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Vol. 17, No. 20 Week of May 13, 2012
Providing coverage of Alaska and northern Canada's oil and gas industry

Pioneer touts Nuna

A 50 million barrel discovery south of Oooguruk; Ivishak test a bust

Eric Lidji

For Petroleum News

Pioneer Natural Resources Alaska Inc. is announcing a 50 million barrel discovery at its budding Nuna development based on exploration drilling completed this past winter.

The Nuna No. 1 well tested at an initial production rate of 2,000 barrels of oil per day, the Texas-based independent said during a first quarter conference call on May 3. Pioneer suspended the onshore well at the end of the exploration season, but expects to conduct a longer test next winter in addition to drilling an additional appraisal well at the prospect.

Pioneer also announced the results from two other wells drilled this winter, a successful development well into the Nuiqsut formation and an unsuccessful test of the Ivishak.

Altogether, the encouraging results could make Oooguruk more attractive for Pioneer after a more than a year of declining production from its flagship asset in Alaska.

Nuna No. 1 tested the southern extent of the Torok formation, the third and shallowest producing formation at the nearshore Oooguruk unit in Beaufort Sea, and it proved to be “one of the best wells we drilled in the Torok,” according to Pioneer Chief Operating Officer Tim Dove. Although Pioneer primarily produces from the Nuiqsut and Kuparuk formations at Oooguruk, essentially every well in the unit passes through the Torok.

Three laterals in test

In a recent pilot project to test the potential of the Torok, Pioneer drilled three lateral wells from its existing gravel island at Oooguruk and the directional Nuna No. 1 well starting on ADL 25528, some 2.5 miles northwest of Kuparuk River unit drill site 3S.

The Torok formation would underpin the Nuna development that Pioneer proposed for the region last year and recently revised in an updated plan of operations for its leases.

As outlined, Pioneer would drill between 35 and 65 horizontal wells from two onshore pads, primarily targeting the Torok but also possibly the Kuparuk, Nuiqsut and Ivishak.

Under the terms of its recent expansion of the Oooguruk unit to include its Nuna area leases, Pioneer must decide by June 30, 2014 whether or not it will sanction the project.

When the state approved the Torok participating area at Oooguruk last summer, Pioneer estimated area contained 690 million barrels of original oil in place and said it could recover as much as 25 percent using primary and enhanced recovery techniques.

Sikumi non-commercial

While Nuna No. 1 appears to be a success, Pioneer wasn’t as fortunate on its other exploration well this winter, the offshore Sikumi No. 1 two miles southwest of Oooguruk.

A “deep test” of the Ivishak formation was wet and although the well encountered some gas another zone, it was “basically non-commercial,” Dove said. Pioneer plugged and abandoned Sikumi No. 1 and wrote down a $19 million loss for the unsuccessful well.

The exploration wells cost Pioneer slightly more than $50 million, combined. Pioneer budgeted $135 million of its $2.4 billion drilling program this year to activities in Alaska.

Pioneer holds a 100 percent working interest in the Nuna No. 1 well and a 70 percent in the Nuiqsut development well with the remaining 30 percent held by Eni Petroleum.

While the company used two rigs to conduct its exploration and development campaigns this winter, activity continues through the summer with one rig on the Oooguruk gravel island in Harrison Bay currently drilling into the Kuparuk, Nuiqsut and Torok formations.

Nuiqsut test successful

Pioneer is also reporting success from its development efforts.

Using a “plug and perf” completion technique borrowed from its Eagle Ford Shale operations, a development well Pioneer drilled into the Nuiqsut formation produced at an initial rate of 4,000 barrels per day, making it “by far our best Nuiqsut well,” Dove said, adding that the results suggested the technique could be used on other Nuiqsut wells.

The “plug and perf” method, also known as a “mechanical diversion” fracturing system, is thought to be more effective because it can stimulate a larger portion of a reservoir.

If the well continues to produce near its initial levels, it could have a substantial impact on production rates at Oooguruk and could make Alaska more attractive to Pioneer.

Pioneer produced 4,000 barrels per day from Alaska in the first quarter, flat from the fourth quarter of 2011 and down from 5,000 barrels per day in the first quarter of 2011.

Companywide, Pioneer produced 147,000 barrels per day in the first three months of the year, a 37 percent increase year over year attributable largely to the growth of three unconventional plays in Texas: the Spraberry, Eagle Ford and the Barnett Shale Combo.

Staying put in Alaska?

Analysts have wondered whether Alaska is a divestment candidate for the company as it continues to grow its unconventional oil production in Texas and the midcontinent.

When asked last August about the future of its Alaska and South Africa assets, CEO Scott Sheffield said “it’s always an option in regard to whether or not to look at divesting those two assets,” but said he saw South Africa as “running out” and Alaska as “growing significantly over the next several years.” Pioneer recently sold its South Africa assets to the national oil company Petroleum Oil and Gas Corporation of South Africa (PetroSA).

When asked again recently about the future of Alaska, Sheffield said the decision would be made “down the road” but noted that Oooguruk production has been flat or declining for a year. “If the team up there can show us they have huge potential to grow production and frac several more Nuiqsut wells and look at some Torok, then we’ll look at keeping and keep growing it,” he said. “And so that’s the key: Do we have enough upside on growth to able to reinvest the cash flow and grow the asset. And we love growing assets.”

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