The 88 Energy (LSE: 88E) share price continues to go ballistic and experienced more impressive gains on Monday. It was last up 19% from last week’s close and trading above 2p per share. The UK oil share hasn’t traded at this level since summer 2018.
Positive operational updates have pushed the share price through the roof in recent weeks. Indeed, the company has quadrupled in value since 11 March.
More good news drives the 88 Energy share price
In its latest market update 88 Energy said that it had located a number of possible hydrocarbon-bearing zones during drilling work at its Merlin-1 well in Alaska.
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88 Energy will now run a wireline programme to ascertain whether mobile hydrocarbons are present at the site. Spudding at Merlin-1 was carried out on 10 March.
Managing director Dave Wall cautioned that “there is still work to do to confirm a discovery”. But he added that “the results to date are encouraging”. There will be an additional update on the wireline programme in seven to 10 days.
Drilling in to the data
88 Energy said that the Nanushuk Formation — which contains the primary targets for its Merlin-1 well — was discovered to be around 600 feet low to prognosis. Furthermore, Nanushuk is now estimated to be 500 metres thicker than the Analogue Wells formation to the north.
88 Energy said that “the gamma log indicates the presence of more sand packages than those in the Analogue Wells”. It added that the sand packages in Merlin-1 “are generally cleaner in nature” too.
Meanwhile, the business said “oil shows were recorded over multiple intervals in the Nanushuk while drilling Merlin-1,” including at the primary targets. 88 Energy also noted that fluorescence ranged from “relatively weak to moderate dry” with slow to moderate (and sometimes fast) streaming cut when exposed to solvent.
Good omens for Harrier
Whilst mud gas peaks were also recorded, 88 Energy said that these were generally not of the same scale of the increase in total gas above background as that seen in the Analogue Wells. However, the UK oil share noted that “one of the prospective horizons in Merlin-1 did have substantially elevated total gas, similar to that in the Analogue Wells”.
It said that heavier gas components (including C5) were observed over multiple intervals. And it commented that “resistivity was elevated over these intervals and is encouraging”. This is particularly positive because the Nanushuk is considered to be a low-resistivity play type, the firm said.
Finally, 88 Energy said that fluorescence was also witnessed in the drilling mud. It said too that this was accompanied by a petroliferous odour over three of the target intervals. The business said that “significantly… one of these intervals is interpreted to be part of a, potentially separate, sand package that is also present in the Harrier prospect.” 88 Energy plans to begin drilling at Harrier-1 in 2022.
Clearly all of this is positive news for the 88 Energy share price. However, bear in mind that the business of oil exploration and production is highly unpredictable. Shareholder returns can be high but so are the risks. And disappointing news from that wireline programme at Merlin-1 could send the company’s share price sinking again.
