88E Flows Light Oils - Discovery Confirmed

Our US oil & gas Investment 88 Energy (ASX: 88E) just confirmed a discovery at its Hickory-1 well on the North Slope of Alaska.

88E flowed light oils from its Upper SFS reservoir at ~70 barrels of oil per day.

Before today, that specific reservoir had never been tested before - not by 88E or $495M capped neighbour Pantheon Resources.

Today, 88E confirmed a “light oil discovery” from the Upper SFS - which is especially important because the reservoir was an unexpected surprise when 88E drilled Hickory-1 in early 2023.

Based off today’s results, 88E will now look to declare a maiden contingent resource across both the Upper and Lower SFS reservoirs.

How do today’s results stack up against our expectations?

We published our expectations for 88E’s flow test results in our last 88E note: What Success Looks like - 88E’s Pathway to Commercialisation

Our expectations were based around the flow rates 88E’s neighbour Pantheon Resources was getting at its wells immediately to 88E’s north.

Today’s result sits right in the middle of our base case expectation at 70 BOPD.

(Source)

The results also sit in line with other vertical wells drilled by 88E’s much larger neighbour Pantheon Resources.

Pantheon across its three tests produced between 45 and 108 barrels of oil per day.

Pantheon is currently capped at $495M whereas 88E is capped at $125.6M.

Most of the market will be focused on the flow rate numbers in isolation, but we think it's worth considering the overall context…

88E’s current flow test is from a vertical well which means flow rates will naturally be lower than the horizontal wells drilled on the North Slope where flow rates can be >1,000 barrels of oil per day.

Horizontal wells have the potential to increase flow rates by ~6-12x.

So in theory 88E’s Upper SFS reservoir could potentially flow at ~420 to 840 barrels of oil per day from a horizontal well.

The basic schematic below shows why horizontal wells have stronger flow rates then vertical wells - primarily because they capture a bigger area of a reservoir:

What’s next for 88E?

Flow test across the SMD-B reservoir 🔄

Now 88E will transition over to testing the SMD-B reservoir.

The SMD-B is a reservoir which 88E’s neigbour Pantheon has tested in the past - during its flow test Pantheon managed to produce at ~45 barrels of oil per day.

So we are hoping for an improvement on those numbers from 88E.