(Alliance News) - 88 Energy Ltd's shares plunged on Tuesday, following the company's announcement that it will plug the Merlin-1 well in project Peregrine in the North Slope of Alaska, following testing issues.
AIM-listed shares in the Alaska-focused oil producer were 62% lower at 1.44 pence on Tuesday in London.
88 Energy had first started testing the well through a wireline program, in order to identify potential reservoir and resistivity in prospective hydrocarbon zones, as well as take samples for study.
Although initial observations indicated the presence of an oil signature in the fluid, a power outage caused by equipment failure led to a pull out from the hole for repairs. When re-entering the zone after repairs, 88 Energy found several sticky sections in the hole, indicating poor hole conditions.
After this, 88 Energy had decided to move to the next prospective zone considered to be the most shallow and that had shown good oil shows and petrophysical traits. However the tool used for testing became stuck due to wellbore condition issues.
Although the tool was freed, returning to the zone was considered too high a risk.
88 Energy said that although not being able to sample two zones considered to be the most prospective does not prevent a discovery, further analysis of sidewall cores and additional drilling may be required for confirmation.
One of the two zones was considered by 88 Energy to be a new prospective horizon within the Nanushuk formation, wholly within the Peregrine acreage, and the other zone has been interpreted to be shared with another zone in the Harrier prospect, north of Merlin.
Further work, including the integration of results from logging with the seismic, will be required to map for potential of these zones. However, it is too late in the season to start flow testing operations, and the forward program will feature the well being plugged.
88 Energy said the well could be re-entered in the future, to drill a sidetrack hole and conduct a flow test.
"Despite the operational issues that prevented obtaining a hydrocarbon sample from the two most prospective zones, the results from the Merlin-1 well are very encouraging for the potential at Project Peregrine. We appreciate that these early results may be difficult to interpret," said Managing Director David Wall.
"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 five wells drilled by 88 Energy in Alaska over the last six years," Wall added.
By Dayo Laniyan; dayolaniyan@alliancenews.com
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88 Energy (88E)