Why the 88 Energy (ASX:88E) share price dived 64% today

What on earth is happening with the 88 Energy Ltd (ASX: 88E) share price that surged more than 700% in March but is down 50% today?

| More on:
A worried man chews his fingers, indicating a share price crash or drop on the ASX 200

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

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.

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.

Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Market News

The words short selling in red against a black background
Share Market News

These are the 10 most shorted ASX shares

Let's see which shares short sellers are targeting this week.

Read more »

Woman in celebratory fist move looking at phone
Broker Notes

Top brokers name 3 ASX shares to buy next week

Brokers gave buy ratings to these ASX shares last week. Why are they bullish?

Read more »

A female financial services professional with a manicured black afro hairstyle turns an ipad screen to show a client across the table a set of ASX shares figures in graph format.
Share Market News

Record CBA share price and blockbuster merger push ASX 200 financials sector to the top

ASX financial stocks led the 11 market sectors last week with a 1.95% gain.

Read more »

A graphic showing a businessman running up a white upwards rising arrow symbolising the soaring Magellan share price today
Share Market News

CBA Shares in focus: How Australia's most valuable company is using AI to compete

Could AI initiatives drive CBA shares higher?

Read more »

Man jumps for joy in front of a background of a rising stocks graphic.
Broker Notes

These ASX 200 shares could rise 20% to 50%

Looking for big returns? Brokers think these shares could do the job.

Read more »

asx share price represented by cartoon letters spelling the word FOMO
Share Market News

What did Macquarie's "FOMO Meter" reveal about the stock market in May?

Is the market getting frothy or is there still room to climb?

Read more »

Market up or down
Share Gainers

Here are the top 10 ASX 200 shares today

ASX investors had a rough end to the week...

Read more »

Man in an office celebrates at he crosses a finish line before his colleagues.
Share Gainers

4 ASX 200 shares racing ahead of the benchmark this week

ASX investors sent these four stocks soaring 12% to 18% this week. But why?

Read more »