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Apache makes breakthrough Suriname find

US independent’s share price soars as oil confirmed in frontier province

The small South American country of Guyana has been transformed since the discovery of offshore oil in 2015 into one of the world’s most prolific exploration hotspots—18 new discoveries from just 20 wells drilled—and will soon begin producing first oil from phase one of ExxonMobil’s Liza project.

But, while Guyana is set to become one of the leading producers in Latin America over the next decade, exploration in neighbouring Suriname had to date failed to replicate its rival’s upstream successes—returning no commercial finds—despite similar geology and major oil companies snapping up acreage across the maritime border from ExxonMobil’s prolific Guyanese Stabroek block. 

The fortunes of the nascent hydrocarbon province may, though, have reached a critical turning point.  US operator Apache, together with joint venture partner Total, announced on 7 January Suriname’s first major offshore discovery from the Maka Central-1 well, in Block 58.

The Noble Sam Croft drillship began operations in late September and encountered multiple targets in the Upper-Cretaceous Campanian and Santonian intervals. The deeper Santonian interval contained 73m of net oil pay, with preliminary testing showing crude of 35-40° API, confounding any expectations it might replicate the predominantly gas-condensate find from Guyana’s Haimara well, drilled by ExxonMobil on the border with Block 58.

“Preliminary formation evaluation data indicates the potential for prolific oil wells” — Christmann, Apache

The shallower Campanian interval encountered 50m of net light oil and gas condensate pay, indicating crude of 40-60° API quality. Apache had planned to drill into the deeper Turonian interval but discovered over-pressured oil-containing reservoirs in the Lower Santonian and therefore decided to terminate drilling at 6,300m. The company said it was a positive sign and the company will test the Turonian in the future.

“We are very pleased with results from Maka Central-1,” says Apache CEO John J. Christmann. “The well proves a working hydrocarbon system in the first two play types within Block 58 and confirms our geologic model with oil and condensate in shallower zones and oil in deeper zones. Preliminary formation evaluation data indicates the potential for prolific oil wells. Additionally, the size of the stratigraphic feature, as defined by 3-D seismic imaging, suggests a substantial resource.”

In December, Apache reduced its stake in Block 58 after Total acquired a 50pc working interest in the block. Under the terms of the deal, Total agreed to pay a $100mn bonus to Apache and a quarterly royalty on the first 1.5bn bl of gross production. If Brent averages less than $65/bl then Apache would receive $0.25/bl quarterly, while between $65/bl and $80/bl the company would gain $0.375/bl. If Brent averages over $80/bl, the US independent would earn $0.5/bl. 

The Noble Sam Croft vessel will next drill an exploration well at the Sapakara West prospect, 12 miles southeast of Maka Central-1—again targeting Cretaceous intervals in the Campanian and Santonian intervals. Apache has identified at least seven distinct play types in Block 58 and more than 50 drilling prospects.  

Breathing space

Apache’s recent financial performance has been underwhelming. In the third quarter of 2019, the US company posted a $170mn loss, triggered by lower oil and gas prices and travails in its Permian Basin assets. Total global production was slightly over 450,000bl/d oe for the quarter, a 5.4pc fall year-on-year. US production dropped by 2.4pc year-on-year to just above 265,000bl/d oe, while international output fell by 9.4pc year-on-year to under 185,000bl/d oe. In October, the exit of Apache’s head of worldwide exploration, Steve Keenan, triggered a 10pc slump to the company’s share price.

A major oil discovery in Suriname is therefore a welcome boon. The company’s share price jumped by over 25pc on 7 January, ending the day above $32.50/share—its highest point since April. Swiss investment bank Credit Suisse appraised the new discovery at 1.45-1.78bn bl oe gross-in-ground resources but cautioned investors on the financial terms available in Suriname: in particular, higher royalty burden and cost recovery than neighbouring Guyana.

Joining the queue

The discovery should buoy other operators in the province. Anglo-Irish producer Tullow, which could also benefit from some good exploration news after a recent rough patch, plans to drill a well at the Goliathberg North prospect in Block 47, in the second half of 2020, together with Argentina’s Pluspetrol and Israel’s Ratio Production.

Previously, US independent Kosmos Energy had drilled two non-commercial wells, at the Pontonoe well in Block 42, with joint partners Chevron and fellow US indie Hess in October, and the Anapai well in Block 45, alongside Chevron, in 2018.

Kosmos will try again in 2020. “The Walker prospect, which we are currently maturing for drilling on the eastern side of Suriname Block 42 is analogous to Ranger [ExxonMobil’s discovery in Stabroek],” Tracey Henderson, senior vice president of exploration at Kosmos, said on an earnings call in 2018. “It has a gross resource of around 250mn bl of oil, and this well will test a robust structural trap similar to Ranger.” 

Source: Petroleum Economist
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