The Talitha #A well was drilled in 2021 and was an appraisal of a conventional oil accumulation discovered by a well named Pipeline State #1 drilled by Arco Alaska in 1988. Pipeline State #1 was designed to drill to 13,000 feet (“ft”) depth but stopped short of this, just below the Kuparuk formation. The well encountered several oil-bearing intervals as well as strong oil shows throughout an extensive section and did observe oil to surface from several Brookian zones whilst drilling. Promisingly, several cores taken from the well confirmed the presence of oil. No reservoir flow tests were performed as at the time as the objective of the well had been to find a lookalike for the prodigious Kuparuk River oilfield. This activity occurred in 1988 when oil prices had plunged to around WTI $15-$20/bbl and the Trans Alaska Pipeline System (“TAPS”) was running at full capacity, hence there was little incentive to continue the evaluation of the discovery at that time. Moreover, at that time 3D seismic imaging was in its infancy, drilling and completion technologies as well as oil extraction techniques were not nearly as advanced as they are today. Had today’s techniques been available in the 1980’s, it is possible that the Pipeline State #1 well may well have initiated the new field development Pantheon envisions today. High resolution 3D seismic acquired in 2013 indicated the potential for an exceptionally large oil accumulation across multiple zones which structurally conform to the oil encountered at Pipeline State #1 which led to the drilling of the Talitha #A well in 2021 which confirmed oil in several zones. Independent experts at AHS Baker Hughes conducted a ‘Volatiles Analysis Service’ (“VAS”) at Talitha #A and confirmed the presence of oil in all cuttings taken over a 3,700 ft section within the wellbore. The recent operations in early 2022 at the Talitha project involved testing several of those oil-bearing zones in the Talitha #A well bore.
TALITHA A PAY INTERVALS
There are several distinct stratigraphic oil zones and possibly more that have been identified at Talitha which have been defined using advanced seismic petrophysics, a technology which integrates petrophysics, geophysics and geology. Advances such as horizontal drilling and reservoir stimulation now enable economic development of these type of reservoirs, which were previously considered uneconomic. This integrated approach has proven to be successful on the Alaska North Slope (ANS) and resulted in an exploration revival of the ANS which now boasts some of the largest onshore conventional oil discoveries in the world.
The Talitha #A well, drilled by Pantheon, is located approximately eight miles west of the Dalton Highway and TAPS and four miles from the Pipeline State #1 well and confirmed the presence of movable light oil in all of the objective horizons. Talitha #A has been announced by Pantheon as a new discovery of oil with over a billion barrels of recoverable oil potential across the multiple stacked (primary and secondary) objectives. These zones are comprised of Brookian reservoirs (primary targets) and the deeper Kuparuk reservoir (secondary target).
Most of the recent larger oil discoveries by other operators on the ANS have been drilled some distance from existing infrastructure which will require extremely high preproduction expenditure and exceedingly long lead times to any production. These recent discoveries by other operators remain several years away from producing any oil and cashflow. Talitha’s closer proximity to the Dalton Highway and TAPS will be immediately appraised and if successful, the objective is to progress it to development via phased modular production facilities reducing the need for substantial upfront capital expenditure, hence allowing production to ramp up as early cashflow is reinvested to grow production.
The Talitha #A well reached a total depth of c. 10,456 ft and drilled through the Shelf Margin Deltaic sequence along with several other targets including (a) the Slope Fan System, (b) the Basin Floor Fan, both within the Brookian section, as well as (c) the deeper Kuparuk formation. Data collected during drilling indicated five potentially productive zones in the (from deepest to shallowest) (i) Kuparuk, (ii) Lower Basin Floor, (iii) Upper Basin Floor Fan sequences, (iv) Slope Fan and (v) Shelf Margin Deltaic horizons. The Company was only able to test the deepest of these zones, the Kuparuk Formation in 2021 as it experienced operational issues that led to a delayed testing operation and eventual suspension of the testing at the onset of the warmer Spring weather. Recent testing operations in 2022 focussed on the three shallow Brookian zones, namely the Lower Basin Floor Fan, the Slope System and the Shelf Margin Deltaic which are all normally pressured and were secured behind casing. The shallow zones are all geologically independent of the Kuparuk, have all confirmed the presence of potentially significant quantities of light oil, and were flow tested as part of the recent program.
Basin Floor Fan
Testing operations on the Lower Basin Floor Fan ("BFF") involved perforating three separate 10 ft intervals over 370 ft out of 600 ft of gross section, at 9405 to 9415 ft, 9205 to 9215 ft and 9045 to 9055 ft. These three intervals were individually stimulated, and successfully flow tested, producing high quality c. 35 to 39 degree API oil and averaging 73 barrels of oil per day ("BOPD") over a three day test period.
On the final day of testing, the well was flowing at a sustained rate of approximately 40 BOPD. Encouragingly, the bottom hole pressure is near to the reservoir pressure, thus providing an indication of the production potential of this portion of the oil accumulation, which is at the distal limits of the field. Future development wells would all be drilled horizontally and stimulated with multiple stage fracs, meaning that flow rates are expected to be many times higher.
The Company was greatly encouraged by the test results given the optimal location for any development of the BFF will be in a structurally higher position where better reservoir properties can be expected and, in a location, similar to which is presently being drilled and tested at Theta West, 10.5 miles to the north west, where the BFF is the primary objective.
Slope Fan System
Testing operations on the Slope Fan System (“SFS”) which is immediately above the BFF involved perforating two separate five ft intervals at 8160 to 8165 ft and 7855 to 7860 ft, within two distinct c. 50 ft sand bodies or 'lobes'. The two intervals were stimulated, and flow tested together, producing high quality c. 35 to 38 degree API oil and averaging 45 BOPD over a three day test period. On the final day of testing, the well was flowing at a sustained rate of approximately 32 BOPD from this combined 10 ft of perforations which again is highly encouraging given production wells on the Alaska North Slope are drilled horizontally, which would typically result in materially higher flow rates.
This is the first indication of producible oil in the Slope Fan System on Pantheon's acreage and has significant implications for future resource and recoverable oil estimates. The two SFS lobes are in two distinct trapping systems and suggest very good reservoir properties. The Company's initial analysis suggests that the deeper of the two lobes extends below the Alkaid Deep anomaly and will be assessed in the upcoming Alkaid #2 well, planned for summer 2022.
The Company has not previously provided guidance on potential resource for the SFS but is now greatly encouraged by these results and will provide an estimate of resource and recoverable oil in due course.
Shelf Margin Deltaic
The Shelf Margin Deltaic testing was the last test in the shallowest zone of the Talitha #A well bore. The Company had to suspend testing of the Shelf Margin Deltaic (“SMD”) horizon due to suspected blockages in the well bore. The well was perforated in the SMD from 6,965 ft to 6,975 ft and was successfully fracture stimulated. Immediately after the fracture stimulation, the test was suspended by a blizzard on the North Slope which shut down all operations for health and safety reasons. Flow testing operations resumed three days later.
Once flow testing commenced and before the well stopped flowing after a short period of time, only 45% of the fracture fluid was produced, with no formation water and small amounts of light high quality 34 degree API oil. Other than the small amounts of oil, no reservoir fluids were produced. The consensus among the Company and external consultants is that there is a blockage preventing any additional reservoir fluid from entering the well bore. Based on all the data, which includes a full suite of logs, sidewall cores, extensive Volatiles Analysis Service (“VAS”) work undertaken by AHS/Baker Hughes over the past 12 months, and the testing of the lower zones this year, the Company’s expectation for the SMD is that it should produce better than the two lower zones already tested; the Basin Floor Fan and Slope Fan System horizons, where the Company achieved excellent results.
Pantheon decided to suspend operations at Talitha with a possible return to testing after the program on Theta West or return next season. The main priority for the remainder of the current winter season is to allow sufficient time to satisfactorily test the BFF at Theta West. The shortage of testing equipment had necessitated the movement of the Coil Tubing Unit and test equipment from Talitha to Theta West. This consequently limits the amount of time available for remedial work at Talitha.
Regardless of the operational challenges, the company believes the potential of the SMD is undiminished and it plans further operations on the SMD at Talitha to remediate the issue either this season, time permitting, or next. Despite the blockage encountered in the SMD, the Talitha well has been a great success for Pantheon, confirming the presence of movable, high quality light oil in both the Slope Fan System and the Basin Floor Fan, which has very significant implications for our acreage. The next well in the programme is an Alkaid appraisal/production well in the summer of 2022 which will penetrate the SMD as well several other potential oil zones, hence additional data will be gathered on the SMD. The plan at Alkaid is to drill a horizontal lateral wellbore on the best oil zone and, if successful, put on a long-term production test.
Pantheon is extremely encouraged by the analysis and initial results of the shallower zones in the Talitha #A well. The reservoir qualities are in line with expectations, the oil appears to be lighter than expected and an additional significant zone has been discovered in Talitha #A, significantly increasing the total resource potential.
An enormous volume of high-quality data has been collected from drilling Talitha #A which has both de-risked these zones for future drilling, and increased confidence of their commercial viability. The Basin Floor Fan zone encountered more reservoir than expected. The Upper BFF is an additional zone with that was penetrated in Talitha #A. The Slope Fan System was proven oil productive and better than expectations. The SMD was not as well developed as anticipated at Talitha #A. Pantheon now interprets that the SMD extends across the Alkaid project where the zone is proven oil bearing, and better developed as it extends southeast across the Dalton Highway. This significantly increases the resource potential near the highway and pipeline. The discovery of oil in these formations enhances the prospectivity of other adjoining potential oil-bearing structures that will form part of a future drilling programme. The Company believes that it can “see” light oil in reservoir within its 3D seismic.
The SMD was the primary interval of focus utilized to define the Talitha Production Unit which covers 44,373 acres. The SMD could be classed as analogous in stratigraphic setting to the large Pikka/Horseshoe discovery to the west which is also described as a SMD play. The SMD play now extends into the Alkaid Unit to the northeast lying directly above the tested Alkaid discovery. New mapping also extends the play due east and underneath the Dalton Highway and TAPS.
Kuparuk
The third and deepest oil formation is the Kuparuk formation. The Kuparuk formation is a prolific regional producer just north of Pantheon’s leases where there is a giant oilfield named the Kuparuk Field, holding an estimated oil in place of 14 billion barrels of oil. Oil was discovered in the Kuparuk formation at the Pipeline State #1 well in 1988 but much deeper than the established Kuparuk oil fields to the north. The Pipeline State well encountered 47 ft of net oil pay in the Kuparuk but was never tested. The Talitha #A well was drilled “up dip” from Pipeline State and encountered thicker and better reservoir rocks. The well encountered ± 60 ft of well-developed sand with high resistivity readings and very strong gas chromatograph indications of oil. The presence of oil in reservoir was independently confirmed by VAS. Talitha #A demonstrated the key elements of a proven hydrocarbon system in the Kuparuk formation with the presence of movable high-quality (± 42 degree API) oil, however during testing the well-produced oil intermittently along with solution gas and formation water with lower salinity than anticipated. High quality light oil flowed intermittently at rates up to 100 BOPD as test encountered several operational issues and is believed to exhibit ‘oil wettability’ characteristics, which will be addressed in future wells through the application of different drilling products and techniques. The Kuparuk horizon at this location was over pressured which was both unexpected and unlike any known Kuparuk well regionally, causing challenges in testing. The Kuparuk at Talitha #A is some 800 ft downdip from its ideal 'updip' position and was recognized, predrill, as a secondary target but important stratigraphic play test. The Talitha #A well location was selected as the optimal location for the shallower Shelf Margin Deltaic horizon, the primary target of the well.
Our technical team prioritised testing the Kuparuk formation and ultimately recommended deferring plans to test the shallower horizon during the 2021 drilling season because the well logs of the Kuparuk indicated excellent reservoir, comparable to reservoirs in highly productive nearby Kuparuk fields. Based upon the well logs and regional analogues, the test results were a surprise, and more work will be needed to understand the Kuparuk reservoir at this location. Comprehensive analysis of the VAS and wireline data from these zones over the forthcoming months will enable the Company to fully optimize its testing programme for next season, as well as enabling lengthier flow tests.
Before drilling Talitha #A, Pantheon completed an internal analysis of the Kuparuk Formation in late 2020 where it estimated the Kuparuk formation, on a 100% basis, has the potential to contain 1.4 billion barrels of oil in place and a Prospective Recoverable Resource of 341 million barrels of oil as a most likely case. A standalone development concept would be significantly enhanced if this development is combined with the discovered resources the shallower section at Talitha and Alkaid.