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June 23, 2021
Business Featured News

Oil Search Limited Acquires Alaska Assets

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Oil Search Limited has acquired interests in the Alaska North Slope in the United States of America.

In an announcement to the markets today, Oil Search revealed it would be acquiring 25.5% interest in the Pikka Unitand adjacent exploration acreage, as well as 37.5% in the Horseshoe Block.

Located in Alaska’s North Slope, the assets were purchased from Armstrong Energy LLC and GMT Exploration Company LLC, for a total of US$400m.

The terms of the acquisition are as follows;

  • The purchase of a 25.5% interest in the Pikka Unit and adjacent exploration acreage, 37.5% interest in the Horseshoe Block and 37.5% in the Hue Shale, for US$400 million.
  • An option, exercisable at Oil Search’s discretion until 30 June 2019, to purchase all of Armstrong and GMT’s remaining interest in the Pikka Unit and the Horseshoe Block (25.5 % and 37.5% interest respectively) as well as an additional 25.5% interest in the adjacent exploration acreage and 37.5% in the Hue Shale, for US$450 million.
  • Oil Search will carry Armstrong and GMT’s share of the 2018/19 appraisal programme (approximately US$25-30 million) if the option is not exercised by 1 June 2018.
  • Oil Search will assume operatorship on 1 June 2018.
  • Oil Search will form a long term partnership with Armstrong, leveraging its technical capabilities and experience in the identification of additional potential growth opportunities in Alaska.

According to Oil Search Managing Director, Peter Botten, Oil Search has been seeking to acquire oil interests to complement our PNG gas assets, to create a more balanced portfolio that is less exposed to one single commodity and one country.

“The key challenge has been to achieve this without diluting the Company’s world class, high returning PNG assets. Utilising our existing relationships, this Alaska North Slope opportunity has been proactively pursued and an agreement structured to the benefit of all parties.

The interests acquired provide a unique opportunity for Oil Search to participate in a world class, high returning, proven oil province that can add material value to the Company.

The Nanushuk field in the Alaska North Slope is a giant oil discovery and has been acquired at an attractive point in the commodity cycle, at a very competitive price of approximately US$3.1 per barrel of discovered resource. This purchase price reduces to US$1.3 per barrel if Repsol’s gross resource estimates are used.

In addition, the transaction delivers significant exploration upside, providing the Company with the potential to develop, over time, a business of a similar scale to our PNG operations.

Most importantly, this acquisition does not impact our focus or ability to deliver our exciting growth projects in PNG and is consistent with our vision to deliver top quartile returns to shareholders.”

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