88 Energy Ltd (AIM:88E, ASX:88E, OTC:EEENF) almost never finds itself stuck in the mud and as one project phases into another, investors always seem to have a new set of catalysts on the horizon – and in the coming weeks, Hickory will be the focal point.
What’s the story?
88 Energy on Monday confirmed its placing shares were in high demand, with the equity raise announced last week closing oversubscribed.
The company is issuing new shares at a price of 0.95 Australian cents, or 0.55p sterling, as it closed a bookbuild placing with commitments for A$17.5mln beating the initially reported goal of A$15mln.
Cash proceeds are earmarked for the drilling of Hickory which is located in the Project Phoenix area on Alaska’s North Slope, located in the acreage adjacent to the discoveries made by AIM-peer Pantheon Resources.
At the same time, the company said it had secured a permit-to-drill and it is expecting to pick up its contracted rig in time for a March 2023 spud.
What does it mean?
The speculative spotlight will shift to 88 Energy. With a well now funded and locked into the schedule the small-cap share should see a spike of interest from punters as drilling nears.
88 Energy has never struggled to brush of past disappointments, and, almost always has another high-impact opportunity coming down the pipeline.
In the case of Hickory, it has rebounded from its last well programme, by sectioning off a portion of its acreage that’s nearest to the neighbouring discoveries made by Pantheon Resources and has extrapolated that prospectivity – the result is a series of large exploration targets.
Hickory will test a series of ‘stacked’ targets which altogether are estimated to amass some 647mln potential barrels of oil.
What does the market say?
Judging by the share price reaction, up around 17% in the past two sessions, the market appears happy to have exchanged some equity dilution for a schedule of tangible exploration triggers.
88 Energy shares opened Friday at around 0.58p, more or less at the placing price, marking a brief pullback following a buoyant January (the share closed off 2022 at 0.55p before trading up to 0.7p on 30 January).
Since clearing the funding uncertainty to effectively greenlight the Hickory well, 88 Energy shares have quickly raced up to 0.8p and could reach substantially higher in the run-up to drilling if the speculators continue to buy in ahead of the well results coming through the spring.
What they say
"Completion of this placement ensures 88 Energy is fully funded for the drilling cost of the Hickory-1 exploration well,” managing director Ashley Gilbert said in Monday’s statement.
88 Energy also said that it will also commit some of its new funds to Project Leonis (new acreage so far awarded subject to adjudication, and due for formal later in the first half of 2023).
It also continues to seek other opportunities. “We continue to pursue additional new ventures, targeting opportunities across the asset life cycle that are complementary to our existing portfolio and provide shareholders with exposure to further value creation potential," Gilbert added.
What comes next
News flow will build over the coming weeks with a series of RNS announcements likely to chart the various steps until drilling starts, each of which should help build speculative interest in the shares.
Once drilling begins, presently guided to happen sometime in March, the most significant catalysts are likely to come with initial results and drill reports.
The company will likely give details for each of the reservoirs targets and whether or not the immediate well data suggest the presence of hydrocarbons. These findings will either support the pre-drill expectations, to suggest major new discoveries, or rule them out to reveal that speculative estimates set expectations too high.
If the initial results appear successful, a flow testing programme will be committed to and that will be a much more definitive exercise for assessing the commercial potential of the Hickory project.
Investors will need to wait until the winter season (that’s described as "2023/24") to get that data. In the intervening waiting period, this new countdown will dominate the attention span of 88 Energy investors.
The company will however have plenty to do and prove before they need to be concerned with that.
Overlapping all this will probably be an increase in newsflow about Leonis, the new Alaska project, and subject to its performance investors may also note a focus on Project Longhorn, which is the name given to 88 Energy's producing assets in Texas.