
1730 on 3(rd) September (AK time) at an average rate of 100 barrels
per day. The choke was subsequently stepped up to 8/64 inch at 1800
10(th) September (AK time) as the overall declining pressure
gradient versus time improved, indicating potential pressure
support. The choke was gradually increased to 10/64 and then 12/64
in order to lower the bottom hole pressure significantly below the
reservoir pressure to increase the draw down on the formation.
Consequently, the well head pressure fell below that required to
support flow through the separator (35psi) and the well stopped
flowing naturally on 18(th) September 1630 (AK time), as expected,
and was shut in. To date, the cumulative amount of stimulation
fluid produced from both testing periods is 5,533 barrels, 19.9% of
fluids injected.
Since the shut-in, significant pressure build up has already
occurred, with current wellhead pressure over 739psi. This is
consistent with the interpreted overpressure of the HRZ and is an
encouraging sign.
A total of 16.57mcf of gas was measured as production since the
9(th) September, with an average flow rate of 1.79mcf per day.
Results to date are consistent with several other early stage
unconventional plays that have subsequently been proven successful;
however, it is too early to tell the significance of these results
for the HRZ play. As previously advised, the Joint Venture is of
the view that greater than 30% of the frac fluid needs to lifted
from the formation before gaining connectivity with the reservoir
and achieving representative flowback.
A detailed presentation with the conclusions from the testing of
the HRZ to date as well as planned operations for 1H2018 will be
released to the market shortly.
Bank of America Debt / Alaska Credits Clarification
The current Bank of America debt balance is US$17.7m. The State
will pay back US$1.19m of this imminently, based on US$77m in total
payouts, representing $0.16 in the dollar for each outstanding
dollar owed as at the beginning of the year, calculated on issued
certificates at that time. The debt balance with Bank of America
will consequently be reduced to US$16.5m. It is anticipated that
all outstanding 88E cash certificates will be issued prior to
mid-2018. The State will continue to pay back the outstanding
credits on a yearly basis, with a minimum floor of paid out monies.
Alaska remains one of the wealthiest States in the USA, with close
to US$100 billion in savings and vast natural resources as well as
a burgeoning fishing and tourism industry. Risk related to pay back
of the credits in full is deemed very low. The Company is also in a
strong position in relation to its debt as the estimated amount of
cash credits that will be owed is US$23m, significantly in excess
of the US$16.5m debt.
Managing Director, Dave Wall, commented: "Whilst it is
frustrating to have to wait over the Winter season for the
continued flow test of the HRZ, there are several encouraging signs
observed from this most recent phase of testing. Given the early
stage nature of our appraisal program, we need to have patience and
remain open minded as there is no benchmark against which to track
the progress of this particular unconventional play."
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 35 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. The current gross acreage position
is 348,115 contiguous acres (259,114 acres net to the Company). In
December 2016, the Company successfully bid on additional acres,
some of which were awarded in July 2017. On award of the remaining
acres, the Project Icewine gross acreage position may be further
expanded to 604,000 contiguous acres (368,100 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 ongoing.
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.
Exploration incentives provided by the State of Alaska with up
to 35% of net operating loss refundable in cash were concluded for
all expenditure post 30 June 2017.
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 6(th) April 2016.
About 88 Energy: 88 Energy has a 77.5% working interest and
operatorship in 325,000 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.
http://www.rns-pdf.londonstockexchange.com/rns/3933R_-2017-9-21.pdf
This information is provided by RNS
The company news service from the London Stock Exchange
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