Pantheon Resources PLC (AIM:PANR, OTC:PTHRF)’s update last week didn’t tell us much that we already didn’t know about its keenly anticipated Alkaid-2 drill, but no bad news is good news in this instance.
The oil and gas exploration company told investors that its horizontal drilling at the Alkaid-2 resource in Alaska went “smoothly and without incident,” fairly important when attempting lateral drilling as opposed to vertical.
Lateral or horizontal drilling increases the surface area to which the well bore is exposed, and, in theory, increases the volume of oil that can be produced.
The technique has been around since the 1940s but was perfected in the 1970s and used extensivelyi n the huge Texas shale fields of the Permian Basin and Eagleford.
What’s been done so far?
At Alkaid-2, Pantheon reached its target depth of 8,000 feet, before branching out laterally to 5,300ft.
Future production wells will have a targeted lateral length of around 8,000ft but as this is the first, Pantheon said it had adopted a conservative approach and utilised a shorter lateral.
Analysts at Peel Hunt noted that, based on previous expectations, 8,000ft suggests a flow rate of 1,200 barrels per day (bopd), at 150 bopd per 1,000ft.
What next?
Pantheon chief executive, Jay Cheatam, told Proactive that the next step would be to prepare for multi-stage stimulation and flow testing, with the first oil expected in October.
Multi-stage stimulation is the practice of stimulating and fracturing multiple stages and points in a single well and is often used in horizontal drilling.
Before that, however, the steel tubing needs to be cemented into the well to secure it, which requires a full-scale and very costly drill rig.
What does Pantheon think it has and how big can it be?
Current estimations from Pantheon for its entire Alaska North Slope project, which includes Talitha and Alkaid-1 is roughly 20bn barrels, with around a tenth viewed as recoverable.
However, Cheatham added that once flow testing is completed at Alkaid-2 that he expects both those numbers to be bigger than current expectations.
Successfully testing the reservoirs at greater depth, in this location, is likely to increase the known scale of the resource, according to Brendan Long, oil and gas equity analyst at WH Ireland.
At this stage however, any direct comparisons with Permian or EagleFord would be pointless.
So, what can it produce?
Any estimation now is “not the key point of data”, and won’t be until the flow tests have been completed, expected at some point in October, said Cheatham.
“I am interested primarily in understanding the rocks and petrophysics of the reservoir itself, this cannot be changed,” Long added.
“If the rocks and the petrophysics are encouraging, and the flow rate dynamics over time will provide an indication of that- Pantheon can engineer the completions in a myriad of ways to optimise the wells.”
The flow test, therefore, will be key in truly determining how big a resource Pantheon has its hands on.
Smooth progress
So far, it’s been impressively smooth progress with last week’s update so far, so good.
“There is a remarkable absence of peripheral challenges compared to most early-stage oil & gas projects,” Long said.
“I believe that if the reservoir and the fluids are conducive to flowing oil, everything else will fall into place quite easily.”
“The key infrastructure is only a stone’s throw away, the company is operating in the political safety of lands managed by the supportive State of Alaska, it's an exceptionally straightforward backdrop.”
A challenger to Prudhoe Bay?
Prudhoe Bay is operated by BP in Alaska, although some other players, such as ExxonMobil, also have a working interest in the field.
The oil field in Alaska was discovered in 1968, with production starting nine years later.
At the peak of its production, it was churning out some 1.5mln barrels per day and has produced well over 15bn barrels of oil.
Given Pantheon is operating in the same area, and believes itself to have a resource just as large, the comparisons between the two were inevitable.
However, while Long believes Prudhoe Bay will “remain the largest conventional oilfield in North America”, Pantheon’s work so far is proving to be extremely successful.
“Lazy and conventional wisdom is often proven by the drill bit to be wrong.”
“So far, Pantheon Resources has been on the trajectory of success by doing exceptionally high-quality work that has challenged lazy and conventional thinking.”