88 Energy subsidiary signs agreement to acquire Umiat Oil Field in Alaska

88 Energy, through its fully-owned subsidiary Emerald House, has signed a sale and purchase agreement with Malamute Energy, and Renaissance Umiat to acquire the Umiat Oil Field in Alaska.

The consideration for the acquisition was a 4% overriding royalty agreement (ORRI) and also includes assumption of the liability for abandoning the Umiat-18 and Umiat-23H wells, which were drilled by Linc Energy in 2013/2014.

The estimated cost for abandonment of the two wells is around $1m.

This news comes only days after 88 Energy announced that it was on track for the slated spud of the Merlin-1 well at Project Peregrine, Alaska, in February 2021.

The Umiat Oil Field is covered by two leases consisting of 17,633 acres, which are in a unit that was set up in September 2019 with a ten-year term initially.

Under the current conditions of the unit, a well commitment either for exploration or appraisal is required by 31 August 2022.

Discovered in the mid-1940s, 11 appraisal wells were drilled at the Umiat field by 1953, many of which were tested.

Umiat-5 flowed 268 barrels per day on a three  month test, while Umiat-8 had shown a peak flow rate of 5.9mmcf/d of natural gas during a four-day test.

However, little work was done until 2013/2014 when Linc Energy drilled two wells, Umiat-18 and Umiat-23H, which was tested with a maximum flow rate of 800 barrels per day and showed sustained flow of 200 barrels per day.

Gross 2P reserves were independently estimated to be at 123.7 million barrels of oil (94 million barrels attributable to 88E’s 76% net revenue interest) by Ryder Scott on 1 December 2015.

Linc Energy also carried out substantial engineering and environmental work in support of a potential future development.

88 Energy plans to hold a complete field review to understand at what oil price Umiat may be commercial as a stand-alone development and if optimisation of the earlier development plan is feasible.

88 Energy managing director Dave Wall said: “Our operational activity at Project Peregrine has provided 88E with a unique position from which to acquire the Umiat Oil Field at an opportunistic price point. The asset has potential to add significant value for shareholders, possibly as a standalone development but certainly in the event that there is a material discovery in the imminent Project Peregrine drilling programme.”