Alaskan oil results to lead 88 Energy to resource estimate

Oil and gas explorer 88 Energy is expecting imminent results on oil samples from the Hickory-1 discovery well at its flagship Phoenix project in Alaska, with a contingent resource estimate expected before year’s end.

The tests, currently underway in Houston, are expected to help the company’s commercialisation planning at Phoenix and are being conducted on pressurised oil samples from successful flow tests at the Hickory-1 well earlier this year. The Upper Slope Fan System (USFS) reservoir – which was previously untested – and the shallower shelf margin deltaic-B (SMD-B) reservoir both successfully flowed light crude oil from the company’s onshore oil section within Alaska’s north slope.

Management believes the Hickory-1 flow tests highlighted the quality and deliverability of both the SMD-B and USFS reservoirs for surface oil production. Importantly, oil flow was achieved under natural flow, which is in stark contrast to adjacent competitor tenement acreage results where wells are believed to have shown to produce only under nitrogen lift.

The USFS reservoir produced at a peak flow rate of over 70 barrels of oil per day (bopd) of the premium-priced light crude oil, while the SMD-B reservoir produced at a peak flow rate of around 50 bopd. Importantly, the SMD reservoir flow came with little to no measurable associated gas flow.

Sample results from Houston are expected to confirm the reservoir fluid characteristics, with results expected in the current financial quarter. The results will inform an independent contingent resource estimate for the Upper SFS, Lower SFS, and SMD-B.

United States-based major oil and gas modelling company ResFrac has been engaged by 88 Energy to review the Hickory-1 stimulation. The modelling firm, which specialises in shale oil plays, will review flow design and optimise a strategy for the company ahead of a horizontal well at its existing Franklin Bluffs gravel pad location.

Management says following post-flow test analysis and the announcement of a contingent resource estimate, it plans to progress a farmout arrangement for the Phoenix project’s eventual development.

A strategic partner for future drilling and development will be targeted for early next year, with 88 Energy saying potential commercial production within two to three years at Phoenix is possible if planning and testing goes according to expectations.

The advanced Phoenix oil and gas play covers some 62,324 acres and is favourably located along the northern landward margin – the north slope – of Alaska, south of Prudhoe Bay. Northwards along the east-west Alaskan continent margin, major producing oilfields include Point Thomson, Prudhoe Bay, Kuparak, Oogaruk and Western North Slope.

88 Energy retains a 75 per cent interest in the Phoenix project, which it shares in a joint venture (JV) with private Texan oil and gas company Burgundy Xploration.

Burgundy has historically funded more than US$25 million ($37.4 million) into Phoenix during the life of the project and has committed a further US$350,000 ($524,000) in the near term in return for 88 Energy’s goodwill over a previous standstill agreement between the JV partners.

88 Energy says Burgundy’s plans for a public listing are “progressing well”. Following a data review by Burgundy, advanced discussions are underway on a potential free-carry arrangement at Phoenix for 88 Energy, whereby the former would provide for all anticipated 2025/26 work programs including the drilling, completion and extended flow testing of a horizontal well on the Dalton Highway, in return for additional working interest in the project.

Any further deal is contingent upon Burgundy raising the capital required. However, following the recent US$350,000 commitment, 88 Energy has agreed to a further extend negotiations and the standstill arrangement over Phoenix.

88 Energy believes there is still untapped oil potential at depth within Pheonix. Utilising petrophysics and downhole wireline logging techniques in the Hickory-1 well, management identified a third hydrocarbon-bearing pay zone at depth.

The deepest horizon, the Basin Floor Fan (BFF), contains a gross best estimate (2C) contingent resource of 250 million barrels of oil equivalent.

The recently-discovered light oil-producing USFS and SMD-B reservoirs are at shallower depths overlying the BFF. Multiple stacked reservoirs appear to enhance the commercial opportunities available for development and production – especially in light of the excellent existing infrastructure of the nearby Dalton Highway and Trans-Alaskan Pipeline System.

The company should be well on its way towards planning commercialisation at Phoenix following oil sample results coming back soon and the expected release of an independent contingent resource later this year. That makes for a solid amount of news flow for an oil and gas junior, with plenty more expected from its emerging oil exploration play in Namibia.

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