88 Energy Limited (88E) talks exclusively to Share Talk about Icewine #1 exploration well, seismic acquisition, future activity.
Here is small overview for non shareholders of 88E
88 Energy: 88 Energy has a 78% working interest and operatorship in ~272,000 acres (~174,000 acres’ subject to formal award) onshore the prolific North Slope of Alaska (“Project Icewine”). The North Slope is the host for 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 three highly prospective play types that are likely to exist on the Project Icewine acreage – two conventional and one unconventional. The Company plans to progress drilling and seismic acquisition in the near term to take advantage of the globally unique fiscal system in Alaska, which allows for up to 85% of CY2015 exploration expenditure to be rebated in cash.
We have covered 88E Energy twice over the past month on the site and now we have the opportunity to catch up with 88E Energy management team in a question and answer session.
Thank you Dave for agreeing to answers investors questions today and we appreciated you taking the time out from your schedule to talk to us and answer investors questions.
Share Talk: At the end of last year the company did a placing where it invited existing holders to invest rather than going down other avenues for capital. Why did the company take this approach and would you say it was a success?
A: The Company had not been able to provide the opportunity for existing shareholders in previous placements and many shareholders had expressed concern that we were not looking after them. This time around, we had time to undertake a share purchase plan so we were able to provide the opportunity for all shareholders to participate.
Share Talk: With icewine#1 now being complete would you say the initial expectations of the drill have been met or exceeded at this point by you and Mr Basinski?
A: That question is difficult to answer as expectations are not really the best measure of a successful outcome, I also cannot talk for Paul. My expectations have been exceeded for sure, but I am a pragmatist so they were not that high! At this point in time, we are excited about what we are seeing but this must be caveated as we have a ways to go and what we are chasing is unlike anything that has been exploited before.
Share Talk: With the hydrocarbons leeching from the core samples at the lab during testing, would you say it’s a high probability that the find will be commercially viable, and successful in de-risking the acreage?
A: The hydrocarbon leaching in isolation really only tells us that there are liquid hydrocarbons in the core material, which does not have much bearing on commerciality. Commerciality will be driven by flow rate, capex and oil price. The potential flow rate is what we are trying to determine in the lab via the core analysis and depends (mainly) on viscosity of the hydrocarbons, permeability, porosity and pressure. Also we need to be able to effectively fracture stimulate the rock.
Share Talk: You mentioned an Achilles heel can you say more on what that may be and is it easily resolvable? I’m guessing it’s about potential costs to a JV partner and the price of oil at the moment?…
(if so will targeting the shallow brookian traps be a prudent move whilst the price of oil recovers)
A: The Achilles Heels were mentioned in our 5th November presentation on slide 7 and are shown here below (I should have clarified this in the announcement)
Share Talk: When are the full complete results expected on the lab results, and will these come with a forward looking plan?
A: The lab evaluation will be complete in mid to late Feb. The forward plan is to progress the project – unconventional and conventional priority dependent on results from the lab and seismic. The intention continues to be to introduce a partner with deeper pockets so we don’t have to dilute further. This depends on a number of factors, not the least of which being the oil price.
Share Talk: Are you letting future joint venture partners in on your finds already? Are potential talks in the early stages with several of your visitors from December? Is there a possibility of more than one partner?
A: Discussions remain on going with various parties. The December reference has no basis. There is always a possibility of more than one partner; however, historically evidence suggests that this is unlikely.
Share Talk: Has there been much 3rd party interest in your project?
A:Yes – whether that translates into an attractive deal is another question.
Share Talk: With the chances of finding commercially recoverable oil on the Icewine acreage are you worried about any of the infrastructure that is in place nearby to get the product to market?
A: The infrastructure nearby has spare capacity and is a key positive element to the story.
Share Talk: Are you still happy to call the north slope of Alaska the oiliest place on earth? Or is Icewine in a particularly sweet sweet spot in the middle of it..
A: Alaska’s oiliness has not and will not change. It’s a given. In terms of the “sweetspot” that is used by us in relation to a particular thermal maturity window that we are chasing for the HRZ shale, where a vapour phase exists (lower viscosity and higher flow rate).
That is part of the lab analysis that is currently underway.
Share Talk: How would you compare the potential here to the Eagleford discovery in Texas as it looks like a better porosity and thickness just in the shales alone and conventional as well?
A: Hard to compare as is not apples with apples and we are also in the middle of an evaluation. I can answer this better once that is complete.
Share Talk: With the 3D that has been shot by saexploration will this be purchased with the 75% rebate in place and are you planning on doing so? How long would you say it will take to analyse the data and provide estimates?
A: Purchases of seismic are not subject to the rebate – only the costs of the acquisition itself. When SAE acquired the seismic on behalf of ASV, the rebate was 85%. Any additional seismic we shoot in 1H 2016 will be subject to 75%. That data will be acquired by mid year and processed by year end.
Share Talk: With so much happening with 3D purchase, land purchase and 3D to be shot are the expectations there for costs to be covered with current money in the bank and the joint venture partner?
A: All depends on the cost of the seismic, whether we buy all of it, acquire our own and how much acreage we pick up. If we were to try to do all of everything then we would need more funds.
Share Talk: What news is expected over the next few weeks and months, and what are you most looking forward to with 88e?
A: The final lab evaluation of the core and planning of the seismic. Looking forward to an increase in oil price combined with successful results from the evaluation, which would mean a deal would be highly likely…
LSE Share Talk will be following 88E Energy PLC progress over the coming year and if you wish to follow their twitter account @88EnergyLtd or look at the company website http://88energy.com/ . This is a company with a short – midterm business plan that looks very interesting and one Private Investors should have on their watch list.
One again thanks Dave for the interview and we are looking forward to updating Share Talk subscribers on 88E Energy PLC future updates.
A special thank you Steve larratt and the 88e Twitter groups for submitting questioning and Share Talk subscribers.