UK 22:31 Monday, 21 September 2026
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Disclosure: I own shares in one or more of the stocks mentioned. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
Any of you who like to have a gamble on oil exploration drills should take a look at 88 Energy (88E). The AIM-listed oil explorer is about to kick off a drilling campaign in Alaska at its Project Icewine licence, and it is potentially one of the biggest exploration drills of the year, given the size of resource that it is targeting.
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Comments
Daz
You have sold it to me Gary, one of the better Oil plays on the Casino!
wildrides
You gotta be kidding ………… go to the casino and bet red or black. for odds of 5 in 10 .
jembo
This outfit is based in Western Oz, Perth, I hope no connection the Bandy and Landau crew?
Gary Newman
Wildrides,
Not sure I’d be risking too much on the actual drill result, as I’ve mentioned. From the 0.6 area though I see it as likely to be better than red or black (with that you either double your money or lose the lot). The drill rebate makes this better risk/reward than usual in my opinion and is why they’re drilling now even though the shale play I unlikely to be commercial at current oil prices (as I’ve also mentioned). Just see this as likely to have momentum in the lead up to the drill and TD- big volume today suggests plenty of interest. It also looked to me like the placing overhang had cleared, hence my reason for covering it now. ATB
VINES
a shareprophets writer ramping his own shares says to me this site is moving downmarket
Gary Newman
Vines,
I cover a large variety of shares – most of which I am not holding. I think I’ve been fairly balanced in terms of highlighting the negatives as well!
Just saw it as an opportunity for anyone interested in this one to get in as I thought the overhang had cleared and it was about to move – it’s up over 17% since this morning and the volume seen certainly isn’t down to my article here!
Tom Winnifrith
Vines
A bearcast special in honour of a couple of morons and er… you are one of them
http://www.shareprophets.com/views/14968/tom-winnifrith-bearcast-explaining-ethical-financial-journalism-to-morons
T
wildrides
Only kidding Gary ……. just putting the opposite view to deter some of the green horns who always stay in right to TD and get slaughtered . Already in myself ;-)
Gary Newman
Wildrides,
Don’t blame you at all after some of the recent train wrecks for PIs – TRP, RMP several times, etc. Would have been surprised if you weren’t in this one or looking at it, as I know you’re into oil and know your stuff (even if we don’t always agree – would be boring if we did!).
You would hope that PIs would reduce their risks, but of course many won’t and will either buy in way too high on any spike nearer TD, or leave the whole lot running – great if there is a strike, not so good otherwise. Although given the size of rebate here for drilling costs I also think that significantly reduces downside risk as the company won’t be left penniless after the first drill.
Unfortunately too many get caught up in the potential and don’t consider the risk.
I think from these levels there is plenty of chance for people to derisk along the way where they feel comfortable and make a profit, and volume certainly indicates that there is interest – was also nice to see the way it moved today which suggests to me a lot of the overhang has cleared, as compared to the action on Friday.
VINES
tom, don’t you think the writer of this deserves moron status for giving a farmout a dollar per acre value. you only do dollar per acres on land sales not farmouts otherwise you’re adding on the well costs and making the figure a nonsense. Gary, looking like a used car salesman cant be helped but you don’t have to write like one
Steve
Gary,
Just to clarify a few points (all aussie dollars).
“This greatly reduces the downside risk and will leave the company with a decent amount of cash even after the drill, and once it receives the rebate.”
The company won’t receive the rebate – it will go to BoA. 88E fund $4.8million for this well with BoA funding the balance, around $15million. Currently the company has $10.5million so post drill and running expenses this will be around $5.5million.
They will then had to fund up to $4million of the 3d seismics campaign with BoA again funding the rest secured against the rebate.
So they have enough for the first well and the seismics – the second planned well will require additional funding.
“It recently secured $50 million in funding from the Bank of America, and in total its planned drilling campaign – including a further three or four wells targeting conventional oil”
I think you are mistaken – the 3-4 well conventiional programme is being done by Great Bear who have adjacent acreage – so this will provide additional interesting newsflow but is not being done by 88E.
“but as a binary bet the upside on any strike (taking into account the roughly 4 in 10 chance of that happening) would appear to outweigh the downside risk”
I’m not so sure it is binary in this case – its unlikely this well will result in it either being declared commercial or uncommercial. Its not targeting a conventional play but is coring for hydrocarbon saturation – I think the chances of this well finding hydrocarbon saturation of being significantly higher than 4 in 10 so I think the chance of outright failure during well 1 is lower.
I actually think the results of this well, the analysis on the cores and the seismics will be an extended period of ramperoony, very similar to Horse Hill – first we’ll get oil saturation, then we’ll get analysis oil per acre which is extrapolated over the acreage for huge numbers, then we’ll get some seismics telling us there is billions of barrels of conventional prospects plus non-conventional. However the difference here is that if it genuinely is prospective acreage it can be developed easily and there is already significant interest in the area and benchmark valuations as you outline.
Vines – nothing wrong with using dollars per acre for a non-convential play – its pretty standard in the industry. Its an extremely valid comparsion with 88E currently being valued at about $340 per acre. If the programme 88E are about to embark on provides significant further evidence of this being a prospective non-conventional play a signficantly higher dollars per acre is perfectly feasible – throw in some conventional and it becomes even more interesting.
Gary Newman
Vines,
That was exactly how the example that i gave was stated – I have also read research notes by Credit Suisse in which they compared companies with offshore Alaska interests by way of value per acre (based on their market cap in this case). The example given was for illustrative purposes to show how the value of the acreage had grown at the point when a large company took an interest!
I am a professional journalist (have been for over 17 years for a small company called Time Inc) – in my day job as well as here – and have never had anyone else who thinks i write like a used car salesman! Not quite sure why you think i look like one either – most I’ve met tend to wear cheap suits :)
Gary Newman
Meant to add, if you look around at other unconventional shale oil plays you will find other examples where valuations have been given in $/acre for comparison purposes – obviously if the farm in is based on booked reserves then you would more likely use $/barrel. Maybe the $/per acre is more common in the US where there is a lot of shale oil.
Gary Newman
Steve,
Thanks for clarifying that $/acre is used – our posts over-lapped there – and I’d seen it used in relation to quite a few US shale plays (including by analysts).
Perhaps i should have made it clearer with regards the BoA loan – usually limited in terms of space and had already exceeded the usual word count! – and the fact that any rebate will repay that facility and it is the only reason why a company the size of 88E were able to secure the funding in the first place (and why it had to put up part of the drill costs). Without the rebate there is no way it could ever afford to repay this facility and would never have been able to drill this well.
The company should be eligible for at least some rebate itself on this initial well, but that would drop from 85% to 75% for the 3D seismic from the timing of those.
With regards the other conventional wells, you are correct and i appear to have mis-read the RNS on the Bank of America facility referring to a regional facility – and as you point out is even more positive as will provide news flow without any additional expense for the company. Apologies for that – had lots of different reports open and spent a lot of time going through them all.
Maybe binary was the wrong word to use in this instance – although in terms of geological success there are only really two outcomes here either they find hydrocarbons or they don’t, but from an economic success point of view it isn’t as clear cut as that, especially with the oil price so low and the likely field breakeven for the unconventional side of things (although that could well reduce).
There were other things which i also didn’t have space for, such as how close it is to the existing pipeline, plus the actual infrastructure already in place (pretty sure that included drill pads as well on the acreage!).
It is very interesting given some of the large companies already operating here and the fact that some have already done deals to get in on some of the other licence areas.
Taking everything together, I really do think that this is one of the few occasions where it is worth taking a risk – certainly from current levels if you get a chance to leave free shares running, or derricks to some extent at least, given the potential upside on any good news and if investors really start to buy into that.
Normally I’d avoid small AIM companies like this one – especially given its past as Tangiers Petroleum – and certainly wouldn’t get involved in an exploration drill in this market. But if people are going to take that sort of risk i can’t think of any currently (or recently) that have offered a better opportunity (not like a wildcat drill in Namibia from the likes of TRP), given the size of the company and the potential upside from a strike (the last real big one we saw that was a successful was probably Ogo 1 for Lekoil, and in terms of development this would be a lot easier). Obviously the second well and horizontal sidetrack will depend on the outcome of the initial drill.
Cheers,
Gary
VINES
no one said dollar per acre isn’t used lol, the point was saying a nearby license was sold on two years after paying $24/acre, for $2,250/acre is ramping rubbish
I googled it and Repsol paid $18m for 70%. the press release boasted it would fund explo up to $750m but u don’t include forward exploration spend in a price per acre valuation unless doing a massive ramp. It was used in their presentation that says all you need to know about what david wall is about, we saw this at tangiers.
If you wanna do a real price per acre on it, take the $18m paid for 70%, scale it to 100% then divide by the acres and you get $50/acre not $2250. i get that your a good writer on fish but this was not good journalism, im sorry.
wildrides
Vines ya plonker ………. what are you on today …….. fancy dobbing our Gazza in to Uncle Tom ! Dont forget his great music too ,
CARS ………… de de de dum ……de de de dum ………. CARs ……………………..Great tune .
Daz
So the farm in value is worth zero? Like Gary I have seen analysts use data in that way, perhaps you need to DYOR a tad more.
Gary Newman
Daz,
It was also more just to illustrate the interest in the area and potential when a major gets involved – plenty of farm out deals don’t involve much if any cash where smaller companies are concerned and are a way of carrying them for future costs, rather than them banking large amounts of cash from any deal. From what i can see Repsol have committed to this spending as part of the deal, although obviously i don’t have access to the full contract signed at the time!
Its obviously all very early days anyway – they need to find something first.
I thought i was pretty balanced compared to a lot of the other coverage that I’ve seen, given that I used the reduced % share of the licence following spud (some have been using pre-spud %) and also mentioned the mean recoverable prospective resources rather than taking about billions of barrels of oil in place (which I’ve also seen elsewhere). When it came to the Chance-of-Success I made it clear that it was the geological COS – again some have just given a COS figure and not distinguished that it is that rather than the economic COS – again I’ve mentioned the likely field economics for the unconventional plays in the context of current oil prices.
There is of course only so much detail I can go into as well in the space available.
I think as long as people are sensible with this one in terms of not gambling too much on the actual result, then many will do well from here and is why I’m holding some myself (and added a few more today as well). It isn’t a large holding for me as i don’t gamble silly amounts on any AIM company these days.