Consistent with its Alaska strategy to focus on the Pikka development west of the central North Slope, Santos said Sept. 19 that it will "farm-down" half of its working interest in 148 state of Alaska exploration leases on the eastern North Slope in an agreement with APA Corp.'s and Armstrong Oil & Gas Inc.'s Alaska subsidiaries, APA Alaska LLC1 and Lagniappe Alaska LLC2. Following execution of the agreement Santos working interest will be 25%.
Under the terms of the deal, initial activities during the exploration phase will be undertaken without cost to Santos.
Alex Franceschi, a spokesperson for APA's Apache Corp., told Petroleum News that Bill Armstrong's Lagniappe Alaska will be the operator of the 148-lease block.
When asked how Apache got involved in the deal, Franceschi sent Petroleum News the following statement: "Apache maintains a global exploration team for the purpose of generating attractive future growth opportunities. As previously disclosed, we strategically allocate a limited percentage of our capital program each year to exploration activities, and this partnership in Alaska is a part of that program."
The lease block, Santos said, contains "multiple prospects in the late Cretaceous Brookian and Schrader Bluff formations."
Santos acquired the acreage as part of its merger with Oil Search in 2021. The farm-down is subject to customary government approvals.
"I am pleased we've reached this agreement to farm down our exploration assets in Alaska. This transaction demonstrates the continued level of interest in exploration and development projects in the region, a tier one jurisdiction with supportive stakeholders and prospective undeveloped acreage," Santos Managing Director and CEO Kevin Gallagher said.
In 2021, Apache Corp. moved to a holding company structure under APA Corp., the public company trading on the Nasdaq stock exchange. According to Wikipedia, APA's Apache is an American company engaged in hydrocarbon exploration. It is organized in Delaware and headquartered in Houston. The company is ranked 431st on the Fortune 500.
Two-year exploration program?In early March, Lagniappe Alaska began permitting a two-year exploration program starting as early as next winter on some of the 148 leases and identified in the company's oil discharge prevention and contingency plan paperwork as the South Badami Area. The paperwork was filed with the Alaska Department of Environmental Conservation's Division of Spill Prevention and Response.
Lagniappe is looking at drilling three to six onshore oil and gas exploration wells, although there has been no indication from Lagniappe, Santos or APA that this is still the plan.
The paperwork was signed March 2 by William D. Armstrong, president of Armstrong Oil & Gas Inc. and member of Lagniappe Alaska.
Although Bill Armstrong will not comment on the Sept. 19 agreement with Santos and APA, on March 30 he told Petroleum News in a text that the exploration wells will target Brookian objectives -- "Pikka look-a-likes that are defined off of high effort, reprocessed modern 3D. Really exciting stuff. Big targets."
There has been "virtually no prior drilling in the area. The wells that have been drilled have great shows and some have bypassed pay on old logs," Armstrong added.
Ice roads will be constructed to access drill sites.
Per the paperwork filed March 2, potential well names and locations (Latitude, Longitude, Meridian, Township, Range, Section) are as follows:
*King Street-1 70.085880 -147.552190 U.M. T9N R18E 34
*Voodoo-1 70.028080 -147.367630 U.M. T8N R19E 22
*Montucky-1 69.981620 -146.763780 U.M. T7N R21E 12
*Killian-1 70.115032 -147.234009 U.M. T9N R19E 23
*Killian-2 70.108218 -147.081451 U.M. T9N R20E 28
*Sockeye-1 70.073558 -146.764640 U.M. T8N R21E 1
A little something extraLagniappe is a Cajun word that loosely translates into "a little something extra" or "a good unexpected surprise" -- apropos for the Nanushuk play on the North Slope, which Armstrong and a partner first drilled and identified as a huge oil reservoir in 2013 (Qugruk 3 well). The discovery led to the Pikka oil field, today operated by Santos' Oil Search (Alaska).
Since that billion-barrel discovery, the industry has been on a tear, drilling at Pikka, Horseshoe, Putu, Mitquq, Stirrup, Willow, West Willow, Narwhal, Harpoon and Bear.
All reports say the play concept in Lagniappe's acreage to the east is very similar. Multiple zones, onshore, good gravity oil, reasonably close to infrastructure.
But the targeted objectives are slightly younger than what Santos and partner Repsol have at Pikka et al but with better reservoir qualities - porosity and permeability -- even though they are deeper.
There have been very few wells drilled in and near Lagniappe's South Badami area -- and most of those wells were drilled in the 1970s trying to find another Prudhoe Bay, but almost all of the wells had good oil shows, Armstrong said in a 2021 interview.
Prior to finding all of that oil in the Nanushuk formation west of the central North Slope most people were saying the North Slope had very little remaining potential. The Nanushuk at Pikka changed all that.
Armstrong formed Lagniappe just prior to the Nov. 15 bid opening for the 2018 state areawide North Slope oil and gas lease sale.
Lagniappe was high bidder on 120 tracts, bidding an average of more than $72 an acre for a total of $14.1 million.
Both Oil Search and Lagniappe picked up leases in what is today the 148-lease block.