REG - Pantheon Resources - Spudding of Alkaid #2 Well

Pantheon ResourcesAnnouncement

07/07/2022 07:16

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RNS Number : 6035R  Pantheon Resources PLC  07 July 2022

 

7 July 2022

 

Pantheon Resources plc

Spudding of Alkaid #2 Well

Pantheon Resources plc ("Pantheon" or "the Company"), the AIM listed oil and
gas company with a 100% working interest in all of its oil projects spanning
c. 153,000 acres adjacent and near to transportation and pipeline
infrastructure on the Alaska North Slope ("ANS"), is pleased to announce the
following updates.

 

Spudding of Alkaid #2 Well

Operations have commenced on the Alkaid oil accumulation with the spudding of
Alkaid #2, the Company's first horizontal well on the ANS, using the Nabors
105AC drill rig. The rig is larger than those previously used, with increased
capacity, and can undertake multiple functions. As of 8 PM BST on 6 July,
Pantheon was drilling ahead at a depth of approximately 300 feet.

The Alkaid #2 well will assess three impactful objectives over multiple
formations:

(i)            Production testing a proven oil formation
encountered in Alkaid #1

(ii)           Exploring the deeper potential for oil in that zone

(iii)          Appraising an extension of oil discovered in the Shelf
Margin Deltaic at Alkaid #1 and Talitha #1.

 

The Alkaid #2 well is located adjacent to the Dalton Highway and Trans Alaska
Pipeline System (TAPS) which are the main transportation highway and export
pipeline, respectively, and approximately 4.5 miles from the Alkaid #1
discovery well drilled in 2015. A key objective of this well is to gain robust
production test data to accurately assess the ultimate potential of the
reservoir. Whilst the Company believes the optimum well design to exploit the
Alkaid anomaly would include +8,000 foot lateral sections, in this first well
the Company will adopt a more conservative approach with a shorter lateral
simply to minimise operational risk.

 

 Alkaid Horizon Resource Summary
 Oil in Place (OIP)(1)              900 mmbo
 Recoverable Resource (10-15%)(1)   90-135 mmbo
 Recoverable Resource (2020 IER)    76.5 mmbo
 NVP (10) at $55/bbl (2020 IER)(2)  $595 million

(1) Management estimate

(2) Prevailing realized oil price of $55/bbl held flat used in the
Independent Expert Report published in January 2020. This estimate discounted
certain parts of the field by 50%, and hence is considered by the Company a
conservative estimate.

 

Long Term Production Testing

The primary function of Alkaid #2 is to conduct a long term production test on
the oil zone previously tested at Alkaid #1. If successful, Pantheon will
truck the produced oil to Pump Station #1, located approximately 20 miles
north of Alkaid, and sell the produced oil to a nearby North Slope facility.

Alkaid #1 tested an average of over 100 BOPD via a small "through-tubing
single frac", which perforated six feet of the 240 feet net pay interval.
Alkaid #2 will test this same zone through a long horizontal section accessing
several thousand feet of oil bearing section.

Deeper Exploration Potential

Alkaid #2 also has significant exploratory potential immediately below the
total depth at Alkaid #1. As part of the current drilling programme, the
Company intends to evaluate the extent of this deeper oil column.

Alkaid #1 was terminated within the oil zone at a time when regional flooding
of the Dalton Highway occurred. Based on seismic and other analytical
analysis, the Company believes the Alkaid horizon's oil zone is substantially
thicker than drilled to date, offering the potential for additional resource
growth to that outlined above and which will be assessed in the Alkaid #2
well. This increased resource potential combined with current oil price
forecasts, as opposed to the $55/bbl used by the Independent Expert in 2020,
could have a material impact on any new resource valuation.

Appraisal of Shelf Margin Deltaic ("SMD")

 

The recent oil discovery at Talitha #A in the Shelf Margin
Deltaic formation has upgraded the potential for the SMD to produce oil at
the Greater Alkaid location, as well as at the Talitha project. Pantheon
estimates the SMD contains 2.6 billion barrels OIP and a Contingent Resource
of 404 mmbo. In a success case, the Company believes a large portion of this
resource could be developed from the Dalton Highway which would represent a
considerable near term development opportunity, especially if combined with
the deeper oil zone utilising the same production infrastructure.

 

A successful programme at Alkaid #2 would yield early cashflow which is of
significant value at current oil prices. The Alkaid #2 horizontal well will be
Pantheon's first long term production test well in Alaska and will utilize
unconventional oil production technologies applied to conventional oil
reservoirs to maximize potential reserves and production, which has now become
standard operating procedure across the entire ANS. The industry has
transferred these technologies from the Lower 48 states into Alaska to develop
this higher quality oil in the stratigraphic Brookian sections containing
billions of barrels of recently discovered oil. Additionally, the Greater
Alkaid oil accumulation sits underneath and adjacent to the TAPS pipeline and
the Dalton Highway which is a material advantage as it is ideal for year-round
"Phased Development". This would minimize upfront capital expenditure and
allow for future capital needs to be partly funded through production
revenues, yielding higher Internal Rates of Return.

 

Jay Cheatham, CEO of Pantheon Resources, commented, "As our first horizontal
well, Alkaid #2 is an important operation for Pantheon. The long-term
production test through the horizontal section will define the resource and
aid the understanding and future development potential of Alkaid. But most
importantly, if successful, it will begin generating revenue for the Company.
The Alkaid #2 well is the first production well in this new oil field using
unconventional technology. As is typical in the industry, we will apply what
we learn from this well to subsequent wells in order to optimise future
drilling, testing and production.

 

"The appraisal of the Shelf Margin Deltaic and the deeper portion of the
Alkaid horizon has the potential to provide significant upside combined with
our other discoveries. Commercial success at any standalone project, along
with our geographic location, onshore and adjacent to export infrastructure in
a low sovereign risk jurisdiction, would be transformational for Pantheon."

 

 

Bob Rosenthal, Technical Director, commented, "Alkaid #2 marks Pantheon's
transitioning process from explorer to producer, where we now begin to focus
on optimising the development of these large resources. As for any new field,
being the first horizontal well, we will be conservative in our drilling to
minimise the chances of operational issues and assist in future well design.

 

"We have discovered a lot of oil on the ANS across our Theta West, Talitha and
Greater Alkaid projects which are estimated by management to contain over 23
billion barrels of Oil in Place and over 2.3 billion barrels of recoverable
resource in those horizons that have flowed oil, and Alkaid #2 could add to
these estimates."

 

 

Glossary

 bbl                  Barrel
 BOPD                 Barrels of oil per day
 Contingent Resource  Contingent Resources are those quantities of petroleum which are estimated, on
                      a given date, to be potentially recoverable from known accumulations, but
                      which are not currently considered to be commercially recoverable
 mmbo                 Million barrels of oil
 NVP                  Net present value

 

-Ends-

 

 Further information:

 Pantheon Resources plc
 Jay Cheatham, CEO                                                  +44 20 7484 5361
 Justin Hondris, Director, Finance and Corporate Development

 Canaccord Genuity plc (Nominated Adviser and broker)
 Henry Fitzgerald-O'Connor, James Asensio                           +44 20 7523 8000

 BlytheRay
 Tim Blythe, Megan Ray, Alice McLaren, Madeleine Gordon-Foxwell     +44 20 7138 3204

 

Notes to Editors

Pantheon Resources plc is an AIM listed Oil & Gas company focused on
several large projects located on the North Slope of Alaska ("ANS"),
onshore USA where it has a 100% working interest in 153,000 highly
prospective acres with potential for multi billion barrels of oil recoverable.
A major differentiator to other ANS projects is its close proximity to
transport and pipeline infrastructure which offers a significant competitive
advantage to Pantheon, allowing for materially lower capital costs and much
quicker development times. The Group's stated objective is to create material
value for its stakeholders through oil exploration, appraisal and development
activities in high impact, highly prospective conventional assets, in
the USA; a highly established region for energy production with
infrastructure, skilled personnel and low sovereign risk. All operations are
onshore USA, with drilling costs materially below that of offshore wells.

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