Armstrong Energy seeks to expand unit

Armstrong Energy is asking the state to expand its prospective Pikka North Slope oil and gas unit, which the company already believes holds upwards of 1.5 billion barrels of recoverable oil.

The expansion application, submitted to the Department of Natural Resources Sept. 19, requests the department add 14,400 acres to Pikka in leases adjacent to the southern portion of the current unit.

Pikka was approved in June 2015 as a 63,300-acre unit situated between Caelus Energy’s Oooguruk Unit to the east and ConocoPhillips’ Colville River Unit to the west.

Armstrong Energy, a Denver-based independent, is the Pikka operator on behalf of its working interest owner partners Repsol, a Spanish major, and GMT Exploration, a small Denver-based independent.

Armstrong took over as the operator of Pikka and the 51 percent majority owner of the Nanushuk project in late 2015 after the company agreed to swap ownership stakes with Repsol.

The leases in the first expansion are held solely by Armstrong. The state and Arctic Slope Regional Corp. hold joint mineral and royalty interests in the expansion leases. Armstrong acquired them in May 2015.

Bill Armstrong, founder and CEO of his namesake company, said in a September interview with the Journal that he believes the Nanushuk development in Pikka could eventually support production upwards of 120,000 barrels per day. Getting there, however, will likely require about $5 billion of investment over the next five-plus years, according to Armstrong.

The company is currently working through the early stages of the environmental impact statement process with the U.S. Army Corps of Engineers for the Nanushuk project in Pikka.

According to the expansion application, Pikka needs to be expanded to fully develop the Nanushuk project. The additional area could support up to 88 wells targeting the Nanushuk, Alpine and Kuparuk formations.

Since 2011, Armstrong and Repsol have drilled 16 wells and sidetracks, which all produced, in what is now the Pikka Unit, he said.

Armstrong has applied to drill two delineation wells, Pikka No. 1 and Pikka No. 1A within the proposed expansion area. The company also plans to drill an exploration well on state leases about 25 miles to the south of Pikka this winter into similar formations based on a seismic data shoot conducted last year, according to Armstrong.

The Division of Oil and Gas is seeking public comments on the Pikka expansion application through Oct. 31.

Elwood Brehmer can be reached at [email protected].

12/03/2016 - 10:06pm