Although it is the smallest company operating on the North Slope, Accumulate Energy Alaska Inc. has been expanding and exploring its leasehold over the past two years.
The local subsidiary of Australian independent 88 Energy Ltd. drilled the Icewine No. 1 exploration well in late 2015, acquired 2-D seismic information over its leasehold in early 2016 and was preparing to drill the Icewine No. 2 follow-up as The Explorers went to print. Along with its joint venture partner Burgundy Xploration LLC, Accumulate also expanded its holdings in the central North Slope through lease sales in 2015 and 2016.
Accumulate drilled the 11,600-foot Icewine No. 1 vertical well in the Franklin Bluffs region in late 2015 to test the potential of the HRZ shale and conventional targets. The company originally planned to return to the Icewine project this winter to drill a lateral with multistage fracturing to provide points of comparison to Icewine No. 1. But after reviewing results from its $3 million 2-D seismic acquisition, the company decided to drill, hydraulically fracture and flow test the 11,200-foot Icewine No. 2 vertical well.
The company changed its plans because the vertical well was both cheaper and simpler to drill. The vertical well would save about $5 million over the cost of a horizontal, according to the company. The vertical well also allowed the company to choose from a wider array of available drilling rigs on the North Slope, according to the company.
Even with those advantages, Icewine No. 2 should cost some $17.7 million, according to 88 Energy. A similar well in a play in the Lower 48 would cost about half as much.
By late March 2017, Accumulate had mobilized the Doyon Arctic Fox rig to the well site, set the conductor and was installing the cellar. The company received final permits for the well in early April. The company said that it planned to spud during the week of April 24, and to stimulate and flow test the HRZ shale formation in June or July.
The well site in the Franklin Bluffs region allows the company to access the drilling location year-round, providing an advantage over seasonally restricted sites farther north.
If the results from Icewine No. 2 prove to be intriguing, Accumulate wants to return next winter to sidetrack or deepen the well or to drill the Icewine No. 2H horizontal lateral.
According to descriptions from July 2016, the horizontal well would proceed directionally for 14,877 feet to a depth of 11,100 feet and include a 3,000-foot lateral.
Quick turnaround
88 Energy and Burgundy Xploration formed their joint venture in November 2014 and have since expanded their land holdings in Alaska through various lease sales.
The project reached its first milestone with the Icewine No. 1 well, the following year.
According to 88 Energy, the well proved the presence of working petroleum systems in the Brookian and Beaufortian sequences. By mid-September 2016, the company was touting shows in the Brookian and a conventional discovery in the Kuparuk formation.
In early 2016, the independent firm DeGolyer & MacNaughton estimated that the HRZ shale at the Icewine prospect contained some 985.3 million barrels of liquids in a mean case. The estimate included oil, wet natural gas and condensate. Using internally generated figures, the joint venture estimated that the prospect contained more than 2.6 billion barrels of liquids in a mean case. The difference between the estimates, according to 88 Energy, came from a disagreement over how much of the acreage is productive.
In earlier investor presentations, 88 Energy proposed even higher estimates. The company described a potential Icewine development program consisting of 40 pads with 30 wells each - for some 1,200 wells total - targeting between 10 billion and 21 billion barrels of oil in place at the prospect. By comparison, more than 3,400 wells have been drilled to pursue the approximately 25 billion barrels of oil in place at Prudhoe Bay.
Alpha and Bravo
After processing its 420-mile 2-D seismic acquisition over the Icewine area, 88 Energy identified some 20 conventional oil prospects in the Brookian sequence, according to 88 Energy. They estimated that five of those conventional prospects - Alpha, Bravo, Golf, India and Juliet - might hold a combined mean volume of 758 million barrels of oil.
The company has since narrowed its focus to the Alpha and Bravo prospects.
The Bravo prospect is the largest of the group, with a mean estimate of 273 million barrels of oil, according to internal company estimates. The Alpha prospect is smaller, with a mean estimate of 118 million barrels, but is closer to the Dalton Highway corridor.
88 Energy has generally divided the Icewine region into three fairways: Eastern, Central and Western. The Alpha prospect is part of the Eastern region. The Bravo prospect is part of the Western region, which includes some of the more recently acquired acreage.
The company has described the conventional leads as being “predominantly stratigraphic” and geologically analogous to the Tarn oil pool at the Kuparuk River unit.
Those prospects could improve the economics of an HRZ shale development.
Accumulate is the third company to explicitly target source rock in Alaska, after Great Bear Petroleum Operating LLC and Royale Energy Inc. Great Bear was the first of the group and continues to pursue its project. Royale was the second and has left the state.
All three companies have found conventional exploration and development to be a pre-requisite for source rock developments in Alaska. The size and scale of source rock operations requires infrastructure and cash flow, which conventional work could provide.
With “further successful appraisal at Icewine No. 2; based on type curves from internal resource estimate combined with fiscal/cost assumptions,” an unconventional development at the Icewine project could break even with oil prices at about $40 barrel, according to an 88 Energy investor presentation from mid-September 2016. In earlier presentations, the company presented a range of exploration and development costs between $27 and $68 per barrel, depending on the size and scope of the resource. In its most recent presentation, from February 2017, the company reiterated the $40 figure.
