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88 Energy Limited - Quarterly Report

RNS Number : 4472M
88 Energy Limited
21 January 2021
 

 

This announcement contains inside information

 

88 Energy Limited

 

Operations Update

 

88 Energy Limited ("88 Energy" or the "Company", ASX:88E, AIM 88E) is pleased to provide the following update related to its operations on the North Slope of Alaska.

 

Highlights

·    Mobilisation of snow road construction equipment to the Merlin-1 drill site has commenced

·    Spud of Merlin-1 remains on schedule for mid-late February 2021

Targeting independently assessed gross mean prospective resource of 645 million barrels*

·    Lease AA095899 in the recent Coastal Plain lease sale formally awarded

Peregrine Drilling Imminent - Mobilisation Underway

Permitting and planning associated with the drilling of Merlin-1 at 88 Energy's Peregrine Project, located in the NPR-A region of the North Slope of Alaska, remains on schedule for a mid to late February spud. Schedule permitting, the Harrier-1 well will commence drilling once operations have completed at Merlin-1.

 

Mobilisation of snow road construction equipment to the Merlin-1 location has commenced. To date 34 miles of a total ~90 miles of the snow road to Merlin-1 have been constructed.

 

88 Energy is carried for the first US$10m of an estimated US$12.6m total expenditure, in exchange for a 50% working interest in the project, as part of a farm-out agreement (see announcement dated 4th December 2020).

 

*Please refer to the XCD Energy ASX release dated 20 May 2020 for full details with respect to the Prospective Resource estimate and associated risking.

 

Cautionary Statement: The estimated quantities of petroleum that may be potentially recovered by the application of a future development project relate to undiscovered accumulations. These estimates have both an associated risk of discovery and a risk of development. Further exploration, appraisal and evaluation are required to determine the existence of a significant quantity of potentially movable hydrocarbons.

 

Coastal Plain Lease Award

Lease AA095899 was formally awarded, effective 1 January 2021. The lease is considered highly prospective for oil and gas as several prospects on the Central North Slope side of the boundary are interpreted to extend into this area. It is considered likely that a significant portion of these oil pools may be accessed without surface access within the Coastal Plain area.

 

About Project Peregrine - Imminent Drilling

Project Peregrine is located in the NPR-A region of the North Slope of Alaska and encompasses ~195,000 contiguous acres. It is situated on trend to recent discoveries in a newly successful play type in topset sands in the Nanushuk formation. 88 Energy has a 100% working interest in the project that will reduce to 50% post the completion of funding as part of a recent farm-in, whereby 88E is carried on the first US$10m (of an estimated US$12.6m total cost) for the Merlin-1 well.

 

Project Peregrine and Recent Nanushuk Discoveries

The Merlin-1 well is scheduled for spud in mid-late February 2021 and is targeting 645 million barrels of gross mean prospective resource* to commence immediately following completion of operations at Merlin-1, subject to results from Merlin-1 and weather. Harrier-1 is targeting gross mean prospective resource of 417 million barrels*. Harrier-1 is expected to cost ~US$7m.

 

*Please refer to the XCD Energy ASX release dated 20 May 2020 for full details with respect to the Prospective Resource estimate, associated risking and applicable Cautionary Statement.

 

Each of the Merlin and Harrier prospects is located on trend to an existing discovery, in the same play type (Nanushuk topsets). This has de-risked the prospects considerably and resulted in a relatively high independently estimated geologic chance of success.

 

The below graphics can be found in the pdf version of this announcement available from the Company's website;

-     Mobilisation to Merlin-1

-     Project Peregrine and Recent Nanushuk Discoveries

-     Independent Resource Assessment

-     Merlin-1 - on trend to large Willow oil field

 

 

Media and Investor Relations:

 

88 Energy Ltd

Dave Wall, Managing Director       

Tel: +61 8 9485 0990

Email: admin@88energy.com

 

Finlay Thomson, Investor Relations

 

Tel: +44 7976 248471

EurozHartleys Ltd

Dale Bryan

 

Tel: + 61 8 9268 2829

Cenkos Securities                                       

Neil McDonald/Derrick Lee

 

Tel: + 44 131 220 6939

Pursuant to the requirements of the ASX Listing Rules Chapter 5 and the AIM Rules for Companies, the technical information and resource reporting contained in this announcement was prepared by, or under the supervision of, Dr Stephen Staley, who is a Non-Executive Director of the Company. Dr Staley has more than 35 years' experience in the petroleum industry, is a Fellow of the Geological Society of London, and a qualified Geologist/Geophysicist who has sufficient experience that is relevant to the style and nature of the oil prospects under consideration and to the activities discussed in this document. Dr Staley has reviewed the information and supporting documentation referred to in this announcement and considers the resource and reserve estimates to be fairly represented and consents to its release in the form and context in which it appears. His academic qualifications and industry memberships appear on the Company's website and both comply with the criteria for "Competence" under clause 3.1 of the Valmin Code 2015. Terminology and standards adopted by the Society of Petroleum Engineers "Petroleum Resources Management System" have been applied in producing this document.

 

 

Appendix 5B

Mining exploration entity or oil and gas exploration entity
quarterly cash flow report

Name of entity

88 Energy Limited

ABN


Quarter ended ("current quarter")

80 072 964 179


31 December 2020

 

Consolidated statement of cash flows

Current quarter
$A'000

Year to date (12 months)
$A'000

1.

Cash flows from operating activities

-

-

1.1

Receipts from customers

1.2

Payments for

(69)

(170)


(a)   exploration & evaluation


(b)   development

-

-


(c)   production

-

-


(d)   staff costs

(505)

(1,477)


(e)   administration and corporate costs

(447)

(1,317)

1.3

Dividends received (see note 3)

-

-

1.4

Interest received

-

2

1.5

Interest and other costs of finance paid

(568)

(2,237)

1.6

Income taxes paid

-

-

1.7

Government grants and tax incentives

85

259

1.8

Other (XCD - redundancy payments)

-

(177)

1.9

Net cash from / (used in) operating activities

(1,504)

(5,118)


2.

Cash flows from investing activities

-

-

2.1

Payments to acquire or for:


(a)   entities


(b)   tenements

(2,033)

(2,692)


(c)   property, plant and equipment

-

-


(d)   exploration & evaluation

(1,985)

(38,394)


(e)   investments

-

-


(f)    other non-current assets

-

-

2.2

Proceeds from the disposal of:

-

-


(a)   entities


(b)   tenements

-

-


(c)   property, plant and equipment

-

-


(d)   investments

-

-


(e)   other non-current assets

-

-

2.3

Cash flows from loans to other entities

-

-

2.4

Dividends received (see note 3)

-

-

2.5

Other  -      Joint Venture Contributions

-     XCD Energy takeover costs

-     XCD Energy open cash

7,612

-

-

32,183

(869)

435

2.6

Net cash from / (used in) investing activities

3,594

(9,337)


3.

Cash flows from financing activities

9,870

14,870

3.1

Proceeds from issues of equity securities (excluding convertible debt securities)

3.2

Proceeds from issue of convertible debt securities

-

-

3.3

Proceeds from exercise of options

-

-

3.4

Transaction costs related to issues of equity securities or convertible debt securities

(478)

(840)

3.5

Proceeds from borrowings

-

-

3.6

Repayment of borrowings

(399)

(399)

3.7

Transaction costs related to loans and borrowings

-

-

3.8

Dividends paid

-

-

3.9

Other (provide details if material)

-

-

3.10

Net cash from / (used in) financing activities

8,993

13,631


4.

Net increase / (decrease) in cash and cash equivalents for the period



4.1

Cash and cash equivalents at beginning of period

4,681

15,903

4.2

Net cash from / (used in) operating activities (item 1.9 above)

(1,504)

(5,117)

4.3

Net cash from / (used in) investing activities (item 2.6 above)

3,594

(9,337)

4.4

Net cash from / (used in) financing activities (item 3.10 above)

8,993

13,631

4.5

Effect of movement in exchange rates on cash held

(918)

(235)

4.6

Cash and cash equivalents at end of period

14,845

14,845

 

5.

Reconciliation of cash and cash equivalents
at the end of the quarter (as shown in the consolidated statement of cash flows) to the related items in the accounts

Current quarter
$A'000

Previous quarter
$A'000

5.1

Bank balances

14,845

4,681

5.2

Call deposits

-

-

5.3

Bank overdrafts

-

-

5.4

Other (provide details)

-

-

5.5

Cash and cash equivalents at end of quarter (should equal item 4.6 above)

14,845

4,681

a)           

6.

Payments to related parties of the entity and their associates

Current quarter
$A'000

6.1

Aggregate amount of payments to related parties and their associates included in item 1

13

6.2

Aggregate amount of payments to related parties and their associates included in item 2

-

Note: if any amounts are shown in items 6.1 or 6.2, your quarterly activity report must include a description of, and an explanation for, such payments.

6.1       Payments relate to Director and consulting fees paid to Directors. All transactions involving directors and associates were on normal commercial terms.

 

7.

Financing facilities
Note: the term "facility' includes all forms of financing arrangements available to the entity.

Add notes as necessary for an understanding of the sources of finance available to the entity.

Total facility amount at quarter end
$US'000

Amount drawn at quarter end
$US'000

7.1

Loan facilities

16,008

16,008

7.2

Credit standby arrangements

-

-

7.3

Other (please specify)

-

-

7.4

Total financing facilities

16,008

16,008




7.5

Unused financing facilities available at quarter end

-

7.6

Include in the box below a description of each facility above, including the lender, interest rate, maturity date and whether it is secured or unsecured. If any additional financing facilities have been entered into or are proposed to be entered into after quarter end, include a note providing details of those facilities as well.

On the 23rd of March 2018, 88 Energy Lt's 100% controlled subsidiary Accumulate Energy Alaska Inc entered into a US$ 16.5 million debt refinancing agreement to replace the existing Bank of America debt facility. The key terms to the facility are noted in the ASX announcement released on 26th of March 2018. The facility is secured by available Production Tax Credits.

 

8.

Estimated cash available for future operating activities

$A'000

8.1

Net cash from / (used in) operating activities (item 1.9)

(1,504)

8.2

(Payments for exploration & evaluation classified as investing activities) (item 2.1(d))

(1,985)

8.3

Total relevant outgoings (item 8.1 + item 8.2)

(3,490)

8.4

Cash and cash equivalents at quarter end (item 4.6)

14,845

8.5

Unused finance facilities available at quarter end (item 7.5)

-

8.6

Total available funding (item 8.4 + item 8.5)

14,845




8.7

Estimated quarters of funding available (item 8.6 divided by item 8.3)

4.3

Note: if the entity has reported positive relevant outgoings (ie a net cash inflow) in item 8.3, answer item 8.7 as "N/A". Otherwise, a figure for the estimated quarters of funding available must be included in item 8.7.

8.8

If item 8.7 is less than 2 quarters, please provide answers to the following questions:


8.8.1     Does the entity expect that it will continue to have the current level of net operating cash flows for the time being and, if not, why not?


Answer: N/A

 


8.8.2     Has the entity taken any steps, or does it propose to take any steps, to raise further cash to fund its operations and, if so, what are those steps and how likely does it believe that they will be successful?


Answer: N/A

 


8.8.3     Does the entity expect to be able to continue its operations and to meet its business objectives and, if so, on what basis?


Answer: N/A

 


Note: where item 8.7 is less than 2 quarters, all of questions 8.8.1, 8.8.2 and 8.8.3 above must be answered.

 

Compliance statement

1        This statement has been prepared in accordance with accounting standards and policies which comply with Listing Rule 19.11A.

2        This statement gives a true and fair view of the matters disclosed.

 

 

Date:                21st January 2021

 

 

Authorised by:  By the Board

(Name of body or officer authorising release - see note 4)

 

Notes

1.          This quarterly cash flow report and the accompanying activity report provide a basis for informing the market about the entity's activities for the past quarter, how they have been financed and the effect this has had on its cash position. An entity that wishes to disclose additional information over and above the minimum required under the Listing Rules is encouraged to do so.

2.          If this quarterly cash flow report has been prepared in accordance with Australian Accounting Standards, the definitions in, and provisions of, AASB 6: Exploration for and Evaluation of Mineral Resources and AASB 107: Statement of Cash Flows apply to this report. If this quarterly cash flow report has been prepared in accordance with other accounting standards agreed by ASX pursuant to Listing Rule 19.11A, the corresponding equivalent standards apply to this report.

3.          Dividends received may be classified either as cash flows from operating activities or cash flows from investing activities, depending on the accounting policy of the entity.

4.          If this report has been authorised for release to the market by your board of directors, you can insert here: "By the board". If it has been authorised for release to the market by a committee of your board of directors, you can insert here: "By the [name of board committee - eg Audit and Risk Committee]". If it has been authorised for release to the market by a disclosure committee, you can insert here: "By the Disclosure Committee".

5.          If this report has been authorised for release to the market by your board of directors and you wish to hold yourself out as complying with recommendation 4.2 of the ASX Corporate Governance Council's Corporate Governance Principles and Recommendations, the board should have received a declaration from its CEO and CFO that, in their opinion, the financial records of the entity have been properly maintained, that this report complies with the appropriate accounting standards and gives a true and fair view of the cash flows of the entity, and that their opinion has been formed on the basis of a sound system of risk management and internal control which is operating effectively.

 

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