January 24, 2019 --- Vol. 25, No.4January 2019

Oil Search, Armstrong partner on Lagniappe leases

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Oil Search said Jan. 24 that it has exercised its option with Armstrong Energy to acquire a 50 percent interest in, and operatorship of, the 195,200-acre block of leases on the eastern North Slope held by Lagniappe Alaska LLC, a 100 percent-owned Armstrong company.

Lagniappe, formed in Alaska just prior to the Nov. 15 bid opening for the 2018 state areawide North Slope oil and gas sale, was the high bidder on the acreage, bidding approximately $82 an acre for a total of $14.1 million.

The leases are likely to be issued by the state mid-year.

Oil Search said it will pay approximately $8 million for the 50 percent interest in the leases.

Following the lease sale, Petroleum News tracked down Lagniappe's founder, Bill Armstrong, who said the company planned to aggressively explore the block, which is exactly what his company did when it acquired its leases west of the central North Slope where it found a huge oil deposit that was missed by previous drilling and is currently being developed by Armstrong partner Oil Search (Repsol is also a partner with a 49 percent interest).

When Oil Search first entered into a partnership with Armstrong it took an option to acquire 50 percent of any acreage picked up by Armstrong on the North Slope under an Area of Mutual Interest, or AMI, agreement. "This was to ensure that Oil Search could continue to work closely with Armstrong, which has extensive knowledge of the Alaskan North Slope with a proven and successful exploration lease acquisition strategy," said Peter Botten, Oil Search's managing director

"We are delighted to be exercising our rights under the AMI. This area was identified in a regional study, conducted jointly by Armstrong and Oil Search in 2018, as being highly prospective for oil. The leases acquired by Lagniappe capture the entire prospective trend identified by the study, which contains two separate plays. One of the plays identified is analogous to the Pikka oil field, with similar potential materiality, while the other is also a proven and material play in the region. The area has existing 2D and 3D seismic data and nearby wells and pipeline infrastructure," he said.

The potential of the area is "very exciting and, as operator, we intend to explore it systematically," which will include reprocessing existing seismic data and the acquisition of a new 3D survey. The eight-year term of the leases will allow a thorough evaluation and prioritization of leads and prospects to occur prior to committing to drill," Botten said.

This latest lease acquisition "is part of a measured growth strategy in the region, targeting high quality, highly prospective, material value opportunities, which will position the company for a long and successful future in Alaska," he said.


Editor's note: see full story in Feb. 3 issue of Petroleum News, available online Friday, Feb. 1, at

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