88 Energy secures new Texas acreage
By Josh White
Date: Friday 15 Dec 2023
(Sharecast News) - 88 Energy announced the acquisition of additional oil and gas production assets in the Texas Permian Basin on Friday, marking a significant expansion of its regional footprint.
The AIM-traded firm said the acquisition included a non-operated working interest in leases and wells with conventional onshore production and development opportunities.
With the acquisition, 88 said it had secured a 64.4% net working interest in 1,262 net acres strategically located near the existing Project Longhorn assets.
Its joint venture partner and operator, Lonestar I, acquired a 21.5% working interest in the new assets, while the existing non-operated partners retained the remaining interest.
The purchase price, paid in cash by the joint venture entity Bighorn Energy, which comprises Longhorn Energy Investments (LEI) and Lonestar, amounted to $0.35m, with a net cost of $0.26m to 88 Energy.
It described the transaction as an attractive low-cost entry point, with an estimated cost of 33 cents per barrel of oil equivalent based on independently certified net 2P reserves of 0.68 million equivalent barrels.
The acquired assets consist of nine low-producing existing wells, generating about 26 gross barrels of oil equivalent per day, and ten development opportunities are presented across multiple zones.
88 Energy said the opportunities were classified as gross undeveloped 2P reserves, estimated at 1.2 million barrels of oil equivalent, and contingent and prospective resources yet to be quantified.
In conjunction with the previously announced additional acreage obtained in July, Bighorn Energy had prioritised low-cost workovers before new drilling activities.
Five workovers were scheduled for completion in the first half of 2024, with the potential to increase production to between 180 and 220 gross equivalent barrels per day, with a predominant composition of about 75% oil.
After the successful execution of workovers, Bighorn said it would consider approving the drilling of two new production wells in the second half of 2024, which were expected to contribute an additional 160 to 200 gross barrels of oil equivalent per day, primarily oil.
On the completion of the workovers and new wells, in conjunction with the existing producing wells, 88 Energy expected Longhorn's total gross production would reach an estimated 600 to 675 equivalent barrels per day, with 75% of production being oil by the end of 2024.
Additionally, the newly acquired acreage included two injection wells that would undergo assessment for restoration, providing Bighorn with options for water disposal, mainly as production increased when new wells were brought online.
Bighorn recently secured a $5m line of credit facility to support its development opportunities, which 88 Energy said would assist in cash flow management associated with its endeavours.
At 1052 GMT, shares in 88 Energy were down 0.98% at 0.24p.
Reporting by Josh White for Sharecast.com.
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