This announcement contains inside information

16 August 2021

88 Energy Limited

Merlin-1 well confirms light oil with appraisal well planned for Q1 2022

Highlights

·   Merlin-1 post well evaluation successfully demonstrates presence of oil in the N20 and N18 targets; plus a new target (N19) was penetrated;

·   41 feet of net log pay interpreted across the three reservoir intervals;

·   Geochemical analysis determined oil with an estimated API gravity between mid-30 to low-40 API (light oil);

·   Merlin-1 results incorporated into an updated Project Peregrine independent unrisked net entitlement mean total Prospective Resource estimate of 1.6 billion barrels* with Merlin-2 geological chance of success assessed as 56%; and

·   Merlin-2 appraisal drilling locations identified to the east of Merlin-1 where enhanced reservoir thickness and quality expected, with appraisal drilling planned for Q1 2022.

88 Energy Limited (ASX:88E, AIM:88E, OTC:EEENF) (88 Energy or the Company) is pleased to announce that the post-well evaluation of the Merlin-1 well (which was drilled in March 2021 to a depth of 5,267 feet) has successfully demonstrated the presence of oil in multiple stacked sequences in the Cretaceous Nanushuk Formation (N20 and N18 targets).  An additional new target, the N19 sand, that was not previously mapped, also returned a strong hydrocarbon signature following geochemical analysis.

Wireline analysis and core data correlate to 41 feet of net log pay across the 3 reservoir intervals. In addition, results of the post well formation evaluation, including core and Reservoir Description Tool (RDT^TM) data have determined the presence of moveable hydrocarbons. Geochemical analysis of the cores has determined the presence of a light oil with an estimated API gravity between mid-30 to low-40 API.

Given the up-dip location of the Merlin-1 well with respect to the N20, N19 and N18 reservoirs, hydrocarbon shows and sand quality at this location was consistent with pre-drill expectations.  88 Energy has identified appraisal drilling locations to the east of the Merlin-1 well, closer to the shelf break, where enhanced reservoir thickness and quality are expected.

Post well analysis has also determined that the N14 horizon, one of the targets of the Merlin-1 well, was not intersected, as it is believed to lie below the total depth of the well.  The N14 prospect remains a target of interest and the Merlin-1 well may be re-entered in order to test this prospective target as part of the Company's future drilling activities at Project Peregrine.

An independent oil and gas reservoir evaluation consultancy, ERCE Australia Pty Ltd (ERCE), has conducted an updated assessment of the Project Peregrine prospective resources post the Merlin-1 well results.  The updated prospective resource estimates and risking assessments for Project Peregrine (see Table 1) are noted below:

Table 1: Revised Project Peregrine Prospective Resources

1. The Prospective Resources presented here are the result of a risked probabilistic aggregation of the individual stacked prospective layers in each prospect; the success case estimates present the distribution of possible outcomes in the event that at least one prospective layer is successful.

2. Unrisked mean total is not representative of the expected total from the four prospects and assumes a success case in all four wells.

3. COS represents the geological chance of success of at least one of the stacked layers which comprise each prospect. This excludes phase risk which ERCE has estimated to be 70% oil (30% gas). The Prospective Resources have also not been adjusted for the chance of development, which is estimated by 88 Energy to be 60% (including phase risk), ERCE sees this as reasonable based on the data available. Quantifying the chance of development (COD) requires consideration of both economic contingencies and other contingencies, such as legal, regulatory, market access, political, social license, internal and external approvals and commitment to project finance and development timing. As many of these factors are out-with the knowledge of ERCE they must be used with caution..

4. Gross Prospective Resources include off-block volumes over which 88 Energy has no mineral rights. Net working interest Prospective Resources are based on the on-block volumes and 88 Energy's 100% working interest. Net entitlement Prospective Resources are the net working interest Prospective Resources less royalties payable to others. The net entitlement interest to 88 Energy is calculated as 84.7% of net working interest after deduction of state royalty (12.5%) and overriding royalty interests (1.3%and 1.5%).

*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.

88 Energy is the operator of Project Peregrine and holds a 100% working interest in the acreage.

A detailed summary presentation of the Merlin-1 well results and analysis can be found in the attached pdf 

http://www.rns-pdf.londonstockexchange.com/rns/7196I_1-2021-8-16.pdf

88 Energy Managing Director, Ashley Gilbert, commented:

"We are thrilled with the results from the Merlin-1 exploration well.  This is the best well we've drilled on the North Slope of Alaska to date, with light oil detected in the Nanushuk across three separate horizons.  Whilst we have a lot more work to do, the Merlin-1 well has confirmed an active petroleum system in the Peregrine acreage.  Results of this significance, together with the magnitude of the opportunity, merit a pace of evaluation that facilitates further drilling and seismic in upcoming winter seasons."

"The company is advancing planning for an appraisal well following the Merlin-1 well, which is scheduled for the Alaskan winter drilling window in Q1 2022."

Additional information related to Merlin-1:

Merlin-1 is located in the NPR-A region of the North Slope of Alaska with the following co-ordinates X:196695 Y: 5666711 Zone 4 NAD 27. 88 Energy has a 100% working interest in the well and is Operator. The well was spud on 10^th March 2021 and was drilled to a Total Depth of 5,267'. Multiple prospective pay zones in sandstone reservoir between depths of 3,400' and 5,100' have been identified. Fluids recovered via downhole sampling from three Lower Grandstand units has confirmed, through laboratory analysis, to be primarily water, though carbon isotope analysis of these fluids deemed the respective source rocks to be in the oil window. Note: the most prospective zones in the Merlin-1 well, namely N20, N19 and N18, were not able to be sampled due to operational issues.

Media and Investor Relations:

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.

About Project Peregrine

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.

The Merlin-1 well was spudded in March 2021 with drilling operations completed in April 2021. Interpretation of results was completed in August 2021 with post well evaluation successfully demonstrating the presence of oil in N20, N19 and N18 targets, with 41 feet of net log pay across the three reservoir intervals noted and geochemical analysis determined the oil to have an estimated API gravity between mid-30 to low-40 API (light oil).

A second well, the Merlin-2 appraisal well, is planned to be drilled in Q1 2022 as a follow up well to the Merlin-1 exploration well which is targeting a net entitlement mean Prospective Resource of 652 million barrels (unrisked).