International Interest in the North Slope

Elixir, Entek, and Exploration

Elixir Petroleum is an international oil and gas exploration company whose strategy is to “acquire high impact exploration projects” that meet several objectives, including onshore, early stage, low cost exploration opportunities with moderate geological risk or conventional and unconventional oil and gas projects with clear monetization outcomes.

Elixir Petroleum bid on and was awarded three leases adjacent to the Umiat oil field in 2014, and in 2018 finalized the necessary steps to allow settlement of the acquisition of the 35,423 acres of leases. Elixir was then the high bidder on an additional ten leases totaling 114,310 acres on the North Slope, located near the first three, which are “on trend with recent large oil discoveries made by ConocoPhillips,” the company stated in late 2018.

Elixir doesn’t have long-term plans to continue investing in Alaska: in November 2018 Elixir granted an exclusive option to Entek Energy to acquire all of Elixir’s Alaska acreage, including the ten new leases, gaining up to 200 million Entek shares in return. Elixir stated in a December 2018 release, “The recent bid round represents the last significant expenditure the company expects to make on the Alaskan leases as the focus of the company shifts back toward the high impact Mongolian CBM acquisition that Elixir is in the process of completing.”

Mongolian CBM refers to the Nomgon IX Coal Bed Methane project, which is located in the South Gobi Desert in Mongolia. As of March Elixir finished planning a 2D seismic program for the area with the goal of identifying and imaging subsurface coal seams to up to 1,500 meters in depth to find optimal locations for two coal bed methane core-holes scheduled for later this year. With the plans finalized, Elixir issued an invitation to tender to conduct the 2D seismic program and had responses from eight companies, which as of press time it was still assessing.

While Elixir is shifting its focus away from Alaska, it clearly sees the potential of the North Slope, as evidenced by the 200 million shares it will gain through the transition with Entek. In a March Alaskan Transaction Update, Elixir Managing Director Dougal Ferguson stated, “Completion of this transaction provides Elixir’s shareholders who are on the Elixir register on or before 12 April 2019 with fantastic leverage to both these world class exploration opportunities.”

In addition to the Entek shares, Elixir will receive a cash payment from Entek of $1.35 million, of which $500,000 will be used to repay a bridge loan from Entek. The remaining $850,000 the company plans to put toward progressing the 2D seismic program in Mongolia.

In a late 2018 release about the additional ten NPR-A leases, Entek Executive Chairman Mark McAuliffe said, “This is great news for Entek and its shareholders. Upon exercise of the option, Entek will hold leases over a substantial prospective area situated immediately to the south of the Willow Field which is currently under evaluation by ConocoPhillips.

“After some years of minimal activity, Entek will again be an active player in oil exploration in this exciting new oil province.”

Entek’s plan for the newly acquired Alaska leases includes reprocessing existing 2D seismic, doing a resource assessment, securing investment partners, and potentially engaging in a 3D seismic program in 2019/2020, according to an Entek investor presentation titled Moving into the Right Address and published in March.

In the same presentation, Entek explained to investors its interest in the North Slope: it’s one of the world’s super basins, which has produced more than 16 billion barrels of oil; there’s “significant” underutilized capacity in TAPS; there’s an estimated 28 billion barrels of remaining resource, including recent discoveries of more than 1 billion barrels of conventional oil; the state has an “excellent fiscal regime and stable political climate supportive of oil and gas exploration”; and oil and gas major players have an already-established presence in the area.

Entek focuses on exploring high impact oil and gas opportunities with significant potential in proven and producing areas. The company already has a foothold in North America in the Niobrara shale formation, which extends through most of northern Colorado and eastern Wyoming.

Production

Other international companies have a definite eye on production.

Pantheon Resources was formed in 2005 as an independent UK-based oil and gas exploration company. Pantheon completed acquiring the assets of Great Bear Petroleum in January for approximately $49 million; those assets included Great Bear Petroleum Ventures I and Great Bear Petroleum Ventures II, 250,000 leased acres on the North Slope, and 1,000 square miles of 3D seismic data.

In March, Pantheon confirmed oil during production testing of its Alkaid well, originally spud in 2015 but immediately suspended due to regional flooding. The company stated in a release, “The production and pressure data collected through testing, along with pressures and log data acquired when the well was drilled in 2015, gives us increased confidence in the 240 feet of net oil pay in the Brookian [zone of interest]. The acquired data will now be used to determine reservoir parameters and improve development plans.” According to Pantheon CEO Jay Cheatham, “This is an excellent result which exceeded our expectations… we are very fortunate that the Alkaid reservoir is directly adjacent to both the Trans Alaska Pipeline and to the Dalton Highway. It is on track to become our first oil development in Alaska.”

Papua New Guinea-based Oil Search took operatorship in March 2018 of its recently acquired Alaska assets: a 25.5 percent interest in the Pikka unit and adjacent exploration acreage, in addition to 37.5 percent interest in the Horseshoe Block.

Earlier this year Oil Search “expanded significantly” its leases on the North Slope, “positioning the company for long-term growth,” according to the company’s 2018 Annual Report. The company has already drilled two exploration wells in the Pikka Unit, one in December and the second in January. Oil Search announced in April that both wells produced oil. During the company’s 2018 Results Presentation in February, Managing Director Peter Botten said, “Everything we’ve seen about Alaska has been encouraging and exciting… Right now we’re aiming to drill up to three wells in 2019/2020, probably some further appraisal wells in Pikka, but also looking at how we look at and appraise the Horseshoe area to the south… although our focus clearly is on delivering high-value out of Papua New Guinea, Alaska does look good for us and we’re very pleased with the acquisition.”

Italian company Eni began production in Alaska in 2011. The wholly-owned and –operated Nikaitchuq field was Eni’s first Arctic project and has estimated reserves of 220 million barrels of oil and produces 18,000 barrels of oil per day. Eni also owned 30 percent of Caelus’ Oooguruk field and announced in January its intention to buy out the rest and take over operations.

According to a January Eni release, “the acquisition of the 70 percent of Oooguruk will allow Eni to immediately increase its Alaska production… and to implement important operational synergies and optimizations between Oooguruk and Nikaitchuq, both operated at 100 percent. Eni plans to drill further production wells at Oooguruk and Nikaitchuq, with the target to increase its total Alaska production beyond 30,000 barrels of oil per day. This operation will also further strengthen Eni’s presence in the region, after the recent acquisition in August 2018 of 124 exploration leases (for a total of approximately 350,000 acres) located in the Eastern North Slope of Alaska.”

An ongoing positive investment environment and continued interest from global entities is and will continue to be a boon for Alaska’s economy and communities.