The 88 Energy Ltd (ASX: 88E) share price was sliced in half on Tuesday morning after an update related to its Peregrine project in the National Petroleum Reserve in Alaska (NPR-A).
At the time of writing, the 88 Energy share price is down 64% trading at 2.6 cents after closing at 7.3 cents on Thursday.
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Project Peregrine update sinks the 88 Energy share price
Project Peregrine is one of three 88 Energy projects in Alaska. Recent updates for Peregrine have been both a blessing and a curse.
On 29 March, the company announced that it had detected potential hydrocarbon-bearing zones whilst conducting drilling operations for the Peregrine project.
The announcement acted like jet fuel for the already surging 88 Energy share price, which had run more than 300% in March, prior to the announcement. Its shares finished March up almost 700%, from 0.9 cents to just shy of 7 cents.
While the potential hydrocarbon-bearing zones excited investors, 88 Energy managing director Dave Wall noted that:
Whilst there is still work to do to confirm a discovery, the results to date are encouraging and we look forward to providing an additional update on the wireline program in 7 to 10 days.
The announcement also included a cautionary statement that said:
The estimated quantities of petroleum that may be potentially recovered by the application of a future development project relate to undiscovered accumulations. These estimates have both an associated risk of discovery and a risk of development. Further exploration, appraisal and evaluation are required to determine the existence of a significant quantity of potentially movable hydrocarbons.
Why the 88 Energy share price is spewing today
Today's announcement updated the market with regards to the Peregrine operations.
In its announcement, 88 Energy detailed its wireline program which was first used to identify potential reservoir and resistivity as well as provide an estimate of the mobility of the fluid present. The results were promising with multiple prospective zones identified, consistent with the shows and logs obtained while drilling.
The company then attempted to take samples across the identified zones. It noted that "initial observations indicated the presence of an oil signature in the fluid using an optical fingerprint sensor in the downhole sampling tool, communication was established with the reservoir in the deepest zone of interest".
However, a power outage due to equipment failure and other challenges resulted in the company not being able to sample its two most prospective zones. Additional analysis of sidewall cores sand potentially further drilling may be required to confirm a discovery.
Wall commented:
We appreciate that these early results may be difficult to interpret. That is because we do not yet have all the data required to allow interpretation.
This means some uncertainty remains; however, it is already clear that Merlin-1 has delivered by far the best outcome of any of the 5 wells drilled by 88 Energy in Alaska over the last 6 years.
