88 Energy oil well reaches total depth with good early shows

ASX-listed oiler, 88 Energy, has logged multiple hydrocarbon shows over several prospective oil zones whilst drilling its highly anticipated “Charlie-1” oil appraisal well on Alaska’s oil-rich North Slope. The well has now reached total depth and the company said its hydrocarbon zones are looking remarkably like the oil zones identified in a nearby offset well.  

With drilling operations now complete, wireline logging is underway at the project that according to the company, could be housing a staggering 480 million barrels of oil, net to 88 Energy.  The well has reached 3,386 metres and is not far from an old well drilled by BP back in 1991.

The Perth-based company used ‘logging-while-drilling’ tools to give early indications of the quality of the reservoir rocks and the potential fluid types in the reservoir targets and it is now moving ahead with wireline logging operations to ascertain the full significance of the shows recorded while drilling.

Management said the wireline logging operations at Charlie-1 well should take about seven days to complete and will provide enough data for some initial interpretations.  The Company also confirmed that COVID-19 has had no impact on the program to date and appropriate measures have been put in place to ensure that any potential future impacts are being proactively addressed.

The Charlie-1 oil test well is actually a step-out appraisal well to the old BP-operated oil exploration well, “Malguk-1” drilled some distance to the south of Charlie-1.  Malguk-1 encountered oil shows in multiple horizons back in 1991 but ran into operational difficulties and was never tested. 

The oil shows at Malguk-1 were accompanied by elevated mud gas readings and high electric log resistivity readings, all of which are consistent with oil pay.  The operating difficulties encountered by BP stopped the company from testing the multiple zones of oil shows before the winter drilling season saw the window closed.

88 Energy’s technical team re-evaluated the old wireline logs from Malguk-1 and determined that four of the zones of interest in that well had ‘bypassed oil pay’ so the Charlie-1 well is considered an appraisal test of those zones.  The company also acquired 3D seismic over the prospect area and the interpretation of that new data has added another three prospect horizons to test at the same well location.

88 Energy forecasts that the total gross mean prospective resource across the multiple stacked targets to be intersected by Charlie-1 is up to a massive 1.6 billion barrels.

After four years of working up Charlie-1 to a ‘drillable status’ and finding a farm-in partner to cover much of the cost of the well, 88 Energy’s moment of truth is arriving.

That farm-in partner, UK-based independent oil and gas producer, Premier Oil, has plenty of horsepower too, delivering some 80,000 barrels of oil equivalent production per day last year.  Premier is picking up the first US$23m of the well, after recently farming into Charlie-1 as its entry deal into the prolific North Slope of Alaska. 

As operator, 88 Energy retains a 30% working interest in the Charlie prospect, whilst Premier Oil has farmed into the project for a 60% stake. The remaining 10% working interest is currently in the hands of Burgundy Xploration LLC.

It will likely take a couple of winter operating seasons for 88 Energy to see any cash flow from a success at Charlie but if it checks out, those cashflows may well be substantial.

With the financial risk largely covered by Premier and the reporting of hydrocarbon shows while drilling, 88 Energy’s tail is starting to move skyward now and the results just might put a spring in its step.

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