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Major Pikka phase 1 milestone achieved, early start-up end 2025 likely
Kay Cashman Petroleum News
On the evening of July 30, in an ASX release Santos Ltd. announced a major milestone for its Pikka phase 1 project in northern Alaska with the arrival of key processing modules by barge at Oliktok Point on the Beaufort Sea.
(See map in the online issue PDF)
This was a complex operation beginning from the Hay River Marine Terminal, Canada, transiting 1,086 miles along the Mackenzie River system to Tuktoyaktuk on the Beaufort Sea and 380 miles via sea barge from Tuktoyaktuk to Oliktok Point.
The remaining processing modules are being mobilized from the Pacific Northwest and are scheduled to arrive at site during August.
The Seawater Treatment Plant, or STP, fabricated in Batam, Indonesia, is currently on tow to Alaska.
The processing modules and STP will be installed, integrated and then commissioned together with already installed facilities in readiness for first oil.
In March, Santos Executive Vice President and President Alaska Bruce Dingeman said the company is in a good position to pursue acceleration to first oil around the end of 2025. This, he said at the time, will be "dependent on logistics and weather allowing for the mobilization of key production models by barge up the Hay River."
Until the company has more certainty, guidance remains unchanged with first oil in mid-2026, Dingeman said.
It appears that certainty has been achieved.
In the recent ASX announcement dated July 30 if you're in Alaska and July 31 if you're in Australia, Santos Managing Director and CEO Kevin Gallagher said the Pikka phase 1 project continues to make excellent progress: "Our highly capable team that delivered early completion of the pipeline in just two winter seasons followed by a successful river-lift of key processing modules, has created the opportunity for early startup and production from Pikka."
With Pikka phase 1 almost 90% complete the company is currently drilling its 21st well.
Santos subsidiary and operator in Alaska, Oil Search (Alaska), continues to test wells at Pikka, which is not yet in production. For example, in June two wells (producing for a combined total of six days) contributed an average of 541 barrels of oil per day to Alaska North Slope crude production.
The company began testing wells at the field in September 2023.
Buy-out in works Speaking of Gallagher, the June 22 issue of Petroleum News reported Santos said on June 16 that it had received a non-binding indicative proposal from a consortium led by XRG P.J.S.C., a subsidiary of Abu Dhabi National Oil Co., or ADNOC, which is looking to grow a global gas business. ADNOC, through its investment arm XRG, with Abu Dhabi Development Holding Co. and U.S.-based private-equity firm Carlyle, made the US$18.7 billion proposal for the acquisition of all of the ordinary shares on issue in Santos. The cash offer of US$5.76 per share, represented a 28% premium to the Australian company's close on June 13.
The Santos board confirmed that, subject to reaching agreement on acceptable terms of a binding scheme implementation agreement, or SIA, it "intends to unanimously recommend that Santos shareholders vote in favor of the potential transaction, in the absence of a superior proposal and subject to an independent expert concluding, and continuing to conclude, that the potential transaction is fair and reasonable and in the best interests of Santos shareholders."
The offer was preceded by two confidential, non-binding and indicative proposals from the XRG Consortium to acquire all of Santos' shares on March 21 for US$5.04 in cash per share and on March 28, for US$5.42 cash per share.
"Credit to Gallagher for extracting such a premium offer -- he will have earned the payout of his ensuing incentives in doing so," Saul Kavonic, an energy analyst at MST Marquee, said in a note. "Gallagher has found his escape parachute and it's made of gold."
The proposal is subject to the satisfactory completion of confirmatory due diligence by the XRG Consortium and the negotiation and execution of an SIA with Santos on customary terms and conditions, Santos said in its June 16 release.
Goldman Sachs and JB North & Co are acting as financial advisers to Santos; Rothschild & Co. is acting as independent board adviser. Herbert Smith Freehills Kramer is acting as legal adviser to Santos.
Implementation of the scheme under the SIA would be conditional on (among other things) customary approval from the Foreign Investment Review Board, Australian Securities and Investments Commission, National Offshore Petroleum Titles Administrator, PNG Securities Commission, PNG Independent Consumer and Competition Commission and Committee on Foreign Investment in the United States.
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