The 88 Energy Ltd (ASX: 88E) is having a tough day on the market in response to a company update.
The company's shares are currently swapping hands at 16 cents apiece, a 51.5% fall. In comparison, the S&P/ASX 200 Index (ASX: XJO) is up 0.74% at the time of writing.
So what news did this ASX energy share deliver to the market?
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Merlin-2 well results 'disappoint'
88 Energy is an oil exploration company with projects on the Alaskan Central North Slope and Permian Basin in Texas, United States.
Today, the company advised it was unable to obtain fluid samples from target zones in the Merlin-2 well in Alaska. This was despite encouraging oil shows and logging while data drilling.
Initial wireline logging analysis showed reservoir quality at the well is "insufficient" to justify a production test".
The main objective of the Merlin-2 well operations was to collect hydrocarbon samples from the target zones. However, this was not to be due to the tightness of the formation at the location.
Future operations at the Merlin-2 well will involve plugging and abandoning the well and leaving the drilling area.
Commenting on the results, managing director Ashley Gilbert said:
We appreciate that this result will be disappointing news for shareholders, in particular that we were again unable to obtain a fluid sample at surface or perform a flow test.
However, we will now take the necessary time to fully analyse the data from the Merlin-2 well. This will provide a basis upon which the company can provide further updates on the future potential appraisal program for the Project Peregrine acreage.
In 2021, the company paid off US$16.1 million in debt from the sale of Alaskan oil and gas tax credits. Speaking on the financial position of the company today, Gilbert added:
88 Energy remains in a strong financial position, post the Merlin-2 well, with zero debt and a healthy cash balance that will be further strengthened with projected cash flows from the recently acquired portfolio of Texas production assets, project Longhorn.
Share price snapshot
The 88 Energy share price has gained dropped 62% in a year, sliding 34% year to date.
For perspective, the S&P/ASX 200 Index (ASX: XJO) index has returned about 12% over the past year.
The company has a market capitalisation of about $262 million based on the current share price.
