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The Explorers 2020: Game changer: 88 NPR-A exploration plans
Buys XCD, drilling wells in Harrier and Merlin Nanushuk prospects, analogous to Harpoon, Willow; portable rig, no ice roads Kay Cashman Petroleum News
Australia independent 88 Energy Ltd., a Perth-based ASX and AIM listed firm (88E), is moving forward with plans to drill two exploration wells in the winter of 2020-21 in the National Petroleum Reserve-Alaska on acreage it acquired in an off‐market takeover from XCD Energy. The program could prove to be a game changer for North Slope exploration in terms of saving time and money and thus making northern Alaska more affordable for small-to-mid-sized operators.
The wells, whose main target will be the prolific Nanushuk reservoir, will be drilled by one of 88 Energy’s three operating subsidiaries, Accumulate Energy Alaska, which is run by long-time Alaska geologist Erik Opstad.
The Harrier and Merlin prospects where the wells will be drilled are in the 195,000-acre XCD Peregrine block. On Jan. 21, 2020, XCD managing director Dougal Ferguson told Petroleum News that Merlin is considered a direct analogy to ConocoPhillips’ Willow oil discovery, while ConocoPhillips’ Harpoon prospect “is interpreted to lie on the same sequence boundaries as the Harrier prospect.”
Harrier and Merlin lie between the Umiat oil field to the south and Willow and Harpoon to the north.
First of its kind In a July 13, 2019, interview, Opstad told PN that the main target of the Harrier 1 and Merlin 1 wells, the Nanushuk, can be reached in less than 5,000 feet in the area, while a third prospect in the Peregrine block, Harrier Deep, has a Torok objective at about 10,000 feet. It will not be drilled in the 2020-21 winter season.
The shallower Nanushuk wells do not require the use of a rotary rig, or an ice road that is needed to transport the heavier traditional North Slope exploration rigs, allowing Accumulate to use a less expensive lightweight workover or coiled tubing rig that can be moved off-road in pieces by tundra-safe track vehicles on snow trails. Although the use of lightweight, portable rigs and snow roads has been studied and considered by XCD, Armstrong and Oil Search, 88 Energy will be the first to conduct such a program on the North Slope.
XCD has said the three onshore prospects hold a mean unrisked recoverable prospective resource of 1.6 billion barrels of oil, per an independent report generated by ERC Equipoise. (Harrier Deep was pegged at 572 million barrels.)
“We’re starting the process for an oil spill plan for the federal acreage,” Opstad said. Although the state has primacy with that type of permitting, the feds have some involvement.
“The only hurdle,” Opstad said, is that the federal process can be daunting, and “timing is very important to this project.”
History in Alaska 88 Energy has been operating on the North Slope since 2015 having originally entered the region via an agreement in 2014 with Burgundy Xploration.
Previously, 88 Energy had been named Tangiers Petroleum, with oil and gas assets offshore Morocco and on and offshore Australia.
In November 2014, Tangiers joined forces with Burgundy, the agent and high bidder on almost 87,000 acres south of the Prudhoe Bay unit in the Division of Oil and Gas’ North Slope areawide lease sale.
Tangiers became 88 Energy taking an 87.5% interest in, and operatorship of, the leases, which the partners named Project Icewine.
Today Icewine (see map in pdf and print versions of this article) is operated by subsidiary Accumulate.
In addition to Accumulate, 88 Energy has two other Alaska operating subsidiaries - Regenerate Alaska and Captivate Energy Alaska.
In the ensuing years 88 Energy expanded its exploration lease holdings to 492,000 gross, 300,000 net, acres in the central North Slope, plus the latest acquisition in July 2020 of XCD’s 100% interest in the 195,000-acre Peregrine block in NPR-A.
The company via subsidiary Accumulate also operated four exploration/appraisal wells on the North Slope in conjunction with partners - Icewine No. 1 in 2015, Icewine No. 2 in 2017, the Winx 1 well in the winter of 2018-19 and Charlie 1 in the winter of 2019-20. None of the wells proved commercially successful, although according to 88 Energy the jury is still out on the Icewine unconventional targets in Icewine No. 2 and the condensate discovery in Charlie 1.
Today, 88 Energy’s Alaska portfolio contains three key exploration project areas - Yukon Leases. Project Icewine and Project Peregrine. The company said in its July 21 second quarter 2020 quarterly activity report that it had relinquished its Western Block leases where it drilled the Winx well.
Yukon Gold leases In the 2017 and 2018 state areawide lease sales 88 Energy picked up eight leases on 15,234.71 contiguous acres on the eastern North Slope along the border of the ANWR 1002 area. Those leases contain a historic BP oil discovery, Yukon Gold.
The 100% owned Yukon leases are operated by subsidiary Regenerate, which is run directly by David Wall, managing director of 88 Energy.
In its second quarter 2020 quarterly activity report, 88 Energy said, “discussions continue with nearby resource owners to optimize the monetization strategy of the acreage, with permitting continuing for future potential exploration drilling - subject to farm-out.”
Unlike the 2019 fourth quarter activity report released in January 2020, the July report does not specify that the permitting was being done for a new well in 2021, likely because of the change in oil prices and market conditions since then, making the timing of the well uncertain.
Activity close to Yukon Gold A few miles north and a little east of Yukon Gold and the eight 88 Energy leases, Jade Energy owns and operates the untapped Sourdough prospect and is planning to drill a new Sourdough oil well in the winter of 2021-22, under an agreement with Point Thomson operator ExxonMobil.
The well, on state lease ADL 343112 in area F, Tract 32, of the Point Thomson unit will be drilled to approximately 12,750 feet to encounter a prospective Brookian sand target and Hue shale.
As part of the 2012 settlement between the state of Alaska and the working interest owners of the ExxonMobil Point Thomson unit, an East Pad was to be built, an East Pad well drilled and an additional well drilled in the unit.
The state has since agreed that the requirement will be fulfilled through independent Jade Energy’s plans for Sourdough, which will utilize some existing Point Thomson infrastructure for its operations
ADL 343112 holds two mid-1990’s Sourdough oil discovery wells that were drilled by BP, which estimated Sourdough held 100 million barrels of recoverable oil.
ExxonMobil and the other major working interest owner at the time, BP Exploration Alaska, and minority owner ConocoPhillips Alaska all assigned their full working interests in Tract 32 of the lease to Jade, each retaining a small overriding royalty. The deal gave all three North Slope producers some skin in the game, fully aligning them in delivering a successful Sourdough development.
By building a 70,000 barrel per day liquids export pipeline at Point Thomson that connects to the Badami unit and thus moves oil and condensate to Pump Station 1 of the 800-mile trans Alaska oil pipeline, ExxonMobil improved the development economics of other oil prospects to the east, such as Sourdough, and Yukon Gold.
Jade’s owners are Anchorage-based Opstad and Castle Rock, Colorado-based Greg Vigil, who each own 50% of the firm, with Opstad in charge of operations.
Project Icewine, conventional In 2019, 88 Energy signed a sale and purchase agreement with London-based Premier Oil Plc under which Premier farmed-in for a 60% interest in Area A of the conventional Project Icewine acreage, with 88 Energy retaining a 30% working interest in Area A and the remaining 10% working interest held by Burgundy.
Under the terms of the agreement, Premier paid the full costs of the appraisal well, Charlie 1, up to a total of $23 million to test the reservoir deliverability of the nearby 1991 Malguk 1 BP oil discovery.
The well came in under budget, but the results were not commercial, and the well was plugged and abandoned in April 2020, although 88 Energy continues to study the results.
While Premier has withdrawn from the joint venture, it is continuing to pay costs in relation to the drilling operations and post well testing and site cleanup, 88 Energy said in its July 21, 2020, report.
On May 4, 2020, the Alaska Department of Natural Resources’ Division of Oil and Gas extended the time for Accumulate to make payments on annual oil and gas lease rentals due to the state in 2020. For oil and gas lease rentals due in June, July and September of 2020, a six-month extension was given to make rental payments due in these periods. For oil and gas lease rentals due in October and November of 2020, a three-month extension was given.
Project Icewine, unconventional Unconventional detailed logs and sidewall cores were also acquired in the HRZ formation in Project Icewine. They will continue to be analyzed in 2020.
The HRZ “remains a viable target and options to commercialize this potentially large resource continue to be pursued,” 88 Energy said in its second quarter 2020 activity report.
The company plans to conduct a formal farm-out process to fund further appraisal.
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