88 Energy acquires 100% of Project Peregrine in Alaska
The Alaskan-focused explorer told investors that it intends to buy out its partner for US$14 million, payable in new 88 Energy shares, in exchange for APDC’s 50% interest, thereby giving 88E a 100% interest in the project which is located on the North Slope of Alaska.
88E will pay US$14m to APDC, payable in new 88 Energy shares, issued in several tranches with the first tranche of 235m shares at A$0.022 having already been issued to APDC.
The company will also pay $10m in cash on the achievement of gross 2P reserves of 100 million barrels within 36 months as well as $2.5m in cash payments per 50 million barrels on the achievement of gross 2P reserves added over 100 million barrels within 36 months.
PDC will retain a 1.5% overriding royalty interest on future production from the Peregrine licences and will receive 10% of the gross sale proceeds in respect of an assignment of greater than 49% of Project Peregrine within 24 months, excluding a bona fide farm-out.
Addressing shareholders, 88E said the transaction will allow it to pursue a continuation of the exploration program at Project Peregrine next winter, whereas APDC had indicated that it was contemplating a pause in activity to further understand the results from the Merlin-1 well.
Whilst APDC had been encouraged by the initial results from Merlin-1, it said that it is unlikely to be able to satisfy anticipated funding requirements for operations in future seasons and as a result, did not want to hold 88 Energy back from future development of the acreage, it said.
88E explained that APDC will remain liable for all outstanding cash calls in relation to Merlin-1, and will have contributed a total of US$20 million towards the project at completion.
Managing Director of 88 Energy, Ashley Gilbert, commented: "This is an excellent outcome for our shareholders as we now have full control of the project, including the possibility of further farm-out to a new partner with greater technical and operational capability, ahead of future planned drilling and exploration activity. With the additional data we now have in hand, the potential for improved transaction metrics has increased. We also remain optimistic about the future results from the ongoing laboratory tests related to the Merlin-1 well.”
He added, “Having 100% working interest in both Project Peregrine and the neighbouring Umiat Oil Field, opens up significant potential for the Company to realise value in the region."
View from Vox
Shares in 88E have seen a near three-fold increase in value since the start of 2021 and the recent news that it had started drilling at Merlin-1 marked “an exciting and pivotal time”.
The Merlin-1 well was spudded in March 2021 and targeted 645 million barrels of gross mean prospective resource. With drilling now complete, and the interpretation of the results underway, a second well, Harrier-1, targeting 417m barrels is planned to be drilled in 2022.
Drilling at the Merlin-1 well follows the Crude Oil WTI Index reaching its highest level since October 2018 last month, with the commodity reaching highs of $67.98 per barrel.
Project Portfolio Across Alaska’s North Slope
The Alaskan explorer completed its acquisition of XCD Energy, which holds a 100% Working Interest in the highly prospective Alaskan North Slope, back in August 2020. The merged entity has formed a diversified portfolio of exploration projects on Alaska’s North Slope.
The combined company will have increased scale, market presence along with higher funding capability and trading liquidity across the ASX and London AIM exchanges.
The three key projects include Project Icewine, Yukon leases and Project Peregrine with the assets at various stages of development, the company previously outlined this summer.
In late 2020, 88E was also formally re-assigned the "Area A" leases at Project Icewine meaning its working interest in around 40% of the project has increased from 30% to 75%.
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