88 Energy reports progress at Project Phoenix

19th Aug 2024 12:38

(Sharecast News) - 88 Energy updated the market on Project Phoenix on Monday, focusing on results from the Hickory-1 discovery well and its ongoing collaboration with joint venture partner Burgundy Xploration.

The AIM-traded firm said the Hickory-1 well, drilled in February 2023, underwent flow testing during the Alaskan winter in early 2024.

It said the tests focussed on two primary targets - the Upper SFS (USFS) and SMD-B reservoirs.

Notably, the USFS reservoir demonstrated a peak flow rate of about 70 barrels of oil per day with a maximum oil cut of 15%, flowing naturally to the surface without the need for nitrogen lift.

The SMD-B reservoir showed a peak flow rate of around 50 daily barrels, with a maximum oil cut of 10%.

88 energy said the oil samples collected from both reservoirs were characterised as light crude, with API gravities ranging from 38.5 to 41.4.

Further analysis of pressurised oil samples was ongoing in Houston, with results expected in the third quarter.

The results, along with an independent contingent resource assessment due in the fourth quarter, would guide the next phase of Project Phoenix, including potential plans for a horizontal well production test at the Franklin Bluffs location.

88 Energy said it had engaged ResFrac to optimise its completion strategy for a horizontal well, and planned to initiate a farmout process to attract a strategic partner for future drilling and development.

The company also said its joint venture partner Burgundy Xploration had met its 2023 financial obligations and signed the flow test authority for expenditure (AFE) earlier in the year.

Under a standstill agreement, Burgundy was expected to cover its share of the AFE costs, around $3m, by mid-August through either a public listing or a private capital raise.

If unmet, Burgundy was required to transfer 50% of its working interest in the Toolik River Unit leases to 88 Energy's subsidiary.

Burgundy was reportedly making progress towards a public listing, having recently recruited a board and senior executives with experience in public markets.

Advanced discussions were said to be underway for a potential transaction, where Burgundy would provide a carry to 88 Energy for a 2025-2026 work programme, including drilling and extended flow testing of a horizontal well.

Given Burgundy's commitment to pay $0.35m in the near term and its ongoing efforts toward a public listing, 88 Energy said it had agreed to extend the standstill agreement until 31 December.

If Burgundy failed to meet its obligations by the new deadline, 88 Energy retained the right to enforce the joint operating agreement.

At 1204 BST, shares in 88 Energy were down 1.5% at 0.1p.

Reporting by Josh White for Sharecast.com.