Money exchanges hands in August on buyout of Armstrong’s interest in Pikka

Kay Cashman

Petroleum News

The payout of the $450 million involved in Oil Search’s buyout of the remainder of Armstrong Energy’s working interest in Pikka, Horseshoe and nearby leases took place as planned at the end of August, Amy Burnett, Oil Search’s manager of U.S. media and communications, told Petroleum News Sept. 12.

“The lease transfers were officially agreed at the closing between the parties, but the transfers have not yet been made official by DNR, ASRC, or BLM,” Burnett said in an email.

The closing she is referring to occurred on June 27 when Oil Search exercised its option to sharply increase its stake in Pikka and Horseshoe leases west of the central North Slope. The company and minority partner Repsol SA are planning a Pikka development that will produce 120,000 barrels per day - initially from the big Brookian Nanushuk discovery and then later tapping into other stacked plays in the Pikka unit.

As far as Oil Search’s future relationship with Armstrong, Oil Search said in early July that the two companies would continue to work together in reviewing opportunities on the North Slope, in accordance with the area of mutual interest agreement, or AMI, that was entered into as part of the original March 2018 acquisition.

Oil Search and Armstrong are still partners in the eastern North Slope’s Lagniappe lease block.

When asked about those leases, Burnett said Oil Search was “still in the very early evaluation stage for the Lagniappe leases and it is premature to discuss plans.”

In the June 27 closing, Oil Search and Repsol aligned their interests across many of their shared North Slope assets, resulting in Oil Search retaining 51% in the Pikka unit and the Horseshoe block, while also purchasing a 51% interest in leases Repsol acquired in 2017, which are immediately east of Horseshoe within the prospective Nanushuk trend.

The alignment involved a net payment of $64.3 million from Repsol to Oil Search in the late August transaction.

- KAY CASHMAN