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Armstrong sells Pikka Oil Search, based in Papua New Guinea, has partnered with Repsol, Exxon Kristen Nelson Petroleum News
Oil Search, based in Papua New Guinea, has bought into Armstrong Energy and GMT Exploration’s interests at Pikka and Horseshoe on the North Slope.
Oil Search said in a Nov. 1 statement that it paid $400 million for a 25.5 percent interest in the Pikka unit and adjacent exploration acreage and 37.5 percent interests in the Horseshoe block and the Hue shale, with the sale subject to regulatory approval.
The company has the option, exercisable until June 30, 2019, to purchase all of Armstrong and GMT’s remaining interest in the Pikka unit and the Horseshoe block (25.5 percent and 37.5 percent respectively) as well as an additional 25.5 percent interest in adjacent exploration acreage and 37.5 percent in the Hue shale, for $450 million.
Oil Search said it will carry Armstrong and GMT’s share of the 2018-19 appraisal program, estimated at $25-$30 million, if the purchase option is not exercised by June 1, 2018, and will assume operatorship on June 1, 2018.
Armstrong is the current Pikka operator; Repsol holds a 49 percent interest.
Balance portfolio Oil Search said the Alaska assets would complement its high-quality gas assets in Papua New Guinea and balance its gas-dominated portfolio.
The $400 million price represents a low-cost entry, “made at an attractive time in the commodity cycle,” and equates to $3.10 a barrel, with potential resource upside reducing the cost to $1.30 a barrel, Oil Search said.
The acquisition was made on the basis of some 500 million barrels, Oil Search said, noting that joint venture partner estimates are more than 1 billion barrels.
Further appraisal drilling Further appraisal drilling will take place at Nanushuk in early 2018, “after which an independent resource audit will be obtained, with potential to add more than 125 million barrels net to Oil Search’s booked resources,” the company said.
Oil Search said there is a clear route to rapid commercialization at Nanushuk, with target production rates of 80,000-120,000 barrels of oil per day, gross, for the first phase of development and 7-11 million barrels of oil net to Oil Search, with first oil production in 2023.
Oil Search said it would assume operatorship in June 2018, and will build Alaska North Slope operating capabilities by partnering with Armstrong Energy LLC and through a cooperative agreement with Halliburton to provide resources and capability to supplement Oil Search’s technical and operating skills on the ground in Alaska.
The company also said it has agreed with Armstrong Energy to “jointly explore and develop other opportunities in the area.”
Search for oil interests “For some time, Oil Search has been seeking to acquire oil interests to complement our PNG gas assets, to create a more balanced portfolio that is less exposed to one single commodity and one country,” Oil Search Managing Director Peter Botten said in commenting on the transaction.
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