ASX-listed 88 Energy, is staring down the barrel of a potential oil discovery at its 600-million-barrel prospective oil target being drill tested in the frozen arctic ground of Alaska’s oil-rich North Slope. The company said its Merlin-1 drill hole has intersected multiple reservoir sandstone layers within the target Nanushuk formation, with many layers exhibiting indications of the presence of oil, collectively referred to as “oil shows”.
The market punted 88 Energy hard in March with the ASX, AIM and OTC-listed 88 Energy’s share price hiking from just below a cent a share to a high of 4c a share on the back of its proposal to drill test Merlin -1.
According to the company, the Merlin-1 test well has drilled through multiple reservoir sand layers which appear similar to those which hold the oil at the giant 750-million-barrel Willow oil field, located a relatively short distance from 88 Energy’s Project Peregrine ground.
Whilst details are still a little unclear, 88 Energy said the oil shows recorded over multiple intervals included evidence of oil fluorescence. Typically, crude oil looks black or brown under natural light, but it fluoresces white or yellow under ultra-violet light, allowing it to be detected easily as the drill cutting samples reach the surface for detailed geological analysis.
Interestingly, oil reservoir zones are often accompanied by elevated hydrocarbon gas indications, or ‘gas peaks’, suggesting the oil is potentially recoverable and the company noted multiple gas peaks in the same rock layers where the company recorded visible oil shows. The combination of both can be a ‘signature indication’ of producible oil in the target rock layers.
88 Energy was quick to caution that it is still early days in the evaluation of the encouraging zones of oil shows and geophysical logging of the target sand layers is still required to ascertain whether these early indications are representative of commercial oil accumulations.
The company’s moment of truth appears to have arrived as its market cap topped A$388m in recent trading, less than a year after picking up the Peregrine project leases in its all-scrip takeover of fellow Alaskan oil hopeful, XCD Energy.
Interestingly, the Perth-based 88 Energy has locked in a farm-in partner to do the heavy financial lifting, with Alaska Peregrine Development Company, or “APDC” stumping up the first US$10m for the exploration hole to earn a 50 per cent interest in Project Peregrine.
The company recently rattled the tin and tucked away around $12m to pad out its balance sheet ahead of the spudding of Merlin-1. Management said previously it could be up for as much as US$4m as its 50 per cent share of any extra costs over and above the farm-in amount.
Some cost overruns now seem likely as the JV evaluates the multiple sniffs recorded while drilling through Alaska’s latest hot oil target, the Nanushuk formation.
88 Energy Managing Director, Dave Wall said: “Whilst there is still work to do to confirm a discovery, the results to date are encouraging and we look forward to providing an additional update on the wireline program in 7 to 10 days.”
88 Energy is targeting a gross mean prospective resource of 645 million barrels at Merlin, with its sibling prospect, Harrier, potentially chiming in for another 417 million barrels of gross mean prospective resource in the same Nanushuk target.
Interestingly, the company said one of the target reservoir sands with oil shows at Merlin is also a target at its Harrier prospect, boding well for the future of 88 Energy’s ground if Merlin-1 comes through with the goods.
The region’s crude oil explorers recently revealed the giant oil potential of the Nanushuk formation after drilling successfully into the topset sandstones of an ancient, buried delta, more than half a century after the discovery of the giant Prudhoe Bay oil field on the Arctic coast of Alaska.
With the Nanushuk already breathing new life into the USA’s frozen north, 88 Energy is standing centre stage and is ever so close to taking the applause for its final act in the Nanushuk play.
Is your ASX-listed company doing something interesting? Contact: matt.birney@businessnews.com.au
By Matt Birney
