Oil Search Ltd. is expanding its Alaska profile through a series of A&D transactions it recently entered into, including a $450 million acquisition to buy more of a massive North Slope discovery.
Also, part of the deal-making was a transaction with Spain’s Repsol SA. The transactions follow Oil Search’s entry into one of the largest U.S. oil discoveries in decades made jointly in 2017 by Repsol and Denver-based independent, Armstrong Oil and Gas Inc.
Initially, Oil Search agreed to acquire half of Armstrong’s interest in the Alaskan discovery—named Horseshoe—for $400 million, which the company closed in February 2018. However, the deal also included a provision to buy Armstrong’s remaining interests for $450 million.
Oil Search, Papa New Guinea’s largest company and investor, had until June 30 to exercise the option.
On June 29, just under the wire, Oil Search agreed to take the remaining Horseshoe interests. Oil Search said in a news release that the deal’s structure gave the company enough time “to develop a better understanding of the full Pikka Unit Nanushuk oil field potential and regional exploration opportunities.”
__________________________________________________________________________________________________
RELATED:
Natural Gas Player Oil Search Ltd. Talks Alaskan Oil
__________________________________________________________________________________________________
Discovered in March 2017, the Horseshoe Field is located in Alaska’s Nanushuk Formation. The 1.2 billion-barrel oil find was the result of exploration partnership between Armstrong and Repsol. The companies’ described the find as the “largest U.S. onshore conventional hydrocarbons discovery in 30 years.”
Since the initial acquisition last year, Oil Search has said the Horseshoe discovery has the potential to be even larger based on 2018 drilling results conducted by ConocoPhillips Co.
In total, the exercised option comprises Armstrong Energy LLC’s remaining 25.5% interest in the Pikka Unit and 37.5% interest in the Horseshoe area plus a further 37.5% interest in the Hue Shale leases and a 25.5% interest in other exploration areas in the Alaska North Slope.
Both transactions also include interest owned by GMT Exploration Co. LLC, another Denver-based independent.
“The acquisition of Armstrong/GMT’s remaining interests allows Oil Search to maintain operatorship of a world-class oil development close to existing infrastructure, with material appraisal and exploration growth potential,” Oil Search said June 29.
Oil Search said it will continue to work together with Armstrong in accordance with an area of mutual interest agreement that was entered as part of the original March 2018 acquisition. The pair plan to review opportunities on the North Slope of Alaska outside the Pikka and Horseshoe areas.
Additionally, Oil Search entered into an asset swap transaction with Repsol on June 29 to align ownership interests across their now shared Alaskan assets. The swap will result in a net payment of $64.3 million to Oil Search.
The company also plans to partially sell down its Alaskan assets and is looking to launch a formal divestment process of some of its interests. A sale is scheduled to conclude in first-half 2020, ahead of a final investment decision for the initial Pikka Unit Nanushuk development. Oil Search intends to retain a roughly 35% interest in its core assets.
Oil Search said the Armstrong option is scheduled to close in late August. The company will fund the acquisition from its existing corporate debt facilities, which are anticipated to total $1.2 billion.
Shearman & Sterling LLP advised Oil Search in connection with its exercise of the Armstrong option while concurrently transacting to align project interests with Repsol. The Shearman & Sterling team was led by partner R. Coleson Bruce, counsel Angie Bible and associates John Craven and Ryan Staine.
Gibson, Dunn & Crutcher LLP is advising Repsol E&P USA Inc. in its alignment transaction and project development arrangements with Oil Search. The Gibson Dunn transaction team is led by Houston partner Justin T. Stolte.
Emily Patsy can be reached at epatsy@hartenergy.com.
Recommended Reading
Avant Natural Resources Steps Out with North Delaware Avalon Tests
2024-08-21 - With the core of the Delaware Basin in full manufacturing mode, Avant Natural Resources is pushing an operated portfolio into the northern reaches of the New Mexico Delaware.
US Oil, Gas Rig Count Unchanged this Week
2024-11-01 - The oil and gas rig count held at 585 to Nov. 1. Baker Hughes said that puts the total rig count down 33 rigs, or 5% below this time last year.
Now, the Uinta: Drillers are Taking Utah’s Oily Stacked Pay Horizontal, at Last
2024-10-04 - Recently unconstrained by new rail capacity, operators are now putting laterals into the oily, western side of this long-producing basin that comes with little associated gas and little water, making it compete with the Permian Basin.
Powder in the Hole: Devon May Fire up its PRB in Coming Years
2024-08-23 - Devon Energy is perfecting its spacing and completion recipe in Wyoming’s Powder River Basin play to possibly unleash full-field development later this decade.
E&P Highlights: Aug. 12, 2024
2024-08-12 - Here’s a roundup of the latest E&P headlines, with a major project starting production in the Gulf of Mexico and the latest BLM proposal for oil and gas leases in North Dakota.
Comments
Add new comment
This conversation is moderated according to Hart Energy community rules. Please read the rules before joining the discussion. If you’re experiencing any technical problems, please contact our customer care team.