88 Energy Ltd (AIM:88E, ASX:88E, OTC:EEENF) has announced the acquisition of an asset package comprising producing wells, to be known as Project Longhorn, in the Permian Basin, Texas.
The assets presently yield around 300 barrels of oil per day, across 32 existing wells, and, the company expects to double volumes by the end of the year through the work-over of seven of the wells – with the programme starting in March.
It will a non-operated 73% working interest in the project, which includes 2.1mln barrels of proved and probable (2P) reserves. The company described it as a low-cost entry into production, and, highlighted that it will result in immediate cash flow for the company.
88 Energy is paying US$9.7mln to acquire the assets, comprising US$7.2mln in cash and US$2.5mln of shares.
"While our core focus remains exploration of our world-class Alaskan North Slope acreage, the acquisition of Project Longhorn provides 88 Energy with immediate cash flow and direct exposure to any further strengthening in energy prices,” said chief executive Ashley Gilbert.
“It also delivers optionality for incremental, low-capital, rapid payback reinvestment in the region."
To date, the Longhorn wells have produced 110,000 barrels of oil equivalent (70% oil).
88 Energy’s aims for an internal rate of return (IRR) between 75% and 400% depending of the type of subsequent drilling and/or work-over programmes follow. Similarly, it anticipated payback of capital expenditure over seven to eighteen months.
The company noted that it aims for a target break-even oil price in the range of US$21 to 28 per barrel.