--UPDATE, ADDS BACKGROUND AND MANAGEMENT COMMENT--
88 Energy (LON:88E) shares rose nearly 200% on Wednesday after it revealed better than expected results from tests on samples taken from the recently drilled Icewine-1 well, in Alaska.
The company said that permeability tests on samples recovered from the HRZ shales in the Icewine-1 well exceeded expectations and porosity readings were at the upper end of expectations.
In the words of 88 Energy, these findings cross off two of three potential ‘Achilles heels’ of its new HRZ shale play.
Moreover, it highlighted that for two samples the permeability reading was beyond the parameters of standard measuring techniques, which according to 88 Energy, indicates the possible presence of ‘permeability super highways’.
Managing director Dave Wall called it “an outstanding achievement” and said the company could not have hoped to be in a better position at this stage of the project’s evaluation.
Plainly, investors agreed. On AIM, by 2:45pm, 88 Energy shares were up some 128% at 0.78p from 0.34p; though the day’s high was 1p.
A closer consideration of the latest findings indicates a number of arguably positive things.
Firstly, the high readings for permeability and porosity mean that two unknowns and potential technical pitfalls appear to have been crossed off the list.
Secondly, and perhaps more importantly, the findings correlate with the theories and models of Paul Basinski.
Basinski, an esteemed geologist who was among the early pioneers of the Eagle Ford shale play, runs 88 Energy’s joint venture partner Burgundy Xploration and his work is the basis of the current exploration programme.
Put simply, the findings to date have been just as the partners had predicted and as such the initial exploration concept is being de-risked.
“At this stage - whilst we don’t have all the final results in yet - the results are very, very close to what he predicted or have exceeded those expectations,” 88 Energy managing director Dave Wall said in an interview with Proactive Investors.
“So, obviously that is highly encouraging.”
Wall acknowledges that more work will be needed to understand how beneficial these results will ultimately prove to be, but, he describes today’s results as “very good”.
He highlights that high porosity and high permeability both are positive and major contributing factors in determining whether or not production is possible from the shale. But, he also stressed that final conclusions can’t yet be drawn until all the programme’s findings are pulled together.
Wall added that the remaining tests results should give further insight into the shale’s thermal maturity and rock mechanics.
Essentially, these results are expected to show how ‘frackable’ the shale formation, he explains.
Further evaluation, fine tuning and possibly more tests may then help guide an analysis into whether or the new shale play has the right parameters to be technically and economically viable.
In the interview with Proactive Investors Wall also says that the especially high permeability readings, which still require further analysis, could potentially represent an “icing on the cake” for the project.
“If these other zones, these superhighways, which we still need to understand a little better, can contribute then potentially this could add that little icing on cake in terms of increasing flow rates and lower declines,” Wall explained.