88 Energy doubles down on Texas oil play
88 Energy has expanded its footprint in Texas after agreeing to pick up an interest in Permian Basin production and development assets with best-estimate reserves of 0.68 million barrels of oil equivalent.
The newly-acquired ground has nine producing wells that pumped out 6200 barrels of oil equivalent (BOE) gross last year – with an estimated net profit before tax for the project of about $300,000. The current average production from the wells is about 26BOE per day gross, which is 17BOE per day net to 88 Energy, of which about 75 per cent is oil.
In February last year the company acquired ground comprising the Bighorn phase one assets. It was followed by further ground acquisition in July, about 5km to the south of Bighorn phase one, which is named Bighorn phase two.
It has now also added five new leases over a patch of ground named Bighorn phase three, which is about halfway between Bighorn phase one and two. The whole project has been named project Longhorn.
88 Energy says it expects total Longhorn production to be between 600 and 675 BOE per day, at 75 per cent oil, by the end of next year – up from about 370 BOE per day last month at 61 per cent oil.
That boost will be achieved through five recompletions on existing wells and the possible drilling of two new wells next year. The company says it will favour the cheaper workovers ahead of the new drills, which are budgeted at about $2.23 million net.
The Longhorn project now sits at 10.6 square kilometres, comprised of 18 leases with 49 producing wells and associated infrastructure. There are also two injection wells, which the company will assess for restoration to facilitate the disposal of produced water.
88 Energy says the purchase price of US$350,000 (AU$521,000) net was paid in cash by its joint venture (JV) subsidiary Bighorn Energy to Endeavor Energy Resources. Bighorn Energy will acquire interests in Bighorn phase three of between 51 and 100 per cent working interest of the leases and wells and Texan company Lonestar I will operate the project through an affiliate.
Management says the development opportunities within project Longhorn consist of multiple potentially oil-bearing intervals that have been successfully developed as reserves. The upside has been identified and classified as contingent or prospective resources, which have lower confidence and will be quantified in the future.
An independent assessment of the total reserves in the Bighorn three area by PJG Petroleum Engineers in September quoted a best technical estimate (2P) of 1.2 million BOE, equating to 0.68 million BOE net to 88 Energy. The gross high-side reserve estimate (3P) is 1.49 million BOE, which is 0.84 million BOE net to the company. The low-side gross reserve estimate (1P) is 1 million BOE, or 0.57 million BOE to the company.
The Bighorn phase one and two areas have a combined 2P gross reserve estimate of 5.82 million BOE, which is 2.98 million BOE net to 88 Energy.
As well as its Texan oil ground, the company is leaning into one of the final frontiers of petroleum exploration in Namibia’s Owambo Basin, grabbing a 45 per cent interest in 18,500 square kilometres of onshore acreage last month.
Owambo exploration to date has identified an extensive lead portfolio, including 10 structural closures with soil sampling picking up elevated hydrocarbon levels, giving more confidence for the presence of a working petroleum system.
The African acreage is massive. It is about 70 times bigger than 88 Energy’s Phoenix project in Alaska and 12 times the size of its entire Alaskan portfolio.
Last month, the company revealed a solid addition of 250 million BOE in its best estimate of gross contingent reserves within the basin floor fan reservoir at its Phoenix project in Alaska, following a review of offset well data and a seismic tie to successful well tests nearby.
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