88 Energy Limited Quarterly Report (4254L)

TIDM88E

RNS Number : 4254L

88 Energy Limited

19 July 2017

19 July 2017

QUARTERLY REPORT

Report on Activities for the Quarter ended 30 June 2017

The Directors of 88 Energy Limited ("88 Energy" or the "Company", ASX & AIM:88E) provide the following report for the quarter ended 30 June 2017.

Highlights

-- Spud of Icewine#2 Production Test well occurred on 24(th) April 2017, with the following key project milestones;

o The Arctic Fox drilling rig reached a Total Depth of 11,450' on 15(th) May 2017, on schedule and without incident;

o Wireline logging successfully completed throughout the production interval;

o Stage 1 and Stage 2 stimulation operations completed successfully, with over 98% of the intended proppant volume placed in the HRZ reservoir;

o Flowback commenced on 19(th) June 2017 with 16% of stimulation fluid recovered prior to shut in on 10(th) July 2017, with trace hydrocarbons encountered during flowback; and

o Drilling and production testing expenditure anticipated to be within budget.

Key Events Subsequent to the Quarter End

The well was shut in on 10th July 2017 for an anticipated period of 6 weeks to allow for pressure build up and imbibition to occur.

Icewine#2 Operations

On 6(th) April 2017, approval of the Permit to Drill was granted by the Alaskan Oil and Gas Conservation Commission ('AOGCC') and shortly thereafter on 24(th) April the Icewine#2 well was spudded with the Arctic Fox rig.

The well reached a Total Depth ('TD') of 11,450' on the 15(th) of May, on schedule and without incident. Wireline logging, cementing the 4.5" production liner and demobilisation of the Artic Fox rig was completed by the end of May.

Log interpretation to finalise the stimulation design was completed in early June, and the two stage artificial stimulation of the HRZ reservoir was successfully completed on 19(th) June, with over 98% of the intended proppant volume placed into the HRZ reservoir.

Flow back from the upper zone commenced on 19(th) June, with approximately 8% of the total stimulation fluid recovered before it became apparent that the upper and lower zones were in communication, which consequently resulted in the drill out of the plug between the upper and lower zones.

Subsequent to period end the well was shut in on 10(th) July 2017 for an anticipated period of 6 weeks, with 16% of stimulation fluid recovered prior to shut in.

Corporate

The ASX Appendix 5B attached to this report contains the Company's cash flow statement for the quarter. The significant cash flows for the period were:

-- Exploration and evaluation expenditure of A$13.7m primarily relating to Icewine#2 operations and lease rental payments to the State of Alaska;

   --      Payments to the Bank of America in relation to the debt facility totalled A$0.6m (US$0.5m); 
   --      Administration and other operating costs A$1.0m (March 2017 of A$0.9m); and 

-- Proceeds from issue of shares resulting from the conversion of options and warrants totalled A$0.5m.

At the end of the quarter, the Company had cash reserves of A$31.6m, including cash balances held in Joint Venture bank accounts.

Media and Investor Relations:

88 Energy Ltd

Dave Wall, Managing Director Tel: [phone]

Email: [e-mail]

Finlay Thomson, Investor Relations Tel: [phone]

Hartleys Ltd

Dale Bryan Tel: + 61 8 9268 2829

Cenkos Securities

Neil McDonald/Derrick Lee Tel: [phone]

This announcement contains inside information.

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.

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, spudded in 2Q 2017 with operations ongoing at 30 June 2017.

+Rule 5.5

Appendix 5B

Mining exploration entity and oil and gas exploration entity quarterly report

Introduced 01/07/96 Origin Appendix 8 Amended 01/07/97, 01/07/98, 30/09/01, 01/06/10, 17/12/10, 01/05/13, 01/09/16

 
 Name of entity 
------------------------------------------- 
 88 Energy Limited 
------------------------------------------- 
 ABN                Quarter ended ("current 
                     quarter") 
---------------    ------------------------ 
 80 072 964 179     30 June 2017 
---------------    ------------------------ 
 
 
 Consolidated statement                     Current quarter   Year to date 
  of cash flows                                  $A'000        (6 months) 
                                                                  $A'000 
-----------------------------------------  ----------------  ------------- 
 1.     Cash flows from operating 
         activities 
 1.1    Receipts from customers                          79            102 
 1.2    Payments for 
        (a) exploration & evaluation               (13,741)       (15,005) 
        (b) development                                   -              - 
        (c) production                                    -              - 
        (d) staff costs                               (384)          (735) 
        (e) administration 
         and corporate costs                          (632)        (1,206) 
 1.3    Dividends received                                -              - 
         (see note 3) 
 1.4    Interest received                                 4              5 
 1.5    Interest and other                                -              - 
         costs of finance paid 
 1.6    Income taxes paid                                 -              - 
 1.7    Research and development                          -              - 
         refunds 
        Other (JV Partner Contributions 
 1.8     - Burgundy Xploration)                       6,626          6,626 
                                           ----------------  ------------- 
        Net cash from / (used 
 1.9     in) operating activities                   (8,048)       (10,213) 
-----  ----------------------------------  ----------------  ------------- 
 
 2.       Cash flows from investing 
           activities 
 2.1      Payments to acquire: 
          (a) property, plant 
           and equipment                                  -              - 
          (b) tenements (see                              -              - 
           item 10) 
          (c) investments                                 -              - 
          (d) other non-current                           -              - 
           assets 
 2.2      Proceeds from the disposal 
           of: 
          (a) property, plant 
           and equipment                                  -              - 
          (b) tenements (see                              -              - 
           item 10) 
          (c) investments                                 -              - 
          (d) other non-current                           -              - 
           assets 
 2.3      Cash flows from loans                           -              - 
           to other entities 
 2.4      Dividends received                              -              - 
           (see note 3) 

 2.5      Other (provide details                          -              - 
           if material) 
                                           ----------------  ------------- 
 2.6      Net cash from / (used                           -              - 
           in) investing activities 
-------  --------------------------------  ----------------  ------------- 
 
 3.       Cash flows from financing 
           activities 
          Proceeds from issues 
 3.1       of shares                                      -         17,091 
 3.2      Proceeds from issue                             -              - 
           of convertible notes 
          Proceeds from exercise 
 3.3       of share options                             545            545 
          Transaction costs related 
           to issues of shares, 
           convertible notes or 
 3.4       options                                        -        (1,250) 
 3.5      Proceeds from borrowings                        -              - 
 3.6      Repayment of borrowings                         -              - 
 3.7      Transaction costs related                       -              - 
           to loans and borrowings 
 3.8      Dividends paid                                  -              - 
          Other (provide details 
 3.9       if material)                               (665)          (665) 
                                           ----------------  ------------- 
          Net cash from / (used 
 3.10      in) financing activities                   (120)         15,721 
-------  --------------------------------  ----------------  ------------- 
 
 4.       Net increase / (decrease) 
           in cash and cash equivalents 
           for the period 
          Cash and cash equivalents 
 4.1       at beginning of period                    39,677         27,303 
          Net cash from / (used 
           in) operating activities 
 4.2       (item 1.9 above)                         (8,048)       (10,213) 
 4.3      Net cash from / (used                           -              - 
           in) investing activities 
           (item 2.6 above) 
          Net cash from / (used 
           in) financing activities 
 4.4       (item 3.10 above)                          (120)         15,721 
          Effect of movement 
           in exchange rates on 
 4.5       cash held                                     45        (1,257) 
                                           ----------------  ------------- 
          Cash and cash equivalents 
 4.6       at end of period                          31,554         31,554 
-------  --------------------------------  ----------------  ------------- 
 
 
 
 5.    Reconciliation of cash           Current quarter   Previous 
        and cash equivalents                 $A'000        quarter 
        at the end of the quarter                          $A'000 
        (as shown in the consolidated 
        statement of cash flows) 
        to the related items 
        in the accounts 
----  -------------------------------  ----------------  --------- 
 5.1   Bank balances                             31,554     39,677 
 5.2   Call deposits                                  -          - 
 5.3   Bank overdrafts                                -          - 
 5.4   Other (provide details)                        -          - 
                                       ----------------  --------- 
       Cash and cash equivalents 
        at end of quarter (should 
 5.5    equal item 4.6 above)                    31,554     39,677 
----  -------------------------------  ----------------  --------- 
 
 
 6.    Payments to directors of the entity     Current quarter 
        and their associates                        $A'000 
                                              ---------------- 
       Aggregate amount of payments to 
        these parties included in item 
 6.1    1.2                                                182 
                                              ---------------- 
 6.2   Aggregate amount of cash flow                         - 
        from loans to these parties included 
        in item 2.3 
                                              ---------------- 
 6.3   Include below any explanation necessary 
        to understand the transactions included 
        in items 6.1 and 6.2 
----  -------------------------------------------------------- 
 6.1 All transactions involving directors and 
  associates were on normal commercial terms. 
-------------------------------------------------------------- 
 
 
 7.    Payments to related entities of         Current quarter 
        the entity and their associates             $A'000 
                                              ---------------- 
       Aggregate amount of payments to 
        these parties included in item 
 7.1    1.2                                                 81 
                                              ---------------- 
 7.2   Aggregate amount of cash flow                         - 
        from loans to these parties included 
        in item 2.3 
                                              ---------------- 
 7.3   Include below any explanation necessary 
        to understand the transactions included 
        in items 7.1 and 7.2 
----  -------------------------------------------------------- 
 7.1 Consultant fees paid to associated entities 
  were on normal commercial terms. 
-------------------------------------------------------------- 
 
 
 8.    Financing facilities          Total facility   Amount drawn 
        available                       amount at      at quarter 
        Add notes as necessary         quarter end         end 
        for an understanding             $US'000         $US'000 
        of the position 
                                    ---------------  ------------- 
 8.1   Loan facilities                       17,710         17,710 
                                    ---------------  ------------- 
 8.2   Credit standby arrangements                -              - 
                                    ---------------  ------------- 
 8.3   Other (please specify)                     -              - 
                                    ---------------  ------------- 
 8.4   Include below a description of each facility 
        above, including the lender, interest rate 
        and whether it is secured or unsecured. 
        If any additional facilities have been entered 
        into or are proposed to be entered into 
        after quarter end, include details of those 
        facilities as well. 
----  ------------------------------------------------------------ 
 On 20 August 2015, 88 Energy entered into a 
  credit agreement with the Bank of America. The 
  facility is secured by available Production 
  Tax Credits. 
------------------------------------------------------------------ 
 
 
 9.    Estimated cash outflows          $A'000 
        for next quarter 
----  ------------------------------  --------- 
 9.1   Exploration and evaluation*     (17,600) 
 9.2   Development                            - 
 9.3   Production                             - 
 9.4   Staff costs                        (370) 
       Administration and corporate 
 9.5    costs                             (550) 
       Other (provide details if 
 9.6    material)                         (210) 
                                      --------- 
 9.7   Total estimated cash outflows   (18,730) 
----  ------------------------------  --------- 
 

* Includes amounts relating to lease rentals, lease acquisition, seismic acquisition & interpretation, G&A, G&G, expenditure on Icewine#2 operations including potential refund to JV partners for activities achieved under budget.

 
 10.    Changes in              Tenement        Nature of interest   Interest        Interest 
         tenements               reference                            at beginning    at end 
         (items 2.1(b)           and location                         of quarter      of quarter 
         and 2.2(b) 
         above) 
-----  ----------------------  --------------  -------------------  --------------  ------------ 
 10.1   Interests               N/A 
         in mining 
         tenements 
         and petroleum 
         tenements 
         lapsed, relinquished 
         or reduced 
-----  ----------------------  --------------  -------------------  --------------  ------------ 
 10.2   Interests               N/A 
         in mining 
         tenements 
         and petroleum 
         tenements 
         acquired 
         or increased 
-----  ----------------------  --------------  -------------------  --------------  ------------ 
 

Compliance statement

1 This statement has been prepared in accordance with accounting standards and policies which comply with Listing Rule 19.11A.

   2        This statement gives a true and fair view of the matters disclosed. 
   Sign here:              ............................................................ Date: ............................................. 

(Company Secretary)

   Print name:            Sarah Smith 

Notes

1. The quarterly report provides a basis for informing the market how the entity's activities have been financed for the past quarter and the effect on its cash position. An entity that wishes to disclose additional information is encouraged to do so, in a note or notes included in or attached to this report.

2. If this quarterly report has been prepared in accordance with Australian Accounting Standards, the definitions in, and provisions of, AASB 6: Exploration for and Evaluation of Mineral Resources and AASB 107: Statement of Cash Flows apply to this report. If this quarterly report has been prepared in accordance with other accounting standards agreed by ASX pursuant to Listing Rule 19.11A, the corresponding equivalent standards apply to this report.

3. Dividends received may be classified either as cash flows from operating activities or cash flows from investing activities, depending on the accounting policy of the entity.

This information is provided by RNS

The company news service from the London Stock Exchange

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July 19, 2017 02:00 ET (06:00 GMT)