Pantheon Resources plc shares operational and corporate update

Pantheon Resources has provided the following update:

Alkaid #2 update

The Alkaid #2 well returned to production on 21 February, following the cleanout of the sand blockage in the final 1000 ft (c.20%) of the wellbore. The IP30 production rate is calculated at c.505 bpd of liquid hydrocarbons consisting of c.180 bpd oil, c.325 bpd of condensate and natural gas liquids (NGLs), along with c.2300 mcfpd natural gas, after shrinkage. The quantum of liquid and gas production flowing without artificial lift from Alkaid #2 demonstrates the good deliverability of the reservoir, which is a significant de-risking event for Alkaid development. When separated and sold, condensate and NGLs are estimated to achieve 80% – 90%, or potentially higher, of ANS crude oil price (ANS crude typically trades at a premium to WTI oil). Post cleanout, flow rates were initially marginally higher than pre-cleanout suggesting that despite the sand blockage the final 1000 ft was connected and already contributing to the main wellbore through the fractures communicating with each other. Alkaid #2 also penetrated the shallower shelf margin deltaic (SMD) reservoir, which management estimate to contain over 400 million bbl recoverable resource. The addition of these resources to any potential Alkaid development will significantly boost economic returns. The data collected indicates the SMD has significantly better reservoir qualities than the Alkaid anomaly.

As has been previously disclosed, it is believed that the Alkaid #2 well fracked into a gas cap resulting in a much higher gas oil ratio than that encountered at the nearby Alkaid #1 well which is in the same reservoir. It is believed that this is Alkaid #2 specific, and accordingly, future wells, should be drilled deeper to avoid the gas cap and thus should produce a much improved GOR. Alkaid #2 has now produced for over 50 days and production has resumed in line with the pre-cleanout decline profile.

The Alkaid #2 test has been a long and complex well and has generated significant data in de-risking the play. The company believes this result is Alkaid #2 specific and not a reflection on the Alkaid reservoir which produced flow test results of 108 bpd and a much lower GOR from a single 6 ft fracked and tested section in the Alkaid #1 well. Both Alkaid #1 and #2 have confirmed the presence of a material hydrocarbon system with very good reservoir deliverability, which the company firmly believes supports the case for a commercial development. As previously explained, future development wells will be drilled deeper to avoid the gas cap which should result in a far richer GOR.

Alkaid #2 – context

Alkaid represents less than 4% of Pantheon’s resource base, is independent of Pantheon’s other discoveries, and is Pantheon’s first production test well in a new geological play type. As is typical for first time operations in new fields, there is a learning curve with any first well that will be optimised over subsequent wells to yield the best results.

In Pantheon’s stress test, economic modelling as discussed in the company’s 24 January webinar, a development was modelled with a well drilling cost of US$19.5 million which modelled a 50% increase over the then estimate of US$13 million. The company has continued to analyse and review this figure and currently estimates development drilling costs to be in the region of +/- US$13.5 million per well. Using the US$13.5 million well cost, assuming a 10 000 ft lateral and no improvement in productivity, Alkaid development economics yield a +20% IRR at an US$80 ANS crude price. If Pantheon achieves efficiency and optimisation improvements as discussed by Phillip Gobe in the company’s recent webinar and as explained above, these returns will improve significantly. These stand-alone economics are based on developing the 76.5 million boe resources at Alkaid and do not include the SMD.

Commissioning an independent expert report

Pantheon is pleased to announce that it has commissioned Netherland Sewell & Associates, a leader in petroleum property analysis, and one of the most respected names in independent reserves reporting, to undertake an independent expert report over the company’s Theta West and Alkaid projects. Additionally, SLB is updating the dynamic reservoir models across Pantheon’s portfolio. These reports will run in parallel to the farmout process as well as providing investors and financiers an independent assessment of the resources.

Jay Cheatham, CEO, said: “We are pleased that production testing at Alkaid #2 has recommenced and proven the productive capability of the reservoir. Given the high GOR seen, we will locate and design future wells with longer laterals to minimise gas and improve liquid hydrocarbon production. The first well in any new play type is a learning exercise.

“It is worth remembering that Alkaid is the smallest project in the Pantheon portfolio making up less than 4% of Pantheon’s estimated discovered resources. Its location on the Dalton highway, along with the test at Alkaid #1, made it an ideal candidate for testing and production. Pantheon will now increase its focus on the larger oil projects in Pantheon’s portfolio as it begins a farmout process to undertake future activities. The large Theta West oil accumulation with resources of over 17 billion barrels of oil in place is Pantheon’s major asset. A large portion of the Theta West oil accumulation is in a shallower reservoir than anything else in our portfolio and analogous to giant oil fields in other parts of the world.”

Bob Rosenthal, Technical Director, said: “Having stabilised the well, the long-term production test will now give us valuable data to plan future wells with better oil production capabilities. We IP’d at over 500 barrels of oil and condensate and almost 500 barrels of gas to oil equivalent, equalling 1000 boe/d which actually indicates excellent reservoir deliverability. We are in contact with a substantial amount of hydrocarbons, and our data clearly demonstrates the productive capability of the reservoir which in my view was the biggest risk in this project! I was asked repeatedly over the last year about the commerciality of our projects. As stated above using our current production data we still believe this will ultimately be commercial. Our team, which includes among the best oil service providers in the world, have already commenced detailed reservoir studies to optimise flow rates in commercial development. As Jay says, we simply need to position future wells in better locations after having discovered and now successfully tested the reservoir. Our job now is to optimize drilling and completions to maximise the potential commerciality of Alkaid as well as continue to assess the potential of our other major discoveries which include our large discovery at Theta West.”

Read the article online at: https://www.oilfieldtechnology.com/drilling-and-production/06032023/pantheon-resources-plc-shares-operational-and-corporate-update/

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Pantheon Resources plc, the AIM-quoted oil company with 100% working interest in approximately 153 000 acres located adjacent to transportation and pipeline infrastructure on State Land on the Alaska North Slope, has provided the following operational update on the Alkaid #2 well.

As previously announced, the lateral section of the Alkaid #2 wellbore is partially blocked with approximately 1000 ft of frac sand which (i) has restricted tested flow rates due to the lack of contribution from the blocked section, and (ii) has necessitated a more conservative testing protocol in order to not exacerbate the blockage, which has resulted in a slower cleanup phase.

Encouragingly, despite the blockage, the well is flowing naturally into Pantheon’s recently commissioned permanent production facilities located on the Dalton Highway at a rate of over 500 bpd of hydrocarbon liquids which includes oil, condensate and natural gas liquids (NGL’s), as well as significant natural gas, from an estimated 4000 ft of lateral. Importantly, it is estimated that the well is still less than 40% of the way through cleanup phase, so potential exists for these rates to further improve. Crude oil is processed on location and oil sales are underway. To date over 7000 bbl of 38 – 41 degree API oil has been trucked and sold into the Trans Alaska Pipeline System. This oil is lighter than existing North Slope oil production and hence a welcome addition to the production stream.

A proportion of the gas production is used to generate power across all the facilities that are now electrically powered and operational, reducing flaring and providing cost savings to operations at this location.

At this early clean up stage, Alkaid #2 is delivering hydrocarbon liquid rates near expectations over the 4000 ft unblocked section, with gas rates well above original prognosis. Sustained daily production over more than the last 30 days has averaged over 500 bpd of hydrocarbon liquids, of which circa 200 bpd of crude oil and over 300 bpd being condensate and NGLs, all of which can be sold either by blending into the pipeline or trucking to an Alaskan refinery. Gas rates are above 2.5 million ft³/d which is higher than originally anticipated, however this is not believed to be from a gas cap but coming out of solution near the well bore. This is not considered a long-term problem as excess gas could be reinjected into the reservoir for pressure maintenance. This combined hydrocarbon deliverability to date confirms the forecasted reservoir properties and highlights the potential deliverability of the Alkaid reservoir. The company is confident there is upside above these rates as it is apparent that only a portion of the completed wellbore is contributing to the production stream; and it is estimated that the well has produced to date less than 40% of the volume of frac fluid used in the stimulations.

As previously announced, the flow rate is restricted by the accumulation of sand in the horizontal portion of the well bore also slows down well cleanup. This is not uncommon in long horizontal wells that have been treated with multi stage fracture stimulations. With the correct equipment, removing the sand and cleaning the well is a simple operation which is currently planned for January. The sand blockage in the well bore was identified early in the production test, however no winterized workover rig was available which prohibited the removal of the tubing and a proper clean out at that time. Instead, a coiled tubing unit (CTU) was used to conduct a through-tubing cleanout, but was unable to reach the full well depth and hence was partially successful with more than 1000 ft remaining blocked and untouched by the CTU clean out. A rig is available in January to clean out the entire well bore and is expected to open the entirety of the lateral allowing the full potential of the well to be revealed and at the same time accelerating the cleanup phase.

In advance of the clean out the Company plans to shut in and perform reservoir diagnostics, a normal oilfield practice, to gather additional data.

Jay Cheatham, CEO, said: “The Alkaid #2 well is delivering a total hydrocarbon liquid mixture exceeding 500 bpd from what we believe is from only c.4000 ft of lateral. The liquid mixture includes high quality oil with associated condensates and NGL that are saleable through TAPS. The total hydrocarbon production rates confirm we have tapped into a significant hydrocarbon system. To have this level of production at this stage in the “clean up” phase of production testing remains positive. The current reservoir performance is compromised by the sand blockage and we will not have a true indication of reservoir performance until the entire well bore is clean. We are deliberately using a conservative approach in flow testing of not ‘pulling on the reservoir’ too hard, allowing the natural healing of the fractures to minimise future sand flow. Overall, we’re very encouraged with the preliminary results of the production test and the fact that we have permanent facilities for treating and selling our oil as well as utilizing our gas to power our operations on location. Despite this encouragement however, we remind shareholders as we always do, that a definitive assessment of the well cannot be made until flow testing operations have concluded and we are still too early in the process.

“We expect flow rates after the clean out to improve. The location of Alkaid, immediately adjacent to the Dalton Highway, again highlights the significant advantage we have to other operators on the North Slope in expediting our oil developments. These initial positive testing results have increased our confidence in pursuing an Alkaid #3 well, subject to funding, which would be a high impact appraisal well to test the Shelf Margin Deltaic, the reservoir target immediately above the discovered oil at Alkaid #1 and #2. A success at Alkaid #3 would be a commercially impactful well with material resource implications and would also leverage off the established production facilities for important near term cashflow and it could be drilled outside of the traditional winter drilling season.”

Read the article online at: https://www.oilfieldtechnology.com/drilling-and-production/03012023/pantheon-resources-issues-operational-update-on-alkaid-2-well/

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