--UPDATE adds broker comment--
88 Energy’s (LON:88E) advanced as its exploration prospects on Alaska’s North Slope have been boosted by excellent nearby well results.
On AIM the explorer’s shares jumped around 31% in early deals to trade at 0.95p.
A joint venture between Repsol and Armstrong Oil & Gas, located about 50 miles from the boundary of 88 Energy’s Project Icewine, saw successes in a number of wells.
The vertical Qugruk 8 had flow rates up to 2,160 barrels of oil per day (bopd) in a test on a small portion of the well’s net pay zone. Qugruk 301, a horizontal well, meanwhile, flowed with rates as high as 4,600 bopd.
It was highlighted that the exploration work had resulted in the discovery of several new oil fields, while every one of the first 16 wells found hydrocarbons; the area is said to still have “immense potential”.
"We strongly believe that there are many great conventional oil projects yet to be found and developed in Alaska," said Bill Armstrong, president of 22.5% stakeholder Armstrong Oil & Gas.
88 Energy is primarily focused on an unconventional play in the area, though these better-than-expected nearby exploration results point to significant conventional oil potential too.
These conventional plays will be examined within the boundaries of Project Icewine once the company has acquired 3D seismic data.
Dave Wall, 88 Energy’s chief executive, in a statement, said the Repsol-Armstrong successes provide an example of the scale of additional potential that may be unlocked in conventional plays.
“The results reported by Repsol and Armstrong are outstanding and well above expectation,” he added.
“They clearly vindicate Repsol's US$768mln deal with Armstrong in 2011 as well as highlight the success that can be achieved through utilisation of modern 3D seismic on the North Slope.
“The flow rates, large areal extent, reservoir quality and oil gravity all point towards what are likely to be large to very large commercial discoveries, located only 50 miles from the boundary of our project.”
SP Angel analyst Zac Phillips in a note highlighted that the neighbours’ results have provided some de-risking of the Icewine acreage.
“There is a saying in oil and gas that the best place to find oil is where it already exists, and in highlighting the news from Repsol's JV, it would certainly indicate that Icewine is in the right area,” he said in a note.