88 Energy PLC steams ahead as it kicks off Merlin-1 drilling

What it owns

() is being expanded and repackaged through a merger with fellow Aussie listed, Alaska focussed explorer XCD Energy Ltd.

A paper transaction sees the creation of an explorer with a diversified portfolio on Alaska’s North Slope, with three distinct key areas: Project Icewine, Project Peregrine, and the Yukon licences.

It will have improved scale, market presence and funding capability, and share liquidity, according to AIM and ASX listed 88 Energy.

The new company will leverage 88 Energy’s geological and operational expertise, specific to the North Slope of Alaska – where it has drilled four wells and acquired several 2D and 3D seismic data.

Significantly, the adds fresh drilling opportunities which promise catalysts whilst 88 Energy continues to work on the progression of the existing discoveries, conventional and unconventional, which require further appraisal and de-risking works.

The new opportunities are in XCD’s Peregrine area. In May, this acreage was further bolstered by an updated evaluation by consultant ERC Equipoise (ERCE) which outlined 1.63bn barrels of mean prospective resources across three targets – Merlin, Harrier, and Harrier Deep.

The existing portfolio:

Project Icewine, Alaska

The operator on the majority of 528,000 contiguous acres onshore Alaska in proven oil province, of which 349,000 acres are net to 88 Energy through a 66% working interest, a 10-year leasehold and 16.5% royalty

The opportunity comprises unconventional acreage and conventional opportunity on the North Slope

Gold, Alaska

The award of 14,194 acres (100% 88 Energy); Contains historic oil discovery assessing 3D seismic

Western Blocks, Alaska

88 Energy Limited () earning 36% by paying 40% of costs for a commitment well on a 400MMbbl prospect; adjacent to recent discoveries

How it’s doing

The big news in March 2021 was the pudding of the company’s Merlin-1 exploration well in the North Slope area of Alaska.

The drill rig began drilling the well at 03:38 on March 10 and will initially be drilled to 1,500 feet at which point surface casing and blow-out preventer will be installed. This is due to take a week, before drilling then resumes down to a maximum target depth of around 6,000 feet. That phase of drilling will last for three to five days.

The well will subsequently be flow tested, subject to the initial results from wireline logging.

The firm also noted that its contribution to Merlin’s costs is expected to rise to around US$4mln, from prior estimates of US$1.4mln, with the company putting the blame on delays associated with US President Biden’s Executive Order, which impacted permitting, along with adverse weather.

It also highlighted that its cash position stands at around US$13mln, which more than covers its share of the drilling costs.

The company added that, given the operational delays, it is now considered unlikely that the proposed next well, Harrier-1, will be drilled this season.

The Merlin well effort was bolstered in February after the company said it had raised A$12mln (£6.7mln) in a share placing to support its ongoing evaluation of the conventional and unconventional prospectivity on the North Slope.

The firm said the new funds will also allow it to identify and exploit new opportunities in the region.