Investors holding 88 Energy Ltd (LON:88E, ASX:88E) shares after a 450% rise in the past month are keenly awaiting the next update from the Merlin-1 well in Alaska.

The exploration share is up 15% on Tuesday, or 75% over the past week, as excitement remains high whilst analysis of the well continues.

88 Energy on Monday told investors that logging-whilst-drilling data indicated multiple potentially hydrocarbon bearing zones in Merlin-1.

The initial data confirmed the presence of the Nanushuk formation, which contains the company’s primary exploration targets.

Additionally, it reported that oil shows were recorded over multiple intervals in the Nanushuk.

The company similarly noted that fluorescence was also observed in the drilling mud accompanied by a petroliferous odour over three of the target intervals.

Subsequently, a wireline logging process will gather further data insights and detail to define the intervals.

The aim is to determine whether mobile hydrocarbons are present.

This will be a key step in answering the key question among investors – whether or not the encouraging results to date will ultimately manifest in a new commercially viable discovery.

88 Energy noted that a mandatory test of the well’s blowout preventer would precede the wireline logging and once underway the programme is expected to take five to seven days to complete.

Subject to the wireline results, the company intends to complete the well for a flow test which would yield further data to indicate potential production volumes.

Success will potentially unlock a substantial bounty, according to third-party resource estimates.

Consultant ERC Equipoise, in January 2020, estimated some 645mln barrels of ‘mean’ prospective resources for the Merlin feature. At that time, ERC pencilled a low-case estimate of 41mln barrels and a ‘high-case’ estimate amassed some 1.46bn barrels.

ERC’s ‘best’ estimate was of 270mln barrels and it estimated the geological chance of success at 37% (which is a comparatively high marker for greenfield exploration projects).

Evidently, these numbers would represent a potentially transformational breakthrough for the company even if a lot more de-risking would still be required.

Given the high level of speculative interest in the share and the possibility of a binary outcome, its perhaps obvious that 88 Energy will continue to be a closely watched stock in the coming days and weeks.


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