88 Energy has signed agreements to acquire interests in leases and wells in the Permian Basin with total net proven and probable reserves of 1.1 million barrels of oil equivalent (MMboe).
The Australian company’s binding agreements with Oxy USA WTP LP through its 75% ownership Bighorn Energy LLC, in which Lonestar I LLC owns the remaining 25%, expand the joint venture’s Longhorn acreage by 435 net acres to 1,399. The project’s producing wells have increased to 40 with eight added in the $1.5 million transaction. The acquisitions, about four miles south of the existing acreage, also expand the Bighorn partners’ Longhorn leases to 14 with five additions, 88 Energy said in a news release Monday.
Longhorn averaged 425 boe per day of gross production in the first quarter of 2023, about 72 percent of which was oil, according to 88 Energy’s quarterly results reported on April 26. The project has given 88 Energy $2.88 million (AUD$4.3 million) in net returns since the company acquired non-operated stakes in 2022.
Lonestar, which assumes $400,000 of the Oxy USA WTP asset price, will continue to operate Longhorn, 88 Energy said.
“The acquisition provides 88 Energy with immediate production upside through 2 new wells planned in the second half of 2023 (on leases in which Longhorn will have a 75% working interest), each of ‘they expect to deliver IP30 of approximately 80-100 BOE per crude day (~75% oil)…’ said Monday’s announcement.
“The existing assets of the Longhorn Project are currently producing ~400 BOE per day gross (~75% oil), which together with the two new wells planned on the newly acquired acreage, as well as 2 workovers on the existing Longhorn acreage, are expects to deliver a gross production rate of approximately 500 BOE per day by the end of 2023.”
The new assets feature low-cost entry at about $1 per BOE, 88 Energy said.
“All undeveloped reserves are within 1320 feet (40 acres) of existing production, so development of these reserves only requires one completed well tied to existing production,” he added.
Western Australia-based 88 Energy entered Longhorn last year by acquiring a majority stake in Bighorn from Lonestar along with 73 percent ownership of the Texas project for $9.7 million. “The acquisition represents 88 Energy’s first step in producing oil and gas assets and is in line with the company’s strategy to build a successful exploration and production company,” 88 Energy said in an announcement on February 21, 2022.
According to its January-March performance report, it is targeting at least five new drilling sites at Longhorn.
In addition to Longhorn, 88 Energy also has interests in the Icewine West Project, the Leonis Project, the Peregrine Project, the Phoenix Project, the Umiat Unit and the Yukon leases, all in Alaska’s North Slope.
At Peregrine, 88 Energy’s largest project in terms of net acreage at 125,735 acres, the company reported “definitive evidence of hydrocarbons” in its Q4 2022 performance report.
But he later gave up six blocks due to “limited prospectivity”, saving the company $214,000 (about AUD$320,000). “The focus of Project Peregrine moving forward will be on the unproven Harrier prospect (N14 and N15 targets) and the N14 South Reservoir target,” he said in his quarterly presentation on April 26. “N14 corresponds with ConocoPhillips’ Harpoon prospect 15 miles north of the Peregrine Project leases. The southern target of N14 is the remaining target in the Merlí prospect and is accessible from the Merlí location -1. Northern leases are modeled to have better porosity and permeability and are closer to infrastructure.”
To contact the author, please email jov.onsat@rigzone.com
