88 Energy will earn a 45 per cent interest in 18,500 square kilometres of onshore petroleum acreage in Namibia’s Owambo Basin as the final part of a three-stage farm-in agreement.
The company’s staged entry into one of the globe’s final frontiers of petroleum jurisdictions represents a diversification from its Phoenix operation in Alaska, giving it the opportunity to earn a significant working interest with the potential for it to transition to future project operator.
The Namibian acreage (PEL 93) is currently operated by Monitor Oil and Gas Exploration Namibia (MELN) with a 75 per cent working interest. A private Namibian company, Legend Oil Namibia (Legend) holds a 15 per cent working interest and Namibian Government’s National Petroleum Corporation of Namibia (NAMCOR) holds the remaining 10 per cent.
Under the proposed farm-in agreement between Eighty Eight Energy Namibia (88EN) – a newly-formed, wholly-owned subsidiary of 88 Energy – and the other owners, a new joint operating agreement will be formed. It will allow 88 Energy to earn up to a 45 per cent working interest in PEL 93.
As part of that arrangement, the company will have to fund its share of agreed costs under the 2023-2024 work program, in addition to future work schedules. It says it anticipates the maximum total investment costs to be $29.3 million.
Stage one of the three-staged agreement will see 88 Energy pay Monitor $5.8 for past costs and a carry for next year’s work program, which includes about 250 line kilometres of 2D seismic acquisition. That will earn 88 Energy a 20 per cent working interest in PEL 93.
Stage two of the deal will see 88 Energy up its share of the working interest to 37.5 per cent by paying MELN up to the first $11.8 million of the first well gross cost. The company says that well may spud as early as the first half of 2025.
Stage three gives 88 Energy the option to fund the first $11.8 million of the second well gross cost to receive a further 7.5 per cent working interest, upping its total hold in PEL 93 to 45 per cent. Monitor will continue to operate the license.
88 Energy managing director Ashley Gilbert said: “The execution of this farm-in agreement with Monitor provides 88 Energy and its shareholders with a fantastic opportunity to earn a significant working interest in a very large scale, highly prospective, under-explored acreage position on attractive and logically staged commercial terms. While 88 Energy is continuing its focus on its existing Alaskan North Slope assets, PEL 93 provides a logical expansion of 88 Energy’s existing portfolio, with similar scale and potential that our shareholders are accustomed to.”
The company says a range of geophysical and geochemical techniques employed by Monitor at PEL 93 have identified an extensive lead portfolio, including 10 structural closures. Interestingly, soil sampling over the leads – a method usually reserved for mineral exploration – has picked up elevated hydrocarbon molecules, 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.
Dr Michael C. Daly, the executive vice-president of Exploration at BP, published an article following a talk at the Imperial College in London in September this year that nominated the sub-Saharan African basins, of which one is Owambo, as one of the last remaining onshore frontier basins globally. He said it had massive reserve potential that was broadly time and depositionally-equivalent to the Omans productive basins.
88 Energy made the news last week with a solid addition of 250 million barrels of oil equivalent (MMboe) in its best estimate of gross contingent reserves within the basin floor fan reservoir at its Phoenix project. That resource increase came from a technical review of offset well data and a seismic tie to successful well tests nearby.
The company’s diversification from Phoenix into frontier African exploration is an exciting opportunity with the potential for plenty of news flow in the coming months and years.
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By Andrew Duffy
