88 Energy (88E ) shares jumped after it told investors that it has completed the sale of the Alaskan Oil and Gas Tax Credits, thereby allowing the group to fully repay its existing debt.
The Alaskan-focused explorer announced last month that it had entered into an agreement that would facilitate the sale of all the Alaskan Oil and Gas Tax Credits which were held by Accumulate Energy Alaska, Inc. ("Accumulate"), a 100% owned subsidiary of 88 Energy.
At the time, the Company stated that the sale price of the Tax Credits was US$18.7 million cash, payable upon completion of the sale and transfer of the outstanding tax certificates.
The purchaser was described as ‘a large oil and gas company in the US with multiple exploration and production assets and has capacity to fund transactions of this nature.’
The deal accelerates the timeframe of 88E’s value realisation from the Tax Credits, which under current estimates would not have been fully paid out by the Alaskan state until 2026.
The Company said the majority of the proceeds from the sale are to be applied towards full repayment of 88 Energy's current outstanding debt of US$16.1 million with FCS Advisors, LLC (d/b/a Brevet Capital Advisors) ("FCS"), which was due to mature on 30 December 2022.
Meanwhile, the residual sale consideration of US$2.6m is to be receipted by 88E, which will then be applied towards working capital requirements. 88E said repaying its debt early will save future cash payments that would have been made towards outstanding debt interest.
Speaking of the transaction in June, Managing Director, Ashley Gilbert, commented: "This is a transaction which accelerates the realisation of value of the Alaskan Oil and Gas Tax Credits and the early repayment of outstanding debt due to be repaid by the end of 2022.
Gilbert added, “As a result of the transaction, the Company is now set to be debt free with reduced annual overheads of over US$1 million in associated finance costs."
Following the confirmation of the transaction today, 88 Energy is now debt free (other than typical trade creditors) and holds cash of A$14.8 million (unaudited) as at 30 June 2021.
In a separate statement released this morning, 88E said it has issued 203,634,883 fully paid shares at a deemed issue price of A$0.026 per share pursuant to its acquisition of a 50% working interest in Project Peregrine from Alaska Peregrine Development Company.
It outlined that an application has been made for admission of the Consideration Shares to trading on AIM ("Admission"), with admission expected to occur on 7 July 2021.
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Shares in 88E have seen a near three-fold increase in value since the start of 2021. Today’s transaction positions the company as debt free and follows 88E’s recent activity at the Merlin-1 well in Alaska where the Group kick-started a drilling programme earlier this year.
The Merlin-1 well was spudded in March 2021 and targeted 645 million barrels of gross mean prospective resource. With drilling now complete, and the interpretation of the results underway, a second well, Harrier-1, targeting 417m barrels is planned to be drilled in 2022.
Drilling at the Merlin-1 well follows the Crude Oil WTI Index reaching its highest level since October 2018 last month, with the commodity reaching highs of $67.98 per barrel.
Shares in 88 Energy have increased by nearly 35% in value since the beginning of June. The stock was trading 13.48% higher during late morning trading at 1.7p following today’s news.
Reasons to Follow 88E
Project Portfolio Across Alaska’s North Slope
The Alaskan explorer completed its acquisition of XCD Energy, which holds a 100% Working Interest in the highly prospective Alaskan North Slope, back in August 2020. The merged entity has formed a diversified portfolio of exploration projects on Alaska’s North Slope.
The combined company will have increased scale, market presence along with higher funding capability and trading liquidity across the ASX and London AIM exchanges.
The three key projects include Project Icewine, Yukon leases and Project Peregrine with the assets at various stages of development, the company previously outlined this summer.
In late 2020, 88E was also formally re-assigned the "Area A" leases at Project Icewine meaning its working interest in around 40% of the project has increased from 30% to 75%.
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