88 Energy Limited

Update on June 2018 Activities: 88 Energy Limited (ASX: 88E) is a small cap company with the market capitalization of $111.16 Mn as of July 19, 2018. The stock price surged up 5% after the company gave the update on the operations for its projects located on the North Slope of Alaska. According to the release, Icewine#2 HRZ Shale Flow Test has re-commenced at the Icewine#2 well to determine the productivity of the unconventional HRZ shale, utilizing a velocity string and artificial lift. Further, it stated that the recent results support the potential economic viability of the HRZ shale play and are within the range of outcomes achieved at other early stage unconventional plays, despite not achieving a flow rate that is representative of the capability of the reservoir. Moreover, the Joint Venture was designed for the suspension of operation to maximize the flexibility for the future use of the wellbore that includes the drilling of a horizontal side-track with a multi-stage stimulation. The Yukon 3D seismic survey was on fast-track to the possible benefit from an available seismic crew in the latter part of the 2018 acquisition season. Final processed products are expected in Q4 2018.


Icewine 3D Survey (Source: Company Reports)

On the other hand, the group has recently entered into a collaborative agreement with Otto Energy and Red Emperor to expand its position in Alaska, North Slope by acquiring the majority of Great Bear's working interest in four leases comprising the Western Blocks (ADL 391718; ADL 391719; ADL 391720; ADL 391721). The objective of this collaborative deal is to gain significant opportunity in terms of more exposure in the North Slope site. In consideration to this, the Consortium Partners will provide a performance bond to the State of Alaska of US$3.0 Mn by 31 July 2018; and drill an exploration well in the Western Block leases by 31 May 2019. In turn, the Consortium Partners will provide several considerations to Great Bear such as the Free carry Great Bear for a 10% working interest in the leases for the initial test well, and also provide an option for Great Bear to acquire a further 10% working interest prior to the spud of the initial test well by paying the pro-rata share of all costs of the initial test well. Meanwhile, the stock price has fallen 54.55 per cent in the past three months and trading at nearly 52-week low level. Hence, we maintain our “Hold” recommendation on the stock at the current market price of $ 0.021, considering the aforesaid facts.

 
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