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Vol. 17, No. 32 Week of August 05, 2012
Providing coverage of Alaska and northern Canada's oil and gas industry

Completion technique keeps Pioneer optimistic about Oooguruk

A new completion technique helped operator Pioneer Natural Resources Inc. post a 25 percent increase in Alaska oil production in the second quarter, and now the company is gearing up to use the technique on four additional North Slope wells this coming winter.

Pioneer also plans to drill another well into the Torok formation this winter to follow up on a 50 million barrel discovery it previously announced at its budding Nuna prospect.

The Texas-based independent produced 5,000 net barrels of oil per day from the Oooguruk unit in the second quarter, up from 4,000 net bpd in the first quarter.

The increase came after Pioneer drilled a well into the Nuiqsut formation in the first quarter and completed the well using a mechanically diverted fracturing system.

The well produced at an initial rate of 4,000 barrels per day, making it “by far our best Nuiqsut well,” Pioneer Chief Operating Officer Tim Dove said earlier this year.

With the well remaining online for most of the quarter, Pioneer was able to post its first quarter-over-quarter increase Alaska oil production in two years. But Pioneer production remains below its peak of 7,000 net bpd from the second and third quarters of 2010.

After successfully using a mechanically diverted fracturing system at its Eagle Ford and Spraberry operations in Texas, Pioneer evaluated the method in Alaska earlier this year on a well into the Nuiqsut formation. Also known as “plug and perf,” the technique is thought to be more effective than a “dynamic diversion” fracturing system because it can focus more energy at the point of fracture and stimulate a larger portion of a reservoir.

Based on its initial success, Pioneer now plans use the technique on four new development wells at Oooguruk this winter. “Those fracs will not be done until well after the freeze,” Dove said during an earnings call Aug. 1. “We need space for the frac fleet and we need space for frac tanks and other equipment. We really need ice for space around the island. So we really won’t be getting to those fracs until probably February.”

Pioneer is currently running a one-rig development program at the Oooguruk unit, targeting all three formations at the field: the Kuparuk, the Nuiqsut and the Torok.

Pioneer operates Oooguruk and holds a 70 percent working interest in the unit. The Italian supermajor Eni Petroleum holds the remaining 30 percent interest.

Companywide, Pioneer produced 150,500 barrels of oil equivalent per day in the second quarter, up 3 percent from the first quarter because of growth in Texas and Alaska.

Another Torok appraisal

Pioneer also plans to continue evaluating its Nuna prospect this winter.

The company drilled the Nuna No. 1 well earlier this year, reporting an initial production rate of 2,000 barrels of oil per day from the southern extent of the Torok formation.

While Nuna No. 1 is currently shut in pending future onshore production facilities, Pioneer plans to drill an “appraisal” well this coming winter to further test the Torok.

“The idea is offsetting the excellent well we drilled last winter and evaluating the potential for development,” Dove said, noting that the company has already begun front-end engineering and design work on onshore facilities needed to develop the prospect.

Pioneer drilled Nuna No. 1 directionally from a pad some 2.5 miles northwest of Kuparuk River unit drill site 3S, and said it expects to drill the appraisal well in a similar fashion.

The state expanded the Oooguruk unit last year to include four leases along its southern edge to bring the entirety of the Torok formation into the unit boundaries. In return, Pioneer must decide by June 30, 2014, whether it plans to sanction Nuna. If so, the company plans to build the Nuna DS-1 pad by June 30, 2015 and begin drilling in 2016.

Staying put in Alaska

Those plans have quieted talk among analysts that Alaska might be up for sale.

“It’s important for us to sit there,” CEO Scott Sheffield said when asked directly whether Alaska still remained a candidate for divestment for Pioneer. “We have a lot of upside. We need to understand that potential upside before we make any long term decisions.”

For several quarters, analysts had presented Alaska and South Africa as potential capital-generating sales for Pioneer. While Pioneer recently sold its South Africa assets, Sheffield has said he sees Alaska “growing significantly over the next several years.”

During the Aug. 1 call, Pioneer said it wants to form a joint venture in the Wolfcamp Shale and is offering between 33 to 50 percent working interest in around 200,000 acres in the southern portion of the Midland Basin to help accelerate development there.

Asked whether that joint venture, and the potential capital associated with it, would put to rest talk of additional divestments through 2013, Sheffield said, “All of our assets are for sale for the right price. So we will continue to look at performance of those assets and make that determination in the future, whether or not we should be selling an asset.”

—Eric Lidji

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