A good relationship just got better. Independents Kerr-McGee and Armstrong Alaska have teamed up for a third North Slope project — the third in twelve months. Kerr-McGee, which officially entered Alaska on Jan. 8, 2004 when it acquired majority interest in Armstrong’s Nikaitchuq unit, has farmed into the Two Bits project where it will take over as operator of the exploration program and earn a 50 percent stake.
“We’re committed to drill one well this winter,” Kerr-McGee spokesman John Christiansen told Petroleum News Jan. 27.
If the first well is successful, “additional drilling may occur during the current drilling season,” Rick Buterbaugh, vice president of investor relations for Kerr-McGee, said in a Jan. 26 fourth quarter earnings conference call.
Two Bits, renamed Ataruq by Kerr-McGee, consists of two onshore prospects and covers approximately 8 square miles. It is located just west of the Kuparuk River unit, south of the Palm field and north of the Tarn field.
In Inupiaq, the Native language spoken from Siberia to Greenland, Ataruq means “is connected with,” which is appropriate since Ataruq is a possible extension of Palm and Kuparuk, Stu Gustafson, Armstrong’s vice president of operations, said last year.
Armstrong Alaska, an Anchorage-based affiliate of Denver independent Armstrong Oil and Gas, is in the process of transferring all the exploration permits for Ataruq to Kerr-McGee, Gustafson said.
Could be first independent-operated North Slope field
If one of the two prospects proves commercial, “we will start production drilling” and begin production at Ataruq by late 2005 from standalone modular facilities, Gustafson said Oct. 28, noting it would likely be the first oil produced from an independent-operated field on Alaska’s North Slope. (See Dec. 19 and Nov. 7, 2004 articles on Two Bits in Petroleum News archives at www.PetroleumNews.com).
Initial production from the project was expected to be approximately 15,000 barrels per day. According to the plan of operations Armstrong filed with the state of Alaska, as many as 20 wells might eventually be drilled as part of the proposed development.
“There is a strong probability of success on this project. It’s one of the next generation of prospects that are out there on the North Slope that need to be evaluated. We’re pleased to have Kerr-McGee as a partner because they have shown that they can operate on the North Slope in an effective and efficient manner,” Armstrong Vice President Ed Kerr told Petroleum News Jan. 26.
When asked if Armstrong will continue to work closely with Kerr-McGee on drilling this winter as it did on the Nikaitchuq wells last winter, Kerr said, “Yes. We have an extremely close working relationship with Kerr-McGee and that will continue.”
Tuvaaq exploration well spud
Ataruq will be drilled by either Nabors Alaska rig 27E or Nordic Calista’s Nordic 3 rig. Christiansen said Kerr-McGee expects Nordic 3 to drill the well, but Petroleum News’ sources say it will depend on which rig finishes the partners’ other wells first.
Kerr-McGee is “gearing up for a very active drilling season” in Alaska, Buterbaugh said Jan. 26. “After some initial delays due to the weather, preparations for the ice road and pad are completed and we have begun appraisal operations at the Nikaitchuq (oil) discovery” in the shallow waters of the Beaufort Sea.
“We expect to spud within the week the first horizontal appraisal well targeting the Schrader Bluff reservoir. Following the drilling we intend to perform an extended flow test for two to three weeks. This well will be followed by a second horizontal appraisal to test the Sag River formation,” Buterbaugh said.
Kerr-McGee operates the Nikaitchuq unit with a 70 percent interest; Armstrong holds a 30 percent interest.
Buterbaugh said Kerr-McGee expected to spud an exploratory well at the company’s second North Slope prospect, the Tuvaaq unit, on Jan. 27. Tuvaaq, another Kerr-McGee-operated prospect developed by Armstrong, is in the western Milne Point region between the Pioneer Natural Resources-operated Oooguruk unit and the Nikaitchuq unit. Kerr-McGee has a 42 percent interest in Tuvaaq, Armstrong holds an 18 percent interest and Pioneer, another Armstrong North Slope partner, holds a 40 percent interest.
