This announcement contains inside information

23 June 2023

88 Energy Limited

Hickory-1 Flow Testing Program and Post Well Analysis Update

Highlights

·   Multiple zones in Hickory-1 scheduled to be tested, all expected to flow based on reservoir characteristics

·   Permitting and planning commenced, with the flow testing program scheduled to begin as early as possible during the 2023/2024 Alaskan winter operational season

·   Rig selection expected to be concluded imminently for Hickory-1 flow tests

·   Post-well analysis of cores, mud gas isotubes and wireline data is ongoing; initial results encouraging with good correlation to migration and thermal maturity models for Project Phoenix

88 Energy Limited (ASX:88E, AIM:88E, OTC:EEENF) (88 Energy or the Company) is pleased to provided an update in relation to the Hickory-1 flow testing program at Project Phoenix on the North Slope, Alaska.

Hickory-1 Flow Testing Program

The Hickory-1 well is currently cased and suspended ahead of the upcoming flow testing program, which is scheduled to commence as early as possible in the 2023/2024 winter operational season. The flow test and well stimulation program is being developed in consultation with flow test design experts, who are utilising available regional information in combination with a detailed evaluation of the drilling and wireline logging data from Hickory-1.

One aspect of the flow testing design that is of particular importance is the choice of fluids used to stimulate the reservoir. The chemical composition of these fluids can interact with certain clay types in the reservoirs, thus having significant implications for each reservoir's performance and the stimulation operation. The Company is working with technical consultants to determine the optimal fluids to be used to stimulate the reservoir in conjunction with the overall flow test program design to ensure the best possible outcomes.

Program planning is on schedule and will include rigorous technical and economic optimisation prior to finalisation. Rig selection and contract negotiation is expected to be concluded imminently and key long lead items required are being ordered.  

Hickory-1 Drilling and Wireline Program

Hickory-1 intersected multiple hydrocarbon-bearing zones across all primary and secondary pre-drill targets and identified the new Upper Slope Fan System reservoir. The 2023 Hickory-1 drilling and wireline program delivered the following key outcomes:

·    Confirmed presence of multiple hydrocarbon-bearing pay zones across all pre-drill targets, in addition to the newly identified Upper SFS reservoir;

·    Approximately 450 feet of estimated net pay calculated from wireline data over all pay zones, with gross pay estimated to be over 2,000 feet;

·    Average total porosity of 9-12% across all zones, with key target zones in the Upper and Lower SFS exhibiting between 11-16% total porosity; and

·    Reservoir quality and thickness met or exceeded pre-drill expectations, with higher-than-expected porosity in the SFS and BFF, as well as increased total gross reservoir, total net reservoir, and total net pay.

A summary of the pre-drill assessment and post-drill observations is outlined in Tables 1 and 2 below.

Table 1: Hickory-1 exploration well pre-drilling assessment

Table 2: Hickory-1 exploration well initial post-drilling observations

Preliminary petrophysical comparison of prospective zones in Hickory-1 against the interval that flowed oil in Pantheon's Alkaid-1, suggests favourable potential for successful flow of hydrocarbons from multiple zones in the Hickory-1 well.

Pantheon's wells on the adjacent northern acreage (Alkaid-1, Alkaid-2, Talitha-A and Theta West-1) have all flowed 35 to 40⁰ API oil from similar sandstones, with testing confirming reservoir deliverability of light, sweet oil (refer Pantheon public releases 7 February and 21 February 2022).

Hickory-1 Post Well Analysis

Post well analysis is ongoing with results from the testing programs anticipated to be fully completed and received in early Q3 2023. The summary below provides an overview of the planned program of post well analysis of results and pre-planning for flow testing:

Geological Analysis 

·        Including refining the depositional model and thin sections analysis 

Geophysical Analysis 

·        Refining current interpretations, update AVO analysis +/- seismic inversion to integrate Hickory-1 shear data 

Routine and Special Core Analysis 

·        Including porosity and permeability testing to calibrate petrophysical models 

Geochemical Analysis 

·        Including High Resolution Gas Chromatography and mud gas carbon isotope analysis 

Geomechanical Analysis 

·        Azimuthal rock property analysis including strength testing for stimulation modelling  

Flow Testing Planning 

·        Stimulation modelling and design  

·        Tender for services and award 

Mudgas isotubes results were analysed from samples collected at 100-foot intervals and at all significant mud gas peaks throughout the well.  Thermal maturity data from the isotubes show all Phoenix reservoirs cluster around 1.0 % Ro, coincident with a light oil generative source rock. The Vitrinite reflectance results are further supported by reservoir pyrolysis tests conducted on side wall core plugs from a separate lab facility. Figure 4 below shows that all valid reservoir tests plot in the interpreted "oil window" with a general trend of increasing maturity with depth. Finally, the interpretive "wetness" plot of the mud gas isotube data also supports oil-only phase interpretation across all Hickory-1 reservoirs with an average of 15% (as a rule of thumb, Oil >10% and condensate <10%).  Results correlate well with the Company's migration models and understanding of thermal maturity across Project Phoenix. Finally, the laboratory's staff geochemist remarked that "[Hickory's] mud gas hydrocarbon contents are almost all greater than 10 000 ppm which are indicative of strong shows".

This announcement has been authorised by the Board.

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 Phoenix

Project Phoenix (88E 75.2% WI) is located on the central North Slope of Alaska and encompasses approximately 82,846 gross acres. It is situated on-trend to recent discoveries by Pantheon Resources Plc (LSE: PANR) in multiple, newly successful play types across top, slope and bottom-set sands of the Mid Schrader Bluff, Canning and Seabee formations. Hickory-1 results and independent mapping have demonstrated that these plays extend into the Phoenix acreage.

Project Phoenix holds an estimated unrisked conventional total of 647MMbbl of prospective oil resources (pre-drilling, mean unrisked, net to 88E), independently assessed by Lee Keeling and Associates (LKA) in Q3 2022 (see 88E ASX release dated 23 August 2022). The acreage was significantly de-risked by the recent Pantheon drilling and flow tests on their adjacent acreage to the North, coupled with data from Icewine-1 well logs (encountered 380 ft of net oil pay within SMD sands) and a modern 3D seismic data set (FB3D).

Figure 3: Project Phoenix lease area, including mapped play fairways, Franklin Bluffs 3D area and planned Hickory-1 well location.

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

1.    These pre-drilling resources estimates are net to 88 Energy and have been calculated using a 75.227% working interest and a 16.5% royalty.

2.    The unrisked means, which have been arithmetically summed, are not representative of expected total from the prospects and implies a success case in all reservoir intervals. 88 Energy cautions that the arithmetically summed 1U estimate may be a conservative estimate and the arithmetically summed 3U estimate may be optimistic when compared to a statistical aggregation of probability distributions.

3.    COS represents the geological chance of success as assessed by 88 Energy and reviewed and endorsed by LKA. 

4.    Prospects are subject to a phase risk (oil vs gas). The pre-drilling chance of oil has been assessed as 100% for all targets except for the Kuparuk Formation which has been assessed as 70%.  Phase risk has not been applied to the unrisked numbers.

5.    The Prospective Resources have not been adjusted for the chance of development. Quantifying the chance of development (COD) requires consideration of both economic 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 outside the knowledge of LKA they must be used with caution.

6.    Please refer to ASX announcement dated 23 August 2022 for further details in relation to the prospective resources estimate and associated risking with Phoenix.

·    It should be noted that the prospective resources were calculated prior to the drilling of Hickory-1.