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88 Energy primed for catalysts as investors look to testing restart in Alaska

The Alaska-focussed explorer is preparing to restart the Icewine-2 well testing programme which aims to be a commercial test of the HRZ shale discovery
oil and gas operations
The restart is slated for June 11

Anticipation is rising for investors in 88 Energy Ltd (LON:88E, ASX:88E) now that a date has been set for the restart of the Icewine-2 well programme in Alaska.

88 Energy has revealed that the well testing, which was suspended over the Alaskan winter, is due to resume on June 11.

It will be a closely watched programme that is designed to de-risk the HRZ shale play as it is a test of the well’s commercial potential.

Now that the market has a date, it is likely that speculative buyers will return to the AIM-quoted stock.

The programme opens up the possibility of significant upside for the 88 Energy share price, although challenges, prior to the winter shut-down, meant that there may still be some lingering apprehension.

READ: 'Pivotal' period ahead for 88 Energy across its conventional and shale interests

As it gets back to the project after the Alaskan winter, the company added that site clearance works have begun at the Franklin Bluffs pad and it is undertaking final preparations to mobilise the test equipment.

"The team remains busy on several fronts; however, focus is now clearly on the imminent recommencement of production testing at the Icewine-2 well,” said Dave Wall, 88 Energy managing director.

In a recent update, Wall said the previously completed fracking programme had gone very well - in fact better-than-expected - however, the programme ran into some difficulties.

Timing hindered original Icewine-2 programme

“We did get caught out in terms of timing,” the 88 Energy managing director said in an interview with Andrew Scott.

“We ended up having to shut the well in for the cold arctic winter because we hadn’t finished flowing back the required amount of fluid that we needed to from the reservoir. Of course, this is fluid that we injected into the reservoir [through the fracking programme].

“The plan is, in early June, we will recommence the flow back, we’ll use nitrogen lift to accelerate the rate at which we can draw fluid from the reservoir and then hopefully - and all indications suggest that this should happen – we’ll get hydrocarbons flow.

“And what happens after that will depend on how high the rate of flow we can achieve.”

Wall added: “Internally and externally we’ve given our expectation that 100 barrels of oil per day is the yardstick where we’d measure success.”

The 88 Energy boss also talked about the possibility of a partnership deal for the shale, albeit he said that any deal would depend upon the outcome of testing operations and future work.

“What we always say is that we’ll do the best thing for creating wealth for our shareholders, so [we’ll do] whatever is accretive.

“One of the things we’ve also been communicating and guiding in recent months is that we have spent a lot of shareholders' money on this project, Project Icewine, and predominantly in relation to the HRZ [shale discovery], but, also on the conventional.

“We think that it is appropriate that we start to validate the value that we’ve created, by bringing in a third party to help bring the project forward and also underpin the valuation of the company by having a ‘look through’ transaction which will show that someone else from industry also agrees that we’ve created significant value.”

Conventional exploration and seismic

In addition to the Icewine-2 well and the HRZ shale play, the group is also investigating the conventional potential across the exploration portfolio.

The conventional work will be driven by a 3D seismic survey. Data processing is presently underway.

Early data products are anticipated for the Project Icewine area by ‘mid-year’, the company said, meanwhile, data from a separate prospective area referred to as the ‘Yukon Gold area is anticipated in the fourth quarter.

Insights from the Icewine area data are expected to provide the basis for a formal farm-out process in the future.

Funded

Last month, 88 Energy brought in A$17mln of new equity funding, with both UK and Australian brokers arranging a share placing.

It supplemented the group’s cash resources, which in March stood at around US$10.5mln, and supports the next phase of work in Alaska.

The significantly oversubscribed placing saw a total of 460mln new 88 Energy shares sold at a price equivalent to 2p each.

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