Pantheon Resources PLC (AIM:PANR, OTC:PTHRF) told investors that the Alkaid-2 well, which has returned to test production, supports the case for a commercial development of the project in Alaska.
The well has now been in production since 21 February under test conditions and has been yielding some 505 barrels of oil per day of liquid hydrocarbons (180 barrels oil, 325 barrels condensate and natural gas liquids) plus 2.3mln cubic feet per day of gas.
The company noted, as previously announced, that results from Alkaid-2 indicate it was drilled and fracked in the “gas cap” resulting in much higher gas ratios versus oil, and future wells will be drilled deeper to avoid repeating this outcome.
Additionally, it added that the quantum of liquid and gas production flowing without artificial lift from the well demonstrates the good deliverability of the reservoir, which is a significant de-risking event for the Alkaid asset.
Pantheon described the well programme at Alkaid-2 as “long and complex” whilst highlighting that it has “generated significant data in de-risking the play”. Complications encountered with this well are seen as ‘Alkaid-2 specific’ and not a reflection on the Alkaid reservoir which performed more strongly in the prior Alkaid-1 well.
"We are pleased that production testing at Alkaid #2 has recommenced and proven the productive capability of the reservoir,” chief executive Jay Cheatham said in a statement.
“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."
Cheatham added: “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.”
In today’s statement, Pantheon noted that it recently modelled a development well drilling cost of US$19.5mln at Alkaid, though after further modelling and analysis has revised this estimate down to US$13.5mln and – assuming a 1,000 lateral section and not factoring in improved well performance in the future – forecasts the field’s development economics in excess of 20% IRR (internal rate of return) based on US$80 per barrel crude.
Improved efficiency and/or productivity through future well optimisation is however expected to improve returns significantly. Pantheon also noted that these estimates are based on the Alkaid resources alone and do not factor in the ‘SMD’ formations.
CPR and farm-out process
The company is now commissioning consultant Netherland Sewell & Associates for an independent review - a competent person's report (CPR) – covering the Theta West and Alkaid project, plus it will update the company’s existing dynamic reservoir models.
The CPR report is expected to run in parallel to a partnering (farm-out) process.
“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,” Cheatham added.
“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."