An exploration renaissance is underway at Alaska’s North Slope basin—a region boasting a long history of successful oil discoveries.

Renewed industry interest in this region can largely be attributed to new technologies along with exploration incentives that are leading to the commercialisation of once-stranded oil resources.

Discoveries in the region include the largest current oil field in North America, Prudhoe Bay, which originally contained over 25 billion barrels of oil. Next door sits ConocoPhillips’ seven-billion-barrel Kuparuk, which is the second largest oil field in North America.

The North Slope basin is surrounded by several other large oilfields. Since 1977, this region has produced over 17 billion barrels of oil through the Trans-Alaska Pipeline System.

Dual-listed 88 Energy, which trades on the London and Australian stock exchanges under the ticker “88E”, has four active exploration projects in the Alaskan North Slope: Project Icewine (conventional), Project Icewine (unconventional HRZ shale), Yukon Acreage and Western Blocks.

These projects are scattered across 486,000 contiguous acres that total 250,000 net acres—each of which has access to the Trans-Alaska Pipeline. The company is now seeking to unlock the large potential of the acreage’s conventional plays.

88 Energy’s Project Icewine

88 Energy’s Project Icewine has a 2.9 billion-barrel unrisked gross mean conventional prospective resource, which is based on modern 3D/2D seismic imaging, of which 1 billion barrels are net to 88 Energy.

The company plans to spud its fully funded Charlie-1 appraisal well at Project Icewine in February. The well is shaping up to be one of the largest onshore targets to be drilled around the world next year and given 88 Energy's large net resource potential, this could prove to be a turning point for the company.

This upcoming drill is targeting no less than seven stacked horizons across four targets with gross mean prospective resources of 1.6 billion barrels—480 million barrels net to 88 Energy at its 30% working interest. Each have been identified using the same modern technology used to make the most recent Brookian discoveries.

The Charlie-1 appraisal well has been designed as a step out appraisal of the Malguk-1 well drilled in 1991 by BP Exploration (Alaska), Inc.

Malguk-1 encountered oil shows with elevated resistivity and mud gas readings over multiple horizons during drilling but was not tested at that time. This was due to complications toward the end of operations, which resulted in not having enough time before the close of the winter drilling season. That well was also drilled using vintage 2D seismic imaging, which was insufficient to adequately determine the extent of any of the prospective targets encountered.

88 Energy subsequently undertook revised petrophysical analysis, which identified what is interpreted as bypassed pay in the Malguk-1 well. The company also completed the acquisition of modern 3D seismic tools in 2018, to have a better idea of the extent of the discovered oil accumulations.

Drilling at Charlie-1 is expected to take just 30 days. What’s more, the results will arrive almost immediately, given that conventional targets are being tested. Along with testing the multiple stacked conventional targets, the upcoming drilling of Charlie-1 will also test the HRZ shale.

Charlie-1 is an appraisal drill—which means it carries much lower relative risk compared to the company’s previous wells that were pure exploration drills.

Premier Oil funding Charlie-1

88 Energy will operate Charlie-1 via its 100%-owned subsidiary Accumulate Energy Alaska Inc. Costs will be funded by Premier Oil Plc under a farm-out agreement worth up to $23m.

In addition, a recent share placement saw the company raise $6.75m, significantly strengthening the balance sheet in preparation of the Charlie-1 spud. At the end of third quarter, the company reported cash reserves of $10.1m. At the same time, its expenditure during the current quarter is estimated at $1.6m.

88 Energy made the strategic decision to partner with Premier Oil rather than going with an industry major. This option suits 88 Energy perfectly, as Premier is only interested in the conventional oil—which means that 88E retains the rights to the unconventional HRZ shale.

In exchange for 60% of the conventional potential in the Western Play Fairway—or Area A in the graphic below—Premier Oil will pay the full costs of this well, up to a total of $23m. This is just one portion of the larger Project Icewine acreage.

Western Play Fairway (Area A), the area farmed-out to Premier Oil & the focus of near-term exploration, is depicted in orange.

Western Play Fairway (Area A), the area farmed-out to Premier Oil & the focus of near-term exploration, is depicted in orange.

88 Energy will retain a 30% holding in the project; the remaining 10% will be held by 88 Energy’s joint-venture partner, Houston-based Burgundy Xploration.

Drilling at the Charlie-1 well is the immediate focus heading into February’s spud, while the other conventional targets—including those in the adjacent Area B and Area C—provide future exploration opportunities. Premier Oil is already lining up for a stake in these, too. Should Charlie-1 be successful, Premier has the option to take a 50% interest in Area B or C by investing up to $15m more.

If the Charlie-1 well is successful, 88 Energy—along with Premier Oil—anticipate drilling a horizontal well in 2021. The first oil production from that project is expected in 2024 or 2025.