The Explorers 2024: Bill Armstrong brings in Apache

Lagniappe-operated endeavor on E. North Slope risky but high reward

Kay Cashman

Petroleum News

Since the last annual issue of The Explorers magazine was released in June 2023, Bill Armstrong has brought APA Corp., holding company for Apache Corp., into the 275,000-acre block of 148 leases that he put together south and southwest of the Badami unit on the eastern North Slope; acreage he operates through Armstrong Oil & Gas subsidiary Lagniappe Alaska. Santos was already a partner in the leases.

The deal he cut made APA a 50% working interest owner, with Lagniappe and Santos each holding 25%.

APA said it planned to invest $1.9 billion to $2.0 billion in upstream oil and gas capital worldwide in 2024, investing for the long term by directing $100 million of the upstream budget toward exploration activities predominantly in Alaska.

Lagniappe is a Cajun word that loosely translates into "a little something extra" or "a good unexpected surprise" -- apropos for the Nanushuk play on the North Slope, which Armstrong and a partner first drilled and identified as a huge oil reservoir in 2013 (Qugruk 3 well). The discovery led to the 100 billion-barrel Pikka oil field, today operated and being developed by Santos.

Since that billion-barrel discovery, the oil industry has been on a tear, drilling at Pikka, Horseshoe, Putu, Mitquq, Stirrup, Willow, West Willow, Harpoon and Bear.

All reports say the play concept in Lagniappe's acreage to the east is very similar: Multiple zones, onshore, good gravity oil, reasonably close to infrastructure.

But the targeted objectives are slightly younger than what Santos and partner Repsol have at Pikka et al but with better reservoir qualities -- porosity and permeability -- even though they are somewhat deeper.

There have been very few wells drilled in and near Lagniappe's South Badami area -- and most of those wells were drilled in the 1970s trying to find another Prudhoe Bay, but almost all of the wells had good oil shows, Armstrong said.

Prior to finding all of that oil in the Nanushuk formation west of Prudhoe Bay and the central North Slope most people were saying Alaska's North Slope had very little remaining potential. The Nanushuk at Pikka changed all that.

Armstrong thinks there are new oil discoveries to be made east of Prudhoe Bay, also in the Brookian.

In a text to Petroleum News before the partnership deal was struck between APA, Santos and Lagniappe, Armstrong described the area as "defined off of high effort, reprocessed modern 3D. Really exciting stuff. Big targets," adding there has been "virtually no prior drilling in the area. The wells that have been drilled have great shows and some have bypassed pay on old logs."

Gallagher, Christmann happy

In a conference call on Feb. 22 that covered fourth quarter and full year 2023 financial and operational results, APA CEO and President John J. Christmann was asked to provide more color on the risk profile for the eastern North Slope exploration drilling program.

"These are 3D and amplitude supported but this is a step-out in an area where there is risk associated with it so I'm not going to give you a number on a ratio. We're going to drill three wells and they are risky but they're high reward," Christmann replied.

Christmann asked Tracy Henderson, the company's exploration manager, to expand on his response and she said: "What interested us in the block was that we do see materiality with these prospects that warranted exploration."

He also turned to her when asked whether the partners were searching for Pikka lookalikes. "Yes, I would agree with that," Henderson said. "We're looking at more play types like Pikka and Willow on the other side of Prudhoe Bay. And that is the Brookian play we're going to be exploring for in a younger sequence but it's absolutely the same geologic model and set up that we expect to see. Basically just farther east than it's been explored for."

Unexpected challenges

In a Feb. 26 text Bill Armstrong updated Petroleum News on Lagniappe's progress.

"Our drilling is just now starting," Armstrong wrote.

"Warm weather, then really windy weather has delayed our program a couple of weeks."

More unusually bad weather followed and continued to plague drilling operations -- more wind, snow and below normal temps.

What impact these conditions have had on drilling and possible flow-testing operations is unknown, but PN sources say all three wells will be completed this season.

Likely in response to rumors APA's Apache would take over operatorship if Lagniappe's drilling program was successful, Christmann was asked on Feb. 22 "what's next in the timeline for the program?"

"We're in the exploration stage right now, so we've done a lot of scoping. It's onshore on state lands. Things can move a little quicker than on federal there. You're close to big pipeline capacity, but let's work through the exploration phase, see what we find and then go from there at a later date. But we're excited about it," Christmann replied.

Apache April 8 update

In September 2023 Franceschi was asked by Petroleum News how Apache got involved in the deal. "Apache maintains a global exploration team for the purpose of generating attractive future growth opportunities. As previously disclosed, we strategically allocate a limited percentage of our capital program each year to exploration activities, and this partnership in Alaska is a part of that program," she replied.

The partners are looking at drilling three more wells next winter, so a total of six wells with three rigs drilling simultaneously in both cases.

Under the terms of the deal between the three working interest owners, initial exploration activities during the two-year exploration phase will be undertaken without cost to Santos, which is concentrating on development of Pikka Phase 1 west of the central North Slope.

Armstrong's agreement with APA has not been disclosed.