88E coring towards “potentially huge HRZ prize” in Alaska

88 Energy Limited (ASX, AIM: 88E), an Australian junior oil explorer operating in Alaska, has published its latest drilling update for its flagship Icewine Project.

Since spudding its first Icewine well in October 2015, 88E has now completed 11,180 metres of drilling from the 11,600 metres originally planned. Its Alaskan Icewine asset amounts to 212,489 acres (860 sq. km) where 88E currently holds a 78% stake with both conventional and unconventional oil potential.

88E reports that “the core was successfully acquired in the HRZ interval from 11,075′ – 11,165′ with a 96% recovery factor”. Additionally, oil shows with “cut and fluorescence were observed in cuttings returned to surface”.

However, once the core was laid down and cut into 3′ intervals for transportation and additional analysis carried out, no cut or fluorescence was observed in these samples.

The “contradiction” will be further investigated as part of the planned evaluation of the core drilling program, according to 88E.

In a statement to the ASX, 88E said, “At this stage, it is too early to make any definitive statements regarding the thermal maturity of the HRZ at the lcewine-1; however, it is likely that a gas/condensate phase has been encountered, which bodes well for the thermal maturity model at Project lcewine, in a general sense.”

The HRZ remains the primary target at lcewine with results seen so far being very encouraging although definite results will not be available until a full evaluation has been completed over the coming months. Preliminary petro physical analysis of the logs acquired in the intermediate section from 3,500′ – 8,500′ are encouraging for Brookian conventional potential at lcewine-1 and across the leasehold.

In addition, 88E reports that conventional zones between 4000-4400m of its coring programme, comprise a series of sandstone sequences peaking at 28% porosity. Preliminary petro physical analysis supports oil saturations in these sandstone units “above 60% and up to 75%”.

Managing Director of 88 Energy Limited, Mr. Dave Wall commented: “Preliminary results remain supportive of the HRZ play at Project lcewine; however, evaluation has only just commenced and uncertainty remains high. The 96% recovery factor of the first core in the HRZ interval provides us with an excellent opportunity to evaluate the potentially huge HRZ prize over the coming weeks.”

Mr. Wall also said, “Early interpretation of the conventional potential at Project lcewine has been high-graded with evidence of significant amounts of oil and excellent reservoir in the region. Acquisition of 30 seismic will be crucial to unlocking this potential and, with the success of the recent placement and share purchase plan, the Company [88E] is well placed to execute its seismic strategy in the near term.”

Alaska operating conditions

Generous exploration incentives are provided by the State of Alaska with up to 85% of exploration expenditure in 2015 being cash refundable, dropping to 75% in mid-2016 and thereafter down to 35%. Other operational benefits in Alaska include:

• 10 year primary term for state leases
• No mandatory relinquishment of leases
• 16.5% royalty

The foreseeable future

Moving forward, 88E plans to finalise its current coring operation before conducting the statutory “blow out preventer test” and deciding on whether to deepen the well to intersect the Kuparuk sands portion of Icewine-1. A second HRZ core is currently underway with results expected early next year.

88E’s primary objective is an untested, unconventional liquids-rich shale play in a prolific source rock, the HRZ shale (Brookian Sequence), that co-sourced the largest oil field in North America; the giant Prudhoe Bay Oil Field Complex. Internal modelling and analysis indicates that Project lcewine is located in a high liquids vapour phase sweetspot analogous to those encountered in other Tier 1 shale plays such as the Eagle Ford in Texas, USA.

The Brookian conventional play is proven on the North Slope with a 2013 US. Geological Survey (USGS) estimating the remaining oil potential to be around 2. 1 billion barrels just within the Brookian sequence. Additional conventional potential exists in the deeper Kuparuk sands and the lvashuk Formation.

The commercial implications of these hydrocarbon bearing Brookian sandstones will be “fully investigated following the completion of the [Icewine-1] well” says 88E. The indications of significant volumes of oil in the system and excellent reservoir are highly encouraging on a regional basis, which will now require more authoritative 3D seismic analysis.

The drilling programme at Icewine-1 is on course to deliver first insight into the conventional prospectivity of 88E’s acreage, but will need detailed 3D seismic surveying to be conclusive.