Sydney and Port Moresby-based Oil Search Ltd. has spread beyond Papua New Guinea to buy into oil permits in Alaska west of the Prudhoe Bay oil fields.
The company has paid $400 million for assets on the North Slope—including the Nanushuk and surrounding oil fields—in a deal with private companies Armstrong Energy LLC and GMT Exploration Co. LLC.
In detail the assets involve 25.5% interest in the Pikka Unit and adjacent exploration acreage, 37.5% interest in the Horseshoe block, and 37.5% in the Hue shale. Spanish company Repsol SA holds the remaining interest in the Pikka Unit, exploration acreage, and Horseshoe leases.
Oil Search has also negotiated an option, exercisable until the end of June 2018, to purchase all of Armstrong and GMT’s remaining 25.5% interest in the Pikka Unit and all of their remaining 37.5% interest in the Horseshoe block, as well as an additional 25.5% in the adjacent exploration acreage and 37.5% in the Hue shale for another $450 million.
Oil Search will carry Armstrong and GMT’s share of the 2018-19 appraisal program, anticipated to be $25-30 million, if the option is not exercised by the beginning of June. Oil Search will take over the operatorship role on June 1, 2018.
The company says the Nanushuk and satellite fields contain about 500 million bbl (gross) of oil. Nanushuk, discovered in 2013, is described as one of the largest conventional oil fields discovered in the US in more than 30 years.
The field contains 19 exploration and appraisal wells and could have an upside capacity of 1.2 billion bbl. Further appraisal drilling will take place in Nanushuk early next year, after which an independent resource audit will be obtained.
Initial development plans target 80,000-120,000 b/d of oil with the field to be brought on stream in 2023.
To aid Oil Search in the work programs, the company has entered into a cooperative agreement with Halliburton under which Halliburton will provide resources and capability to supplement Oil Search’s technical and operating skills in Alaska. This arrangement mirrors the one formed between Oil Search and Halliburton in Papua New Guinea in 2003 soon after Oil Search took over operatorship of the Papua New Guinea oil fields from Chevron.
Oil Search will fund its Alaskan acquisition from existing cash reserves; the company’s current liquidity stands at $2 billion comprising $1.2 billion in cash and $850 million in undrawn corporate facilities.
The acquisition is subject to US regulatory approvals, but there are no preemptive rights associated with the purchase. Oil Search anticipates the deal will be completed early in first-quarter 2018.
