#88E Winx-1 On the verge of greatness.

#88E  Winx-1 On the verge of greatness.

I have recently come to 88E, having invested at the start of last week. However I’ve been looking at the geology of the drill for many weeks.

After being tempted to write a blog over the weekend, I decided it was better to wait for the inevitable news release today.

I can’t yet get my head around why the market and certain twitter folk are mispresenting RNS’s at the moment and O&G  RNS’s in particular. We had the same issue on AAOG, which now looks like being a decent producer, once flow testing takes place. For 88E and the Winx drill, this misrepresentation is continuing apace and Winx is NOT (contrary to some belief) a duster.

Fridays RNS, simply said that they drilled the Seabee and didn’t find anything (this was the least important target by a country mile anyway) and that they had drilled to a depth of around 4550ft and had intersected oil/water. They didn’t say that this was only in the very top Nanushuk layer, however anyone with any research in the company knew that this was the case.

The criticism of 88E is that they should have put a bit more information into the RNS and maybe this needs to be taken on board, however the company had been very open in saying that the Nanushuk stretched all the way down to 4800ft with multiple seals and layers. Maybe a case of assuming the investor and the market in general is actually knowledgeable…..

I am going to refer to Horseshoe quite a bit, so let’s explain this. Horseshoe was drilled in 2017. It created the biggest onshore oil find in the US for 30 years, by extending a layer of Nanushuk much further south. It was worth hundreds of millions of dollars. Horseshoe had a net pay of 30-45m (100-150ft).

Winx is looking to show that this reserve stretches into the 88E/RMP etc license area. It also has a secondary purpose to evaluate the Torok layer.

Now back to the drill. Nanushuk is made of several (N5,N4,N3) layers. On 3D, N4 and N3 have strong seals. N5 has a much weaker seal. Nanushuk is young oil source, due to this it has a water layer that gradients down and run parallel to the highest N layers with a strong under seal. 88E finding a water/oil mix at the top of the Nanushuk (N5) was both expected and hoped for. Horseshoe had the same layer and it helps to separate the known water layer from the rest of the Nanushuk targets thanks to the stronger N4 seal. That oil also existed was excellent news which helped to confirm the oil bearing ability of Nanushuk in the Winx region.

It seems that most of this was completely lost on the market.

This brings us to today’s news.

All of the Nanushuk has been drilled and we have entered the Torok.

234ft of Nanushuk were found, with multiple oil shows. If Winx can find even half of Horseshoe (50-75ft) of actual net pay that would be an amazing, transformative result. LWD is clear that C1-5 ratios and resistivity indicate gas and oil.

Another quick side track, LWD Logging While Drilling is not new, it can be very useful, particularly 

on fast paced drills such as Winx, however it can be a little bit inaccurate. The resistivity is a measurement of the conduction of electricity in the fluid, less = water, more = thick oil. It does need a baseline to work accurately. It does prevent drill fluids from interfering with the C1-C5 mix though.

The Torok has been encounted at 6052ft, importantly LWD has found evidence of oil. We are not yet at the bottom of the Torok.

It’s fair to say that the geology model hasn’t been great (although it looks highly successful), the greater depth of all targets would indicate that the drill didn’t hit the target, as sweetly as it might have done. As good as the drill looks like it might be, it could be better. With this in mind the license area might not just extend the edges of the Nanushak, but it might potentially show it at full strength (like horseshoe), in the license area.

It would be fantastic if 88E would just say. “Hey everyone, we’ve found loads of oil, its all commercial, you are all millionnaires.” But it doesn’t work like that. This is a 3 step process.

Step 1 LWD results.

Step 2 Wirelogging results.

Step 3 Flow testing results.

You can’t skip a step. The RNS has shown that so far the Winx drill has done everything asked of it, except the Seabee. If Steps 2 and 3 comeback positively, (we have no reason to think they won’t), then this will be a major, major rerate for all the companies involved.

We should hear tomorrow morning concerning the Torok.

We then should hear within 3-4 days the results of step 2.

If Torok is more than 200ft then there is no reason why Winx wont be even more important for Alaskan oil than Horseshoe.

88E currently has a farm out process ongoing, due to be completed by the end of March. It would be naive to think that Winx wouldn’t affect this. Most companies interested in the farm out with 88E, would be highly interested in the reserves of Winx. Rather than participate in a farm out with limited exposure to 88E assets, it would make far more sense, if funding allowed, to bid for the company. A strategic interest in Winx and full ownership of the farm out assets would be cheaper and give a company more options. I think that 88E’s problematic existence on ASX and AIM and its restricted ability to raise funds would make this a viable option for 88E and its management.

Key points.

LWD requires a baseline for oil/water resistivity comparisons. It seems possible that the current higher Nanushak layer might not be water, one to watch out for.

The drill is important for the entire North Slopes and so also for the whole of Alaska, if it’s successful in determining net pay, it will make Alaskan News and Oil news globally.

The drill is going as well as could be hoped at this stage.

Modern wire logging is very accurate if it shows net pay for oil, then it will flow, how much is uncertain, but it will flow.

The angle of penetration and the geology of the drill, shows that it likely missed the sweet spot.

Just like horseshoe, a sidetrack drill might be planned to intersect even more net pay and find the sweet spot, this will be from a position of giant size strength.

The share price will respond, how quickly I am unsure as the market is incredibly dumb since the major Aim funds have left, but I fully expect considerable US buying if Winx comes in, as its shaping up to look like.