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Vol. 26, No.8 Week of February 21, 2021
Providing coverage of Alaska and northern Canada's oil and gas industry

Oil patch insider: Borealis assigns numerous ORRIs; may have sold E. North Slope block

Kay Cashman

Petroleum News

In the latest monthly lease report posted by Alaska’s Division of Oil and Gas, 23 pages are devoted to Borealis Alaska Oil’s over-riding royalty interest assignments. More ORRI assignments are expected from the company, a re-brand of Nordaq Energy, as well as working interest assignments to a rumored buyer of the company’s eastern North Slope leases - Balcony Natural Resources, which per Alaska Department of Commerce filings looks to be newly formed and 100% owned by Kerry Smith, who heads up Oleum Partners LLC of Dallas, Texas.

Neither Smith nor Borealis’ top executive Dave Pfeiffer would comment on the rumored sale.

Borealis’ ORRI assignments, which were all approved by the division in early January and were retroactively effective to June 2020, appear to be on that eastern North Slope block of 52 leases that are adjacent to, and directly south of, a larger block held by Oil Search Alaska and its partner Lagniappe Alaska, a Bill Armstrong company.

The leases are part of Borealis’ Grey Owl prospect trend on state land, some of which are near the border of the 1002 Area of the Arctic National Wildlife Refuge.

The assignments are to an assortment of individuals and companies and sometimes differ from lease to lease. Borealis’ ORRI recipients include the following: Geohorn LLC, John Paul Dejoria, Alexis Dejoria, Daniel Ray Gilbertson, First Alaskan Oil LLC, Robert Lee Bush, John Capra, Kah Alaska LLC, LSNI Alaska LLC, Michaeline Dejoria Heydari, and Scintilla Alaska LLC.

More assignments to come

In a Feb. 12 interview, Petroleum News asked Pfeiffer why the numerous assignments were made, and he said “I don’t know what you’re looking at, but we’ve done a lot of transfers of working interests and ORRIs and there’s more to come.”

Nordaq, he said, had some litigation and financial issues: “There was a period there where we had a lot of litigation. We were being sued by one of our major shareholders. We were suing a former executive and were being counter-sued by that individual. These transfers are all part of a larger settlement that happened in 2019 but are taking some time to go through.”

When told that most of the leases appeared to be in the company’s eastern North Slope block, Pfeiffer said: “Coming up at the end of this month our rents are due … for year 8 on those leases. … They were set to go from $10 an acre to $250 an acre, which wouldn’t be financially feasible for us, so we went through the process of applying for rent abatement and just two days ago we received notice from DOG (Division of Oil and Gas) that they accepted our application.”

Reprocessing 2D seismic

WesternGeco, a Schlumberger company, is reprocessing 2D seismic in and near the area of the Grey Owl prospect leases, Pfeiffer said.

“We were initially planning to shoot a 3D seismic program over that acreage,” but Covid-19 halted a lot of such activities on the North Slope.

“WesternGeco, who owns the 2D seismic there, and as part of a bigger program with I believe Armstrong, Oil Search and some others in that area … we kind of got in on that. And they’re in the process right now of doing that. We should have reports in a couple of weeks.”

According to “our in-house geologist Dick Garrard” the reprocessing “cleaned up a lot of the noise and we’re hoping, we can get what we need from the 2D seismic,” Pfeiffer said.

Similar to the Nanushuk

The Grey Owl trend involves prospects in the Brookian rock sequence, the sequence that contains the Nanushuk formation, the source of numerous discoveries west of the central North Slope, Pfeiffer said.

However, the Grey Owl prospects are in the Canning, a rock formation that consists of layered sandstones referred to as turbidites. Unlike the Nanushuk, which was formed on the upper edge of an ancient marine basin, the Canning turbidites were deposited on the basin floor.

While the location of the turbidites in the axial region of the basin bodes well for reservoir quality, findings from the West Kavik Unit No. 1 well, drilled by Texaco in 1969, indicate the presence of over-pressured light oil in the Canning at Grey Owl, Garrard said last year.

The area is just 25 miles south of existing oil infrastructure in the Badami unit.

Armstrong excited about area

Armstrong,thone of the most successful explorers on Alaska’s North Slope, said this in January 2020 of Lagniappe and Oil Search’s acreage adjacent to the Borealis block: “The area is an explorationist’s dream. There have been very few wells drilled, something like one well per 200 square miles, and most of those wells were drilled in the 1970s trying to find another Prudhoe Bay and almost all of the wells had good oil shows. … It’s like west Texas 100 years ago.”

Like the huge Pikka development, which Armstrong brought Oil Search in on, the area has multiple objectives that image beautifully on 3D seismic, he said.

“It’s really new and really exciting. I believe what we do on the eastern Slope will set off a whole new flurry of activity.”

Armstrong also liked the fact that his and Oil Search’s eastern North Slope acreage was on state leases and close to infrastructure.

In his Feb. 12 interview with Petroleum News, Pfeiffer also said he was pleased that Borealis’ eastern North Slope block was comprised of state, not federal, leases: “With the new… administration, those are more desirable now because they’re not subject to what’s coming out of the White House.”


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