As of 8pm BST on 6 July, Pantheon Resources (AIM:PANR) was drilling ahead at a depth of approximately 300 feet.

Pantheon Resources plc (“Pantheon” or “the Company”), the AIM listed oil and gas company with a 100% working interest in all of its oil projects spanning c. 153,000 acres adjacent and near to transportation and pipeline infrastructure on the Alaska North Slope (“ANS”), is pleased to announce the following updates.

Spudding of Alkaid #2 Well

Operations have commenced on the Alkaid oil accumulation with the spudding of Alkaid #2, the Company’s first horizontal well on the ANS, using the Nabors 105AC drill rig. The rig is larger than those previously used, with increased capacity, and can undertake multiple functions. As of 8 PM BST on 6 July, Pantheon was drilling ahead at a depth of approximately 300 feet.

The Alkaid #2 well will assess three impactful objectives over multiple formations:

(i) Production testing a proven oil formation encountered in Alkaid #1

(ii) Exploring the deeper potential for oil in that zone

(iii) Appraising an extension of oil discovered in the Shelf Margin Deltaic at Alkaid #1 and Talitha #1.

The Alkaid #2 well is located adjacent to the Dalton Highway and Trans Alaska Pipeline System (TAPS) which are the main transportation highway and export pipeline, respectively, and approximately 4.5 miles from the Alkaid #1 discovery well drilled in 2015. A key objective of this well is to gain robust production test data to accurately assess the ultimate potential of the reservoir. Whilst the Company believes the optimum well design to exploit the Alkaid anomaly would include +8,000 foot lateral sections, in this first well the Company will adopt a more conservative approach with a shorter lateral simply to minimise operational risk.

1 Management estimate

2 Prevailing realized oil price of $55/bbl held flat used in the Independent Expert Report published in January 2020. This estimate discounted certain parts of the field by 50%, and hence is considered by the Company a conservative estimate.

Long Term Production Testing

The primary function of Alkaid #2 is to conduct a long term production test on the oil zone previously tested at Alkaid #1. If successful, Pantheon will truck the produced oil to Pump Station #1, located approximately 20 miles north of Alkaid, and sell the produced oil to a nearby North Slope facility.

Alkaid #1 tested an average of over 100 BOPD via a small “through-tubing single frac”, which perforated six feet of the 240 feet net pay interval. Alkaid #2 will test this same zone through a long horizontal section accessing several thousand feet of oil bearing section.

Deeper Exploration Potential

Alkaid #2 also has significant exploratory potential immediately below the total depth at Alkaid #1. As part of the current drilling programme, the Company intends to evaluate the extent of this deeper oil column.

Alkaid #1 was terminated within the oil zone at a time when regional flooding of the Dalton Highway occurred. Based on seismic and other analytical analysis, the Company believes the Alkaid horizon’s oil zone is substantially thicker than drilled to date, offering the potential for additional resource growth to that outlined above and which will be assessed in the Alkaid #2 well. This increased resource potential combined with current oil price forecasts, as opposed to the $55/bbl used by the Independent Expert in 2020, could have a material impact on any new resource valuation.

Appraisal of Shelf Margin Deltaic (“SMD”)

The recent oil discovery at Talitha #A in the Shelf Margin Deltaic formation has upgraded the potential for the SMD to produce oil at the Greater Alkaid location, as well as at the Talitha project. Pantheon estimates the SMD contains 2.6 billion barrels OIP and a Contingent Resource of 404 mmbo. In a success case, the Company believes a large portion of this resource could be developed from the Dalton Highway which would represent a considerable near term development opportunity, especially if combined with the deeper oil zone utilising the same production infrastructure.

A successful programme at Alkaid #2 would yield early cashflow which is of significant value at current oil prices. The Alkaid #2 horizontal well will be Pantheon’s first long term production test well in Alaska and will utilize unconventional oil production technologies applied to conventional oil reservoirs to maximize potential reserves and production, which has now become standard operating procedure across the entire ANS. The industry has transferred these technologies from the Lower 48 states into Alaska to develop this higher quality oil in the stratigraphic Brookian sections containing billions of barrels of recently discovered oil. Additionally, the Greater Alkaid oil accumulation sits underneath and adjacent to the TAPS pipeline and the Dalton Highway which is a material advantage as it is ideal for year-round “Phased Development”. This would minimize upfront capital expenditure and allow for future capital needs to be partly funded through production revenues, yielding higher Internal Rates of Return.

Jay Cheatham, CEO of Pantheon Resources, commented, “As our first horizontal well, Alkaid #2 is an important operation for Pantheon. The long-term production test through the horizontal section will define the resource and aid the understanding and future development potential of Alkaid. But most importantly, if successful, it will begin generating revenue for the Company. The Alkaid #2 well is the first production well in this new oil field using unconventional technology. As is typical in the industry, we will apply what we learn from this well to subsequent wells in order to optimise future drilling, testing and production.

“The appraisal of the Shelf Margin Deltaic and the deeper portion of the Alkaid horizon has the potential to provide significant upside combined with our other discoveries. Commercial success at any standalone project, along with our geographic location, onshore and adjacent to export infrastructure in a low sovereign risk jurisdiction, would be transformational for Pantheon.”

Bob Rosenthal, Technical Director, commented, “Alkaid #2 marks Pantheon’s transitioning process from explorer to producer, where we now begin to focus on optimising the development of these large resources. As for any new field, being the first horizontal well, we will be conservative in our drilling to minimise the chances of operational issues and assist in future well design.

“We have discovered a lot of oil on the ANS across our Theta West, Talitha and Greater Alkaid projects which are estimated by management to contain over 23 billion barrels of Oil in Place and over 2.3 billion barrels of recoverable resource in those horizons that have flowed oil, and Alkaid #2 could add to these estimates.”

Further information:

Pantheon Resources plc

Jay Cheatham, CEO

+44 20 7484 5361

Justin Hondris, Director, Finance and Corporate Development

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