ASX-listed 88 Energy has added a historic oil project to its armoury of petroleum assets picking up the old Umiat oil discovery that sits immediately south of its Project Peregrine on the North Slope of Alaska where planning is well advanced for the spudding of the Merlin-1 well next month.
The Perth-based oil and gas explorer acquired Umiat from Malamute Energy and Renaissance Umiat for an overriding 4 per cent royalty interest and assumption of the liability for the abandonment of two Umiat wells drilled by Linc Energy in 2013-14. 88 Energy says the approximate cost to abandon the two wells is US$1 million.
The undeveloped Umiat project, which spans an area of about 7,135 hectares across two leases, hosts gross 2P reserves independently estimated at 123.69 million barrels of oil by Houston, Texas-headquartered oil and gas consulting firm Ryder Scott five years ago.
Of the overall total, 94 million barrels of oil are attributable to 88 Energy’s 76 per cent net revenue interest.
Umiat was discovered in the mid-1940s by the US Navy with 11 appraisal wells drilled by 1953, several of which were tested. Umiat-5 flowed 268 barrels a day on a three-month test and Umiat-8 had a peak flow rate of 5.9 million cubic feet of natural gas per day during a four-day test.
According to 88 Energy, little follow-up work was undertaken at Umiat until 2013-14 when Linc drilled two wells, Umiat-18 and Umiat-23H, with the latter registering a maximum flow rate of 800 barrels a day and a sustained flow rate of 200 barrels a day.
The company now plans to conduct a full field review of Umiat to work out at what oil price a possible stand-alone development may be deemed economic. In addition, in the event of a discovery at Project Peregrine, the company says Umiat may contribute significant value to any development.
Last month 88 Energy finalised a farm-out agreement with Alaska Peregrine Development Company, who can earn 50 per cent of Project Peregrine via the payment of US$11.3 million towards the cost of the Merlin-1 well.
The well has an estimated total cost of US$12.6 million. 88 Energy says it will contribute the balance of US$1.3 million and retain the other 50 per cent stake in the Peregrine field, with the joint venture partners to subsequently equally share the costs associated with the project.
Based on an independent assessment completed last year by ERC Equipoise, Project Peregrine contains a gross un-risked prospective resource of 1.6 billion barrels of oil equivalent across three prospects including Merlin and Harrier.
The hydrocarbon-bearing Brookian Nanushuk Formation reservoirs have been the source of renewed exploration interest on the North Slope of Alaska, in the wake of a gush of oil discoveries made there in the past five or six years.
88 Energy says Merlin and Harrier are interpreted to be reservoired in the same Nanushuk sequences as ConocoPhillips’ recent oil discoveries in the region, the Willow field and Harpoon prospect, respectively.
The Peregrine JV is targeting a gross un-risked prospective resource of 645 million barrels from the Merlin-1 well.
Our operational activity at Project Peregrine has provided 88 Energy with a unique position from which to acquire the Umiat oil field at an opportunistic price point. The asset has potential to add significant value for shareholders, possibly as a stand-alone development but certainly in the event that there is a material discovery in the imminent Project Peregrine drilling program.
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