Oil Search Ltd., Sydney and Port Moresby, has again expanded its acreage position on the Alaskan North Slope (ANS) by exercising an option to acquire 50% interest in 120 leases immediately east of its Hue shale blocks, which lie southeast of Prudhoe Bay. The option includes Oil Search taking operatorship.
The leases were successfully bid on by a 100% subsidiary of Denver-based Armstrong Energy LLC called Lagniappe Alaska LLC in the November 2018 Alaskan state lease sales.
Oil Search obtained its initial leases in Alaska from Armstrong early last year, including the Pikka Unit Nanushuk and the Horseshoe oil discoveries on the western ANS as well as a foothold in the Hue shale exploration area in the eastern ANS. As part of that transaction, Oil Search and Armstrong entered into an area of mutual interest agreement that covered a broad section of the ANS.
The aim was for Oil Search to continue to work closely with Armstrong, which had extensive experience, expertise, and success, including a successful exploration lease acquisition strategy in the region. Under terms of the deal, Oil Search has the right to acquire 50% of any new areas acquired by Armstrong and its wholly owned subsidiaries.
Oil Search’s acquisition of half of the new East Hue blocks, which cover an area of 195,200 acres, are a direct result of the agreement.
Oil Search will pay $8 million, which is equal to half of the acquisition costs incurred by Lagniappe at an average cost of $82/acre.
The company says that the Hue area was identified in a regional study conducted by Armstrong and Oil Search last year as being highly prospective for oil—perhaps equal in importance to the Nanushuk trend in the west.
The new leases capture the entire prospective trend that contains two separate plays, one of which is analogous to the Pikka Unit in the western ANS that is already being appraised by the Oil Search group. The other is also a proved and material play in the region, says Oil Search Managing Director Peter Botten.
Botten said the area has existing 2D and 3D seismic data as well as nearby wells and pipeline infrastructure. He also said the forward program will include reprocessing of the existing seismic data and the acquisition of a 3D survey. The leases have an 8-year term that will enable the group to make a thorough evaluation and prioritization of leads and prospects prior to any drilling commitments.
“This latest acquisition builds on the expansion of our lease position, both together with our partners Repsol (of Spain) and directly, in prospective acreage close to and adjacent to the Pikka Unit announced in December 2018,” Botten said.
It is anticipated that the new leases east of Hue will be formally awarded by the state in midyear.