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Vol. 21, No. 43 Week of October 23, 2016
Providing coverage of Alaska and northern Canada's oil and gas industry

Aiming for Horseshoe

Armstrong’s 9,000-foot well would test new idea in area south of Pikka

ERIC LIDJI

For Petroleum News

Armstrong Energy LLC is proposing a two-well exploration program this winter.

The company plans to drill the Horseshoe No. 1 exploration well west of the Meltwater satellite and the Pikka No. 1 exploration well at the southern tip of the Pikka unit.

The latter is an appraisal well at the Pikka unit. The former is a wildcat well some 20 miles south of the Pikka unit, near a horseshoe bend in the Colville River.

In a proposed plan of operations for Horseshoe No. 1 recently released for public comment, Armstrong said it intended to drill a 9,000-foot nearly vertical well from a 4.5-acre ice pad this winter. The ice pad would be connected to a 200-foot square staging pad at the existing Drill Site 2P at the Meltwater satellite of the Kuparuk River Unit by a 17.5-mile road across Great Bear Petroleum and ConocoPhillips Alaska leases. The drilling pad will include space for a drilling rig, maintenance buildings and a 60- to 90-man camp.

According to a timeline included in the filing, Armstrong plans to begin ice road construction later this year and conduct drilling operations between January and April 2017. The company will use All American Oilfield Rig No. 111 or an equivalent rig.

The state Division of Oil and Gas is taking comments on the plan through Nov. 17.

The state is expected to release a plan of operations for the Pikka well soon. The proposed Pikka No. 1 well would appraise an earlier discovery at the Pikka unit.

Armstrong believes it is sitting on a major discovery on its leases between the Kuparuk River and Colville River units. The company estimates the Nanushuk discovery contains oil across a 25,000-acre area at a depth of about 4,100 feet, with 225 feet of net pay in 650 vertical feet of reservoir rock. The company recently asked the state and Arctic Slope Regional Corp. to expand the Pikka unit to accommodate its development program.

What is the target?

Earlier this year, Armstrong Energy CEO Bill Armstrong said the Horseshoe well would “test a new idea” gleaned from the recent Horseshoe 3-D seismic program in the area.

By pursuing the wildcat project, Armstrong is betting prices will rise over the coming decade. The company believes existing conventional fields and even unconventional fields will fall short of demand by 2020, sending oil to “$70 to $80 per barrel at a minimum,” Armstrong estimated in an August 2016 interview with Petroleum News.

In its permitting application, the company was vague about its plans. The well design, according to the company, would “be similar to that employed in previous exploration wells.” As far as the target, “nearly all downhole aspects of the well are confidential.”

According to permitting documents, Armstrong plans to drill the Horseshoe well on ADL 392048, which is part of a package of leases in the area that the company acquired from Royale Energy Inc. in late 2015. Earlier this year, Armstrong transferred a 25 percent working interest in the lease - and two neighboring leases - to Repsol E&P USA Inc.

Shortly after acquiring this so-called “western block” in 2012, Royale touted both the conventional potential of the Brookian and Beaufortian in the region as well as source rock potential. Along with its partner Rampart Energy Inc., Royale commissioned the Big Bend 3-D seismic program and began permitting a two-well Aki exploration program.

In a report released in June 2014, Netherland Sewell and Associates Inc. estimated that two prospects identified through the seismic program might contain between 17.8 million and 325.3 million barrels of oil in place, with a best case scenario of 77.5 million barrels.

In an oil discharge prevention and contingency plan released for public comment in August 2014, Royale said it had identified locations for eight potential wells at its Aki prospect. Like the current Horseshoe program, the two Aki wells would have been drilled from a temporary ice pad accessed by a snow or ice road leading to Drill Site 2P.

A lawsuit between partners prevented the exploration program from advancing. As part of the resolution of the dispute, Royale acquired Rampart’s interest in September 2015 and assumed 100 percent interest over the western block. By the end of the year, Royale had sold the western block to an unnamed buyer, which turned out to be Armstrong.



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