TIDM88E
RNS Number : 0355I
88 Energy Limited
12 April 2022
This announcement contains inside information
12 April 2022
88 Energy Limited
Project Longhorn - Texas Oil and Gas Production Update
Highlights
-- Project Longhorn production in excess of 400 BOE per day
gross (approx. 70% oil) at end of March.
-- Over 30% increase in production rates since the acquisition completed in mid-February 2022.
-- Successful completion of first planned capital-efficient work-over in March.
-- Second work-over currently underway and a third to be executed immediately thereafter.
-- 88 Energy benefiting from recent increases to oil price,
further strengthening the cash returns from the high-margin oil
production within the Project Longhorn portfolio.
-- First cash distribution received in March (approx. A$0.6 million net of OPEX / CAPEX).
88 Energy Limited (ASX:88E, AIM:88E, OTC:EEENF) ( 88 Energy or
the Company ) is pleased to provide an update on operations at its
recently acquired Project Longhorn conventional oil and gas
production assets in the proven Permian Basin, onshore Texas, U.S.
88 Energy has a circa 73% average net working interest in these
established production assets, which have independently certified
net 2P reserves of 2.05 MMBOE.
In March 2022, the Operator of the Longhorn production assets,
Lonestar I, LLC , successfully completed the first of a series of
capital-efficient work-overs planned after the completion of the
Longhorn acquisition. This work-over was completed on time and on
budget and has delivered an immediate increase to the total oil and
gas production rates of the project.
Production from the Longhorn wells exceeded 400 BOE per day
gross (over 300 BOE per day net and approx. 70% oil) at the end of
March 2022. This represents an increase of over 30% since the
completion of the acquisition in mid-February 2022. The production
increase provides additional direct exposure to the higher WTI oil
price environment and accelerates pay-back on both the acquisition
of the assets and the capital investment in the work-overs.
Project Longhorn has exceptionally low operating costs (lifting
costs), which provides high margins from production. First cash
receipts from Project Longhorn were received by 88 Energy in March
2022, which comprised a payment of approximately A$0.6 million (net
to 88 Energy and net of OPEX/CAPEX).
Project Longhorn remains on track to complete the targeted seven
capital development activities this year, which is expected to
approximately double current production rates by the end of
CY2022.
The acquisition of Project Longhorn in Q1 CY2022 represents 88
Energy's first move into producing oil and gas assets and is in
line with the Company's strategy to build a successful exploration
and production company. This initial step has been undertaken in a
measured fashion via the purchase of a non-operated working
interest with a single basin focus. Project Longhorn contains well
understood geology with low technical risk and provides near-term
upside via low-cost field development opportunities.
88 Energy Managing Director and CEO, Ashley Gilbert,
commented:
"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."
Project Longhorn - conventional onshore oil and gas in Texas
88 Energy acquired the Project Longhorn assets in February 2022.
Longhorn is located in the attractive and proven Permian Basin, and
consists of a total landholding exceeding 1,300 net acres. The
assets comprise 9 leases with 32 producing wells and associated
infrastructure. Lonestar I, LLC retains an approximate 24% net
working interest in the assets and, through an affiliate will
remain Operator. The remaining working interests are retained by
pre-existing joint venture partners.
As part of the acquisition, 88 Energy has agreed to a low-cost
work program for CY2022 that includes seven work-overs. These
initiatives are expected to approximately double production rates
by the end of CY2022.
The acquisition of a working interest in Project Longhorn
delivers 88 Energy immediate cashflow, as well as further low-cost
capital development upside providing appealing forecast
economics:
-- Gross capital development activities costing: from US$0.7
million to US$1.4 million depending on the type of drilling or
work-over performed.
-- Target development IRRs: 75% to 400% depending on the type of drilling or work-over performed.
-- Target capital expenditure payback: 7-18 months depending on
the type of drilling and completion performed and future oil
prices.
-- Target break-even WTI oil price: US$21/bbl - US$28/bbl
depending on the type of drilling or work-over performed.
Gross (100%) and Net Entitlement Reserves to 88 Energy (73%
average net working interest) have been independently assessed by
Odin Reservoir Consultants Pty Ltd as at 31 December 2021 as
follows:
Table 1: Project Longhorn Reserves (barrels of oil equivalent;
millions)
1P 2P 3P 1P 2P 3P
====== ====== ====== ===== ===== =====
2.78 3.46 4.00 1.64 2.05 2.33
====== ====== ====== ===== ===== =====
Further information related to these Reserves is provided in
Appendix 1 of the announcement notified by the Company on 21
February 2022.
Reserves Cautionary Statement
Oil and gas reserves and resource estimates are expressions of
judgment based on knowledge, experience and industry practice.
Estimates that were valid when originally calculated may alter
significantly when new information or techniques become available.
Additionally, by their very nature, reserve and resource estimates
are imprecise and depend to some extent on interpretations, which
may prove to be inaccurate. As further information becomes
available through additional drilling and analysis, the estimates
are likely to change. This may result in alterations to development
and production plans which may, in turn, adversely impact the
Company's operations. Reserves estimates and estimates of future
net revenues are, by nature, forward looking statements and subject
to the same risks as other forward-looking statements.
A image showing the Project Longhorn location can be viewed in
the pdf version of this announcement, which is available on the
Company's website www.88energy.com :
Media and Investor Relations:
88 Energy Ltd
Ashley Gilbert, Managing Director
Tel: +61 8 9485 0990
Email:investor-relations@88energy.com
Finlay Thomson, Investor Relations Tel: +44 7976 248471
Fivemark Partners , Investor and Tel: +61 410 276 744
Media Relations Tel: +61 422 602 720
Andrew Edge / Michael Vaughan
EurozHartleys Ltd Tel: +61 8 9268 2829
Dale Bryan
Cenkos Securities Tel: +44 131 220 6939
Neil McDonald / Derrick Lee
Glossary
Bbl = barrels Mbo/Mbbl = thousand barrels of
Bcf = billion cubic feet oil
Bcfg = billion cubic feet of gas MMbo/MMbbl = million barrels of
Boe = barrels of oil equivalent oil
Bopd = barrels of oil per day Mboe = thousand barrels of oil
Btu = British Thermal Units equivalent
mcfg = thousand cubic of gas MMboe = million barrels of oil
mmcfg = million cubic feet of equivalent
gas Mcf = thousand cubic feet
mcfgpd = thousand cubic feet of MMcf = million cubic feet
gas per day mmbtu = million British Thermal
mmcf = million cubic feet Units
psi = pounds per square inch
UoM = unit of measure
WTI = West Texas Intermediate
crude oil price, quoted in US$
per barrel
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END
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