Oil Search says takeover bid and CEO departure won’t change goal for decision on big North Slope project this year

Oil Search, the Papua, New Guinea company developing a major oil prospect on the North Slope, has become embroiled in a takeover effort by an Australian oil company and the sudden departure of its CEO.

However, the events made public earlier this week won’t change the company’s plan for a Final Investment Decision by year-end for its Pikka project near the Colville River on the North Slope.

Oil Search chief financial officer Peter Fredricson has been named acting CEO after former CEO Keiran Wulff resigned for medical and other reasons.

Pikka, if developed, would be a multi-billlion-dollar new project.

“We are continuing to advance Pikka toward a final investment decision targeted for later this year and first oil targeted for 2025,” company spokesperson Amy Burnett said Wednesday in an email.

A bid to buy Oil Search by Santos, revealed by the company in an investors’ call Monday, has been rejected but the companies are continuing to talk.

Oil Search and its partner in Pikka, Repsol, have been searching for an investor in Pikka but Santos’ initial proposal was to buy 100 percent of Oil Search because of the company’s other assets including holdings in an ExxonMobil-led LNG project in Papua New Guinea, according to sources familiar with the offer.

An initial phase of Pikka, estimated at $3 billion, would produce 80,000 b/d with production doubled as the project is fully developed, Oil Search has said in briefings.

Oil Search may adjust the schedule for the FID if conditions require, Burnett said. “This is a high quality asset and if there is not a clear value proposition for shareholders or market conditions don’t support an FID decision we will adjust accordingly,” she said.

“We are assessing a range of funding options in parallel with a potential selldown to give Oil Search flexibility to make FID later this year,” Burnett said.

Pikka is one of two larger North Slope projects that would substantially boost production from the slope if they go forward. The other project is ConocoPhillips’ Willow development in the federally-owned National Petroleum Reserve-Alaska, which is in final stages of engineering with an FID also planned late in 2021, although there is also litigation on Willow brought by conservation groups.

Pikka is on state-owned lands near the existing Alpine field west of Prudhoe Bay and the Trans Alaska Pipeline System. The company has done extensive drilling at tfirm resources and has completed gravel roads and drilling pads to support development.

Pikka is one of a series of discoveries being made by companies including ConocoPhillips in the Nanushuk, a large oil-bearing geologic formation that extends across wide areas of the western North Slope.

The Nanushuk has long been known but it is only recently that companies have developed the technology to profitably extract oil.

Alaskan officials say the two projects could boost throughput through the Trans Alaska Pipeline System from its current approximate 480,000 b/d to over 600,000 b/d over the next few years.

In another development for Oil Search, CEO Keiran Wulff resigned for medical reasons and because of internal complaints made by a whistleblower, Oil Search chairman Rick Lee said in the call to investors. Lee would not comment further.

Lee said the board entered into discussions with Wulff following the receipt of concerns and complaints about his behaviour, noting he “behaved in a manner inconsistent with the standards expected.”