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  • Alaska Governor Parnell’s Plan Has Brought Apache and Repsol to Alaska; World Energy Thinks Many Others Will Soon Follow.
     
     

    Recently Goldman Sachs published a report saying crude prices could average $150 to $200 per barrel within the next two years. Meanwhile Alaska, which used to be the largest producer of oil in the United States, has seen steady decline. The State basically has two historically producing basins, the North Slope and the Cook Inlet. However, the North Slope has gone from producing around 2 million barrels of oil a day to roughly 600,000 a day. Similarly, the Cook Inlet has gone from producing 200,000 barrels a day to only 10,000 a day. This reduced production threatens to shut down the infrastructure and cut the lifeblood of the oil revenues the state currently enjoys.

    “There are still plays in the 300 million, 400 million or 500 million to a billion-plus size — they’re still out there, but they’re almost all stratigraphic”

    Because of this, Governor Parnell has worked very hard with the State Legislature to pass significant tax rebates and incentives to increase production in the state and is working with Senator Stevens and others to lower north slope production taxes and make Alaska our nation’s number 1 producer, yet again. This is timely, especially if you read the recently published“Fortune Hunt – Alaska”, a Petroleum News publication focusing on the opportunity for wealth that Alaska’s resources provide. Inside that publication we found some choice quotes that show opportunity abounds within the State.

    On the Cook Inlet:

    “…the Cook Inlet basin has produced about 1.4 billion barrels of oil and 10 trillion cubic feet of natural gas, but U.S. Geological Survey scientists have theorized that only 4 percent of the petroleum that could have been generated by the basin’s source rocks has ever been found.” (Page 15 of “Fortune Hunt – Alaska”)

    And on page 74, “To encourage exploration and development, the State of Alaska offers Cook Inlet oil and gas producers one of the most favorable tax and royalty environments in the United States, with total rates at or below every other major producing state.”

    “Plus, the state pays up to 40 percent of exploration costs. And production tax increases and decreases with oil prices and the level of investment; in other words, the more you invest, the less tax you pay. And there is a credit for capital investments, plus a 25 percent credit for net losses.”

    “On top of that, in 2010 Alaska lawmakers passed a bill with a $25 million tax incentive for the first offshore Cook Inlet well drilled by a jack-up into the Mesozoic. Subsequent wells get $22.5 million and $20 million if they use the same rig.”

    On the North Slope:

    “There are still plays in the 300 million, 400 million or 500 million to a billion-plus size — they’re still out there, but they’re almost all stratigraphic,” Mark Myers, former director of Alaska’s Division of Oil and Gas and the U.S. Geological Survey.” (Page 34)

    On page 35 of the publication we find this gem: “There is, in fact, a known oil field being evaluated by Renaissance Alaska at Umiat, about halfway down the eastern side of NPR-A on the northern side of the foothills….The prospect has 37 degree gravity oil, and targets formations between 200 feet and 1,500 feet, with the upper portion of reservoir in permafrost.”

    “The unexpectedly prolific sands at Alpine, discovered in 1994 and put online in 2000, opened the door to extending a new Beaufortian play beyond the Prudhoe-Kuparuk infrastructure. The concept is to progressively move farther and farther west into NPR-A opening up new oil pools as access to the pipeline infrastructure becomes available.”

    “The State of Alaska takes seriously our responsibilities to our lease holders. We encourage exploration through innovative new programs paying as much as 40 percent of exploration costs for qualified applicants….” (Page 48)

    On page 45, the publication even covers some of the other quality opportunities near ANWR.

    Stinson, operated by Donkel Oil & Gas, directly east of Point Thomson, north of ANWR 1002 area in Camden Bay surrounding ARCO Stinson No. 1 discovery well. Per the operator, the Tertiary horizon contains 150 million barrels of oil (probable recoverable reserves) within a single 100-foot thick sand (P90: 80 MMBO; P10: 420 MMBO).”

    Donkel is known as a long time independent oil and gas company, working in Alaska since the early 80s, and recently making headlines by selling their Cook Inlet acreage to Apache Oil and Gas last year. Donkel Oil and Gas (NYSEARCA:DOG) just applied to create a Unit over its East Point Thompson play. The (DOG) Unit has 21,354 acres and contains the Stinson well referenced in the publication. On page 43 Donkel Oil and Gas offers the entire block for sale. Recently several articles have been published which cite a USGS study that there are 10.3 billion barrels of oil available in and around ANWR. Lisa Murkowski & congressman Don Young have long been supporters of opening ANWR to exploration.

    Engineers estimate Stinson would have flowed at rates up to 800 BOPD, had the hole integrity been maintained. Additionally, the well flowed 17 million cubic feet of gas per day.

    And the opportunities abound. Recently the CEO of ConocoPhillips had this to say about Alaska: “We want to be known and continue to be Alaska’s oil and gas company. We are willing to commit billions of dollars of investment, commit our technology and our people.”

    The President of Shell put it this way: “We believe Alaska has significant untapped potential and will play an increasingly important role in meeting the energy challenge in the future. It holds great opportunity that comes with great responsibility.”

    And the Independents are reacting to the atmosphere. Small companies like Donkel Oil and Gas have accumulated excellent acreage, while other companies like Brooks Range Petroleum CorpArmstrong Oil and GasBuccaneer EnergyGreat BearEscopeta and Savant are all seeking partners to develop their holdings. Companies getting in early, before the land rush, will enjoy this new “Alaska” and will see significant upside by developing these known resources.

    May 12 1:01 PM | Link | Comment!
  • World Energy Reports: Oil Companies Are Responding to Governor’s Parnell’s Plan to Create a Boom for Alaskan Resources.

    Donkel oil and gas LLC is one of many companies that are going after these undeveloped oil discoveries made by the Majors back when prices where lower and technology was not as advanced as it is today. On May 1 Petroleum News Alaska reported the proposed Donkel Oil and Gas (NYSEARCA:DOG) Unit has 21, 354 acres to develop containing the Arco Stinson Number 1 discovery well and if approved by the State of Alaska Donkel tells World Energy “more oil and gas could be flowing from this very large oil and gas discovery in the very near future. Also Exxon is planning to bring its giant oil and gas Point Thompson discovery on line, which is right next to the DOG Unit and the Stinson discovery well.


    As the price of oil remains near $100 per barrel, Governor Parnell, Senator Murkowski and Senator Begich have all been demanding to open up drilling in Alaska.  The Governor is sending an open invitation to the smaller oil companies that are looking to invest in Alaska, and a strong message to the Federal Government. Dan Donkel of Donkel Oil and Gas LLC says, “Alaska has the big oil fields America needs for the future to save our nation from economic ruin.”   

    These smaller companies include operators like Apache, Brooks Range Petroleum Corp, Armstrong Oil and Gas, Buccaneer Energy, Great Bear, Escopeta and Savant which are all developing resources in Alaska.  I am sure we will see all of them at the Pacific Section American Association of Petroleum Geologists event in Anchorage next week.

    With gasoline topping $4.00 per gallon in 13 states. President Obama recently suggested that we all need to buy smaller cars or “hybrid vans” to deal with this situation.   However, historically the answer to high prices is to announce more drilling here in the United States.  

    One solution would be to follow Governor Parnell’s plan to open Alaska’s Arctic National Wildlife Refuge (ANWR). This could potentially add 1 million barrels of new oil per day over the next ten years to help fill the Trans Alaska Pipeline, while creating lower taxes and adding incentives that will encourage oil companies to come back to Alaska with more risk capital and drill more wells.

    Today Alaska is sitting on unprecedented reserves of oil and natural gas waiting to be tapped. Recently, Governor Parnell has been pointing to the need to drill in the Outer Continental Shelf and around Anwar (not in ANWAR). Additionally, much more activity has been occurring around the Cook Inlet.
     
    Senator Lisa Murkowski has been calling on Congress and the EPA to allow development in Alaska to move forward, and with good reason. Recently several articles have been published which cite a USGS study that there are 10.3 billion barrels of oil available off the North Slope, for instance, the land with the old Stinson #1, drilled by Arco in 1990 flowed lots of oil and gas.   
     
    The Stinson well allowed a third-party engineering firm to assign 150 million barrels of probable reserves (420 million as a P10) to a single Base Eocene sand, while a deeper Base Tertiary sand flowed 51 API (very high quality) condensate to 37 API brown oil (Good Quality) from an impaired drill stem test, that engineers estimated would have flowed at rates up to 800 BOPD, had the hole integrity been maintained. Additionally, the well flowed 17 million cubic feet (NYSEMKT:MCF) of gas per day. According to Don Brizzolara, former Arco geologist, “it would seem very reasonable that from 1 to 4 TCF (trillion cubic feet) of gas are present with an average of around 2 TCF. The combined oil reserves of the Stinson Field may range from 200 to 800 million barrels of oil.”
     
    Donkel says that by developing this “DOG Unit” we will be able to help prove up some of estimated 10.1 billion barrels of oil in place that the USGS identified.  It may even be possible to develop some of the oil in ANWAR without ever stepping foot in the reserve by drilling horizontally from the DOG Unit.  Of course an aggressive development plan will need to be put in place to tap into this oil, but a recent visit to the Offshore Technology Conference in Houston shows that the industry has new procedures and safety recommendations in place, and are ready to deploy them offshore to insure that what happened in the Gulf of Mexico does not happen in Alaska.

    Alaska has always had the oil, and today they have the leadership to attract new oil and gas investment and the oil companies of the World are ready to “Discover” this resource. Donkel says, “We see a renewed Oil Boom coming to Alaska and it is happing now.”

    May 06 3:38 PM | Link | Comment!
  • World Energy Sees Real Change Coming to The Cook Inlet of Alaska

    Houston-based and Australian Securities Exchange listed Buccaneer Energy (NYSE:BCC) is bringing a drilling rig to the Cook Inlet of Alaska.  CEO, Curtis Burton, is known for making the impossible happen.  In the 90’s he led a team to create DeepStar for the industry and unlocked the secrets of deepwater drilling.  Today Curtis leads another team with Dean Gallegos, Clint Wainwright, Andy Rike, Jim Watt and Mark Landt – all long-term industry veterans who know the business.  Together they are poised to make history yet again.

     

    The Cook Inlet of Alaska is in danger of running short on natural gas.  According to the South Central Alaska Natural Gas Study, 95% of the gas in the Cook Inlet was found before 1970.  Currently proven developed reserves are forecasted to only meet demand until 2012.  Until now the only solution appeared to be curtailing industrial use and importing LNG.  However the Inlet is home to an estimated 13-15 TCF of gas and 230 million barrels of oil bypassed by the majors as they moved on to the North Slope of Alaska (Based on published studies by the State of Alaska). 

     

    Buccaneer Energy entered the Inlet through the purchase of Stellar Oil & Gas in April 2010.  Stellar held in excess of 50,000 acres of leased inventory in both land and offshore tracks.  Buccaneer has added an additional 25,000 acres over the past year.  To tap the potential of the Inlet Buccaneer needed a Jack up drilling rig.  However, after evaluating the attendant issues they concluded that lease of a rig was impractical, but the purchase of one would make excellent business sense and would unlock the Inlet’s opportunities for a multitude of operators if the rig were to be chosen for a broad drilling footprint and placed in a custom built “drilling in Alaska only” company.  Burton and others of his team went to work to make this long shot (there hasn’t been a jack-up in Alaska in over 16 years) a reality.

     

    With the creation of Kenai Offshore Ventures (KOV), a partnership with Alaska Industrial Development and Export Authority (AIDEA) and Ezion Holdings Ltd  of Singapore, Buccaneer was able to pull together a collation of industry, capital and government partners to identify, purchase and bring a Letourneau 116c rig to the Inlet.  On Friday the board of AIDEA cleared the way for the organization to invest $30 million in KOV.

     

    “Today’s Board action is the culmination of many months of hard work by a dedicated team of people devoted to the successful completion of thorough due diligence and complex negotiations for the benefit of Alaskans,” said AIDEA Board Chairman Mike Felix. “We are very pleased to take this important step with Buccaneer, and to move forward with much-needed drilling in the Cook Inlet.”

     

    It is estimated that KOV will create some 500 jobs and possibly avert the shortage of gas coming in 2012.  After others had tried for over 16 years, it took Curtis Burton and Buccaneer Energy only a few months to make this a reality.

     

    With the drilling season well underway in the Cook Inlet, KOV will need to move quickly to refurbish and transport the rig to the Inlet in order to be able to drill this year.

     

    The deal requires Buccaneer and Ezion to:

    o   Contribute at least $5 million to the project;

    o   Secure a term loan for the remaining $50 million needed to fund the $85     million drilling venture; and

    o   Contract to buy a jack-up rig from Transocean Limited and contract to upgrade the rig for use in Alaska.

     

    KOV will also have to put a management structure in place to operate the rig, and the deal is also conditioned on Buccaneer committing to drill four wells in the Cook Inlet with the rig.  Buccaneer will have to obtain the permits for its drilling program before the end of August.  Of course KOV will also contract the rig to other operators in the region insuring that the rig has enough work to support it for the duration of the 6 year agreement with AIDEA.

     

    “There are many “to do list items” and challenges, but we are confident that we can meet or exceed expectations set for KOV and our partners” said Burton.

     

    All in, Ezion estimates the value of the deal to be $109 million to be realized over the five year period.

    Apr 06 4:10 PM | Link | Comment!
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