Pantheon Resources (LON: PANR) shares are down 14% so far this morning on the announcement that drilling on that North Slope in Alaska is not going as shareholders would wish. To call the Shelf Margin Deltaic (”SMD”) results a dry hole would be a little too strong but there’s no great evidence of recoverable oil at that drilling. This is not, of course, a good result for a company drilling for oil.
The specific results are that after having drilled the SMD and also fracked the well there was some recovery of drilling fluids and small amounts of light and high-quality oil. The conclusion reached was that there’s some blockage preventing reservoir fluids – the actual thing being looked for – from entering the borehole.
Attention is therefore being switched over to the more attractive Theta West prospect.
This is not, obviously, the end of the process either for this specific site or for the company as a whole. The prospecting area includes other attractive sites to explore and that’s exactly what Pantheon is doing. The North Slope is known to host attractive oil deposits after all. This is an area that has been producing high volumes for decades. The question is whether there’re useful amounts in this specific section of it.
The strategy being used is a sensible one of course. As with any form of mineral exploration or exploitation, technology moves on. We get better at the geology of where the target mineral might be, we get better at extracting from reservoirs we can identify. So, that useful strategy is to go back over old areas where we know there was some of our target mineral at some point and re-explore using the updated tech. It’s possible that we might find what wasn’t found before. Or perhaps now we can extract what could not be extracted before.
This being exactly what Pantheon Resources is doing there on the North Slope. We do know that there is oil there. Not just because of the other operations, but we know there is where the current drilling is being tried. The question though is is there enough to make trying to extract worthwhile?
The answer, so far at least, on SMD is no, possibly not. This is, as the very use of the word “explore” would indicate, something that does happen. The next steps are to do exactly as Pantheon is doing. Move the equipment to utilise the drilling season and have a look at the next prospect. Also, work through the SMD results to see if the “blockage” can be identified and perhaps solved.
While all would prefer that the SMD rilling campaign had hit a gusher, or at least proven an economic reserve, this isn’t always going to happen. What matters to Pantheon over the medium term is the success or not of the overall campaign, not the results from the one single well.
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Tim Worstall is a freelance writer specialising in economics and the financial markets.