ConocoPhillips buys North Slope Nuna prospect from Caelus
A North Slope oil prospect is changing hands in a deal that appears to be another step out of Alaska for a small independent oil company.
ConocoPhillips Alaska announced June 17 that it has agreed to purchase 100 percent of the mid-sized Nuna project from Dallas-based Caelus Energy.
“This transaction represents an attractive addition to our expanding North Slope position and will allow ConocoPhillips to cost-effectively develop Nuna utilizing Kuparuk River Unit infrastructure. “We believe this acquisition could lead to more oil production, more revenue for the state and more jobs for Alaskans,” ConocoPhillips Alaska President Joe Marushack said in a formal statement.
ConocoPhillips officials declined to disclose the terms of the sale.
Caelus representatives referred questions about the deal to ConocoPhillips.
The Nuna sale marks the second asset Caelus has sold this year. Italian oil major Eni announced in early January that it would acquire Caelus’ 70 percent operator stake in the small Oooguruk field. The company still holds the potentially multibillion-barrel Smith Bay oil prospect discovered in 2016 in remote state waters adjacent to the National Petroleum Reserve-Alaska, but work to appraise and advance Smith Bay has largely been shelved.
For ConocoPhillips, the Nuna acquisition is the latest in a series of moves to grow the company’s already large presence on the North Slope. ConocoPhillips purchased all of Anadarko Petroleum Corp.’s North Slope assets for $400 million. The companies had been partners in western Slope exploration and development work, with Anadarko holding a silent minority share in those projects. In December ConocoPhillips also closed a deal to ostensibly swap BP’s 39 percent interest in the large Kuparuk River field for a portion of its interest in the British Clair oil field. ConocoPhillips has also been an aggressive player in recent federal NPR-A lease sales.
Development of the Nuna prospect has been subject to fits and starts since Pioneer Natural Resources discovered it in 2012. Pioneer sold Nuna to Caelus in 2014 as part of a larger $550 million deal for all of Pioneer’s Alaska assets.
Caelus CEO Jim Mussleman said at the time that the company planned to drill roughly 30 wells at Nuna to produce between 20,000 and 25,000 barrels of oil per day from more than 100 million barrels of reserves. First production was expected in late 2016 for the development pegged at roughly $1.5 billion.
Nuna currently consists of a 22-acre gravel pad and road and several exploration and appraisal wells.
Caelus subsequently asked for and in January 2015 received a reduction in the oil royalty rate for Nuna from 12.5 percent to 5 percent from the state Department of Natural Resources to improve the economics of the prospect. The state oil royalty modification required the company had to quickly sanction the project and start oil production by October 2017.
However, the combination of sustained low oil prices and former Gov. Bill Walker’s decision in June 2015 to veto a portion of refundable state tax credits for oil project development in response to a nearly $4 billion state budget deficit — also the result of fallen oil prices — pushed Caelus to delay work on Nuna.
Caelus’ March 2016 request to extend the special royalty terms was denied by then-Division of Oil and Gas director and current DNR Commissioner Corri Feige.
Company leaders have said Caelus was once owed more than $100 million in tax credits by the state. The aim of the now defunct tax credit program was to encourage more small independent operators, such as Caelus, to work in Alaska’s oil and gas basins.
Elwood Brehmer can be reached at [email protected].