Oilman Jim's Letter - 18 April 2024

88 Energy (88E.AX EEENF 88E.L POQ.F) announced its quarterly activities report. Regarding Alaka, MD Ashley Gilbert stated they expect to commence a formal farm-out process for Project Phoenix following completion of the Hickory-1 post flow test analysis, with the aim of attracting a strategic partner for the next stage of development and commercialisation. In Namibia, seismic acquisition for PEL 93 is planned for mid-2024 with a potential initial exploration well targeting the Damara play as early as H2 2025. On Project Leonis, a maiden prospective resource estimate for the Upper Schrader Bluff reservoir is expected H1 2024 and a farm-out process has commenced with multiple parties engaged and reviewing data room materials, ahead of potential drilling of a new well in 2025/2026. At Project Longhorn, two of the planned five work-overs scheduled to be in completed in 1H 2024 are underway. Q1 2024 production averaged 328 barrels of oil per day gross and the company received cash flow distribution of A$700,000 in March 2024. The cash balance as at 31 March 2024 was A$17.5 million with no debt. Around 20% of Hickory-1 flow test payments have been made, with the remainder expected to be paid in Q2 2024.

Challenger Energy Group (CEG.L BSHPF) announced a strategic investment by Charlestown Energy, which will invest £1.5 million in the company, initially in the form of a loan, which upon closing of the AREA OFF-1 farm-out to Chevron and subject to prior completion of an agreed share consolidation will convert at a fixed price of 0.168 pence per share, a c. 20% premium to the current share price. This will result in Charlestown holding a c. 8.7% shareholding in Challenger, thus making Charlestown one of the company's largest shareholders. The investment ensures Challenger's ability to commence technical work on AREA OFF-3 at the earliest opportunity by underpinning the licence requirement to place cash on restricted deposit, ahead of the anticipated completion of the AREA OFF-1 farm-out to Chevron at which time the company will receive $12.5 million in cash proceeds. Thereafter, Challenger is expected to be fully funded for the foreseeable future, with no need for additional capital, whether equity or debt.

i3 Energy (I3E.L ITE.V I32.F) announced a partial sale of the company's royalty assets and elimination of all bank indebtedness. Total gross cash consideration is US$24.81 million (C$33.50 million). The sale of an estimated 388 barrels of oil equivalent per day translates to 6.9 times 2024 forecasted cash flow and approximately US$63,960 per flowing barrel of oil per day, which represents a significant premium to the company's current market valuation. The royalty disposition will allow i3 to accelerate value associated with its extensive inventory of high-return drilling locations, while jointly pursuing accretive inorganic growth initiatives. The company now has a fully undrawn US$55.56 million senior secured revolving credit facility with a Canadian chartered bank.

Melbana Energy (MAY.AX MEOAF) announced an operational update for Alameda-3. Total depth for the 8.5 inch hole section through the Alameda (N-Sheet) reservoir has been reached at 3645 metres. The Alameda-3 appraisal well is a proximate to and with a similar trajectory to the company’s Alameda-1 exploration well that previously discovered moveable hydrocarbons in this reservoir in 2022. The primary goal of Alameda-3 is to test the oil quality and flow rates of both the Alameda (Nsheet) reservoir and the deeper Marti (I-sheet) reservoir that Alameda-1 was unable to properly determine due to the stronger than expected hydrocarbon influxes into the wellbore that occurred during the drilling of that well. Two reservoir cores were successfully obtained at 3210 metres and 3310 metres and the next stage in Alameda-3 is to acquire open hole wireline logs in the 8-1/2” section. Once cased, the program is to drill ahead in 6 inch hole to take cores in the Marti reservoir at approximately 3655 metres and 3743 metres. Total depth for the Marti reservoir is projected to be at around 3835 metres. After the acquisition of wireline logs in the 6 inch open hole, a 4-1/2 inch slotted liner will be run in the Marti reservoir before commencing the testing phase.

VVC Exploration (VVC.V VVCVF) announced the rework of a pre-existing oil well in southwest Kansas as a test for oil production in the region. The company says it has leveraged its subsurface mineral rights to examine the feasibility of oil production in an area where VVC is already involved in helium and natural gas production. A geological review has confirmed the potential for oil production within the area and this confirmation aligns with historic data indicating over 12 million barrels of oil production directly north of the Ardery well site. There is multi-zone production potential, comprising the Morrow Sandstone and the underlying St. Louis Limestone B & C zones. The project, if successful, will enhance the economic outlook of VVC’s Kansas projects at a relatively low cost.

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