The 88 Energy Ltd (ASX: 88E) share price is falling hard in morning trade, down 9%.
Below we take a look at the ASX energy share's latest acquisition announcement.
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What acquisition announcement did 88 Energy make?
88 Energy's share price is plummeting after the company reported it has entered into an agreement to acquire Alaska Peregrine Development Company's (APDC) 50% working interest in Project Peregrine, located in Alaska.
Once the acquisition is complete, 88 Energy will hold a 100% working interest in Project Peregrine.
The company said the agreement will enable it to continue exploring for oil at the site next winter, whereas APDC was considering a pause in exploration as it analyses results from Merlin-1.
Under the agreement, 88 Energy will pay APDC US$14 million (AU$18 million), payable in its shares and subject to certain stipulations. APDC will also receive 1.5% overriding royalty interest on future production from the Project Peregrine licences and a US$10 million cash payment "on the achievement of gross 2P reserves of 100 million barrels within 36 months".
According to the release, APDC will also receive:
- Cash payments of US$2.5 million per 50 million barrels on the achievement of gross 2P reserves added over 100 million barrels within 36 months (capped at 5 additional cash payments); and
- 10% of the gross sale proceeds in respect of an assignment of greater than 49% of Project Peregrine within 24 months, excluding a bona fide farm-out.
Commenting on the agreement, Managing Director, Ashley Gilbert said:
This is an excellent outcome for our shareholders as we now have full control of the project, including the possibility of further farm-out to a new partner with greater technical and operational capability, ahead of future planned drilling and exploration activity… We also remain optimistic about the future results from the ongoing laboratory tests related to the Merlin-1 well…
Having 100% working interest in both Project Peregrine and the neighbouring Umiat Oil Field, opens up significant potential for the Company to realise value in the region.
88 Energy noted that APDC remains liable for all outstanding cash calls in relation to Merlin-1 and that the newly announced agreement does not include the Umiat Oil Field
88 Energy share price snapshot
88 Energy shareholders have witnessed some big price swings over the past 12 months, with shares currently up 100% over the past full year. By comparison, the All Ordinaries Index (ASX: XAO) has gained 21% over that same time.
Year-to-date the 88 Energy share price is also up 100%.
