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88 Energy touts new exploration playbook
From upcoming Explorers magazine: 88E uses light, portable rig, no ice road, making North Slope affordable for smaller operators Kay Cashman Petroleum News
As The Explorers magazine 2021 heads to production, Australia independent 88 Energy Ltd., a Perth-based ASX listed firm (88E), is drilling the Merlin 1 exploration well in its Peregrine project in the National Petroleum Reserve-Alaska on acreage it acquired last year in an off‐market takeover of XCD Energy. The exploration program is 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 Merlin well, whose main target is the prolific Nanushuk reservoir, is being drilled by one of 88 Energy’s three operating subsidiaries, Accumulate Energy Alaska, which is run by Alaska geologist and innovator Erik Opstad. Accumulate is using All-American Rig 111.
In a July 13, 2019, interview, Opstad told PN that the main target of the Merlin 1 and Harrier 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. (An independent report for XCD that was generated by ERC Equipoise said Harrier Deep was pegged at a mean unrisked recoverable prospective resource of 572 million barrels.)
The shallower Nanushuk wells do not require the use of a rotary rig, or an ice road which is needed to transport the heavier traditional North Slope exploration rigs, allowing Accumulate to use a less expensive lightweight workover rig that can be moved off-road in pieces by tundra-safe track vehicles on snow trails.
Although the use of lightweight, portable rigs such as Rig 111 and snow roads has been studied and considered by XCD, Armstrong and Oil Search, 88 Energy’s Accumulate is the first to conduct such a program on the North Slope.
The Willow connection 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,” also in the Peregrine project (see map in the pdf and print versions of this story).
Plans to drill a Harrier 1 well during the 2021 winter season have seemingly been dropped by 88 Energy because of delays caused by a Biden Executive Order.
Harrier and Merlin lie between the Umiat oil field to the south and Willow and Harpoon to the north.
Merlin 1 will initially be drilled to 1,500 feet, then surface casing will be installed and the blow out preventer system tested, all of which is expected to take approximately one week.
“The well will then be deepened through the target horizons in the Nanushuk formation to a maximum total depth of 6,000 feet,” the company said March 10, the day drilling started. “Logging while drilling and mudlogging will provide initial indications as to the prospectivity of the well during this part of the operation, which is expected take three to five days.”
Next, “a sophisticated wireline logging suite” will be run, including sidewall cores and downhole sampling, which will take three to five days.
“If the results from the wireline logging are encouraging, then the well will be completed with casing and a flow test conducted,” the company said.
Delays increased costs “As part of a standard cost review, 88E’s share of the cost of Merlin 1 has been revised to US$4m - increased from US$1.4m. The main contributing factors to the cost increase are delays associated with the Executive Order regarding the issuance of the Permit to Drill; costs associated with shutdown and re-start whilst clarification was attained regarding the Executive Order; delays associated with cold weather and the subsequent knock on to mobilization costs as a result of expediting activities to meet the operational timetable. The company’s current cash position is US$13m, which more than funds its share of the drilling of Merlin 1 and the company’s other planned activities,” 88 Energy said.
In its 2020 annual report, the company’s non-executive Chairman Michael Evans said March 9 that Merlin 1 is “targeting 645 million barrels of gross mean prospective resource” and Harrier 1 will target a gross mean prospective resource of 417 million barrels.
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, and are near recently commissioned infrastructure.
The 100% owned Yukon leases are operated by subsidiary Regenerate.
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.”
88 Energy acquired 3D seismic that was shot in 2018 over the leases. The company says a 90 million barrel resource has been identified in its Yukon acreage.
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 2022 or 2023, 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-1990s 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 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.
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.
Enthusiastic about Alaska In his March 9 chairman’s letter, Evans praised Alaska’s North Slope, saying its source rocks “have been described as unbelievably rich and prolific, having generated and expulsed about 1.5 trillion barrels of oil. Yet only a small fraction of that 1.5 trillion barrels has been found, leaving vast potential remaining to be discovered.”
“Access to existing infrastructure, a very supportive and stable state government and significant exploration upside,” are three of the things 88 Energy likes about the state, Evans said, noting 88 Energy operates 444,517 net acres on the North Slope.
“Our prospective land holding is now of a size one would normally associate with the big end of town and provides continued scope to attract partners,” he said.
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