88 Energy Limited (88 Energy) has provided an update on Project Icewine, located onshore North Slope of Alaska.
• Sundry application for stimulation approved
• Logistic planning on schedule to perform stimulation ~17th June
• Production testing remains on schedule for late June / early July
Icewine#2 Operations Update
The sundry application for execution of the main stimulation work at Icewine#2 has been approved by the Alaska Oil and Gas Conservation Commission (“AOGCC”). Based on the interpretation of data collected in both Icewine#1 and Icewine#2, the final design submitted was based on two stimulation stages comprising of multiple perforations in each stage. One stage will be executed in the lower HRZ and the other in the upper HRZ. These two zones were chosen largely based on areas with similar stress profiles, coincident with where hydrocarbon concentration is highest.
The upper zone will be flowed back for up to two weeks before the lower zone is opened up and comingled with the flow from the upper zone. An additional two weeks of clean up will occur for the comingled flow before the Company may be in a position to report hydrocarbon flow rates.
Production testing remains on schedule for late June / early July.
Further updates will be made as and when appropriate throughout the drilling / testing program.
Managing Director, Dave Wall, commented: “The Company would like to thank its shareholders for supporting the Project Icewine team in getting us to the cusp of flow testing a potentially significant resource play in the HRZ shale.
The work done to date by a dedicated group of employees and consultants has been to a high standard utilising the latest best practice techniques in industry. This increases the chance of a successful execution of the program but does not increase the likelihood of success for the play itself. The remaining key uncertainties, namely effective creation of complex fractures and gas to oil ratio, cannot be resolved until the stimulation is executed.”
Pursuant to the requirements of the 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, Mr Brent Villemarette, who is a Non-Executive Director of the Company. Mr Villemarette has more than 30 years' experience in the petroleum industry, is a member of the Society of Petroleum Engineers, and a qualified Reservoir Engineer 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. Mr Villemarette has reviewed the information and supporting documentation referred to in this announcement and considers the prospective resource 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.
Project Icewine Overview
In November 2014, the Company entered into a binding agreement with Burgundy Xploration (BEX) to acquire a significant working interest (87.5%, reducing to 77.5% on spud of the first well on the project) in a large acreage position on a multiple objective, liquids rich exploration opportunity onshore Alaska, North America, referred to as Project Icewine. In June 2016, the gross acreage position was expanded to 271,119 contiguous acres (210,250 acres net to the Company). In December 2016 the Company successfully bid on additional acres. On award the Project Icewine gross acreage position will be further expanded to ~690,000 contiguous acres (~400,000 acres net to the Company assuming all rights are taken up).
The Project is located on an all year operational access road with both conventional and unconventional oil potential. The primary term for the State leases is 10 years with no mandatory relinquishment and a low 16.5% royalty.
The HRZ liquids-rich resource play has been successfully evaluated based on core obtained in the recently completed (December 2015) Icewine #1 exploration well, marking the completion of Phase I of Project Icewine. Phase II has now commenced, with drilling at the follow-up appraisal well, Icewine#2, commencing early 2Q2017. Production testing is scheduled to occur in mid-2017.
Significant conventional prospectivity has also been identified on recently acquired 2D seismic across the project acreage.
Generous exploration incentives are provided by the State of Alaska with up to 35% of net operating loss refundable in cash.
The primary objective is an untested, unconventional liquids-rich shale play in a prolific source rock, the HRZ shale (Brookian Sequence), that co-sourced the largest oil field in North America; the giant Prudhoe Bay Oil Field Complex. Internal modelling and analysis indicates that Project Icewine is located in a high liquids vapour phase sweetspot analogous to those encountered in other Tier 1 shale plays e.g. the Eagle Ford, Texas.
Recently acquired 2D seismic has identified large conventional leads at Project Icewine within the same Brookian petroleum system and shallow to the HRZ shale, including potential high porosity channel and turbiditic sands associated with slope apron and deepwater fan plays. The Brookian conventional play is proven on the North Slope; the USGS (2013) estimated the remaining oil potential to be 2.1 billion barrels within the Brookian sequence. Two recent discoveries in the Brookian have already exceeded these estimates, with Armstrong/Repsol discovering 1.4 billion barrels in 2015 and Caelus announcing a 2.5 billion barrel discovery in 2016. Additional conventional potential exists in the Brookian delta topset play, deeper Kuparuk sands and the Ivishak Formation.
A Prospective Resources Report by DeGolyer and MacNaughton, was commissioned by 88 Energy to evaluate the unconventional resource potential of Project Icewine in February 2016 and was released to the market on 6th April 2016.