Independents team up on Nanushuk play
Several small explorers are teaming up on the hope of cashing in on the North Slope’s hottest oil play.
Australian-based 88 Energy Ltd. announced Monday that it has agreed to a partnership with Anchorage-based Great Bear Petroleum Corp. to drill its leases adjacent to the successful Horseshoe exploration well and sidetrack drilled in early 2017 by Armstrong Energy.
The Horseshoe well extended the prospective Nanushuk formation play more than 20 miles south of Pikka Unit — in which Spanish major Repsol also holds a significant position — and Armstrong estimates holds roughly 1.2 billion barrels of primarily Nanushuk-sourced oil.
CEO Bill Armstrong said when the Horseshoe results were announced that the well is a strong indicator that the Nanushuk resource in the area could be double what is known in the Pikka Unit.
Armstrong has since sold a portion of its position in Pikka to Oil Search for $400 million, which has operations in Papua New Guinea and takes over as the operator of Pikka July 1.
The four leases totaling about 22,700 acres in the agreement with Great Bear are north and west of 88’s large tracts of state leases and the targeted drilling area is about four miles west of the Horseshoe well. According to an 88 Energy release, the companies believe the area could hold 400 million barrels of Nanushuk oil based on 3D seismic data.
The drilling consortium also includes the Australian firms Red Emperor Resources and Otto Energy, which currently holds an 11 percent interest in the leases; Great Bear holds the remaining 89 percent.
Upon finalizing the deal 88 Energy will hold the largest interest in the leases at 36 percent and manage the drilling program. Red Emperor will hold a 31.5 percent stake in the acreage, followed by Otto Energy at 22.5 percent and Great Bear will be a 10 percent working interest owner.
However, the agreement also allows for Great Bear to buy back another 10 percent stake before the well is spud.
Drilling costs estimated at $15 million and a $3 million state performance bond will be funded by the three Australian companies, unless Great Bear executes its additional 10 percent buy-in option. In that case, Great Bear will fund 20 percent of the expenses based on its ownership stake, according to an 88 Energy release.
Great Bear holds interests in leases totaling 384,000 acres, according to Chief Commercial Officer Pat Galvin, and has also focused much of its previous exploration work south of the producing North Slope fields.
“We’re a small exploration company so we’re always looking for partners,” Great Bear’s Galvin said in a brief interview.
88 Energy holds rights to roughly 475,000 acres of contiguous state leases south of the developed area of the North Slope. It is currently flow testing the Icewine-2 well it drilled in early 2017 on the Franklin Bluffs drilling pad along the Dalton Highway about 35 miles south of Deadhorse. The company is targeting the HRZ shale formation in that work, which is believed to be a source rock for the Nanushuk and Torok plays.
88 Managing Director Dave Wall said in a formal statement that the partnership provides an entrance into “one of the most prospective oil plays in the world,” for the company’s shareholders.
“Preparations for drilling are now underway and commencement of the exploration well is scheduled in less than nine months,” Wall said further.
This coming winter Great Bear also plans to reenter and test the Alkaid well it drilled in early 2015 — also south of established Slope oil development — according to Galvin. The company would also like to drill additional wells on its southern Slope acreage but doesn’t have plans to at this point in 2019, he said.
Elwood Brehmer can be reached at [email protected]alaskajournal.com.