Success with the Icewine-2 appraisal well would likely be sufficient to attract a major partner to 88 Energy Ltd’s (LON:88E, ASX:88E) wholly-owned shale venture on Alaska’s North Slope, so says Aussie broker Hartleys.
88 Energy last week kicked off the drilling of the Icewine-2 well which is designed to provide a production test of the group’s early stage but so far impressive shale discovery onshore Alaska.
It is anticipated that Icewine-2 will undergo production testing in late June or early July.
Icewine-2 follows up the previous success of the Icewine-1 discovery well which confirmed the presence of the potentially large HRZ shale and delivered technical readings that were better than expected prior to drilling.
Production testing will be pivotal for the project’s commercial potential, and as such the programme will be followed closely by investors.
Hartleys analyst Aiden Bradley, in a note, said: “Given the high standing of 88E management and the appraisal results from Icewine#1 we actually believe a successful result from Icewine#2 is already largely factored into the valuation.
“A successful result however would almost certainly attract a farm in partner and this would be the next catalyst for a further re-rating of 88E’s unconventional acreage position.”
Bradley noted expectations in the market for the Icewine-2 well to flow in the range of 100-200 barrels of oil per day.
He also highlighted his view that it is unusual to see a company prioritise unconventional prospectivity over conventional exploration targets – of which 88 Energy has an inventory of 15 leads with potential for more than 1bn barrels – but, he reckons the focus may shift in the future.
“We do not believe however that the market is giving 88E sufficient credit for its conventional opportunity and we believe most of the upside over the next 24 months may come from further testing of this potential.”
Hartleys has a ‘speculative buy’ recommendation on 88 Energy, which is listed both in Australia and in London.