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 Corp, Armstrong Oil and Gas, Buccaneer Energy, Great Bear, Escopeta 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.