88 ENERGY LIMITED 88 Energy Limited (88 Energy or the Company) announced further successful flow test results from the Company's Hickory-1 discovery well, located in Project Phoenix on the North Slope of Alaska (88 Energy ~75% WI owner). SMD-B flow test results: A 20ft perforated interval in the SMD-B reservoir was stimulated via a single fracture stage comprising 226,967lbs of proppant volume. The well was cleaned-up and flowed for 84 hours in total, utilising nitrogen lift throughout the entire test period.
The average fluid flow rate over the duration of the flow back period was approximately 445 bbls/d, with choke sizes ranging from 8/64ths to 33/64ths. The SMD-B test produced at a peak estimated flow rate of ~50 bopd. Oil cuts varied throughout the flow back period, reaching a maximum of 10% oil cut.
The well produced at an average oil cut of 4% following initial oil to surface, with instantaneous rates observed during the 16-hour period varying as the well cleaned up. Some 70% of stimulation fluid had been recovered at the conclusion of the test at which time water salinity measurements indicated that stimulation fluid was still being recovered and the well was still cleaning up. Oil cut would be expected to improve once stimulation fluid was fully recovered.
Multiple oil samples were recovered, with measured oil gravities of between 38.5 to 39.5 API, representing a light crude oil. Importantly, the SMD-B zone flowed oil to surface with little to no measurable gas, representing a low GoR production rate. Pressurised oil samples collected during both the USFS and SMD tests will be transported to laboratories for further analysis.
The SMD-B flow test was concluded with sufficient information for the next steps, and the data recorded will assist 88E in optimisation and design processes in the next phase of advancement of Project Phoenix. Hickory-1 flow test unlocks broader Project Phoenix potential; USFS Recap: Two separate successful flow tests were conducted at Hickory-1, over the SMD-B and Upper SFS reservoirs. As previously announced, the deeper USFS reservoir was initially tested which produced the following results: A 20 ft interval was perforated in the Upper SFS reservoir which was then stimulated via a single fracture stage of 241,611 lbs proppant volume.
The zone flowed at a peak flow rate of over 70 bopd. Oil cuts increased throughout the flow back period as the well cleaned up, reaching a maximum of 15% oil cut. Once oil cut was established during the natural flow back period the well produced at an average oil flow rate of approximately 42 bopd during the natural flow back period.
Importantly, the USFS zone flowed oil to surface under natural flow, with flow back from other reservoirs in adjacent offset wells only producing under nitrogen lift. Multiple oil samples were recovered with measured oil gravities of between 39.9 to 41.4 API (a light crude oil). Additionally, some NGLs were produced during the USFS test, as was anticipated in the planning phase.
The presence of NGLs was demonstrated by samples from the flare line and by visible black smoke in the flare. The company anticipates NGLs produced to be at a similar rate to those observed during flow tests on adjacent acreage given the consistency of results observed between the USFS test and tests conducted on adjacent wells. It may be possible to estimate the amount of NGLs that were not measured in these tests, once fluid characterisation studies are completed in laboratory.
Historically, NGLs prices on the North Slope of Alaska have been similar to, or slightly below, light oil prices and are therefore considered highly valuable. Further work is required to quantify the exact volume of NGLs, which 88 Energy intends to include as part of a maiden certified Contingent Resource assessment at Project Phoenix for the SFS and SMD reservoirs. Forward plan: The Joint Venture will P&A the Hickory-1 well with any future appraisal and/or development activities at this location being via a long horizontal production well.
The rig and associated services are expected to be off-location within the next ten days. It is anticipated that the flow test will be concluded at an estimated cost of circa USD 14.5 million gross, due to the additional length of operations. 88 Energy now plans to undertake post-test studies, including fluid testing to characterise reservoir fluids, and downhole pressure and temperature data analysis to determine reservoir properties, at distances beyond the depth of investigation of the wireline logs.
These studies will then be integrated into existing data sets and models to refine appraisal and development plans for each reservoir, with pre-FEED studies expected to commence during the second half of 2024. Development of these reservoirs is anticipated to be via horizontal production wells, with numerous production analogues elsewhere demonstrating many multiple times the flow rates achieved from vertical wells. Additionally, horizontal developments are common practice on the North Slope of Alaska with Conoco Philips's Alpine and Kuparuk fields both utilising this technique.
Production rates in long horizontal production wells are typically multiples of 6 to 12 times higher than tested in vertical wells, as evidenced in many Lower 48 analogues. Project Phoenix also benefits from the ability to produce from multiple reservoirs concurrently in a development. Commercialisation options for Project Phoenix are to be advanced in parallel, including farm-out to a strategic development partner and/or early, capital-lite production given proximate infrastructure advantages (Hickory-1 is located right next to the Dalton Highway and TAPS).
In addition, the Company plans to work with independent geological consultants to secure a Contingent Resource estimate over the SMD and SFS reservoirs (complementing the previously announced Contingent Resource estimate over the BFF reservoir). Completion of these estimates is expected during the second quarter of 2024.
