28 March 2024
88 ENERGY LIMITED
LODGEMENT OF ANNUAL REPORT
88 Energy Limited (ASX:88E; AIM:88E) ("88 Energy" or "Company") advises that a copy of the Company's Annual Report for the year ended 31 December 2023 (the "Annual Report") has been lodged on the ASX along with the Company's 2023 year-end Corporate Governance Statement and Appendix 4G.
The Annual Report, which was sent to shareholders today, is available on the Company's website at www.88energy.com along with copies of each of these other documents.
Set out below is the Chairman's Statement as included in the Annual Report.
Also, set out below is a summary of the Company's audited financial information for the year ended 31 December 2023 as extracted from the Annual Report, being:
· Consolidated Statement of Comprehensive Income;
· Consolidated Statement of Financial Position;
· Consolidated Statement of Changes in Equity; and
· Consolidated Statement of Cash Flows.
Media and Investor Relations:
88 Energy Ltd
Ashley Gilbert, Managing Director
Tel: +61 8 9485 0990
Email:investor-relations@88energy.com
Fivemark Partners, Investor and Media Relations
Michael Vaughan Tel: +61 422 602 720
EurozHartleys Ltd
Dale Bryan Tel: +61 8 9268 2829
Cavendish Capital Markets Limited Tel: +44 (0) 207 220 0500
Derrick Lee Tel: +44 (0) 131 220 6939
Pearl Kellie Tel: +44 (0) 131 220 9775
CHAIRMAN'S STATEMENT
Dear Shareholders,
It is my pleasure to present 88 Energy's Annual Report, outlining our exploration and appraisal activities, operations, and financial position for the financial year 2023.
It has been another eventful year in the oil and gas market, with volatile prices and supply constraints arising from persisting geopolitical tensions, macroeconomic uncertainties, and the increasing role of renewable energy in the global energy mix. However, as greater focus is placed on the clean energy transition, governments and major utilities are beginning to realise more than ever that maintaining a reliable, secure supply of traditional energy is crucial to meeting future energy demands.
To successfully leverage these challenges and opportunities requires an openness to change and a high degree of flexibility, which I believe are part of 88 Energy's core strengths. Over the past two years, we have evolved our strategy to enhance shareholder value through identifying new and exciting opportunities across the oil and gas lifecycle. Our evolved strategy is evidenced through our ongoing exploration and appraisal agenda and portfolio balancing activities that we achieved during the year. This included divesting our interests in the non-core Yukon acreage and commencing activities to identify farm-in partners to augment future exploration and appraisal of our high-impact Alaskan assets. Also, expanding our footprint at Project Longhorn by gaining access to cost-effective work-over opportunities to increase production and cashflow, and new-country entry into Namibia which represents one of the last frontier oil and gas jurisdictions capable of delivering multi-billion-barrel discoveries, as evidenced by the recent offshore light oil discoveries.
The Hickory-1 exploration well at Project Phoenix was successfully completed in April 2023 with very positive results from the wireline logging suite and sidewall coring program. Hickory-1 was subsequently cased and suspended as planned, to carefully design the flow test and stimulation program in conjunction with industry experts, utilising available offset information and Hickory-1 data to provide the best possible outcome during the flow test operations that are now underway. Hickory-1 pre-drill expectations were met or exceeded on reservoir quality and thickness, with oil shows and net log pay calculated across all primary and secondary reservoirs and identified a new reservoir, the Upper Slope Fan System (Upper SFS), which had not been previously tested by 88 Energy or other nearby-operators. The Upper SFS had the best oil shows across all reservoirs intersected in the Hickory-1 well and the mapping of the Upper SFS demonstrated a reservoir zone more laterally extensive than previously considered.
We released an Independently certified Contingent Resource estimate for Project Phoenix of 250 million barrels of oil equivalent from the Basin Floor Fan (BFF) which is the deepest reservoir encountered in Hickory-1. The Contingent Resource was achieved by demonstrating reservoir continuity through seismic and well data to nearby third-party wells with successful flow tests in the BFF. The Contingent Resource confirmation at the BFF enabled Hickory-1 to be classified as a discovery, but more importantly, bodes well for the shallower and less thermally mature (more oil prone) Slope Fan System (SFS) and Shelf Margin Delta (SMD) reservoirs, which are the focus for the Hickory-1 flow test.
Our ongoing assessment of Icewine West identified a series of SMD prospects, the majority of which have yet to be drilled. Following recent exploration success with the SMD reservoir at Hickory-1, we intend to investigate these prospects to add to an already extensive Icewine West prospective resource portfolio.
Further North, at our Leonis Project, work progressed at pace with the reprocessing and interpretation of 3D seismic as well as a review of regional well data providing additional support for significant resource potential in the Upper Schrader Bluff (USB). We remain on track to delineate an independent, Certified Resource Estimate in 1H24, before commencing a formal farm-out program.
In mid-year, we released an independent Prospective Resource update for Project Peregrine. The certification resulted in two new prospects (N12 and N13) being identified in the prolific Nanushuk Formation. The assessment also indicated that up to three independent prospects could be assessed from a single ice pad via a sidetrack from the Harrier-1 well pad, resulting in significantly lower exploration costs. While we remain committed to Project Peregrine, due to the proposed new regulations presented in September, governing the management of subsurface resources in the National Petroleum Reserve-A (NPR-A), we worked with the Bureau of Land Management Alaska (BLM) in the fourth quarter and received approval to suspend Project Peregrine leases for 12 months to 30 November 2024. The suspension provides relief from A$0.5 million of lease rentals and allows us to continue with refining internal geological and geophysical models and interpretation at minimum cost.
Through its investment in the Bighorn Energy LLC Joint Venture, the Company has acquired an expanded footprint in our producing Permian Basin assets at Project Longhorn. These acquisitions provide multiple development opportunities and additional production to enhance our current output of ~360 BOE/day. Project Longhorn has performed solidly since it was added to the portfolio in 2022 and supplements our core exploration and appraisal activities.
Finally, we executed a three-stage farm-in agreement for up to a 45% non-operated working interest in an onshore Petroleum Exploration Licence (PEL 93) covering a vast 18,500 km2 acreage position in the Owambo Basin of Namibia. This farm-in provides us with a fantastic opportunity to earn a significant working interest in a very large scale, highly prospective, under-explored acreage position. The forward work-program is scheduled to commence in Q2 2024, starting with a low impact 2D seismic program focusing on confirming the structural closures of the 10 independent leads previously identified and will be used to obtain a Maiden Prospective Resource Estimate and define potential drilling locations.
I wish to thank our small but dedicated team for their efforts in delivering key milestones over the past year, delineating future avenues of growth, and identifying value drivers in such a dynamic market environment.
The path to value recognition is not always linear, and I wish to express my gratitude to you, our shareholders, for your continuing dedication through the 88 Energy journey. Our Company is very well placed to unlock the huge potential value residing in our balanced exploration, appraisal, and production portfolio.
On behalf of the 88 Energy team, I wish you all a healthy and prosperous year ahead.
Yours faithfully,
Philip Byrne
Non-Executive Chairman
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2023
| | Note | 2023 | 2022 |
|
|
| $ | $ |
|
|
|
| |
| Other income | 3(a) | 500,927 | 21,760 |
| Share of profit/(loss) from equity accounted investment | 11 | 1,665,442 | 3,317,877 |
| | |
| |
| Administrative expenses | 3(b) | (2,690,171) | (2,778,962) |
| Occupancy expenses | | (34,992) | (51,142) |
| Employee benefit expenses | 3(c) | (2,911,375) | (2,335,914) |
| Share-based payment expense | 18 | (879,455) | (658,111) |
| Depreciation and amortisation expense | | (64,228) | (60,307) |
| Finance cost | | (8,544) | (8,583) |
| Other expenses | | (478,961) | (12,869) |
| Foreign exchange (loss) / gain | | (49,514) | 493,647 |
| Exploration & Evaluation Impairment/Expense | 3(d) | (9,488,362) | (68,649,314) |
| Loss before income tax | | (14,439,233) | (70,721,918) |
| Income tax expense | 4 | - | - |
| Loss after income tax for the year | | (14,439,233) | (70,721,918) |
|
| |
| |
| Other comprehensive income / (loss) for the year Items that may be reclassified to profit or loss | |
| |
| Exchange differences on translation of foreign operations | | (1,627,093) | 6,378,972 |
| Other comprehensive income / (loss) for the year, net of tax | | (1,627,093) | (64,342,946) |
| | |
| |
| Total comprehensive income / (loss) for the year attributable to members of 88 Energy Limited |
| (16,066,326) | (64,342,946) |
|
| |
| |
| Loss per share for the year attributable to the members of 88 Energy Limited: | |
| |
| Basic and diluted loss per share | 5 | (0.0005) | (0.0042) |
The notes to the financial Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2023
| | Note | 2023 | 2022 |
|
| | $ | $ |
| ASSETS | | | |
| Current Assets | |
| |
| Cash and cash equivalents | 6 (a) | 18,182,727 | 14,123,731 |
| Trade and other receivables | 7 | 3,973,934 | 1,549,816 |
| Total Current Assets | | 22,156,661 | 15,673,547 |
|
| |
| |
| Non-Current Assets | |
| |
| Plant and equipment | 8 | 22,348 | 20,337 |
| Exploration and evaluation expenditure | 9 | 110,588,395 | 96,422,918 |
| Other Assets | 10 | 506,817 | 940,424 |
| Equity accounted investments | 11 | 23,251,219 | 19,968,658 |
| Total Non-Current Assets | | 134,368,779 | 117,352,337 |
|
|
|
| |
| TOTAL ASSETS | | 156,525,440 | 133,025,884 |
|
|
|
| |
| LIABILITIES | |
| |
| Current Liabilities | |
| |
| Trade and other payables | 12 | 556,544 | 1,105,132 |
| Provisions | 13 | 283,497 | 244,736 |
| Total Current Liabilities | | 840,041 | 1,349,868 |
|
|
|
| |
| TOTAL LIABILITIES | | 840,041 | 1,349,868 |
|
|
|
| |
| NET ASSETS | | 155,685,399 | 131,676,016 |
|
|
|
| |
| EQUITY | |
| |
| Contributed equity | 14 | 379,917,222 | 340,972,669 |
| Reserves | 15 | 29,972,652 | 30,468,589 |
| Accumulated losses | | (254,204,475) | (239,765,242) |
| TOTAL EQUITY | | 155,685,399 | 131,676,016 |
The Consolidated Statement of Financial Position should be read in conjunction with the notes to the financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2023
|
| Issued Capital | Reserves | Accumulated Losses | Total |
|
| $ | $ | $ | $ |
| At 1 January 2023 | 340,972,669 | 30,468,589 | (239,765,242) | 131,676,016 |
| Loss for the year | - | - | (14,439,233) | (14,439,233) |
| Other comprehensive income | - | (1,627,093) | - | (1,627,093) |
| Total comprehensive income/(loss) for the year after tax | - | (1,627,093) | (14,439,233) | (16,066,326) |
| |
|
|
|
|
| Transactions with owners in their capacity as owners: |
|
|
|
|
| Issue of share capital | 41,429,821 | - | - | 41,429,821 |
| Issue of Options | - | 251,701 | - | 251,701 |
| Settlement of vested PR's | - | - | - | - |
| Share-based payments | - | 879,455 | - | 879,455 |
| Share issue costs | (2,485,268) | - | - | (2,485,268) |
| Balance at 31 December 2023 | 379,917,222 | 29,972,652 | (254,204,475) | 155,685,399 |
| | | | | |
| At 1 January 2022 | 285,809,214 | 23,074,244 | (169,043,324) | 139,840,134 |
|
Loss for the year | - | - | (70,721,918) | (70,721,918) |
| Other comprehensive income | - | 6,378,972 | - | 6,378,972 |
| Total comprehensive income/(loss) for the year after tax | - | 6,378,972 | (70,721,918) | (64,342,946) |
| | | | | |
| Transactions with owners in their capacity as owners: | | | | |
| Issue of share capital | 58,524,106 | - | - | 58,524,106 |
| Issue of Options | - | 360,260 | - | 360,260 |
| Settlement of vested PR's | - | (2,998) | - | (2,998) |
| Share-based payments | - | 658,111 | - | 658,111 |
| Share issue costs | (3,360,651) | - | - | (3,360,651) |
| Balance at 31 December 2022 | 340,972,669 | 30,468,589 | (239,765,242) | 131,676,016 |
The Consolidated Statement of Changes in Equity should be read in conjunction with the notes to the financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2023
| | Note | 2023 | 2022 |
|
| | $ | $ |
| Cash flows from operating activities | | | |
| Payment to suppliers and employees |
| (5,442,176) | (4,907,742) |
| Interest and other income received | | 60,646 | 20,126 |
| Net cash flows used in operating activities | 6 (b) | (5,381,530) | (4,887,616) |
|
| |
| |
| Cash flows from investing activities | |
| |
| Payments for equity accounted investments | | (873,975) | (10,693,565) |
| Payments for exploration and evaluation activities | | (29,903,780) | (52,644,427) |
| Contribution from Joint Operation Partners in relation to Exploration | | 4,515,460 | 1,078,866 |
| Proceeds (payment) for Bonds | | 584,840 | 137,930 |
| Distribution from Equity Accounted Investments | | 2,010,345 | 4,281,910 |
| Net cash flows generated from/used in investing activities | | (23,667,110) | (57,839,286) |
|
| |
| |
| Cash flows from financing activities | |
| |
| Proceeds from issue of shares | 14 | 35,414,713 | 47,052,778 |
| Share issue costs | | (2,322,029) | (3,149,329) |
| Net cash flows from financing activities | | 33,092,684 | 43,903,449 |
|
| |
| |
| Net increase/(decrease) in cash and cash equivalents | | 4,044,045 | (18,823,453) |
| | |
| |
| Cash and cash equivalents at the beginning of the year | | 14,123,731 | 32,317,887 |
| Effect of exchange rate fluctuations on cash held | | 14,951 | 629,297 |
| Cash and cash equivalents at end of year | 6(a) | 18,182,727 | 14,123,731 |
The Consolidated Statement of Cash Flows should be read in conjunction with the notes to the financial statements.
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