88 Energy has expanded its Longhorn project footprint in the West Texas oilfields, paying US$1.1 million (AU$1.7 million) for a 45 per cent non-operated working interest in 435 net acres of proven oil-producing ground.
Included in the deal are five newly-acquired leases that contain eight oil wells. The wells have been in operation for several years and produced 5000 barrels of oil equivalent (BOE) in the 2021-22 financial year.
The project’s average production is about 12 BOE per day, of which 75 per cent is oil. The company’s newly-acquired acreage is estimated to contain net 2P reserves of 1.1 million BOE and extends Longhorn to 1399 net acres, including 14 leases with an impressive 40 producing wells.
To produce an immediate cash flow from Longhorn and exploit low well costs, the company has plans to drill two more wells within its new ground, in addition to more workovers.
The new wells are modelled to deliver combined initial rates of 160 to 200 BOE per day gross, 75 per cent of which is expected to be oil. The cost of drilling the wells will be US$1.5 million (AU$2.25 million) each.
Longhorn’s existing assets currently produce about 400 BOE per day gross (about 75 per cent oil), which together with the two new wells, in addition to two workovers on the existing acreage, are anticipated to deliver a gross production rate on all assets of some 500 BOE per day by the end of this year.
The Longhorn area, near the Texas-New Mexico border, produces oil from well-known, low geologic risk Permian Basin reservoirs. It is the oldest petroleum-producing region in the United States, pumping West Texas oil and gas for more than a century.
Lonestar I will also have a working interest in the Longhorn assets and through an affiliate, will continue as the project operator for the existing and new leases and wells, with the remaining working interests retained by existing joint venture partners.
Last week, 88 Energy revealed that seismic re-processing at its Leonis project in Alaska had increased resolution and revealed strong direct hydrocarbon indicators, increasing the company’s confidence in its data set and geology.
Management says its mapping on the reprocessed data has provided a better delineation of the prospect boundaries and a more detailed understanding of the complex fault-controlled structure. The improved data quality has also allowed the company to leverage cutting-edge seismic interpretation software to image small-scale faulting and answer questions about the internal reservoir structure.
The Leonis area may prove to be highly-prospective for 88 Energy, with the pay unit logged in pervious wells at 60m thickness and delivering “oil over shakers” returns at surface. The pay unit was not targeted by previous operators, but is producing oil at an economic rate in fields to the north.
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By Andrew Duffy
