88E 88 Energy Limited

21 January 2025

QUARTERLY ACTIVITIES REPORT & 5B

For the quarter ended 31 December 2024

88 Energy Limited (ASX:88E, AIM:88E, OTC:EEENF) (88 Energy, 88E or the Company) provides this summary of activities for the quarter ended 31 December 2024. 

Highlights

Project Phoenix (~75% WI)

·      Positive Joint Venture Partner Progress:

Ø Burgundy Xploration LLC (Burgundy) settled US$1 million of a outstanding US$4 million cash call, demonstrating its commitment to the project.

Ø Burgundy reiterated its intention to provide a full carry for the anticipated CY25/26 work program including horizontal well drilling, fracturing costs and long term production test in exchange for an increased working interest.

·      Near-term Progress:

Ø Ongoing review by ResFrac to optimise future stimulation and flow design for a potential extended horizontal well test.

Ø Continued planning and design for an appraisal well in CY25/26.

Ø Studies underway into using the existing Franklin Bluffs gravel pad in order to reduce well costs.

Project Leonis (100% WI)

·      Strategic Acreage Expansion:

Ø Successful bidder on four (4) additonal lease blocks, to add to the existing Project Leonis acreage, signficantly increasing the project's scale and multi-zone exploration potential.

Ø Newly identified Canning prospect indicates significant resource potential, with an approximate areal extent of 43km² (~10,625 acres) and a thick reservoir succession of up to 336 feet.

Ø Formal award of the new lease blocks is expected H1 CY25.

·      Future Potential Well Test:

Ø Progressing permitting and planning for the Tiri-1 exploration well, targeting a Q1 CY26 spud.

Ø Farm-out process underway to secure funding for future drilling.

Namibia PEL 93 (20% WI)

·      Promising Initial Interpretation of new 2D Seismic Data:

Ø Identification of an initial suite of ten (10) significant independent structural closures within the PEL 93 licence area.

Ø High-quality seismic acquisition confirmed, with strong signal-to-noise ratios across all lines.

Ø Leads in the southern area feature substantial interpreted structural closures (some up to ~100km²) with clear hydrocarbon charge potential.

Project Longhorn (~65% WI)

·      Production Performance:

Ø Q4 CY24 production averaged 358 BOE per day gross (~74% oil), down from 391 BOE per day in Q3 due to an incident at the independently operated and owned gas plant.

·      Cash flow Contribution:

Ø A$0.4 million received in December 2024 for the Q4 CY24 period.  

Corporate

·     Cash balance at the end of the quarter of A$7.2 million

·      Staff costs for FY24 of A$1.5 million compared to A$2.8 million in CY23, representing a 46% reduction.

·      Corporate costs for FY24 of A$2.0 million compared to A$2.6 million in FY23, representing a 23% reduction.

Project Phoenix (~75% WI)

Project Phoenix is an oil-bearing conventional reservoir play identified during the drilling and logging of Icewine-1 and Hickory-1 and adjacent to offset drilling and testing. Project Phoenix is strategically located on the Dalton Highway with the Trans-Alaskan Pipeline System bisecting the acreage.

Background

The Hickory-1 discovery well was drilled in February 2023 and flow tested in Q1/Q2 CY24. Testing focused on the two shallower primary targets, the Upper SFS (USFS) reservoir, previously untested, and the SMD-B (SMD) reservoir. Each zone was independently isolated, stimulated and flowed oil to the surface either naturally or using nitrogen lift to facilitate efficient well clean-up. In September 2024, a contingent resource for the SMD-B, Upper SFS and Lower SFS reservoirs was issued by ERCE. This contingent resource was added to the pre-existing contingent resource in the BFF reservoir, issued by NSAI in Q4 CY23.

For full details of the test results please refer to the ASX announcements dated 2 April 2024 (USFS) and 15 April 2024 (SMD-B); For full details of the combined 2C Contingent Resource at Project Phoenix, please refer to the ASX announcement dated 18 September 2024.

Joint Venture Partner Progress

During the quarter, 88 Energy advanced discussions with joint venture partner Burgundy.  Burgundy has reaffirmed its commitment to Project Pheonix and expressed strong interest in providing a full carry to 88 Energy for the CY25/26 work program in exchange for an additional working interest in the project. The CY25/26 work program includes drilling and completing a horizontal test well at the Franklin Bluffs pad location, along with an extended well test on the SMD-B reservoir. 88 Energy is currently reviewing the terms of the proposal, which will be subject to further negotiations. Any proposed carry is subject to Burgundy raising the capital required through a near-term public listing. Further, Burgundy must pay its outstanding Hickory-1 cash call on 15 February 2025. There is no guarantee that any transaction with Burgundy will be completed and as such, 88E has stated its intention to launch a formal farm-out process to ensure progress continues, irrespective of the outcome of Burgundy's listing process. Burgundy settled US$1 million of a outstanding US$4 million cash call, in a strong demonstration of its commitment to the project.

Near Neighbour Activities

The Company is closely monitoring neighbouring leaseholder, Pantheon Resources PLC (Pantheon), following the successful spud of its Megrez-1 well in December 2024, ahead of an extended well test scheduled for Q1 CY25. Pantheon is targeting the Ahpun Eastern Topset reservoir. This test is a crucial step towards confirming the commercial viability and development potential of this reservoir. If successful, it would enhance the understanding of its production potential, further supporting the regional development potential and commercialisation pathways, which will positively impact on the Company's plans to commercialise Project Phoenix. 

Project Leonis (100% WI)

During December 2024, 88 Energy (via its wholly owned subsidiary, Captivate Energy Alaska, Inc) was announced as the successful bidder on four (4) additional leases, covering approximately 10,203 acres immediately adjacent to the existing Project Leonis leases³. The lease blocks were specifically targeted due to additional prospectivity identified and mapped within the deeper Canning Formation reservoir interval. Upon formal award, expected in H1 CY25, Project Leonis will comprise 14 leases, across 35,634 contiguous acres.

New Blocks create an Expanded Multi-Zone Opportunity of Significant Magnitude

The expansion of Project Leonis' acreage position and the addition of the Canning Formation reservoir are significant for 88 Energy. The Upper Schrader Bluff (USB) reservoir provides an attractive appraisal drilling opportunity, targeting a Prospective Resource of 381 MMbbls of oil (net mean, unrisked)^1,2. The USB formation is the same proven producing zone as found in nearby Polaris, Orion and West Sak oil fields to the north-west.

The addition of the Canning Formation as a secondary reservoir further enhances Project Leonis' multi-zone drilling potential. Volumetric analysis of the Canning Formation reservoir is underway and is anticipated to rival the USB Prospective Resources in magnitude. In parallel, AVO analysis for both the USB and Canning intervals continues, aiming to identify sweet spots and refine drilling locations for a potential exploration well in H1 CY26.

This multi-zone opportunity presents a compelling case for future exploration and potential development.

Guided by modern seismic re-evaluation and aided by a strategic location, Project Leonis is firmly positioned as a key asset in 88 Energy's portfolio.

Additional Prospectivity Identified: Canning Formation

Reprocessing and interpretation of the Storms 3D seismic data identified a significant geological feature attributed to basin-wide erosion during the Mid Campanian. The erosional event led to canyon-like scours within the Hue shale providing prominent accommodation space for the subsequent deposition of high-energy Canning Formation toe-of-slope turbidite sequences. These turbidites, which form a thick reservoir succession of up to 336 feet thick and have an aerial extent of 43km², represent a prospect of considerable scale. Notably, this feature is yet to be penetrated by offset wells in the immediate vicinity. However, oil shows, ("oil over shakers") and calculated pay was observed at the chronostratigraphic equivalent sequence in the Hemi Springs Unit 3 well. The corresponding Canning Interval in Hemi Springs Unit 3 has porosities of up to 28%, with the reservoir within the canyon-like feature anticipated to be greater. Analogous to the USB prospect, high net-to-gross turbidites are being produced from Hue Shale scours in Conoco Phillips' Tabasco field, just 23 miles to the north-west. Encouragingly, the Tabasco field outline bears a remarkable resemblance to the Canning prospect at Leonis.

Project Leonis: Forward Program

·      Fairweather LLC are engaged to plan and permit the Tiri-1 exploration well, which will target the USB and Canning reservoir zones at an optimal location within Project Leonis;

·      A comprehensive Quantitative Interpretation (QI) study commenced in Q3 CY24 to leverage the reprocessed Storms 3D seismic data. The primary objective of the study is to identify anomalous responses within the Canning, while the secondary aim is to pinpoint "sweet spots" within the Upper Schrader Bluff. Results from the AVO and inversion analysis are expected in early Q1 2025.

·      Analysis utilising the Storms 3D seismic data continues, focusing on refining exploration targets and identifying an optimal drilling location. The USB reservoir's mapped amplitude anomalies and fault-bound trapping mechanism highlight its robust technical case. Similarly, ongoing analysis of the Canning Formation will enhance the overall understanding of the acreage's potential.

·      Llamas and Bannister Energy Advisors Ltd (LAB) has been appointed to manage a relaunched and expanded farm-out process to attract new potential partners to the project. With the addition of the Canning prospect, 88 Energy believes Project Leonis is a compelling farm-in opportunity. 

Namibia PEL 93 (20% WI)

Namibia is recognised as one of the world's most prospective, under-explored onshore frontier basins, offering significant potential for large-scale hydrocarbon discoveries. Petroleum Exploration Licence 93 (PEL 93) situated in the Owambo Basin, spans an area more than 10 times the size of 88 Energy's Alaskan portfolio and over 70 times larger than Project Phoenix.

Historical Exploration Activities:

·       Joint Venture (JV) operator Monitor Exploration Limited (Monitor), which holds a 55% working interest, utilised geological and geophysical methods to identify the Owambo Basin.

·       Awarded in 2018, PEL 93 contains ten (10) independent structural closures, identified through airborne geophysical techniques and partially verified by existing 2D seismic data.

Recent Developments:

In July 2024, Polaris Natural Resources Development Ltd (Polaris) acquired 203-line km of 2D seismic data. Data processing completed in Q4 CY24 identified significant structural closures with promising hydrocarbon potential:

·       High-quality seismic data: Strong signal-to-noise ratios observed across all nine seismic lines.

·       Interpretation by Monitor: Confirmed multiple significant leads in the southern PEL 93 area, with individual closures up to ~100 km² in size, showing good vertical relief, and clear hydrocarbon charge potential.

Forward Activities:

·       Independent validation of Monitor's findings, integrating available datasets, including well logs, airborne geophysics and soil geochemistry.

·       Delivery of a maiden, independently certified Prospective Resource estimate in H1 2025.

·       Identification of drilling locations targeting the Damara Play.

Regional Context:

·       Recon Africa (TSXV: RECO) spudded the Naingopo-1 well in PEL 73 in July 2024, reaching TD of 4,184 metres in November 2024. Results from extensive evaluations, including wireline logging and coring, are eagerly anticipated.

·       In August 2024, BW Energy Limited farmed into PEL 73 (20% working interest for US$16 million invested), further demonstrating industry confidence in the Owambo Basin's potential.

Project Longhorn (~65% WI)

Q4 CY24 production averaged 358 BOE/day gross (~74% oil), down from 391 BOE/day gross in Q3 CY24 due to an incident an independently operated gas plant in late November, necessitating gas venting. In December 2024, a cash flow distribution of approximately A$0.4 million was received.

Peregrine & Umiat (100% WI)

88 Energy was successful in securing suspensions from the Bureau of Land management Alaska (BLM) for Project Peregrine and the Umiat Unit:

·      Project Peregrine: Suspension extended until 30 November 2025.

·      Umiat Unit: Suspension granted until 30 June 2025.

The suspensions relieve 88 Energy of approximately A$0.6 million in lease rental obligations for CY25.

Finance

At 31 December 2024, the Company's cash balance was A$7.2 million. The ASX Appendix 5B attached to this quarterly report contains the Company's cash flow statement for the quarter.

The material cash flows for the period include:

·      Burgundy Cash Call: US$1 million (A$1.8 million) received in Q4 2024, with US$3 million outstanding extended to 15 February 2025 (plus interest and a US$0.1 million extension fee).

·      Exploration and Evaluation Expenditure: A$0.6 million, primarily related to Hickory-1 post-well activities, offset by the return of an A$0.6 million well bond.

·      Staff and Administration Costs: A$0.85 million, reflecting a significant reduction in annual corporate costs to A$3.5 million in 2024, down from A$5.4 million in 2023 (-38%).

Information required by ASX Listing Rule 5.4.3

Pursuant to the requirements of the ASX Listing Rules Chapter 5 and the AIM Rules for Companies, the technical information and resource reporting contained in this announcement was prepared by, or under the supervision of, Dr Stephen Staley, who is a Non-Executive Director of the Company. Dr Staley has more than 40 years' experience in the petroleum industry, is a Fellow of the Geological Society of London, and a qualified Geologist / Geophysicist who has sufficient experience that is relevant to the style and nature of the oil prospects under consideration and to the activities discussed in this document. Dr Staley has reviewed the information and supporting documentation referred to in this announcement and considers the prospective resource estimates to be fairly represented and consents to its release in the form and context in which it appears. His academic qualifications and industry memberships appear on the Company's website, and both comply with the criteria for "Competence" under clause 3.1 of the Valmin Code 2015. Terminology and standards adopted by the Society of Petroleum Engineers "Petroleum Resources Management System" have been applied in producing this document.

This announcement has been authorised by the Board.

Media and Investor Relations:

Information required by ASX Listing Rule 5.4.3 - Lease Schedules as at 31 December 2024

Appendix 5B

Mining exploration entity or oil and gas exploration entity
quarterly cash flow report

6.1       Payments relate to Director and consulting fees paid to Directors. All transactions involving directors and associates were on normal commercial terms.

Compliance statement

1        This statement has been prepared in accordance with accounting standards and policies which comply with Listing Rule 19.11A.

2        This statement gives a true and fair view of the matters disclosed.

Date:                21 January 2025

Authorised by:  By the Board

(Name of body or officer authorising release - see note 4)

Notes

1.          This quarterly cash flow report and the accompanying activity report provide a basis for informing the market about the entity's activities for the past quarter, how they have been financed and the effect this has had on its cash position. An entity that wishes to disclose additional information over and above the minimum required under the Listing Rules is encouraged to do so.

2.          If this quarterly cash flow report has been prepared in accordance with Australian Accounting Standards, the definitions in, and provisions of, AASB 6: Exploration for and Evaluation of Mineral Resources and AASB 107: Statement of Cash Flows apply to this report. If this quarterly cash flow report has been prepared in accordance with other accounting standards agreed by ASX pursuant to Listing Rule 19.11A, the corresponding equivalent standards apply to this report.

3.          Dividends received may be classified either as cash flows from operating activities or cash flows from investing activities, depending on the accounting policy of the entity.

4.          If this report has been authorised for release to the market by your board of directors, you can insert here: "By the board". If it has been authorised for release to the market by a committee of your board of directors, you can insert here: "By the [name of board committee - eg Audit and Risk Committee]". If it has been authorised for release to the market by a disclosure committee, you can insert here: "By the Disclosure Committee".

5.          If this report has been authorised for release to the market by your board of directors and you wish to hold yourself out as complying with recommendation 4.2 of the ASX Corporate Governance Council's Corporate Governance Principles and Recommendations, the board should have received a declaration from its CEO and CFO that, in their opinion, the financial records of the entity have been properly maintained, that this report complies with the appropriate accounting standards and gives a true and fair view of the cash flows of the entity, and that their opinion has been formed on the basis of a sound system of risk management and internal control which is operating effectively.