88 Energy Ltd (AIM:88E, ASX:88E, OTC:EEENF) is exposed to a potentially transformational ongoing high impact drilling campaign, according to stockbroker Cenkos, which has repeated a ‘buy’ recommendation following the spudding of the Merlin-2 well.
The company, on Tuesday, announced that the Arctic Fox rig had started drilling Merlin-2, part of Project Peregrine, on Alaska’s North Slope.
Merlin-2 will be drilled down to a depth of 8,000 feet. It is targeting some 652mln barrels of oil across the N18, N19 and N20 targets - which were encountered in the Merlin-1 well.
Cenkos analyst James McCormack, in a note, highlighted his valuation of 13.6p per share compared to a prevailing price of 2.26p.
“Situated east and downdip of the Merlin-1 well, the Merlin-2 well is expected to encounter thicker reservoir sections and higher permeability/porosity sands, allowing for a more productive reservoir,” the analyst said.
He added: “A successful result at the Merlin-2 well would also substantially de-risk both the Merlin-1A and Harrier Nanushuk targets, which combined contain an additional 485mmbbls of mean unrisked net prospective resources.”
McCormack meanwhile noted that although Canada, Greenland and Norway have yet to develop their Arctic resources, interest in the US remains strong among both majors and independents.
The North Slope is one of the most-attractive places to explore for hydrocarbons globally, and, the announcement by President Joe Biden to ban imports of Russian oil and gas puts increased focus on domestic US assets, he added
“Despite containing some of the largest oil fields in the US and producing >2mmbbls/d at its peak, the North Slope still remains relatively underexplored, with only c500 wells drilled to date,” the Cenkos analyst said.