88E to flow test Hickory-1 discovery in mid February

Published 12-JAN-2024 11:59 A.M.

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Our US oil & gas Investment 88 Energy (ASX: 88E) is a month and a half away from flow testing its Hickory-1 discovery well.

In February 2023 88E drilled the Hickory-1 well, then in October the company declared the well a discovery and defined a 250m barrel contingent resource.

Now, 88E is going back in to flow test the well where the primary aim will be to show the well can flow commercial amounts of oil/gas to surface.

Permitting for the flow test is on track to be finalised by the end of January and the flow test scheduled to start in mid February.

88E expects the program to cost ~US$11M to complete and said the program was “fully funded” in today’s announcement.

88E to test two primary targets -

With its flow test 88E will be focused on two reservoirs - the upper SFS & SMD reservoirs.

Of the two reservoirs, the upper SFS reservoir has never been flow tested before whereas the SMD-B has flowed oil to surface in wells drilled by 88E’s neighbour Pantheon Resources.

Pantheon managed to bring oil to surface across its Alkaid 2 & Talitha-A well’s from that reservoir.

88E’s flow test is from a vertical well -

88E’s Hickory-1 well is a vertical well so the flow test results are likely to be in line with the vertical wells drilled by 88E’s neighbour Pantheon Resources.

Across 88E’s project vertical wells arent the best form of producing flow tests - typically to get the highest flow rate a horizontal well needs to be drilled.

For context - vertical wells drilled near 88E’s Hickory-1 flowed in the ~50-100 BOPD range whereas horizontal production wells range at ~6-12x that rate.

The more important takeaway from the flow test will be the technical data from the well “such as reservoir deliverability, fluid compositions, pressures and connectivity”.

We will put out our expectations for the flow test closer to the flow test starting in a note.

88E trading near 52 week lows - fraction of its peers.

As of yesterday’s close price (0.4c per share) 88E’s market cap was ~$99M which puts it in a position where it is being valued lower than both its peers in the US and in Namibia.

On the North Slope in Alaska, 88E’s neighbour which is drilling to the north of 88E is Pantheon Resources.

Pantheon’s market cap is almost 4x 88E’s at ~AU$406M.

In onshore Namibia the direct comparison is ReconAfrica which holds ground immediately to the east of 88E.

Recon trades with a market cap ~2.5x 88E’s at ~AU$261M.

We are Invested in 88E because we think it trades at a more attractive market cap relative to its peers & we hope that by making progress with its projects 88E closes the gap to its peers in terms of valuation.