Vol. 24, No.24 Week of June 16, 2019
Providing coverage of Alaska and northern Canada's oil and gas industry

Alkaid going online 2021

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Pantheon combines 2 Brookian prospects; Alaska tech team tackles Texas assets

Kay Cashman

Petroleum News

London-based Pantheon Resources, which acquired the North Slope assets of Great Bear Petroleum in January, says it will bring its Alkaid oil field online as part of a phased production program as early as 2021.

The field is near the Dalton Highway and the trans-Alaska oil pipeline, possibly allowing for some early year-round oil sales to generate income- unusual for North Slope projects under development since most of the region has no permanent roads. (Ice roads and pads are allowed in roadless areas when the tundra is frozen in the winter. Great Bear was previously allowed to drill in the summer from rig mat drill pad locations along the Dalton Highway.)

In a June 6 press release and webcast, the company said its Alaska subsidiary, Pantheon Alaska Petroleum Operating, will use mobile production units to handle output from three or four delineation wells placed adjacent to the Dalton in the highway’s already-established transportation corridor, trucking the oil north to Pump Station No. 1 of the trans-Alaska pipeline until full-scale development of approximately 50 wells and related infrastructure with a central processing facility can be permitted and completed.

The year-round operation of these three or four wells, from which Pantheon expects to produce about 1,500 barrels of oil per day each, will involve working with various state agencies and the U.S. Army Corps of Engineers to determine if this will be permitted at this phase of Alkaid’s development.

“The opportunities of being directly under the Haul Road and the trans-Alaska pipeline system allows us to take advantage of this early production and year-round operation to avoid the restrictions that are common in Alaska - not just weather restrictions and ice road restrictions but seasonal restrictions,” Michael Duncan, Pantheon’s vice present of operations, said in the webcast.

Alkaid, Phecda update

The focus of the June 6 release was a recoverable resource upgrade following completion of the petrophysical analysis and recent winter season flow-testing of the Alkaid No. 1 well, which was drilled in 2015 by Great Bear, but was never tested because of flooding on the Dalton Highway. The company had previously carried out an extensive program of 3-D seismic surveying in its acreage and had identified several oil prospects, including the Alkaid. The subsequent suspension of payments of state exploration tax credits under the administration of former Gov. Bill Walker resulted in a pause in Great Bear’s exploration program.

Some of the June 6 information was previously released by Pantheon, including the fact that results from the Alkaid well had “positive implications” for the adjacent Phecda prospect, upgrading a planned exploration well there as a step out appraisal for the Alkaid discovery.

The Alkaid and Phecda prospects have been remapped, Pantheon said, which included merging in additional 3-D seismic shot subsequent to drilling. Remapping indicated Alkaid and Phecda are part of the same structural accumulation.

Combining the two prospects, P50 recoverable reserves have been increased from 59 million barrels of oil to 90-135 million barrels, Pantheon said.

The combined oil in place estimate was upgraded by the company by approximately 50%, increasing from 595 million barrels of oil to 900 million barrels.

The recovery factor for the two projects was increased from 10% pre-drill to a range of 10-15%. Pantheon said secondary recovery techniques such as waterflooding, which have been successfully applied to other Brookian accumulations on the North Slope, boost recovery factors as much as 40%.

However, “for conservatism” Pantheon said it was too early to model such secondary recoveries into its base case “given such techniques have not been applied at Alkaid.”

Light, high quality oil

After first-quarter testing, the company confirmed the Alkaid well as an oil discovery in the primary target, the Brookian, at an 8,100-foot depth, flowing 80-100 barrels per day of high quality, light oil (40 API) from a 6-foot perforated interval within a 240 foot interval of net pay.

This result, Pantheon said, was “considered of great importance” because the Brookian “is the same formation that is at the heart” of recent major North Slope discoveries by Armstrong Energy, Repsol, Oil Search and ConocoPhillips.

Pantheon has several other Brookian prospects on its acreage.

The company said Alkaid testing “confirmed the efficacy” of its high-tech geophysics analysis in modeling the Brookian - “important because the application of high-tech geophysics has been central” to the other recent major Brookian discoveries on the North Slope.

Alkaid No. 1 was drilled as a vertical test well with the objective of verifying the presence of the oil reservoir and gathering data and was not drilled to maximize production from the wellbore.

Furthermore, the well was on the edge of the reservoir and seismic shows improved reservoir characteristics moving towards the heart of the reservoir, the company said.

“Given how good our data was from this off-structure well, we’re extremely excited about the potential when we move to the heart of the reservoir,” Pantheon CEO Jay Cheatham said during the webcast.

Future development wells will be drilled horizontally and fracked, typical for Brookian developments on the North Slope, which “should result in vastly improved flow rates” than that of the test well, Pantheon said.

“The board believe that, in a success case, a modelled P50 well is estimated to have an estimated ultimate recovery in the range of 1.5-2.5 mmbo and an estimated potential maximum flow rate per well exceeding 1,500 barrels of oil per day.”

Boosts confidence in Talitha

The Alkaid results have also increased Pantheon’s confidence in another of its Brookian prospects to the south, Talitha.

The company has said it will drill an exploratory well at Talitha in the 2019-20 off-road winter drilling season. The well will be near the Pipeline State No. 1 discovery well that was drilled in 1988 by ARCO, predecessor to ConocoPhillips.

“They didn’t have 3-D at the time. Drilling technologies weren’t as advanced as they are today,” Bob Rosenthal, Pantheon’s technical director, said in the webcast.

“ARCO drilled the well looking for a thick, clean sand and instead found a thick zone of interbedded, laminate-type sands and shales. The sands were oil-bearing but at the time given the … $10 price of oil and the fact completion technology wasn’t as advanced as it is today, the well was plugged and abandoned. … With today’s horizontal drilling technology we believe we have a significant discovery” at Talitha, he said.

Alaska team tackling Texas challenges

Pantheon’s main U.S. subsidiary is based in Texas, where the independent has acreage in the Eagle Ford sandstone, Austin Chalk, Wilcox and Navarro plays.

The focus of the company has recently been on Alaska, “principally because of the requirement to achieve our objectives during the 2018-19 winter drilling season,” Pantheon said in its June 6 press release.

However, East Texas “remains a core asset.”

The area has “abundant nearby infrastructure and successful wells can be brought onstream and generate cashflow rapidly,” Pantheon said.

The Great Bear acquisition provided the company with “a world class technical and operational team” with experience in U.S. oil and gas operations.

The new team has started a full and comprehensive technical review of the geology and operations of Pantheon’s East Texas prospects, which had previously been operated by Vision.

In January, Pantheon reached an agreement with Kaiser Francis and associated limited partners to acquire controlling interest in Vision Gas and Vision Resources.

Under Vision’s operatorship, six wells had been drilled in the East Texas acreage, all of which encountered “potentially significant hydrocarbons,” Pantheon said. “Each however, suffered a variety of different operational issues which hampered” their success “and masked the underlying potential of those locations.”

Since obtaining control of Vision, Pantheon has parted ways with Vision’s operational team, and has tasked its new Alaska technical and “highly experienced operational team” to review and make recommendations for the Texas acreage.

Seeking partner for Alaska

Founded in 2005 and listed on the AIM Stock Exchange, a sub-market of the London Stock Exchange, Pantheon is looking for a partner to “contribute a material up-front cash contribution towards sunk cost for entry into the project,” together with an element of “carry,” under which the farminee would fund part of Pantheon’s development costs.

To date more than US$80 million has been invested in seismic with over $200 million “total sunk cost into the Alaskan project,” Pantheon said.

The company’s preliminary modeled Net Present Value10 per barrel of oil in the ground range was estimated at $7-$12.

Alaska North Slope oil trades at a premium to West Texas Intermediate and in the current environment, “we estimate a net back of c.$55 per barrel of oil, after all transportation and pipeline charges.”

Anchorage-based Patrick Galvin, former commissioner of the Alaska Department of Revenue and Great Bear’s chief commercial officer and general counsel, assumed a similar title and duties with Pantheon Alaska, and is the company’s top executive in Alaska.

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