Australia-based Oil Search has exercised its option to double its stakes in the Pikka Unit, Horseshoe Block and other exploration leases across the US state of Alaska for $450m (£355.19m).
Oil Search entry into the Alaskan oil assets
As announced in October 2017, the Australian oil and gas company exercised its option before 30 June 2019 to buy out the remaining ownership stakes of Armstrong Energy and GMT Exploration’s (Armstrong) in the Pikka Unit (25.5%) and Horseshoe Block (37.5%). In the Hue Shale leases, the company acquired an additional 37.5% stake along with a stake of 25.5% in other exploration areas.
Earlier, Oil Search acquired similar stakes in the oil assets in Alaska North Slope for $400m (£315.72m). As part of the original deal, the company acquired a 25.5% stake in the Pikka Unit and adjacent exploration acreage, and a 37.5% stake in the Horseshoe Block.
The leases involved in the deal hold nearly 500 million barrel (gross) in the Nanushuk and satellite oil fields. The Nanushuk field is considered to be among the largest conventional oil fields discovered in more than three decades in the US.
Oil Search said that the option arrangement had given it time to gain a better understanding of the full Pikka Unit Nanushuk oil field potential and also regional exploration opportunities.
Furthermore, it had helped the company to take into account the drilling results of the Putu wells drilled by ConocoPhillips last year, and two of its operated wells – Pikka B and C, which were drilled earlier this year.
The company said that the integrated analysis of the results of the wells and detailed reservoir and resource modelling boosted its confidence that there will be a material upgrade to the resource estimates beyond the acquisition case. Prior to the results, the estimation was of 400mmbbl (gross) within the Pikka Unit Nanushuk reservoir and 100mmbbl (gross) in the nearby satellite fields.
Oil Search is also set to restart a formal sale process for some of its stakes in its Alaskan portfolio, with a divestiture slated to be completed in the first half of 2020, ahead of reaching a final investment decision for the initial Pikka Unit Nanushuk development.
The company and its partner Repsol expect to achieve first production of around 30,000bopd (gross) from the Pikka Unit Nanushuk development in 2022.
Oil Search managing director Peter Botten said: “Following the success of the Pikka Unit drilling, combined with the progress on the development plan, exercising the Option to acquire the remaining Armstrong interests is a logical and value-accretive step. I am confident this decision will deliver major benefits to the Company.
“The additional exposure to high value interests in Alaska, combined with the strengthened relationship with Repsol, positions Oil Search well for long-term success in Alaska.”
Closing of the option exercise with Armstrong is expected to take place in late August 2019.
