PERTH (miningweekly.com) – ASX-listed Oil Search on Wednesday announced a $400-million investment to acquire a number of tier-one oil assets in the Alaska North Slope.

The assets include a 25.5% interest in the Pikka Unit and adjacent exploration acreage, and a 37.5% interest in the Horseshoe Block, which contain some 500-million barrels of combined resources in the Nanushuk and satellite oilfields, with Nanushuk being one of the largest conventional oilfields discovered in the US in more than 30 years.

The ASX-listed company also had the option until the end of June 2019 to purchase all the remaining interest in the Pikka Unit and Horseshoe Block, as well as an additional 25.5% interest in the adjacent exploration acreage and a 37.5% interest in the Hue Shale for an additional $450-million.

Oil Search told shareholders that the acquisition would provide the company with world-class oil assets immediately adjacent to existing infrastructure, and complemented the company’s existing gas assets in Papua New Guinea, while balancing its gas-dominated portfolio.

“For some time, Oil Search has been seeking to acquire oil interests to complement our Papua New Guinea gas assets to create a more balanced portfolio that is less exposed to one single commodity and one country,” said Oil Search MD Peter Botten.

“The key challenge has been to achieve this without diluting the company’s world-class high-returning Papua New Guinea assets.”

Botten said that using existing relationships, the Alaska North Slope opportunity was proactively pursued and an agreement was 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 option to acquire additional equity allows us to increase our interest once appraisal drilling has taken place, as well as the potential to sell-down to a strategic third party to create further value.”

Oil Search will carry project partners Armstrong Energy’s and GMT Exploration Company’s share of the 2018/19 appraisal programme, which is estimated at around $25-million to $30-million, if the option is not exercised by June 2018, and the company was also expected to assume operatorship on that date.

The initial development will target about 500-million barrels of oil in the Pikka Unit, with first production expected in 2023, with production expected to plateau at rates of between 80 000 bbl/d and 120 000 bbl/d.

There is also significant exploration and appraisal upside within the portfolio, with unrisked resource potential estimated at 1.5-billion barrels.

“Based on our current oil price and development cost forecasts, the company has more than sufficient capital to fund the acquisition and development of Nanushuk as well as liquefied natural gas expansion in Papua New Guinea without the need to raise additional equity or impact our dividend policy,” Botten said.

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