88 Energy Shares (88E:ASX) seemed to have been to a trip to the moon and back over the past 12 months. The stock seems to be gaining traction on stock based social media sites, so we thought we better take a look and see what we think the future holds for the 88E:ASX Stock Price.

What Business Do 88 Energy Shares Operate In?

88E:ASX list on their website as having four projects in the Northern slopes of Alaska with a combined acreage of around 440,000 net acres. The four projects listed by 88E are as below:

Project Peregrine: 195,000acres, with a 50% working interest, with a net mean prospective resource of 1.6BBOE*

Project Yukon: 38,681acres with a 100% working interest, with a prospective resource of 90MMBO, project Yukon is also in discussion with local landholders to potentially expand the lease area.

Umiat Oil Field: 2P reserves of 94MMBO, with over 60+ wells already drilled to date, additional development potential being assessed.

Project Icewine: Mean prospects of 1.77BBOE, with potential for Tlitha-1 target extension onto Icewine East.

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In summary the four projects combine to form a portfolio of 3.4billion BOE prospective and 2P reserves of 94million barrels of oil. Source: https://www.88energy.com/operations/

Current 88 Energy Shares Fundamentals:

The 88E:ASX Share price has been on quite the roller coaster ride over the last 12 months. Shares have traded as high as $0.96/share and as low as $0.004/share. The price has now seemed to have stabilized around $0.02/share, giving a market capitalization of $276.2million. This is still up a massive 320% this year.

88 Energy do not currently turn a profit, such the EPS is negative and the PE ratio is irrelevant. The best way to value this company is through their latest appendix 4E performance and any market updates.

From the quarterly report issued on the 20th April 2021, drilling to the Merlin-1 exploration well at Project Peregrine has commenced. 88E Energy also had positive news regarding their Icewine and Yukon leases.

The company noted that they had successfully undertaken a heavilly oversubscribed bookbuild to domestic and international institutional investors raising A$12million at a share price of $0.008 per new ordinary share.

At the end of the quarter the company (88E:ASX) had over A$20.06million in cash, including cash reserves held in JVV bank accounts totaling A$2.3m.

88 Energy Shares produced no revenue for shareholder in the last quarter, with expenses totaling (1.488million) dollars. With the company also utilizing over A$11.23m dollars financing the exploration, tenements and evaluation process. The company now have at the end of the quarter A$20m in cash and cash equivalents.

It’s worth noting due to being a pure-play oil company, ASX:88E performance and project viability will be intrinsically linked to the price of oil.

WTI Price - ASX:88E
WTI Crude Oil Price Chart: Source: USOIL 71.27 ▲ +0.68% (tradingview.com)

If your interested in our approach to due diligence check out this The Ultimate Stock DD Checklist For Beginners 2021 – Prophet | Investing and Shares (prophet-invest.com).

88E Operations Update:

From the Market Update 25th May 2021 the company seem very positive on sampling that they have undertaken of the Merlin-1 well using Halliburton’s reservoir description tool. The team seem to be happy with the amount of resins and asphaltene’s located in the sample, which can only be associated with the presence of oil. However, 88E note that further sampling is required prior to confirming anything.

Interesting to note that the costs associated with Merlin-1 have now largely been finalised with 88E Shares portion of costs being US$9.0million. Discussions with vendors have resulted in the willingness for the vendors to accept payment in 88E stock in lieu of cash and the company will now issue 345,000,000 new shares in 88E at a price of $0.025 per share. This will ensure the company is left in a strong cash position prior to the winter drilling period.

Prophets Take

Whilst here at Prophet we really like the concept of ‘green’ energy future, we simply cannot invest in this company knowing full well that this goes against our investing principals. However, based upon the information presented by the company ASX:88E seems to have a bright future ahead of them.

88 Energy Shares seem to have a set of very promising development and exploration zones. Should ASX:88E be able to prove the resources from Peregrine, Yukon and Icewine and the price of oil continues to move upwards the company should experience a good level of growth in the shareprice.

Cash generation vs burn will be a very interesting point to keep an eye on with this company. Vendors are willing to accept payment in shares as opposed to cash, so potentially even the vendors are keen on 88E’s future.

Prophet will be staying away from ASX:88E shares due not fitting inside our investment criteria.

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