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Squeaky-bum time for 88 Energy investors as Icewine-2 hiatus draws to a close

It remains to be seen whether Icewine-2 programme can be turned around, but results in the coming days could be pivotal for the AIM-quoted share.
oil workers
Icewine-2 is supposed to provide a production test for the HRZ shale play

Investors in 88 Energy Ltd (LON:88E,ASX:88E) will be starting the week with fingers tightly crossed, with hopes that a restart of operations at the Icewine-2 well, in Alaska, can reignite what has in recent weeks been a lame share.

88 Energy’s AIM quoted stock plummeted in July on news that Icewine would see a six-week hiatus, as a remedial step to (hopefully) boost the recovery of fracking fluids from the well.

In late afternoon trading today. 88 Energy shares were up 9.6%, or 0.2p at 2.28p.

Icewine-2 was the explorer’s first well to be fracked, and it was supposed to provide a pivotal test of the production potential in the recently confirmed HRZ shale play.

Everything appeared to be going to plan, until the group found that the two HRZ zones it had fracked were connected (previously they were believed to be separate) and subsequent flow back operations saw low recoveries of fracking fluid – and as a result the hydrocarbons had not flowed prior to the hiatus.

88 Energy’s plan was to shut-in the well for six weeks. This initiative, designed to allow pressure to build and imbibition (soaking) to occur. The process has been effective in other plays by allowing frack fluid to be absorbed, displacing water that may be blocking oil and gas molecules from being able to flow through the reservoir.

Reopening Icewine-2

Last week, 88 Energy told investors that it would open up the Icewine-2 well again on Monday August 21.

Prior to shut-in, the well had produced around 16% of the fluid that was injected during fracking.  

Investors will now be eagerly awaiting news from Icewine, to see whether the remediation has worked or whether the well’s problems continue.

It remains to be seen whether the delay is a red-flag against the project, or whether in the passage of time it will be chalked up as part of the learning process in what remains an unchartered shale play.

The project, if it eventually proves successful, remains in its infancy, and plainly the company has much to learn as it tries to unlock an estimated 1bn-plus barrel prize.

Confirmation sought

The Icewine-2 appraisal well was designed to confirm the geological findings of the first hole, which had confirmed the presence of hydrocarbon bearing HRZ shale.

Success with the Icewine-1 well provided the basis of some big and potentially valuable resources.

That first well had laid out a whole new US shale play and, buoyed by this success, 88 Energy moved quickly to significantly expand its footprint in the surrounding area.

With Icewine-2, the idea was to take the important next steps of fracking and flow testing the HRZ shale. The intention was to prove that the potentially vast oil resource could be accessed and extracted at commercially viable rates. It was a litmus test for the HRZ’s future.

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