88 Energy Ltd (88E): Initiation Report

88E is an Oil and Gas explorer listed on the ASX with a dominant land holding in Alaska and a comprehensive exploration and appraisal program.

Summary Key Points

Favourable landholding and geology: 88E has a 77.5% working interest in over 271,119 (an additional 220,000 net acres subject to award and exercise of option) gross acres on the Alaskan Central North Slope. The United States Geological Survey has stated that the North Slope is one of the last remaining material oil shale plays in the United States.

88E’s partner has an impressive track record in de-risking Shale Plays: 88E is partnered with US based Burgundy Xploration which is led by Paul Basinski. Paul was a key player in the discovery of the prolific Eagle Ford shale play in Texas.

88E has had encouraging results in the de-risking of Project Icewine: Project Icewine is located ~35 miles South of Prudhoe Bay within proximity of some very large conventional oil discoveries. Results from the first well have been encouraging with the confirmation of number of the key technical characteristics of a successful unconventional oil shale play. The focus of 88E’s unconventional exploration program is the HRZ interval which is part of the Brookian unit.

88E’s planned drilling program is underway: ICEWINE#2 is a vertical well that is planned to spud in Q2 of 2017. Post drilling this well will be hydraulically stimulated and flow tested.

88E landholding also shows encouraging conventional prospectivity: 88E believe that its ground has the potential to host conventional accumulations of oil. A recently completed seismic survey has identified several promising leads that 88E are working to mature into drill targets.

88E’s work program is fully funded: 88E recently completed a capital raising where it raised $17 in an oversubscribed placement. This brings its cash balance to $43m which makes it well capitalised to successfully execute its forward plan.

88E is situated in an area with favourable infrastructure: The Icewine project sites astride the Dalton Highway and the Trans Alaskan Pipeline System (TAPS).

Catalysts

  • The drilling and the successful Hydraulic Fracturing of ICEWINE#2.
  • Flow back testing from ICEWINE#2.
  • Further positive geological data from ICEWINE#2 to supplement the dataset from ICEWINE#1.
  • Identification of conventional drill targets from the recently completed seismic survey.
  • Farm-in from large oil and gas player.

Recommendation

We value 88E at a $0.085 share and initiate with a Speculative Buy Recommendation. We have used the current AUD-USD exchange rate of AUD$0.77.


Disclaimer:

DJ Carmichael Pty Limited ACN 003 058 857 is a wholly owned subsidiary of DJ Carmichael Group Pty Limited ACN 114 921 247. DJ Carmichael Pty Ltd is the holder of (Australian Financial Service Licence Number 232571). In accordance with Section 949A of the Corporations Act 2001 DJ Carmichael Pty Limited advise this email contains general financial advice only. In preparing this document DJ Carmichael Pty Limited did not take into account the investment objectives, financial situation and particular needs (‘financial circumstances’) of any particular person. Accordingly, before acting on any advice contained in this document, you should assess whether the advice is appropriate in light of your own financial circumstances or contact your DJ Carmichael Pty Limited adviser. DJ Carmichael Pty Limited, its Directors, employees and advisers may earn brokerage or commission from any transactions undertaken on your behalf as a result of acting upon this information

DJ Carmichael Pty Limited acts as Corporate Adviser to 88 Energy Limited and is paid a fee for that service. DJ Carmichael Pty Limited arranged a placement in 88 Energy Limited in March 2017 that raised $784,000 and was paid a fee for that service. The Author(s) of this report made contact with 88 Energy Limited for assistance with verification of facts, admittance to business sites, access to industry/company information. No inducements have been offered or accepted by the company. 

Recommendation Definitions:

SPECULATIVE BUY – Anticipated 10% out-performance, but high risk
BUY – Anticipated 10% or more out-performance
ACCUMULATE – Anticipated 10% or more out-performance, buy on share price weakness
HOLD – Anticipated 10% underperformance to 10% over performance
SELL – Anticipated 10% or more underperformance

Period: During the forthcoming 12 months, at any time during that period and not necessarily just at the end of those 12 months. Stocks included in this report have their expected performance measured relative to the ASX All Ordinaries Index. DJ Carmichael Pty Limited’s recommendation is made on the basis of absolute performance. Recommendations are adjusted accordingly as and when the index changes.

Michael Eidne

Director - Research

Michael has over 14 years experience working in financial markets in South Africa, UK and Australia. Prior to joining DJ Carmichael, Michael held research analyst positions at Bell Potter Securities and Blackswan Equities. He also spent several years working as a consultant for various Perth-based resource companies before moving back to the equity markets. Michael is originally from South Africa where he was a portfolio manager at Edge Capital, which is a large South African alternative investment manager. He also worked for a number of years at Investec Asset Management as an investment analyst.

Michael has a MSc in Mineral and Energy Economics from Curtin University and a MBA in Finance from the University of Cape Town.