Independents win big acreages in state North Slope lease sale

Some people in industry still have a lot of faith in the North Slope, even with crude oil prices skidding.

Independent companies bid aggressively for acreage Dec. 18 in the state’s North Slope “area-wide” sale, acquiring acreage at rock-bottom prices.

The bulk of the offers were rock-bottom bids but with the exception of two high bids by Denver-based Armstrong Oil and Gas on tracts near a discovery Armstrong plans to develop with Repsol. Armstrong beat out competing bids by ConocoPhillips, in fact.

The Alaska Department of Natural Resources auctioned off 131 tracts on 186,400 acres with high bids totaling $9.51 million.

Armstrong was the highest bidder in the sale, offering $1.92 million on two tracts near the Colville River, the area of the Repsol/Armstrong discovery.

ConocoPhillips offered the only competing bids in the sale of $160,000 for those two tracts.

Two other parts of the North Slope were put up for bid, the “foothills” area of the southern Slope and state offshore acreage in the Beaufort Sea, but drew no bids.

About 2.2 million acres of 5.1 million acres in the state’s central North Slope area were up for bid, not including the southern foothills and Beaufort Sea state acreage where there were no bids.

In a big surprise, Armstrong Oil and Gas offered $3,007 per acre on the high-bid tracts through its affiliate, 70&140 LLC.

The discovery area by Repsol and Armstrong is to the north of the tracts just acquired but the high bids reinforce a belief that the two companies have found a significant new discovery.

Repsol, the operator for itself and Armstrong, has filed applications for development permits with federal and state agencies for facilities capable of producing 120,000 barrels per day. 

The bulk of the leases sold Nov. 18 were to two small independents bidding together, Accumulate Energy Inc. and Burgandy Xploration LLC in a potential shale oil belt south of the Prudhoe Bay field where 88 Energy, an affiliate of Accumulate, is now drilling an exploration well to test shale prospects.

The two companies bid together with Accumulate at 77.5 percent and Burgandy Xploration at 22.5 percent on the leases. The offers were a few cents above the state’s minimum bid of $25 per acre on most of the leases acquired.

88 Energy and another independent, Great Bear Petroleum, are exploring shale oil prospects in a wide area south of the Prudhoe Bay and Kuparuk River fields that are now producing conventional oil.

The oil accumulated in the existing North Slope fields originated in deeply-buried shales to the south, which has led Great Bear and 88 Energy to a theory that these could produce oil similar to that now produced in the Eagleford and Bakken plays of the Lower 48 states.

Tim Bradner can be reached at [email protected].

11/18/2015 - 3:14pm