88 Energy provides operationla update on Project Icewine
Thursday, Sep 21, 2017
88 Energy Limited is pleased to provide an update on Project Icewine, located onshore North Slope of Alaska.


• Shut-in on 18th September (AK time) ahead of suspension for 2017/2018 winter season
• Continued gas flow of ~2mcf/d with a trend of increasing heavy components since last update
• Forward plan to install narrower tubing and execute artificial lift in April/May 2018 to remove frac fluid

Icewine#2 Operations Update

The Icewine#2 well was shut-in on 10th July to allow for imbibition and pressure build up to occur within the HRZ shale. Flow testing re-commenced on 31st August at 10:26 (AK time), and was suspended on 18th September (AK time).

The Joint Venture having assessed the current rate of fluid recovery and, despite several encouraging trends, made the decision to shut-in for the Winter period due to logistical reasons associated with ongoing testing in Arctic conditions. The main issue is that of freezing of the borehole fluid, predominantly fresh water from the frac, over the ~1,300ft permafrost zone due to the low rates of fluid flow observed towards the end of the current test phase. Additionally, winterized equipment deemed suitable for executing efficient artificial lift of the frac fluid is currently unavailable. The forward plan is to optimise and re-initiate the flow testing, utilising artificial lift, in April/May 2018 when weather conditions are more favourable.

Regarding the encouraging trends observed, a summary is included below:

• Decrease in C1 (most recent average <91% vs 93% previously) and increase in C2+ components as a percentage of the gas flow, potentially trending towards the interpreted phase of hydrocarbon in the reservoir
• Increase in the gas / water ratio such that as the water flow rate has decreased over time, the gas rate has remained relatively constant. It is still interpreted that additional fluid is required to be lifted off the formation before effective connectivity to the reservoir can be achieved with representative flowback.

The Icewine#2 well is located on the North Slope of Alaska (ADL 392301). 88 Energy Ltd (via its wholly owned subsidiary, Accumulate Energy Alaska, Inc) has a 77.55% working interest in the well. The well was stimulated in two stages over a gross 128 foot vertical interval in the HRZ shale formation, from 10,957-11,085ft TVD, using a slickwater treatment comprising 27,837 barrels of fluid and 1,034,838 pounds of proppant.

The well was initially flowed back on a 6/64 inch choke and was reduced to a 4/64 inch choke after 26 hours to maintain pressure. Approximately 370 barrels of frac fluid had been recovered as at 1730 on 3rd September (AK time) at an average rate of 100 barrels per day. The choke was subsequently stepped up to 8/64 inch at 1800 10th September (AK time) as the overall declining pressure gradient versus time improved, indicating potential pressure support. The choke was gradually increased to 10/64 and then 12/64 in order to lower the bottom hole pressure significantly below the reservoir pressure to increase the draw down on the formation. Consequently, the well head pressure fell below that required to support flow through the separator (~35psi) and the well stopped flowing naturally on 18th September 1630 (AK time), as expected, and was shut in. To date, the cumulative amount of stimulation fluid produced from both testing periods is 5,533 barrels, 19.9% of fluids injected. Since the shut-in, significant pressure build up has already occurred, with current wellhead pressure over 739psi. This is consistent with the interpreted overpressure of the HRZ and is an encouraging sign.

A total of 16.57mcf of gas was measured as production since the 9th September, with an average flow rate of 1.79mcf per day. Results to date are consistent with several other early stage unconventional plays that have subsequently been proven successful; however, it is too early to tell the significance of these results for the HRZ play. As previously advised, the Joint Venture is of the view that greater than 30% of the frac fluid needs to lifted from the formation before gaining connectivity with the reservoir and achieving representative flowback.

A detailed presentation with the conclusions from the testing of the HRZ to date as well as planned operations for 1H2018 will be released to the market shortly.

Bank of America Debt / Alaska Credits Clarification

The current Bank of America debt balance is US$17.7m. The State will pay back US$1.19m of this imminently, based on US$77m in total payouts, representing $0.16 in the dollar for each outstanding dollar owed as at the beginning of the year, calculated on issued certificates at that time. The debt balance with Bank of America will consequently be reduced to US$16.5m. It is anticipated that all outstanding 88E cash certificates will be issued prior to mid-2018. The State will continue to pay back the outstanding credits on a yearly basis, with a minimum floor of paid out monies. Alaska remains one of the wealthiest States in the USA, with close to US$100 billion in savings and vast natural resources as well as a burgeoning fishing and tourism industry. Risk related to pay back of the credits in full is deemed very low. The Company is also in a strong position in relation to its debt as the estimated amount of cash credits that will be owed is ~US$23m, significantly in excess of the US$16.5m debt.

Managing Director, Dave Wall, commented: “Whilst it is frustrating to have to wait over the Winter season for the continued flow test of the HRZ, there are several encouraging signs observed from this most recent phase of testing. Given the early stage nature of our appraisal program, we need to have patience and remain open minded as there is no benchmark against which to track the progress of this particular unconventional play.”

For more information, please visit: http://88energy.com/

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