Armstrong-led company spends big, snags 1M acres in NPR-A

  • Bill Armstrong, seen in his Anchorage office in 2016, was the high bidder on some 1 million acres in the annual National Petroleum Reserve-Alaska lease sale on Dec 11. (Photo/Michael Dinneen/For the Journal)
  • The tracts in blue show the 1 million acres purchased by North Slope Exploration at the Dec. 11 federal lease sale for the National Petroleum Reserve-Alaska. (Map/Courtesy/Bureau of Land Management)

The State of Alaska’s annual North Slope oil and gas lease sale held Dec. 11 was quieter than recent years but that was partly offset by a spike in industry interest for lands in the federal National Petroleum Reserve-Alaska.

The state’s lease sales for near shore Beaufort Sea acreage and broader onshore North Slope areas together garnered 69 bids from four groups totaling about $7.8 million in bonus bids, according to Division of Oil and Gas Director Tom Stokes.

The NPR-A lease sale put on by the Bureau of Land Management also held Dec. 11 was dominated by North Slope Exploration LLC, a company formed by noted North Slope explorer Bill Armstrong, of Denver, according to state business records.

North Slope Exploration spent roughly $10.5 million to win 85 lease tracts in the central portion of the reserve that is available for leasing. The company’s continuous chunk of lease tracts totaling nearly 1 million acres butts up to the northeast portion of the reserve that is unavailable for leasing in favor of wildlife habitat protection under the current NPR-A Integrated Activity Plan.

Overall, BLM received winning bids totaling $11.2 million on 92 tracts covering just more than 1 million acres in the eastern and central portions of the NPR-A, according to BLM Associate State Director Ted Murphy. Other than 2016, when companies spent $18.8 million on leases, it is the largest collective bid amount for an NPR-A lease sale since 2008.

Armstrong, through his namesake company Armstrong Oil and Gas, led the discovery of the shallow, conventional Nanushuk oil formation in partnership with Spanish major Repsol six years ago before selling his stake in the Pikka Unit prospect to Oil Search for $850 million in a deal announced in late 2017.

The Nanushuk discovery has since sparked a boom in exploration on the North Slope with Oil Search Alaska and ConocoPhillips declaring finds with potential of more than 100,000 barrels per day each.

Armstrong wrote via email that his company needs to conduct seismic surveys over the large area it just acquired before conducting any exploration drilling. His team has several ideas about new potential plays in the area as well as the potential for a continuation of the Nanushuk formation west of the current discoveries, according to Armstrong. He noted that any oil find would need to be very large to be commercially viable in such an isolated area without any industry infrastructure.

BLM is currently going through the environmental impact statement process to amend the NPR-A land-use plan with the aim of opening more acreage in the 23 million-acre reserve for oil and gas leasing.

North Slope bidding on state lands was led by Oil Search Alaska, which is developing the large Nanushuk oil project in the Pikka Unit. Oil Search won nearly 40 least tracts primarily on the eastern portion of the Slope south of the Point Thomson gas field. The company spent as much as $276 per acre to secure the leases it sought.

Great Bear Petroleum Ventures II LLC, a subsidiary of the Anchorage-based independent Great Bear Petroleum, also won 17 leases mostly in the central portion of the state-owned North Slope acreage.

Individuals Samuel Cade and Dan Donkel jointly won six leases in the state waters of Beaufort Sea and independent Narwhal LLC won seven Beaufort Sea leases.

Last year’s Beaufort Sea and North Slope oil and gas lease netted the state more than $28.1 million and other recent sale totals were in the $15 million to $20 million range. Stokes said that part of the reason this year’s sale was smaller is likely that most of the prospective acreage is already under lease.

Stokes also noted that exploration activity including seismic surveys as well as drilling has ramped up across the Slope over the past few years.

BLM’s Murphy added that half of the $11.2 million in bid revenue from the federal sale goes to the State of Alaska.

Australian independent Emerald House LLC won four leases in the eastern part of the reserve and ConocoPhillips, which already has large lease holdings and several oil projects there bid on and won three leases near its current acreage.

Before the Dec. 11 bid opening, companies held 215 leases covering about 1.5 million acres in the NPR-A, according to Murphy.

Elwood Brehmer can be reached at [email protected].

12/18/2019 - 10:24am