TIDM88E
RNS Number : 8904W
88 Energy Limited
15 December 2023
This announcement contains inside information
15 December 2023
88 Energy Limited
Acquisition of Additional Texas Oil and Gas Production
Assets
Highlights
-- Expanded footprint in Texas Permian Basin with acquisition of
further non-operated working interest in leases and wells with
conventional onshore production and development opportunities.
-- 64.4% net working interest (WI) acquired by 88 Energy in
1,262 net acres, located 1/2 mile south and 1/4 mile north of
existing Project Longhorn assets (Longhorn) connecting the acreage
position.
-- Joint Venture partner and Operator, Lonestar I, LLC (Operator
or Lonestar), also acquired a 21.5% WI in the new assets with
remaining WI retained by existing non-operated partners.
-- Purchase price of US$0.35M (net to 88 Energy: US$0.26M) paid
in cash by the Joint Venture, Bighorn Energy LLC (Bighorn) which
comprises of Longhorn Energy Investments LLC (LEI) a 100% wholly
owned subsidiary of 88 Energy (75% ownership) and Lonestar (25%
ownership).
-- Attractive low-cost entry of US$0.33 per BOE based on the
independently certified net 2P reserves position of 0.68 MMBOE(1,2)
.
-- Nine (9) low-producing existing wells (26 BOE/day gross) and
10 development opportunities with potential identified in multiple
zones and classified as Gross Undeveloped 2P Reserves (1.2
MMBOE(1,2) ), along with Contingent and Prospective Resources which
are yet to be quantified.
-- Coupled with the additional acreage announced in July 2023,
Bighorn has reviewed its development opportunities and will now
target lower-cost workovers ahead of new drills. Bighorn has
approved 5 workovers to be completed in 1H 2024 and upon successful
execution are expected to increase production to 180 - 220 BOE
gross per day (75% oil).
-- Once the workovers are completed, Bighorn will consider for
approval the 2 new production wells, as previously announced, in 2H
2024, which are expected to increase production by an additional
160-200 BOE gross per day (75% oil).
-- Upon successful completion of the workovers and new wells
across its acreage, together with the existing producing wells, 88
Energy expects Longhorn total gross production to reach
approximately 600 - 675 BOE per day (75% oil) by year end 2024.
-- The new acreage contains 2 injection wells that will be
assessed for restoration so that Bighorn has optionality for water
disposal, particularly as production increases when new wells come
online.
-- Bighorn recently secured a US$5 million line of credit
facility to assist in cash flow management associated with the
development opportunities.
(1) Refer to page 3 for initial reserves estimates and
assumptions.
(2) Net Revenue Entitlement to 88 Energy.
88 Energy Limited (ASX:88E, AIM:88E, OTC:EEENF) ( 88 Energy or
the Company ) is pleased to announce the execution of binding
agreements for the acquisition of a new non-operated working
interest ( WI ) (64% net to 88 Energy) in leases and wells with
conventional onshore production and development assets within the
Permian Basin of Texas, U.S.
The new oil and gas production and development assets (Bighorn
Phase 3) will form an extended footprint with the initial assets
acquired in February 2022 (Bighorn Phase 1) coupled with the new
assets acquired in July 2023 (Bighorn Phase 2), all together known
as Project Longhorn ( Longhorn ) as shown in figure 1 below. The
new acreage is located approximately 1/2 mile south of Bighorn
Phase 1 and 1/2 mile north of Bighorn Phase 2. The newly acquired
acreage is estimated to contain independently certified net 2P
reserves of 0.68 MMBOE (1,2) .
Figure 1: Project Longhorn acreage
Importantly and alike to the July 2023 acquisition, all proposed
well locations have been classified as low-risk, accessing net
Proven reserves totalling 0.56 MMBOE (1,2-) , given the production
histories from existing wells on the newly acquired leases as well
as adjacent leases. The development opportunities should intersect
multiple potentially oil-bearing intervals which have been
successfully developed in the vicinity of Longhorn and the upside
has been identified and classified as Contingent or Prospective
Resource and will be quantified.
Purchase price of US$0.35M (net to 88 Energy: US$0.26M) paid in
cash by the Joint Venture, Bighorn Energy LLC ( Bighorn ) which
comprises of Longhorn Energy Investments LLC ( 88E-LEI ) a 100%
wholly owned subsidiary of 88 Energy (with a 75% ownership
interest) and Lonestar I, LLC ( Operator or Lonestar ) holding a
25% ownership interest.
The acquisition provides 88 Energy with additional flexibility
over development capital opportunities including 4 lower-cost
workovers (Bighorn CAPEX of US$800-950k/each) along with 6 new
drill targets to accompany at least 14 new drill targets on
existing acreage.
Bighorn has agreed a forward capital development program as part
of its 2024 WP&B which includes 5 workovers in 1H 2024 and
contingent on successful workovers, 2 new drills in 2H 2024. The 2
new wells (on leases which Longhorn has a 75% WI), are each
anticipated to deliver IP30 of approximately 80-100 BOE per day
gross (75% oil) and cost US$1.5 million each, net to 88E-LEI.
Bighorn secured a US$5 million line of credit facility in Q3
2023 to assist in cash flow management associated with the
development opportunities. The facility is supported by a local
Texas Bank, with interest at Prime and contains no cash lock up,
with security over the Longhorn assets. Hedging is required at 50%
of production required to secure the drawdown required.
Longhorn assets in November produced 370 BOE per day gross (61%
oil) and upon successful completion of the 2024 work program and
budget which includes 5 recompletions and contingent 2 new wells
planned on the 2023 acquired acreage, 88 Energy anticipates
Longhorn total gross production to reach approximately 600 - 675
BOE per day (7 5 % oil) by year end 2024.
Acquisition details
On 14 December 2023, the Company, via its 75% ownership interest
in the Joint Venture subsidiary Bighorn Energy, LLC ( Bighorn ),
acquired an interest in the new leases and wells ( Bighorn Phase 3
) from Endeavor Energy Resources, L.P., for consideration of
US$0.35 million gross to be paid in cash by Bighorn. Bighorn will
acquire interests in Bighorn Phase 3 of between 51% - 100% working
interest of the leases and wells .
Project Longhorn: Conventional onshore oil & gas
production
Project Longhorn assets are in the attractive Texas Permian
Basin and following the acquisition, cover approximately 2,625 net
acres (of which 1,262 acres relates to the newly acquired leases).
The combined portfolio of assets consists of 18 leases (5 newly
acquired) with 49 producing wells (9 within newly acquired leases)
and associated infrastructure. Lonestar I, LLC will continue to
have a working interest in the assets, and through an affiliate
will continue as Operator for the existing and new leases and
wells, with the remaining working interests retained by existing
non-operated partners.
New acreage production
The existing production wells in the newly acquired acreage have
been in operation for several years. Production from the newly
acquired leases in CY2022 totalled approximately 6,200 BOE gross,
which had an estimated attributable net profit before tax for the
project of $0.2 million (unaudited). Current average production is
approximately 26 BOE per day gross (88 Energy's net WI: 17 BOE per
day), of which approximately 75% is oil.
Gross (100%) and Net Entitlement Reserves to 88 Energy (64.4%
net working or net revenue interest 45%) have been independently
assessed by PJG Petroleum Engineers LLC as of 30 September 2023 as
follows:
Table 1: Project Longhorn - Bighorn Phase 3 - Reserves
(MMBOE)
GROSS RESERVES NET 88 ENERGY REVENUE ENTITLEMENT
1P 2P 3P 1P 2P 3P
====== ====== ====== ============ ============ ===========
1.00 1.20 1.49 0.57 0.68 0.84
------ ------ ------ ------------ ------------ -----------
Further ASX Listing Rule 5.31 Information (Notes to Reserves)
related to these Reserves is provided in Appendix 1.
Reserves Cautionary Statement
Oil and gas reserves and resource estimates are expressions of
judgment based on knowledge, experience and industry practice.
Estimates that were valid when originally calculated may alter
significantly when new information or techniques become available.
Additionally, by their very nature, reserve and resource estimates
are imprecise and depend to some extent on interpretations, which
may prove to be inaccurate. As further information becomes
available through additional drilling and analysis, the estimates
are likely to change. This may result in alterations to development
and production plans which may, in turn, adversely impact the
Company's operations. Reserves estimates and estimates of future
net revenues are, by nature, forward looking statements and subject
to the same risks as other forward-looking statements.
This announcement has been authorised by the Board.
Media and Investor Relations:
88 Energy Ltd
Ashley Gilbert, Managing Director
Tel: +61 8 9485 0990
Email:investor-relations@88energy.com
Fivemark Partners, Investor
and Media Relations
Michael Vaughan Tel: +61 422 602 720
EurozHartleys Ltd
Dale Bryan Tel: + 61 8 9268 2829
Cavendish Capital Markets Limited Tel: +44 (0)20 7397 8900
Derrick Lee Tel: +44 (0)131 220 6939
Pearl Kellie Tel: +44 (0)131 220 9775
Glossary
Bbl = barrels Mbo/Mbbl = thousand barrels of
Bcf = billion cubic feet oil
Bcfg = billion cubic feet of MMbo/MMbbl = million barrels
gas of oil
Boe = barrels of oil equivalent Mboe = thousand barrels of oil
Bopd = barrels of oil per day equivalent
Btu = British Thermal Units MMboe = million barrels of oil
mcfg = thousand cubic of gas equivalent
mmcfg = million cubic feet of Mcf = thousand cubic feet
gas MMcf = million cubic feet
mcfgpd = thousand cubic feet mmbtu = million British Thermal
of gas per day Units
mmcf = million cubic feet psi = pounds per square inch
UoM = unit of measure
IP30 = Average production rate
over the first 30 days of production
Appendix 1 - ASX Listing Rule 5.31 Information (Notes to
Reserves)
Reserve Evaluation; Project Longhorn -Bighorn Phase 3 Leases
Highlights:
-- PJG Petroleum Engineers LLC (PJG) has prepared the reserve
estimates and a forecast of prices and costs evaluation of the oil
and gas properties of Project Longhorn - Bighorn Phase 3 leases
(New Leases). The effective date of the reserve estimates and cash
flow forecasts presented in this release is 30 September 2023.
-- The PJG reserve evaluation has been prepared for 88 Energy in
accordance with reserves definitions, standards and procedures
contained in the Society of Petroleum Engineers' Petroleum
Resources Management System (SPE-PRMS) and reported in the most
specific resource class in which the prospective resource can be
classified under 2018 SPE-PRMS. The reserves presented in the PJG
report are based on forecast prices and costs. Economic Limit Tests
(ELTs) used to estimate Reserves shown above were carried out
assuming a constant WTI crude oil price of US$75/bbl and a constant
US$3.50/mmbtu for the NYMEX gas price. All oil prices used in the
evaluation have been adjusted from the reference price for quality
and transportation, which is -$0.71/bbl based on historical
averages. Gas prices account for NGL's in the gas and have been
adjusted for heating value by a factor of 1.30 mbtu/cf based on
historical averages. As a result, the net oil and gas prices used
in this report are US$74.29/bbl and US$3.13/mcf respectively.
-- The Proved reserves (1P) net of royalties is 0.42 million bbl
of oil and 0.76 bcf of gas, or 0.57 million BOE, net to 88
Energy.
-- The Proved plus Probable reserves (2P) net of royalties are
0.50 million bbl of oil and 0.90 bcf of gas, or 0.68 million BOE,
net to 88 Energy.
-- The Proved plus Probable plus Possible reserves (3P) net of
royalties are 0.61 million bbl of oil and 1.12 bcf of gas, or 0.84
million BOE.
Background
88 Energy, via its wholly owned subsidiary, Longhorn Energy
Investments LLC, has a 75% ownership interest in Bighorn energy,
LLC (Bighorn) and Lonestar I, LLC has a 25% ownership interest in
Bighorn, acquired the new leases from Endeavor Energy Resources,
L.P. on 14 December 2023. The leases comprise approximately 1,683
Bighorn net acres across 5 leases with 9 producing wells and
associated infrastructure.
Table 2: Developed Reserves of Acquisition
RESERVES GROSS NET ENTITLEMENT
----------------------
UoM 1P 2P 3P 1P 2P 3P
========================= ====== ====== ====== ====== ====== =====
OIL MMBO 0.02 0.03 0.04 0.01 0.01 0.01
================ ======== ====== ====== ====== ====== ====== =====
GAS BCF 0.02 0.03 0.05 0.01 0.01 0.02
================ ======== ====== ====== ====== ====== ====== =====
TOTAL reserves MMBOE 0.03 0.04 0.05 0.01 0.01 0.02
---------------- -------- ------ ------ ------ ------ ------ -----
Table 3: Undeveloped Reserves of Acquisition
RESERVES GROSS NET ENTITLEMENT
----------------------
UoM 1P 2P 3P 1P 2P 3P
OIL MMBO 0.71 0.85 1.05 0.41 0.49 0.60
GAS BCF 1.30 1.56 1.93 0.75 0.89 1.10
TOTAL reserves MMBOE 0.97 1.16 1.44 0.56 0.67 0.82
---------------- -------- ------ ------ ------ ------ ------ -----
Table 4: Total Reserves of Acquisition
RESERVES GROSS NET ENTITLEMENT
----------------------
UoM 1P 2P 3P 1P 2P 3P
========================= ====== ====== ====== ====== ====== =====
OIL MMBO 0.74 0.88 1.10 0.42 0.50 0.61
================ ======== ====== ====== ====== ====== ====== =====
GAS BCF 1.32 1.59 1.98 0.76 0.90 1.12
================ ======== ====== ====== ====== ====== ====== =====
TOTAL reserves MMBOE 1.00 1.20 1.49 0.57 0.68 0.84
---------------- -------- ------ ------ ------ ------ ------ -----
The subsequent sections detail the field and reserves/ resources
information for compliance with ASX listing rules pertaining to the
first announcement of material oil and gas projects.
Assumptions and Notes
a) The reserves information in this document is effective as of
30 September 2023 (Listing Rule (LR) 5.25.1).
b) The reserves information in this document has been estimated
and is classified in accordance with SPE -- PRMS (Society of
Petroleum Engineers -- Petroleum Resources Management System) (LR
5.25.2).
c) The reserves information in this document is reported
according to the Company's economic interest in each of the
reserves net of royalties (LR 5.25.5).
d) The reserves information in this document has been estimated
and prepared using the deterministic method (LR 5.25.6).
e) The reserves information in this document has been estimated
using a 5:1 BOE conversion ratio for gas to oil; 5:1 conversion
ratio is based on an energy equivalency conversion method and does
not represent value equivalency (LR 5.25.7).
f) The reserves information in this document has been estimated
on the basis that products are sold on the spot market with
delivery at the sales point on the production facilities (LR
5.26.5).
g) The method of aggregation used in calculating estimated
reserves was the arithmetic summation by category of reserves. As a
result of the arithmetic aggregation of the field totals, the
aggregate 1P may be a conservative estimate and the aggregate 3P
may be an optimistic estimate due to the portfolio effects of
arithmetic summation (LR 5.26.7 & 5.26.8)
h) Project Longhorn - Bighorn Phase 3 reserves are located in the Permian Basin, Texas, USA.
ASX LR 5.31 Reserves - Project Longhorn - Bighorn Phase 3
Leases
Project Longhorn - Bighorn Phase 3 Leases
LR 5.31.1 - Material Oil and gas prices - Oil prices used in
economic assumptions this report were kept constant at US$75/bbl
used to calculate the to end of field life for WTI crude oil.
estimates of petroleum This was then adjusted to account for
reserves transportation
and quality differences based on historical
actual prices achieved, which averaged
a $0.71/bbl deduction.
Natural gas prices used in this report
were kept constant at US$3.50/mmbtu for
the NYMEX benchmark to the end of field
life. Gas prices account for NGL's in the
gas and have been adjusted for heating
value by a factor of 1.30 mbtu/cf based
on historical averages. Consequently, the
net gas price used in this report is US$3.13/mcf.
Capex - gross capital costs were estimated
by the Operator covering drilling and completion,
recompletion and abandonment costs considered
necessary to recover the reserves. Capital
costs were considered reasonable by PJG,
which cost between US$0.8 million and US$2.0
million depending on the type of activity
performed.
Opex - gross operating costs were based
on historical lease operating statements.
These forecasts were reasonable by PJG.
Discount rate - pre-tax discount rate
of 10%
---------------------------------------------------
LR 5.31.2 Operator Longhorn Energy Investments LLC, a wholly
or non-operator interests owned subsidiary of 88 Energy Limited,
is a non-operator of Project Longhorn and
has an average 64.4% working interest across
the newly acquired leases, based on area.
Table 5 shows lease working interests for
the new acreage - Bighorn Phase 3 leases.
---------------------------------------------------
LR 5.31.3 Permits or The reported reserves relate to the acquisition
Licenses of 5 leases located in the Permian Basin,
Texas, USA. All leases are Held by Production,
have no expiry date and no drilling obligations.
----------------------------------------------------------------- ---------------------------------------------------
LR 5.31.4 Description
of:
Economic Limit Tests were performed and
* Basis for confirming commercial producibility and project NPVs calculated to satisfy the
booking reserves. commerciality requirements of the PRMS.
PJG carried out these analyses for all
wells - current and proposed, based on
pricing noted above under LR 5.31.1, Operator
provided third party gas plant and oil
purchaser statements, Operator provided
current royalty rates and all applicable
State of Texas oil and gas taxation roles
applicable to the specific areas of operations.
Future capital requirements and actual
historical operating costs were obtained
from the Operator's projections and were
accepted as reasonable.
The commercial producibility of undeveloped
reserves is based on stabilised production
rates from existing wells and production
analogues from the same formations.
PJG has relied on Decline Curve Analysis
* Analytical procedures used to estimate the petroleum techniques for this evaluation. Production
reserves decline analysis was performed using all
available production/well test data to
estimate a range (Low, Best and High Cases)
of production forecasts, which were used
as the basis for estimating reserves. An
uncertainty range in both the decline rate
and the exponent factor of the hyperbolic
decline fit was applied to forecast different
decline trends attributable to uncertainty
in reservoir performance, and to estimate
the oil production volumes for the 1P,
2P and 3P reserves categories. These reserves
were sense checked against volumetric reserve
calculations based on log derived parameters.
Production records were obtained from
the Texas Railroad Commission (TRRC) on
a lease basis, or when applicable, by combining
Operator identified API Number well data
historical records, to serve as the basis
of the production volumes in our decline
curve analysis. This data matched Operator
provided data.
All current and proposed wells will utilize
* Proposed extraction method and any specialised sucker rod pumping systems to artificially
processing required following extraction required lift the oil to surface. The reservoirs
are largely depletion / solution gas drive
with some reservoirs having water aquifer
support.
---------------------------------------------------
LR 5.31.5 - Estimated See Tables 2-4 inclusive at the start of
quantities to be recovered Appendix 1.
---------------------------------------------------
LR 5.31.6 - Undeveloped All undeveloped reserves are all located
petroleum reserves; within 1320 ft (40 acres spacing) of existing
a brief statement regarding:- production; hence development of these
* Status of the project reserves simply requires a completed well
and tie back to existing production. Two
new wells are budgeted to be drilled and
* When development is anticipated completed in 2024. The eight remaining
development activities are planned for
the 2024-2026 period. All existing marketing
* Marketing arrangements arrangements, transportation infrastructure
and approvals are planned and budgeted
to be utilized.
* Access to transportation infrastructure
* Environmental approvals required
---------------------------------------------------
LR 5.31.7 - Unconventional Not applicable.
petroleum resources
---------------------------------------------------
LR 5.32 - Project estimates Not applicable; this report constitutes
that have materially first time reporting for Project Longhorn
changed from when the - Bighorn Phase 3 leases.
estimates were previously
reported
---------------------------------------------------
Definitions
-- Reserves are those quantities of petroleum that are
anticipated to be commercially recoverable by application of
development projects to known accumulations from a given date
forward under defined conditions. Reserves must further satisfy
four criteria, based on the development project(s) applied:
discovered, recoverable, commercial and remaining (as of the
evaluation date).
-- 1P is defined as Proven reserves. 2P is defined as Proven
plus Probable reserves. 3P is defined as Proven plus Probable plus
Possible reserves.
-- 1P or Proven Reserves are those quantities of petroleum that,
by analysis of geoscience and engineering data, can be estimated
with reasonable certainty to be commercially recoverable from a
given date forward from known reservoirs and under defined economic
conditions, operating methods, and government regulations. This is
typically considered to have more than a 90% likelihood of
occurring.
-- Probable Reserves are those additional reserves that analysis
of geoscience and engineering data indicates are less likely to be
recovered than proved reserves but more certain to be recovered
than possible reserves. This is typically considered to have
approximately a 50% likelihood of occurring.
-- Possible Reserves are those additional reserves that are less
certain to be recovered than probable reserves. It is unlikely that
the actual remaining quantities recovered will exceed the sum of
the estimated proved plus probable plus possible reserves. This is
typically considered to have approximately a 10% likelihood of
occurring.
-- Developed reserves are expected to be recoverable from
existing wells and facilities. Undeveloped reserves will be
recovered through future investments (e.g. through installation of
compression, new wells into different but known reservoirs, or
infill wells that will increase recovery). Total reserves are the
sum of developed and undeveloped reserves at a given level of
certainty.
-- Contingent Resources (2C) are those quantities of petroleum
estimated, as of a given date, to be potentially recoverable from
known accumulations by application of development projects, but
which are not currently considered to be commercially recoverable
owing to one or more contingencies.
-- Prospective Resources are those quantities of petroleum that
are estimated, as of a given date, to be potentially recoverable
from undiscovered accumulations.
Qualified petroleum reserves and resources evaluator
statement
The petroleum reserves and resources information in this
announcement are based on, and fairly represents, information and
supporting documentation prepared by Paul J Griffith. Mr. Griffith
has over 35 years of experience in senior technical positions in
reservoir, production, and field engineering. He is a registered
Professional Engineer in the State of Texas (Credential ID 68149),
United States of America, his Firm PJG Petroleum Engineers, LLC is
registered to provide Petroleum Engineering services by the State
of Texas Board of Professional Engineers under Firm #F-23307. Mr
Griffith is a Lifetime Member of the Society of Petroleum
Engineers. Mr Griffith is not an employee of 88 Energy or any of
its subsidiaries and has consented in writing to the inclusion of
the petroleum reserves and resources information in this
announcement in the form and context in which it appears.
Table 5: Working Interest
Lease Bighorn Energy 88 Energy LEASE 88 Energy Revenue
WI WI NRI Interest
-------------- --------- -----
L2-1 100% 75% 85% 64%
=============== ============== ========= ===== =================
L2-2 71% 53% 49% 26%
=============== ============== ========= ===== =================
L2-3 98% 73% 73% 54%
=============== ============== ========= ===== =================
L2-4 * 75% 56% 59% 33%
=============== ============== ========= ===== =================
L2-5 51% 38% 85% 32%
=============== ============== ========= ===== =================
Area Weighted
Average 86% 64% 70% 45%
--------------- -------------- --------- ----- -----------------
* Working interest in well.
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ACQBLBDDISBDGXS
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