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.