88 Energy Ltd (LON:88E) shares advanced around 2.5% on Wednesday following news of a new oil discovery in Alaska which could bode well for the shale group’s secondary goal of unearthing conventional resources.
Overnight Caelus Energy, a privately owned oil firm, revealed that Alaska had another very large new conventional oil discovery.
It announced what it described as a “significant light oil discovery’ in shallow arctic (frozen) waters in Alaska’s North Slope region.
Based on results of two wells drilled in 2016 and a seismic programme Caelus estimates the Smith Bay oil discovery in the order of 6bn barrels within its leasehold area. It adds that the broader play, referred to as the Smith Bay fan complex, could exceed 10bn barrels.
Significantly, Caelus says a recovery factor of 30-40% could be possible due to the “favourable fluids” it has observed.
Alaska’s North Slope is very much in focus for explorers, thanks to a number of breakthrough successes and the state’s support for exploration ventures. For example, Armstrong Oil and Gas unearthed the 1.4bn barrel Nanushuk discovery.
AIM quoted 88 Energy’s priority is its new shale discovery, which is also believed to have ‘multi-billion barrel potential’, most recently estimated between 1.4-3.6bn barrels, though it does remain interested in exploring for conventional reservoirs.
As a holder of a large acreage positions on the North Slope the company remains among those best placed to make the next big conventional discoveries.
88 Energy operates some 271,000 contiguous acres onshore. And aside from the HRZ shale discovery, it sees a number of conventional prospects that continue to be derisked by the successes of others in the region.
Indeed, drilling at the shale targeting Icewine well proved working conventional petroleum systems, in the Brookian & Beaufortian plays.
Quantifying the conventional opportunity was one of the key objective of a seismic programme completed for 88 Energy in May.
88 Energy is presently advancing its planning for its next shale well, designed to follow up its success in 2016.
Caelus's Smith Bay: A huge new discovery
Detailing its new discovery Caelus Energy revealed that two wells Caelus-Tulimaniq 1 (CT-1) and CT-2 targeted a large Brookian fan complex, believed to span 300 square miles. This target was confirmed in both wells.
Each well measured gross hydrocarbon columns in excess of 1,000 feet. Some 183 feet of net pay was measured in CT-1, while in CT-2 there was 223 feet.
Caelus said seasonal time constraints prevented either well form being flow tested, but subsequent analysis confirmed the presence of reservoir-quality sandstones containing light oil, between 40-45 degree API gravity.
A development of the Smith Bay discovery could deliver some 200,000 barrels of oil per day, according to Caelus.
The company now plans an appraisal programme to include a new well and new seismic.
Jim Musselman, Caelus chief executive, in a statement said: “This discovery could be really exciting for the State of Alaska. It has the size and scale to play a meaningful role in sustaining the Alaskan oil business over the next three or four decades.”
He added: “Fiscal stability going forward is critical for a project of this magnitude. Without the state tax credit programs, none of this would’ve happened, and I’m not sure Caelus would’ve come to explore in Alaska. We’re proof that the credit programs work.”