From the start in late 2017, Oil Search, which operates two of the largest North Slope oil discoveries in decades in the Pikka and Horseshoe Brookian oil prospects west of the central North Slope, has said it believes in spreading the risk among a few carefully chosen working interest partners. The ASX-listed independent is currently involved in the process of bringing in a third working interest partner, looking to eventually hold a 30 to 35 percent ownership in the Pikka, Horseshoe and surrounding exploration acreage. (Recently, company execs are talking 35 percent.)
Oil Search has a 25.5 percent interest in the Pikka unit and adjacent exploration acreage and a 37.5 percent interest in the Horseshoe block and the Hue shale. It and its partner Repsol also acquired more acreage in the general area in a recent state lease sale.
Oil Search has the option, exercisable until June 30, to purchase all of Armstrong and its minority partner's remaining working interest in the Pikka unit and the Horseshoe block (another 25.5 percent and 37.5 percent respectively) as well as an additional 25.5 percent interest in adjacent exploration acreage and a 37.5 percent in the Hue shale for another $450 million. (The initial buy-in was $400 million.).
Repsol continues to hold as much as a 49 percent interest in the Pikka and Horseshoe acreage acquired from Armstrong and its minority partner, depending on the lease.
Last summer Oil Search, aligning with Repsol, set up a data room and began to seriously evaluate companies that expressed interest in buying in as a working interest partner.
Peter Botten, Oil Search's managing director, said Feb. 18 that the task of bringing in that partner is progressing smoothly with several companies on a "good short list," but the process of identifying potential partners was not yet complete, with the data room still open,
"It's not done, it's never done until it's done," Botten noted
When asked whether they were considering different partners for Pikka and Horseshoe, he said no: "We'll progress it as a matter of urgency over the coming weeks. I think it's pretty clear though that the optimal value is delivered out of these assets by coordinating appraisal opportunities both at Pikka and Horseshoe and beyond."
Armstrong continues to play a role in Oil Search's exploration strategy, keeping an overriding royalty interest in the leases it sells.
- KAY CASHMAN
See story in Feb. 24 issue of Petroleum News, available online Friday, Feb. 22, at www.PetroleumNews.com
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