88 Energy is an Australia-based oil and gas exploration company. Its projects include – Project Icewine, Yukon Leases and Project Peregrine. The Project Icewine has approximately 480,000 contiguous acres in onshore Alaska and has both unconventional and conventional oil potential. The Yukon Gold leases are located on the eastern border of the Central North Slope of Alaska.
We added 88 Energy to our portfolio a few weeks ago and since the 11th of March, 88 Energy shares have just exploded. A 51% surge takes our return and SIV members return to 622% – making the word explosion seem like an understatement.
So what caused this? Well, 88 Energy has had a few operational update announcements. At its Project Peregrine in Alaska where the company has 100% interest, 88 Energy began drilling at the Merlin-1 well. The Merlin-1 well was spudded on 10th March 2021 and is targeting 645 million barrels of gross mean prospective resource. The Merlin-1 well will initially be drilled to 1,500’, then surface casing will be installed and the Blowout Preventer system tested. The well will then be deepened through the target horizons in the Nanushuk Formation to a maximum total depth of 6,000’. Logging while drilling and mud logging will provide initial indications as to the prospectivity of the well during this part of the operation. A sophisticated wireline logging suite will then be run, including sidewall cores and downhole sampling.
The sophisticated drilling equipment and techniques being used will of course come at a cost. 88 Energy’s cost has been revised from US$1.4 million to US$4 million. Drilling Permits, shutdown and restart costs due to bad weather and mobilization costs for expedited operational timetable have also contributed to the increase.
Following on, 88 Energy later announced on the 22nd that drilling has commenced and that they have entered into a share subscription agreement with one of the major contractors for the operation – Elko International. Under the agreement, Elko will be issued 360 million shares at 18 cents – a 225% premium to the placement offer that was undertaken on the 12th of February 2021. The proceeds from the agreement will be about $6.5 million before accounting for costs.
A couple of days ago 88 Energy once again shared an operations update on the dilling data that has surfaced. The Nanushuk Formation, which contains the primary targets for the Merlin-1 well, was encountered ~600’ low to prognosis and is interpreted to be ~500’ thicker than that encountered in the wells drilled into the Willow Oil Field (Analogue Wells) to the north of the Project Peregrine acreage.
The gamma log from the data indicated that there are more and cleaner sand packages present than those found in the Analogue Wells. The quality of the reservoir will be known once the wireline logging is complete – which may result in further upside as investors and traders have reacted very positively to all the recent developments.
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