88 Energy claims slice of massive African oil project

88 Energy has completed the first stage of its farm-in to a massive 18,500 square kilometres of ground in Namibia’s Owambo Basin – one of the globe’s last remaining onshore frontier petroleum basins.

The company now has a 20 per cent working interest in the ground and can up its share incrementally to hit 37.5 per cent in phase two and 45 per cent in phase three of the farm-in.

Prior to the first working interest transfer, the Namibian acreage was operated by a joint venture between Monitor Oil and Gas Exploration Namibia (MELN) with 75 per cent, private Namibian company Legend Oil Namibia with 15 per cent and the Namibian Government’s National Petroleum Corporation of Namibia (NAMCOR) holding the remaining 10 per cent.

Now, with the working interest transfer for phase one of the farm-in completed to include 88 Energy in the joint venture (JV), MELN’s hold has dropped to 55 per cent, while the interests of NAMCOR and Legend remain unchanged. MELN will continue as the project’s operator.

88 Energy says the stage one consideration was US700,000 (AU$1.07 million), with a carry of up to US$3 million (AU$4.57 million) for this year’s exploration, which will include acquisition of about 200 line kilometres of 2D seismic.

The company will be required to pay MELN up to the first US$7.7 million (AU$11.8 million) of the first well gross cost in stage two to earn its 37.5 per cent of the working interest. It will then again have to fork out the first US$7.7 million of the second well gross cost to receive a further 7.5 per cent working interest to claim its 45 per cent.

It puts 88 Energy’s maximum total investment costs at an anticipated US$18.7 million (AU$28.52 million).

The Owambo Basin is fully-fledged frontier oil and gas hunting ground that has been subjected to only sparse historical exploration. Although, interestingly, MELN has identified 10 structural closures from airborne geophysics, which are backed by existing 2D seismic data and coincident soil geochemical anomalies.

Soil sampling is a method typically seen in the hard rock exploration space, but has been applied on the Owambo turf with good results. 88 Energy says gas-in-soils concentrations over interpreted structural leads validates the existence of an active petroleum system and passive seismic anomalies are also closely aligned.

Management says its upcoming 2D seismic program will kick off in the middle of this year and will aim to validate the closures, mature the subsurface modelling and possibly provide drill targets. The first well is planned for next year, with the second to follow sometime in 2026 or 2027.

88 Energy’s plunge into the African exploration space is an intriguing move for the company, which has historically been focusing its efforts on its Phoenix oil project in Alaska.

On Tuesday, the company confirmed plans to flow-test the Hickory-1 well by the end of next week. A successful test would lead to an upgrade to the company’s existing resource, converting part of the prospective resource at the project to the higher-confidence “contingent” category in a major leap forward for the project.

With the multi-stage African land grab underway, the market can expect to see a new source of news flow from 88 Energy as it takes a look at what the Owambo Basin has to offer. And that may be a lot, as the African acreage is about 70 times bigger than the Phoenix project and 12 times the size of the company’s entire Alaskan portfolio.

ASX punters seemed to be buoyed by 88 Energy’s new move and jumped on the company’s buy side this morning, giving its share price a nudge to hit 0.7c, a rise of 40 per cent from yesterday’s close of 0.5c.

Is your ASX-listed company doing something interesting? Contact: matt.birney@businessnews.com.au