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88 Energy Ltd’s Alaska shale to rival Eagle Ford, broker says

Jack Allardyce, analyst at Cenkos, in a note described the HRZ shale found in the Project Icewine well as “a major new play” as he initiated a ‘buy’ recommendation for the AIM quoted explorer.

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Cenkos has begun covering 88 Energy, with a ‘buy’ recommendation.

The oil-bearing shale unearthed by 88 Energy Ltd (LON:88E) in Alaska could rival Texas’s colossal Eagle Ford shale, says City broker Cenkos.

Jack Allardyce, analyst at Cenkos, described the HRZ shale found in the Project Icewine well as “a major new play” as he initiated a ‘buy’ recommendation for the AIM quoted explorer.

Although the analyst points out this remains early days for 88 Energy – and he holds back from giving an indication of 88 Energy’s potential value– Allardyce does say that it is one of the most exciting stocks listed in the UK.

A quick glance at any 88 Energy share price chart certainly backs up the assertion, as the stock is up some 800% in the year to date.

“While the still early-stage nature of Project Icewine makes valuation highly speculative, what is clear is that the company has already uncovered a potentially major new play in a relatively under explored, but hugely prolific region,” Allardyce said.

“As it continues to de-risk the HRZ and begins to quantify conventional prospectivity, we believe it will continue to add significant value to its acreage.”

He goes further, to highlight the high level of potential industry interest in the project.

“Given the scope of a commercial development we would expect major oil companies and North American independents to be likely suitors for the project.

“In our view 88E is likely to have a captive audience were it minded to divest part of or its entire stake in the project, given the major operators on its doorstep.”

According to Allardyce, 88 Energy will need additional funding.

Currently, before factoring in any further drilling this year, the analyst estimates a US$5.5mln funding gap – based on US$3mln of seismic costs and US$5mln of land costs. New drilling would widen this funding gap, he added.

Allardyce said he believes further equity raises are likely, but he also highlighted a possibility of a partnership deal in the ‘short-to-medium term’.

88 Energy’s Project Icewine has exceed all expectations so far, and rising around 800% on AIM this year it is a standout in an otherwise struggling junior exploration sector that’s been trodden down by low oil prices.

Quick facts: 88 Energy Ltd

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Price: 1.57 GBX

Market Cap: £226.09 m

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