NAMIBIA: 88 Energy Provides PEL 93 Update

In November 2023 88 Energy, via its wholly-owned Namibian subsidiary, executed a three-stage farm-in agreement (FOA) for up to a 45% non-operated working interest in the onshore Petroleum Exploration Licence (PEL 93) covering 18,500km2 of underexplored acreage within the Owambo Basin in Namibia. 

In February 2024, the Company announced the successful 20% working interest (WI) transfer by operator Monitor Exploration Limited (Monitor) to 88 Energy as part of Stage 1 of the FOA; this transfer has been approved by the Namibian Ministry of Mines and Energy. Monitor now holds a 55% WI with the remaining 25% shared across local entities, Legend Oil Namibia Pty Ltd and NAMCOR. The current and potential future PEL 93 Joint Venture partners and working interests are as follows:

Stage 1 schedule to earn a 20% working interest in the Licence is complete and comprises:

·      1st instalment: US$0.28 million paid in cash on signing for partial payment of back costs;

·      2nd instalment: US$1.25 million paid in 88 Energy shares on signing for part payment of 2D seismic carry;

·      3rd instalment: US$1.25 million paid in 88 Energy shares upon approval of PEL 93 WI transfer by the Namibian government, as final payment in relation to the 2D seismic carry; and

·      4th Instalment: US$0.9 million paid in 88 Energy shares for final back costs payment and 2024 work-program carry.

Namibia has been identified as one of the last remaining under-explored onshore frontier basins and one of the World’s most prospective new exploration zones. PEL 93 is more than 10 times larger than 88 Energy’s Alaskan portfolio and more than 70 times larger than Project Phoenix.

Recent drilling results on nearby acreage has highlighted the potential of a new and underexplored conventional oil and gas play in the Damara Fold belt, referred to as the Damara Play. It is currently the subject of exploration drilling by ReconAfrica in their nearby PEL 73 block. Historical assessment utilised a combination of techniques and interpretation of legacy data to identify the Owambo Basin, as having significant exploration potential. Monitor utilised a range of geophysical and geochemical techniques to assess and validate the significant potential of the acreage since award of PEL 93 in 2018, identifying ten (10) independent structural closures from airborne geophysical methods and partly verified these using existing 2D seismic coverage.

In May 2024, the Company announced that Polaris Natural Resources Development Ltd (Polaris) was awarded, the 2D seismic acquisition program contract. Polaris mobilised vibroseis units and recording equipment to location in late June 2024 and the program was completed in July 2024. The fully funded 2D Seismic acquisition program acquired ~200-line km of 2D data with data processing now underway and anticipated to be finalised in Q4 2024.

Results of the new 2D seismic acquisition will be integrated with existing historical exploration data to refine current prospect interpretation. Anticipated outcomes include:

·      Validate up to 10 independent structural closures

·      Maiden certified prospective resource estimate

·      Identification of future potential drilling locations targeting the Damara play

Project Longhorn (~65% WI)

The joint venture (Bighorn JV), which comprises Longhorn Energy Investments LLC a 100% wholly owned subsidiary of 88 Energy with 75% ownership and Lonestar I, LLC (Lonestar or Operator) with the remaining 25% ownership, agreed to a development program that included five workovers in 1H 2024.

During the quarter, the Bighorn JV successfully executed four of the planned five workovers within Budget with results below:

·      First workover production commenced in mid-April;

·      Second and third workovers commenced production in mid-May;

·      Fourth workover production began in the final week of June 2024; and

·      The final workover encountered a tubing fish not recorded in the well file. The operator tried several tools but could only clean out 75 feet of the anticipated 1,500 feet of the tubing fish recovered. The Bighorn JV decided to suspend operations and P&A the workover with sunk CAPEX capped at A$0.5M compared to a budget of A$1.2M. 

Completion of the workovers increased gross production from 328 BOE per day (average Q1 2024) to 395 BOE per day (average Q2 2024) with production for June averaging 456 BOE per day (~63% oil). The production volume declines of the four successfully completed workovers are currently lower than initially forecast.

Project Longhorn continued to provide strong cash flows towards lease and corporate costs with the Company receiving cash flow distributions of A$1.2M during H1 2024, post-workover expenditure.

Prior to commencement of the 2024 capital development program, the Bighorn JV executed a a ~10% sell-down (gross, ~7% net to 88 Energy) of the 2023 acquired acreage, in order to re-disk and accelerate development opportunities. The transaction realised net to 88E, acquisition payments of ~A$0.3M and the non-operated partners contributed their share of the five workover capital development costs coupled with a 25% carry of their ownership share of the five workovers. For full details refer to page 6-7 the Q1 2024 Quarterly ASX announcement on 18 April 2024 including reserves update and cautionary statement.

PEL 93 – Farm-In

Following approval by the Namibian Ministry of Mines and Energy of the 20% working interest transfer by Monitor to 88 Energy in relation to PEL 93, under the farm-in agreement, the Stage 1, third instalment payment of US$1.25 million was paid by issuing 397,947,229 new ordinary shares in the Company to Monitor at an issue price of A$0.0048 per share on 22 February 2024.

Monitor also agreed to receive 88 Energy shares as settlement for the fourth and final Stage 1 instalment of the farm-in agreement, as announced to the ASX on 13 November 2023. This instalment covers the final back costs and the 2024 work program carry of US$0.92 million through the issuance of 476,634,546 new ordinary 88 Energy Shares at an  issue price of A$0.003 per share on 24 April 2024.