88 Energy’s move to Texas is putting some colour into the ASX-listed company’s bank account after it banked the first A$600,000 cheque in March from its Project Longhorn. The company has lifted production from the Permian Basin project by over 30 per cent to more than 400 barrels of oil equivalent per day after the first of its planned capital-efficient workovers.
88 Energy has widened its focus from Alaska with the US$9.7 million cash/shares purchase of an approximate 73 per cent stake in Project Longhorn that was producing around 300 boed when acquired in February.
The company said at the time it was aiming to double production from the 32-well spread in the nine leases in the Longhorn project by the end of the year with a series of workovers. It is now conducting its second workover with the third to follow immediately afterwards.
The company said the first workover was completed on time and budget and delivered an immediate increase to production, 70 per cent of which is from oil. Importantly the A$600,000 banked for the month of March was after accounting for both operational and capital expenditure.
Newly minted company MD Ashley Gilbert has moved 88 Energy towards producing oil and gas assets rather than chasing unconventional, high-impact wells in Alaska.
Interestingly the Alaskan assets may still pay off for 88 Energy, albeit from conventional reservoirs where its neighbours have found significant success and which an independent consultant has mapped as extending into 88’s acreage.
The company’s initial move into the world-class Permian Basin gave it a single basin focus with well understood geology, low technical risk and significant near-term upside via low-cost field development opportunities such as the current workover program.
88 Energy Managing Director, Ashley Gilbert said: “88 Energy is pleased with the production performance at Project Longhorn, especially in this high oil price environment. We are also highly encouraged by the successful delivery by the operator of the first planned work-over, as well as the continued progress of the agreed capital development program for 2022. This program is expected to result in strong cash flow outcomes and further direct exposure to the current high energy prices.”
“88 Energy is in a solid financial position, with zero debt and a healthy cash balance that is expected to be further strengthened with projected cash flows from Project Longhorn’s Texas production assets.”
Most of the existing Longhorn wells have been in production for several years with output in the 2021 financial year totalling around 110,000 barrels of oil equivalent resulting in an estimated, unaudited net profit before tax of US$1.6 million.
The Project Longhorn partners also inked an MoU to work jointly towards landing more prospective development acreage in the very fluid Permian Basin M&A market, creating the potential for expanding the Longhorn footprint.
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