GMP Securities has called the Icewine exploration well in Alaska a “potential play opener” as it published an upbeat note on 88 Energy (LON:88E, ASX:88E).
Project Icewine comprises an exciting shale play as well as conventional oil targets on the acreage.
It is estimated as having an unconventional prospective resource of 492mln barrels of oil. With a probability of geological success of 41%, the risked mean prospective resource is 200mmbbls.
Drilling is slated for October, though the company is currently preparing a revised permit application for the project - it is expected that extra information requested by the Alaska Oil and Gas Conservation Commission will be ready by October 19.
GMP analyst Scott Simpson, in a note, says Icewine’s shale play will essentially be “all or nothing” but he highlights that a success would be material and would see 88 Energy become a takeover target.
The larger project, if the well’s successful, could ultimately see a development of up to 1,200 wells (each with an estimated net value of $3.2mln), Simpson explained.
He added that the project’s breakeven oil price would be around US$52 per barrel, which whilst uneconomic at current prices could be attractive to large companies in the longer term.
The analyst also highlights that incentives from the State of Alaska (it will rebate up to 85% of exploration and development spend) are also an economic boost.
As an early mover 88 Energy has an advantage, he added.
“88E has significant leverage to success with a net 76,582 acres across a contiguous 98,182 acre position,” Simpson said in a note.