The Stirrup 1 exploration well drilled by Oil Search Alaska this past winter had one of the highest flow rates of any Nanushuk single-stage stimulation of a vertical well on the North Slope to date, the company’s Papua New Guinea-based parent said April 21 in its first quarter report.
Located approximately seven and a half miles west of the 2017 Horseshoe 1 discovery well and almost 28 miles southwest of Oil Search’s proposed Pikka unit development west of the central North Slope, the Stirrup 1 well successfully penetrated the Nanushuk reservoir and encountered an oil column with net pay of 75 feet.
The wellbore was cored, perforated through a single-stage simulation and shut-in for six days to enable pressure build-up prior to testing in which it flowed at a stabilized rate of 3,520 barrels of oil per day, exceeding company expectations.
While further appraisal will be required, Stirrup is a direct analogue to the Horseshoe 1 Nanushuk discovery and as such the company said the new find could underpin a possible standalone Horseshoe development. Or, it could represent a low cost tie-back option to the Pikka development
The other exploration wells drilled this past winter were the Mitquq 1 and its sidetrack Mitquq 1 ST1 - its flow test also exceeding Oil Search’s expectations.
After discovering oil in the primary Nanushuk reservoir, the Mitquq 1 well was drilled into the secondary Alpine C formation objective where it encountered 52 feet of net hydrocarbon pay, comprising 31 feet of net oil pay and 21 feet of net gas pay. A comprehensive suite of wireline logs, pressure data and hydrocarbon samples were collected prior to the wellbore being plugged back to allow for the drilling of a sidetrack, Mitquq 1 ST1, to appraise the Mitquq 1 Nanushuk discovery.
The sidetrack intersected the Nanushuk formation and encountered approximately 172 feet of net hydrocarbon pay, including a 29 foot gas cap.
The wellbore was logged and cored and in late March a flow test was conducted with a single-stage stimulation. The test included a clean-up, flow period and a six day pressure build-up, with the well achieving a stabilized rate of 1,730 bpd.
Located 5.6 miles east of the proposed central processing facility for the Pikka unit development, Oil Search has referred to the Mitquq prospect as a “high value tieback” to future Pikka infrastructure.
The exploration wells were successfully plugged and abandoned as planned, with the rigs and crews safely demobilized from the site, concluding Oil Search’s second North Slope drilling program.
Pikka unit development
Due to the decline in oil prices, the company previously announced that its final investment decision on the Pikka unit development expected in the second half of 2020, has been deferred until there is “improvement in market conditions.”
The additional time “will allow further value engineering and optimization of the development to take place, with a focus on reducing the breakeven of the project and the results of the Mitquq and Stirrup wells to be integrated into future planning,” Oil Search said April 21.
While formal marketing activities relating to the planned sell-down of a 15% interest in the project have been suspended, the company also said it is continuing discussions with “parties that had expressed interest prior to the oil price fall.”
Liquidity at end of quarter
As of March 31, Oil Search said it had liquidity of $1.15 billion, comprising $670.6 million in cash ($396.2 million at the end of the prior quarter) and $480.6 million in undrawn corporate credit facilities.
The company ended the period with $3.65 billion of debt outstanding, of which $2.94 billion was related to the PNG LNG project finance facility and $715 million to corporate credit facilities.
Cash outflows during first quarter included a dividend payment of $68.6 million.
Oil Search “has taken swift steps to ensure that we are in the strongest position possible to weather a potentially protracted period of global disruption,” Managing Director Keiran Wulff was quoted as saying in the first quarter report.
“While the Company is now in a robust position to withstand a sustained period of low oil prices, we are undertaking further measures to drive down breakeven costs across our business,” targeting a reduction in production costs of $1-2 barrel and enhancing capital management programs.
“This will ensure we are in a good position to progress our world-class growth projects in Papua New Guinea and Alaska when market conditions improve,” Wulff said.
- KAY CASHMAN
