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Oil Search relinquishes 130 North Slope leases in non-cash write off
Kay Cashman Petroleum News
On June 23, Oil Search (Alaska) LLC submitted a written surrender of 130 leases on Alaska’s North Slope to the Alaska Department of Natural Resources’ Division of Oil and Gas, which was acknowledged in a letter from Division Director Tom Stokes on July 9, who said the relinquishment takes effect on filing date. The surrendered acreage will be included in the next state North Slope and Beaufort Sea areawide lease sales; a date that has not yet been noticed, but last year the sales were held jointly in December.
The leases cut loose are “largely located on the edges of the company’s western lease area,” Amy Burnett, Oil Search’s manager of U.S. media and communications, told Petroleum News July 15. “The reduction was in areas we have determined to be less prospective than other leases in our Alaska portfolio.”
In looking at a map six of the leases are off the northwest corner of the Colville River unit; all the rest are in various locations south of the Kuparuk River unit.
“Even with the relinquishments, Oil Search continues to be among the top three leaseholders on Alaska’s North Slope,” Burnett said.
The relinquishment “helps to further focus” Oil Search’s efforts in Alaska, she added, and is part of what the company identified in a July 13 Australian Securities Exchange announcement as an “immaterial impairment” in its plans to write off around $380 million in a non-cash, pre-tax charged for its half-year results, which closed June 30.
Most of the impairment will be assessed against Papua New Guinea area exploration assets and a gas-to-power project.
Due to relatively low oil prices and the related coronavirus pandemic, which are tied to reduced demand for oil, under the leadership of managing director Keiran Wulff Oil Search has been reducing costs where it can in order to ensure the company’s long-term survival - all choices Wulff described as “painful” in a July 1 statement.
To date in 2020 Oil Search has slashed its expected global investment spending by $675 million, suspending all non-essential projects and activities in Papua New Guinea.
Although Alaska has not suffered the payroll and capital reductions of Papua New Guinea, work to begin early oil production in 2022 at Pikka was put on hold. Full project development, however, is still on track for first oil in 2025 from the 135,000 barrel per day oil field.
Leases surrendered June 23 The 130 state leases relinquished by Oil Search are as follows, with some having been issued as early as Jan. 1, 2013, and others as recently as July 1, 2018:
ADL 392159, 392271, 392581, 392715, 392775, 393163, 393651, 392160, 392316, 392582, 392716, 392776, 393164, 393652, 392317, 392583, 392971, 392777, 393165, 393653, 392318, 392584, 392778, 393654, 392319, 392798, 393673, 392320, 392799, 393674, 392321, 392800, 393675, 392322, 392801, 393676, 392323, 392802, 393677, 392324, 392803, 393678, 392325, 392804, 393679, 392326, 392805, 393680, 392327, 392806, 393684, 392328, 392807, 393685, 392329, 392808, 392330, 392809, 392331, 392810, 392332, 392811, 392333, 392812, 392334, 392813, 392335, 392814, 392336, 392815, 392337, 392816, 392338, 392817, 392339, 392818, 392357, 392819, 392358, 392820. 392359, 392821, 392360, 392822, 392365, 392823, 392366, 392824, 392368, 392825, 392370, 392826, 392372, 392827, 392373, 392828, 392829, 392830, 392831, 392832, 392833, 392890, 392891.
- KAY CASHMAN
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