Exp 2015

The
Explorers
Oil & gas
companies
investing in
Alaska’s future
The Explorers, an annual

publication from Petroleum News
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THE EXPLORERS 3
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4 THE EXPLORERS
WELCOME
The slow pace of Alaska allows
some work to continue
winter. Usibelli drilled its first exploration The exploration license program contin-
T he Arctic slows decision making. It

can be harder to start projects in the
far north but harder to stop them as well.
well in 2014. ASRC Exploration is prepar-
ing to drill its first solo exploration well
after years of administrative delays. Miller
ues to attract companies interested in fron-
tiers.
—Eric Lidji
The big question at the moment is how is focusing on low-risk developments
$50 per barrel oil will impact resource de- while it considers future exploration. Contact Eric Lidji at ericlidji@mac.com
velopment across Alaska. The short an-
It’ts
It
tt’’s ti
time
swer: It’s too soon to tell.
Oil prices fell over the second half of
2014, when most companies were finaliz-
ing their exploration activities for the
coming winter. As such, this edition of
The Explorers includes companies who
chose to conduct risky, speculative or pio-
neering exploration and companies who
TO PUT AN END TO YOUR SEVERE BACK PAIN
decided to shy away from such unpre-
dictable work for time being. If oil prices
stay low this year, the next issue of The
Explorers may tell a different story.
MINIMA
ALLLY INVVASIVE
A RGERY
...this edition of The Explorers includes
companies who chose to conduct risky,
speculative or pioneering exploration
and companies who decided to shy
away from such unpredictable work for
time being.
Again
The Explorers profiles companies who ACS, FAANS

either drilled an exploration well or com-
missioned a seismic survey this year or 500
over the two previous years. Applying that B360
criteria depends upon our knowledge of
activities and our classification of those ac-
tivities. If we missed any companies that m
deserved to be included this year, the
omission was unintentional.
AIX and Caelus were included on the
activities of previous operators. Cono-
coPhillips and Hilcorp conducted ap-
praisal or exploration work while
developing existing units.
BlueCrest, Brooks Range Petroleum and
Furie are evaluating near-term exploration BACK TO WORK IN
activities while working immediately to
bring new units into production. Apache, JUST TWO WEEKS
Doyon, Linc, Royale and Shell are deciding
whether and how to continue previous ex-
ploration work. Great Bear, NordAq and
Repsol all conducted traditional explo-
ration activities on the North Slope this Anchorage • W
Wasilla
asilla • Fairbanks • Soldotna
THE EXPLORERS 5
CONTENTS
50
The Explorers
Released June 7, 2015
THE EXPLORERS is a special

annual supplement to Petroleum
News, which is owned by
Petroleum Newspapers
of Alaska LLC.
MAILING ADDRESS:
PO Box 231647
Anchorage, AK 99523-1647
Phone: (907) 522-9469
Fax: (907) 522-9583
Email:
circulation@PetroleumNews.com
Web page:
www.PetroleumNews.com
The Explorers
To order additional copies
of this special publication,
12 AIX 36 ConocoPhillips 67 Miller Energy
contact Heather Yates
at hyates@petroleumnews.com 14 Apache 47 Doyon 70 NordAq
Cover photos courtesy
Judy Patrick Photography
18 ASRC 50 Furie 73 Repsol
Printed by Journal Graphics,
21 BlueCrest 55 Great Bear 76 Royale Energy
Portland, Oregon
27 Brooks Range/AVCG 58 Hilcorp 78 Shell
33 Caelus Energy 63 Linc Energy 81 Usibelli
Better Products. Better Service. Better Results.

Alaska’s Premier Leasing Company. DELTA LEASING, LLC.
Anchorage: 907.771.1300 • Prudhoe Bay: 907.659.9056 • www.deltaleasing.com
6 THE EXPLORERS
Ad Index 73
22 Advertisers MARTI REEVE
SPECIAL PUBLICATIONS DIRECTOR
Guest Editorial KAY CASHMAN

PUBLISHER & EXECUTIVE EDITOR
8 Entering new, KRISTEN NELSON

EDITOR-IN-CHIEF
exciting period
ERIC LIDJI
CONTRIBUTING WRITER
Welcome STEVEN MERRITT
5 The slow pace

PRODUCTION DIRECTOR
MAPMAKERS ALASKA
of Alaska allows CARTOGRAPHY
some work
to continue MARY MACK
CHIEF FINANCIAL OFFICER
Maps SUSAN CRANE

ADVERTISING DIRECTOR
40 Chukchi Sea BONNIE YONKER
ADVERTISING SPECIALIST
41 Alaska Energy Overview RENEE GARBUTT
42 North Slope & Beaufort Sea CIRCULATION MANAGER
TOM KEARNEY
44 Cook Inlet basin ADVERTISING DESIGN
HEATHER YATES
44
Licensing BOOKKEEPER
JUDY PATRICK
10 Exploration program continues to draw applications CONTRACT PHOTOGRAPHER
What’s Up?
The big news around here – ASRC Energy Services
Marine Support is now providing marine services in
the Cook Inlet. Our newly refurbished rig tenders
Dock.
dock is fully equipped to deliver a wide range
of specialized services to the Kenai Peninsula’s
oil and gas industry. Only one company puts
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Engineering l Fabrication & Construction l Pipeline Construction l Marine Services
Operations & Maintenance l Response Operations l Quality, Health, Safety, Environmental & Training
Regulatory & Technical Services l Exploration, Drilling Support & Geosciences l Bakken Support
THE EXPLORERS 7
GUEST EDITORIAL
Entering new, exciting period
Mark Myers: Activity continues with low prices; surge in Cook Inlet drilling,
North Slope exploration; gas line work ongoing
By MARK MYERS period of development in our oil and gas basins.
Commissioner, Alaska Department of Natural Resources As the incoming commissioner for the Alaska Depart-
ment of Natural Resources, I’m excited to see so much of
A laska’s oil and gas resource basins are entering a

new and exciting period.
Assuming that Shell receives the necessary permits,
our untapped oil and gas potential — some of it previ-
ously thought to be non-economic or non-producible —
receiving attention from explorers and investors around
a significant round of exploration drilling is likely to the world.
commence on the Arctic Outer Continental Shelf this There are many vivid examples of this, including:
summer. *Between January 2013 and March 2015, 59 new wells
MARK MYERS
In addition, a variety of companies — from small in- were completed in Cook Inlet by seven operators.
dependents to large companies both familiar and new to Alaska Twenty-five of these were completed as gas wells, aver-
— are forging ahead with significant projects in new fields and aging nearly one gas well per month during this time frame.
legacy fields. *In the past three years, Repsol has drilled 10 oil exploration
We see an upsurge in exploration and development activity wells on lands west of Kuparuk, and has recently applied for a
under way on the North Slope as well as in Cook Inlet. large unit to allow it to move forward with developing multiple
With oil prices in a sustained slump, it is gratifying to see reservoirs.
these projects continuing to move forward and companies ap- *This winter, following a royalty modification, Caelus Energy
plying for new production units on the North Slope and Cook sanctioned its Nuna project, committing significant capital re-
Inlet. From a geologic and engineering standpoint, the work cur- sources to bring this low-permeability reservoir into develop-
rently under way in Alaska puts us in a new and more complex
continued on page 10
Keeping you covered.

To advertise in Petroleum News, please contact Susan Crane at 907-770-5592, Raylene Combs at 509-290-5903,
Renee Garbutt at 907-522-9469, or Bonnie Yonker at 425-483-9705.
8 THE EXPLORERS
THE TEAM THAT
DELIVERS
Safety Health Environment Quality
(907) 562-5303 | akfrontier.com

THE EXPLORERS 9
Exploration program continues
to draw applications
State currently managing 5 licenses in the Interior and Southcentral region; has 2 pending
By ERIC LIDJI sona Lake area to Ahtna Inc., the Alaska Native corporation for the
For Petroleum News Glennallen region. The license covers 43,492 acres west of the com-
munity of Glennallen and requires a $415,000 work commitment.
E ven though all oil and natural gas production in Alaska occurs
either on the North Slope or in the Cook Inlet basin, the rest of
the state is known to contain hydrocarbons.
The license is in the Copper River basin, where previous explo-
ration companies have drilled as many as 11 wells. The most recent
explorer was the Texas-based independent Rutter and Wilbanks
That’s why the state of Alaska maintains an exploration license Corp., which discovered a natural gas reservoir between 2005 and
program, where operators can propose exploration activities in re- 2007 but eventually plugged and abandoned its well because of ge-
gions without regular lease sales. ological problems.
Every April, the Alaska Department of Natural Resources ac- “Our primary focus is to lower utility costs for most con-
cepts applications for exploration licenses over areas between sumers,” Ahtna Land and Resource Manager Joe Bovee told the
10,000 and 500,000 acres. The applicant proposes a geographic area Alaska Support Industry Alliance Meet Alaska conference in Janu-
as well as a work commitment and a term. The process allows ary 2014. The high cost of energy is believed to be the cause of a 10-
other companies to make competing bids, in an effort to get the 15 percent population decline in the region over the past few years,
best deal for the state. Bovee said.
There are currently five active and two pending exploration li- The corporation has reprocessed some 80 miles of existing 2-D
censes. seismic data and, in October 2014, commissioned Global Geophys-
Cook Inlet Energy LLC operates three licenses, which are dis- ical Services to conduct a 2-D seismic survey covering some 40
cussed in greater depth in the profile for Miller Energy Resources miles. Early analysis of the seismic is pointing toward a target on
LLC. They are the 62,909-acre Susitna Basin IV license active the crest of a geologic structure about 14 miles west of Glennallen,
through April 2021, the 45,764-acre Susitna Basin V license active according to Bovee, who has expressed a 60 to 70 percent likeli-
through April 2022 and the 168,581-acre Southwest Cook Inlet ac- hood of encountering natural gas.
tive through October 2018. The company is currently expecting to drill by early 2016, ac-
Usibelli Coal Mine Inc. operates the 204,883-acre Healy Basin li- cording to Bovee.
cense active through January 2021. The license is discussed in The Ahtna program is focusing on the Nelchina sands, which
greater detail in the profile of Usibelli. are a highly pressurized, porous and permeable gas-bearing sand-
The two pending licenses are in the Houston-Willow basin and stone in faulted blocks over an area of roughly 120 square miles.
North Nenana basins. The state is still considering the requests and Information from the existing seismic data suggests the potential
has yet to release the names of those applicants. for gas reservoirs between 4,000 feet and 12,000 feet in the explo-
Another shot at Glennallen ration area, Bovee said.
The remaining license is in the Interior region.
In December 2013, the state issued a five-year license in the Tol- Contact Eric Lidji at ericlidji@mac.com
MYERS continued from page 8 base for the benefit of Alaskans and investors.
The North Slope of Alaska has world-class oil and gas
ment. source rocks but a limited number of high-quality reservoirs.
Hydrocarbon resources that were passed over 30 years ago Much of the untapped resource potential is within “second-
are now being developed and produced. We see this with in- tier” conventional reservoirs with lower porosity and perme-
vestment in new exploration targets and new fields under de- ability. Even though these reservoirs may be of lower quality
velopment, as well as new drilling and development in the than those historically developed on the North Slope, the reser-
legacy fields. voir quality is significantly superior to that of shale resource
The technologies enabling Nuna include advanced applica- plays currently under development in the Lower 48.
tions of directional drilling, hydraulic fracturing, and well com- The combination of this huge untapped resource, new tech-
pletion design. nology and increased investment by many companies means
Furthermore, advances in technologies for seismic acquisi- that the future of the North Slope is bright.
tion processing and analysis are yielding better insight into Mega-projects — gas and offshore
reservoir and source rock properties, and have increased the We also see reason for optimism regarding two major explo-
success rate in exploring for and delineating these resources. ration prizes on the North Slope — our outer continental shelf
New oil associated with these activities increases our reserve
continued on next page
10 THE EXPLORERS
MYERS continued from page 10 tinue the robust dialog between all of the prospective portions of the basin.
negotiating parties and continue sharing With all of this work under way in
and North Slope gas. large amounts of technical information Alaska’s resource basins, I see a bright
A report recently delivered by the Na- needed to make critical decisions. future for explorers and the nation and
tional Petroleum Council to U.S. Secre- With large-scale gas commercializa- global energy markets that will benefit
tary of Energy Ernest Moniz recognized tion moving forward, it is important to from their innovation and hard work.
the important role that Alaska’s Arctic remember that the North Slope is blessed In closing, I’d like to remind all ex-
will play in securing domestic energy with much additional undiscovered and plorers and investors that the State of
supplies when the Lower 48 shale revo- unleased gas — notably in the North Alaska will hold its annual oil and gas
lution plays out. The NPC noted that the Slope Foothills and the National Petro- lease sale for Cook Inlet on May 6 and
U.S. Arctic Outer Continental Shelf is es- leum Reserve-Alaska. The U.S. Geologi- will hold its annual North Slope,
timated to have 48 billion barrels of oil- cal Survey estimates that Alaska’s Arctic Foothills, and Beaufort Sea areawide
equivalent, with more than 90 percent of has more than 200 trillion cubic feet of lease sales next fall.
this in less than 100 meters of water. De- undiscovered conventional natural gas. For more information on our lease
spite this vast resource potential, the only This offers significant opportunities for sales, please visit
U.S. Arctic OCS development to date is new entrants to acquire acreage in highly http://dog.dnr.alaska.gov.
the Northstar field, which straddles state
and federal waters.
It took 22 years to develop Northstar.
It also will take many years to advance
other major OCS oil targets — such as
Shell’s Chukchi Sea Burger prospect —
from exploration to development. But the
National Petroleum Council advises that
we should pursue this exploration now
because the energy supplies from Arctic
Alaska will sustain the United States
when Lower 48 production is projected
to be in decline.
The stakes are high and the prize is
great for renewed exploration in the
Alaska Helicopter Services
OCS. Based out of Merrill Field
But the same can be said for our ef-
forts in Alaska regarding large-scale nat-
ural gas commercialization. Unmatched
In the year ahead, Alaskans will be
closely watching the efforts by the State Capability
of Alaska and North Slope producers to
advance a large-scale North Slope gas
project.
Full range of
The gas at Prudhoe and Point Thom- equipment
son is a mega-resource that has yet to be
fully committed to development. Point for loads up
Thomson alone contains approximately
25 percent of the North Slope’s discov-
to 22,000 lbs.
ered, remaining gas.
Focusing on large-scale LNG exports,
the State of Alaska is negotiating with the
North Slope leaseholders and engaging
with Asian buyers to maximize the value
of the gas on State lands for many gener-
ations of Alaskans. Right now, the state is
pursuing the Alaska LNG Project as well
as taking a new look at a backup plan for
a gasline if the big project falters. Passenger service
My department is heavily engaged in also available
the Alaska LNG Project negotiations and
is seeking to make the best choices for
Alaskans regarding the management of
our gas resources.
The LNG project is now in pre-FEED.
Moving to FEED will require us to con- 1740 E. 5th Avenue, Anchorage, AK 99501 & (866) 931-4354 & www.helimaxaviation.com
THE EXPLORERS 11
AIX acquires Kenai Loop,
exploration plans unknown
Woodlands-based company acquired Buccaneer assets through
bankruptcy sale, currently operating production
By ERIC LIDJI quished certain prospects and ultimately filed for bankruptcy.
For Petroleum News At the time that Buccaneer filed for bankruptcy protection in
late May 2014, the Texas-based AIX Energy was its largest se-
T oward the end of 2014, AIX Energy LLC acquired nearly all
of the assets of the Australian-based independent Bucca-
neer Energy Ltd. in a bankruptcy auction.
cured creditor. AIX Energy had acquired the debt through a se-
ries of transactions over the previous year. An “official
committee of unsecured creditors” highlighted those transac-
The most valuable asset in the acquisition was the producing tions during the bankruptcy proceedings.
Kenai Loop gas field, northeast of the city of Kenai. Although In mid-2013, the venture capital firm Meridian Capital Inter-
AIX Energy has yet to publically announce any exploration national Fund acquired a 19.9 percent interest in Buccaneer, be-
plans for the field, Buccaneer had been advancing exploration coming the large stakeholder in the company. By early 2014,
and development projects simultaneously during its tenure as Buccaneer began selling off assets to balance its books. Around
operator of the onshore field. that time, a Meridian affiliate called Meridian Capital CIS took
Prior to the bankruptcy proceedings, Buccaneer had been over some Buccaneer debt operated by another company. On
among the most ambitious exploration companies in the Cook April 30, 2014, Meridian Capital CIS said it was transferring the
Inlet region. The company was actively pursuing exploration debt to AIX Energy, which subsequently became Buccaneer’s
programs at five prospects while developing the Kenai Loop largest secured creditor.
field. The portfolio ultimately proved to be too large for the AIX Energy LLC officially registered as a corporation in
small independent, and the company sold certain assets, relin-
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12 THE EXPLORERS
AIX continued from page 12 sets with a $44 million credit bid, which is to Kenai Loop production. In late 2014,
when a creditor offers its debt against AIX Energy signed a new deal to provide
Alaska on May 9, 2014, after having re- cash bids. an interruptible supply to Chugach Elec-
served the name “AIX Energy LLC” and AIX Energy currently leases some 1,048 tric Association Inc., totaling no more than
cancelled the reservation the day before, acres of state lands in the vicinity of the 300 million cubic feet.
according to the Division of Corporations, Kenai Loop field and operates four wells Whether AIX Energy intends to de-
Business and Professional Licensing. — Kenai Loop 1-1, Kenai Loop 1-2, Kenai velop Kenai Loop, explore the surround-
Because of those transactions, which Loop 1-3 and Kenai Loop 1-4, accord to ing area, sell the prospect or merely
preceded the bankruptcy filing on May state reports. In late 2014, the city of Kenai harvest its acquisition is unclear at the
31, 2014, the unsecured creditors wanted formally assigned a Buccaneer lease on moment. Throughout its seismic acquisi-
to know more about the relationship be- city property in the vicinity of Kenai Loop tion and exploration campaign, Buccaneer
tween Meridian, AIX Energy and Bucca- to AIX Energy. suggested that the Kenai Loop region
neer. “In order to accomplish indirectly Those wells are located on Alaska might contain additional gas-bearing in-
what it could not do directly, Meridian in- Mental Health Trust leases. tervals worthy of further investigation.
stalled AIX — a newly formed shell entity Through the acquisition, AIX Energy
comprised of individual oil and gas oper- also took over supply contracts pertaining Contact Eric Lidji at ericlidji@mac.com
ators with whom Meridian had long-
standing prior personal relationships —
ARCTIC STRONG
as a ‘straw-man’ lender to foreclose the
debtors’ assets,” the committee wrote in
July 2014.
In August, the two sides reached a set-
tlement, which required AIX Energy to
Arctic Knowledge. Global Experience.
create a trust that would be used to repay Combining nearly 40 years of Arctic knowledge with the unparalleled global
unsecured creditors as part of any liquida- experience of the Edison Chouest Offshore family of companies, Fairweather brings an
tion plan. unmatched level of service and safety to support onshore and offshore exploration and
production activities. Fairweather’s services are bolstered by the Deadhorse Aviation
In an October 2014 bankruptcy auction,
Center (DAC), a multi-modal aviation facility offering direct access to the airport,
AIX acquired nearly all of Buccaneer’s as-
Alaska road system and Arctic Ocean.
TMI? Remote medical and case management services

Full-service medical clinic, ambulance services and medevac
support at DAC
Logistics and expediting services centered on the
page Q&A: Giessel has ambitious plans,
Vo
ol. 20, No. 20 • www.Petr oleumNews.com A weekly oil & gas newspaper based in Anchorage, Alaska
sees plenty of work for interim
Weeek of May 17, 2015 • $2.50

40-plus-acre DAC industrial park
This week’s Mining News
E X P L O R AT I O N & P R O D U C T I O N
Shell plan approved Hub for manned and unmanned aviation services at DAC
w w w. M i n i n g N e w s N o r th . c o m
The weekly mining newspaper for Ala
page Tang

ge : Conggress moves
on definitioon of WOTUS
BOEM issues its conditional go ahead to planned Chukchi Sea exploration drilling
By ALAN BAILEY
Remote aviation and airstrip support, including
COUR TESY SHELL
ska and Canada's North

Week of May 17, 2015
NEWS NUGGETS E X P L O R AT I O N
Comppiled by Shane Lasley

Palmer doubles in size Petrrooleum News
FAA certification
Bok
kan REE resource gets an upg
rade Tough marrkets faill to sllow reso
e ouurce expanssion at SE Alaska VMS p
O
Ucore Rare Metals Inc. May 11 repor
upgrade and expansion of the mineral
ted a significant roojject
Dotson-Ridge deposit of its Bokan Mo
ized resources at the By SHANE LASLEY
n May 11 the Bureau of Ocean Energy
S LT D.
untain rare earths project Mining News

in Southeast Alaska. The deposit now
C O N S TA N T IN E M E TAL R E S O U R C E
contains an estiimated indicated resour

of 4.79 million metric tons averaging
percent (63.54 million pounds) total r
ce
0.6
are
W hile many of its peers are struggling
money to continue exploration a
promisiing mineral prospects a
to find
t the ir
nd deposits,
Management announced its conditional
earthh oxides, a roughly 63 percent Constantine Metal Resources Ltdd. ha
increase over the 2.94 million metric
of indicated resource included in a 20
estiimate. Additiionally, the deposit has
tons
13
forgge ahead with heftyy programs at i
zinc-rich Palmer project in Southeas
s managed to
ts copper- and
t Alaskka. This
approval of Shell’s plan to drill up to six exploration
includes C$7.13 million invested in
exploriing the
1.05 million metric tons of infferred
resource averaging 0.6 percent (13.96
million lbs.) TREO. About 39 percent
volcanogenic massive sulphide depo
Last year's program, funded by Dowa
Mining Co. Ltd., along withh drilling
sit in 2014.
Metals &
wells in the Chukchi Sea, starting this year. The
of JIM M MCKENZIE completed at
thhe TREO in bothh categgoriies are thhe h
er valued heavyy rare earthhs. “We’re pl
igh-
eased to announce thhis
Palmer in 2010 and 2013, have culm
percent expansiion of the resource, co
inated in a 97
mpared to the
company wants to search for oil in the Burger
Meteorological/oceanographic forecasting and marine

important resource upgrade as Ucore last time a calculatiion was comp
contiinues its progress leted for the
towardd production,” saiid Ucore Presiid
McKenzie. “T
ent and CEO Jim
This resource upgrade, together with o
advances in molecular recognition tec
ur recent
deposit in 2010.
The results of the resource estimate
by Constantine on May 11 outline
published
prospect, about 70 miles northwest of the Chukchi
hnology for refining s an inferred
applicatiions, makes for a compelling m
Bokan.”
ine-to-metal storyy at resource of 8.125 million metric to
1.41 percent (2
ns averaging
( 52.6 million pounds) copper, 5.2
percent (940.4 million lbs.) zinc, 0
5
coastal village of Wainwright.
a The BOEM approval
Insiders back US$1.5M Zazu f .32 grams per
inancing
Zazu Metals Corp. May 8 reported co
tranche of a US$1,497,800 million no
mpletiion of the final
n-bbrokered private place-
metric ton (83,600 ounces) gold and
million oz.) silver for Palmer.
“T
The resource estiimate significantly
31.7 g/t (8.3
increases
Drilling at Palmmer in 2014 cut copper- and z
m neralization at a 400-squa
re-m
inc-rich
meter conductive
is subject to several conditions, including Shell
thhe size of the deposit, highlighting t plate identified with downhole
ment financing. In a second tranche, Z
million common shares of thhe compan
azu sold more than 3.46
y at US20 cents each for
success of recent drill campaigns an
he tremendous
d thhe growing a Pacific Rim deep-sea port at Haine
geophysics.
obtaining all of the permits needed for its operations
gross proceeds of
US$692,800. Zebra
potentiial of thhe project,” said
President and CEO Garfield MacVei
Constantine Palmer would be well-situated to proviid
s, a mine at
e zinc and The drill ship Noble Discoverer
Holdings and Investments Zazu intendds to use to expansion in most areas with the t
gh. “IIt is open copper concentrates to Dowa’s st
hickest part of smelters in Japan.
ate-of-the-art
and the company complying with the requirements
mission support
S.a.r.l., a company con- proceeds
ceeds from the offfering f the deposit located at the current down
-dip limit of For its part, Constantine is benef
trolled by a trust settled by
thhe late Adolf H. Lundin,
purchased more than 2.16
for deevelopment
expenditures related to its
thhe South Wall Zone where miner
geophysics support potential for a h
per core wiithin a more extensive are
al zoning and Dowa’s vast VMS experiience and a
igh-ggrade cop- deal that is structured in a way that
itiing from
partnership
allows it to of the Marine Mammals Protection Act and the Sea,, recognizing the significant environmentall,
Lik zinc-llead-silver a of zinc-cop- complete multimillion-dollar explo
ration pro-
million of thhese shares.
Zebra, whhich previiously
owned or controlled
project in Northwest
Alask
laska and general
per-barite mineralizatiion.”
Constantiine and Dowa are contiinuin
this growthh potential wiith a US$5 mil
grams, while avoiding a significant
g to explore selling shares in a market thhat has been
lion program junior mining companies.
dilutiion from
unkind to Endangered Species Act. social and ecological resources in the region and
8,860,280 Zazu shhares, working capital purposes. budgeted for this year.
owns roughly 19.9 percent
of the company’s issued and outstand
ing shares upon comple-
Good deal
“It has been very refreshing to be ab
near 100 percent of our efforts at
building thhe asset at Palmer, and avo
le to focus
growing and We have taken a thoughtful approach to careful-
“W establishing high standards for the protection of this
tion of the offering. Zazu Chairman an Most of the new resource re id thhe distrac-
d CEO Gil Atzmon ported by tion of constantly chasin
g financings, which in thhis
bought 1 million of thhe shares offered
Atzmon, which previo
in the second tranche.
Constantine has been added since D
a funding partner at Palmer in 2013.
owa joined as market has become a
Herculean task,” Green said. ly considering potential exploration in the Chukchi
i usly owned or controlled 5,789,500
shares, owns roughly 12.3 percent of
outstanding shares upon completion o
thhe company’s issued and
f the offering. Zazu
Zazu Accordiing to an agreement inke
Dowa and Constantine in February o
As part of the agreement, Constanti
d between annual cash paym
f thhat year, thhe over four years. Thi
ne receives
ments totaling US$1.25 million
s, along withh any other optiion
see SHELLL PLAN page 19
intends to use proceeds from thhe offer Tokyo-based smelting and mining
ing for development company can payments and man
expenditures related to its Lik zinc-lea earn a 49 percent stake in Palmer agement fees received, has
d-silver project in by investiing allowed thhe company
Northhwest Alaska and general workin US$22 million in the VMS project ove to maintain a healthy bank
g capital purposes. r a four-year account.
span.
Rup
ptured line spills tailing “W
We are currently cash-flow positive,
Award-winning regulatory and academic environmental

gs at Pogo At the tiime, some analysts felt that C whhich is a
GOVERNMENT
onstantiine bizarre and priiviileged p
was givin i g up too large a portion of thhe P osiition to be in,” observed
Sumitomo Metal Mining Pogo almer Green.
May 7 reported to Alaska project for thhe money. Following
Th
he 8-iinch line two years of At thhe end of January, thhe com
Department of Enviironmental resource expansion in tough equity pany had
delivers paste backfill, markets, how- C$636,135 in cash a
ever, the deal has worked out well fo nd its working capital totaled
Conservatiion thhat a ruptured line r both partiies. C$664,811.
Notley rattles industry

a mixture of tailinggs “W We felt from the beginning the scale
spilled roughly 90,000 gallons of of invest-
paste backfill at thhe Pogo gold
and cement, into the ment Dowa is making to earn 49
percent would
Continued expansion
mine in Interior Alaska. The 8- undderground mine for give us a good chance to establish
a resource at Over the previo i us two ye
y ars, Dowa has invested
dispossal. Palmer withh potential for min
inch line delivers paste backfill, a e via i bilityy,” roughly US$10 million in advancing the VMS
Constantine Vice President of Explo
mixture of tailings and cement, ratiion Darwiin deposit and has agreed to invest another US$5 mil-
into the undergground mine for disposa Green told Mining News. lion in 2015.
l. Once underground, thhe Dowa, whhich got its start from mini
concrete created from thhe taiilings fills ng Kuroko This workk is primarily targeting ex
mined-out areas, proviid- deposiits in northern Japan, has m pansion of
ing support for contiinued mining. The
backfill materiial is ore than 120 Glacier Creek, a region of thhe project that consists
years of experience exploring for
repported to contain 1-3 parts-pper-milli
on cyanide but is ren- , mining and of five inter-related subzones of massive sulfide
smelting ore from VMS deposits li
deredd inert by thhe high pH of the conc
rete mixture. Once hard- ke thhe one at mineralization – RW East, RW We W st, and South
Palmer. This makes the Southheast A
science and research studies

ened, the spilled tailings are being rem
oved wiithh heavyy equip- laska project Wall zones 1, 2 and 3.
ment and hand tools. an ideal fit for the Tokyo-bbased com The Southh Wall zones are parallel laye
pany’s expert- rs of near-
ise. ly vertiical VMS mineralization. At th
Additiionally, being located only 33
miles from see PALM
e upper extent
MER DOUBLES page 10
New Alberta premier ponders royalty
o review
w, chooses pipeline
p winners, losers
Tough markets fail to slow resource expansion at Southeast
By GARY PARK trouble
Alaska’s Palmer VMS project. More in North of 60 Mining, page 9.
For Petrrooleum News Her campaign promise of a royalty
review has the industry flailing in all
Thumbs down to LNG offer; First
Nations has salmon concerns C anada’s Calgary-based petroleum
industry is foaming at the mouth
over the stunning election of a left-of-
directions, unaccustomed to not getting
its way with the Alberta government in
the 65 years since the province entered Climate/ice studies, seasonal observations and forecasting
Chances of a breakthrough in relationships between LNG center New Democratic Party govern- the oil-producing age.
proponents and British Columbia First Nations have been ment in Alberta, while incoming Premier During the 44 years of Progressive
snuffffed out almost as fast as they surfaced. Rachel Notley is trying to tiptoe between Conservative administrations that ended
May 5, the industry was able to wield a
Remote sensing and surveys

A small aboriginal community in the province’s northwest introducing a new style of government RACHEL NOTLEY
unanimously spurned an offffer of C$1.15 billion in cash and and accepting the reality that energy con- club over the government, threatening
5,400 acres of land in return for endorsing the Petronas-led tributes 25 percent of her province’s gross domes- and, occasionally even delivering on those threats,
Pacific NorthW West
e LNG project. tic product. to withdraw billions of dollars in capital invest-
Other members of the Lax Kw’alaams nation living in If she is unable to pull offf that high-wire act,
Prince Rupert and Vaancouver have yet to hold their votes Alberta could find itself in even deeper economic see NOTLLEEYY ERA page 15
Drilling and production support, rig move coordination

ahead of a May 12 membership meeting in Vancouver.
It took only a few days from the initial cash-and-land offffer UTILITIES
for 180 members off Lax Kw’alaams living in the Port
see LNG OFFER page 14

MEA moves to new plant
BP challenging Oliktok rates;
issue over expected gas volumes
BP Exploration (Alaska) Inc. is challenging a rate increase on
Utility has own power supply after transition into new gas-fueled Eklutna plant
By ALAN BAILEY
and logistics
Mainly because of the cost of the gas
Health, safety and environment support

the Oliktok Pipeline. Petrrooleum News
The North Slope producer wants state regulators to investigate supply for the Eklutna plant, Matanuska
Electrric customers will see rate increases
the proposed increase, which BP called “unsupported, unjust and
unreasonable.” The changes propose a more than six-fold
increase in the rate to ship natural gas through the pipeline
M ay 1 was something of a red-letter day for
power utility Matanuska Electric
Association, as the utility finally switched over to
as a consequence
liin
ce of the plant com
comiin
ne, the utiliitty has said.
ng on
between the Prudhoe Bay unit and the Kuparuk River unit. supplying its own electricity from its new power
According to BP P, owner Oliktok Pipeline Co. assumed “unrealis-
tically low” throughput on the pipeline and may have failed to
accurately calculate costs that have already been recovered
through earlier shipping fees.
“There may be other reasons why the dramatic increases in the
plant at Eklutna, northeast of Anchorage.
After several years of planning, design and con-
struction, the Eklutna plant actually started to ramp
up its operations in December, when the first of its
Petroleum News.
Delay in startup
The electric utility had originally planned on a
Equipment and building rentals for remote sites
10 massive Wartsila reciprocating engines fired up.
revised rates are not just and reasonable which will become full startup of the power plant at the end of 2014,
By Jan. 31 four of the engines became commer-
apparent upon investigation,” attorneys for BP wrote to the
see OLIKTOK RAATES
T page 18
cially available, with all 10 engines then being
operational on March 27, Julie Estey y, Matanuska
Electric’s director of public relations, has told
the time at which a previous arrangement expired,
under which the utility had been purchasing much
see MEA PLANT page 20

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THE EXPLORERS 13
Apache eyeing long game
in Cook Inlet exploration
Houston company has been resuming seismic after delays,
but corporate strategy favors other regions
By ERIC LIDJI
For Petroleum News NAME OF COMPANY: Apache Corp.
COMPANY HEADQUARTERS:
A pache Corp. started its Alaska tenure at full speed but has
since decelerated.
The Houston-based independent came to Alaska in mid-2010
Houston, Texas
ALASKA OFFICE: 510 L St., Ste. 310, Anchorage, AK 99501
TOP ALASKA EXECUTIVE: John Hendrix
after months of speculation about its eminent TELEPHONE: 907-272-2722
JUDY PATRICK
arrival, quickly proposed a major campaign to COMPANY WEBSITE: www.apachecorp.com
revitalize oil exploration activities throughout
the Cook Inlet basin and just as quickly slowed
program to conduct offshore seismic activities in the upper Cook
those efforts as a response to regulatory delays
Inlet through February 2020. Then, in December, the company
and weaker-than-expected results from explo-
began permitting construction for three gravel pads for exploration
ration drilling.
drilling and associated access roads on Native land within the
Three incidents from 2014 suggest the com-
refuge.
pany remains interested in Cook Inlet.
“Apache is applying for the necessary permits needed to allow
In February, Apache resumed a 3-D seismic JOHN HENDRIX
for exploration of oil and gas,” Apache Alaska spokeswoman Lisa
program in the Kenai National Wildlife Refuge.
In August, the company applied for federal approval of a five-year
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THE EXPLORERS 15
APACHE continued from page 14 2014 event on North American activities, focusing on Canada,
Oklahoma, Texas and the Gulf Coast. But executives referenced
Parker told Petroleum News by email at the time. “While no deci-
three unnamed “undercover plays” budgeted for exploration work
sions have been made it is critical to have all the permits in place.”
in 2015. Alaska remained absent from company updates in Febru-
Whether such cautious optimism can survive lower oil prices
ary and March 2015.
remains to be seen.
In January 2015, Apache replaced its long time Chief Executive Rumors first
Officer G. Steven Ferris, who had been a vocal supporter of the op-
portunities his company had been pursuing in Alaska, and its When Apache representatives attended a state-sponsored con-
Chief Financial Officer Alfonso Leon. The new CEO is John Christ- ference in Anchorage and formed an Alaska subsidiary in early
mann, who the company had recently hired to oversee develop- 2010, a wave of optimism crested in the oil patch.
ment of its North American assets, particularly unconventional That’s not just because Apache is one of the largest oil compa-
opportunities. The new CFO is Stephen Riney, who had previously nies in America.
held a similar position for BP’s exploration and production seg- It’s because the company had spent some $10 billion over the
ment. previous decade acquiring prospects around the world with an eye
The shake-up came after Apache, at the urging of investors, sold toward extending the life of mature oil fields.
off some $6 billion in assets over 2014 to narrow its focus to uncon- With Alaska in its fifth decade of oil development and its third
ventional plays in the United States and Canada. Some felt that decade of declining oil production, the idea of a company focused
Apache was reluctant to make the change, believing that its inter- on rejuvenating old fields captured the imagination. At several
national holdings generated cash flow that supported North Amer- points in 2010, major news outlets reported that BP was in talks to
ican investments. sell the Prudhoe Bay field to Apache as part of a larger divestment
In November 2014, in response to declining oil prices, Apache campaign.
announced a $4 billion budget for its onshore operations in North That didn’t happen.
American in 2015, down from $5.4 billion for the segment in 2014. Later in the year, rumor had it that Apache wanted to buy the
Some analysts believed the company would spend more than its Cook Inlet assets of Chevron. Ultimately, Chevron sold those assets
budget. Those predications, though, came when oil prices were to the independent company Hilcorp.
above $70 per barrel. An Apache executive told the Houston Finally, in late July 2010, Apache arrived. The company acquired
Chronicle that the company would be “comfortable … even all the 196,524 acres from Samuel H. Cade, Daniel K. Donkel and three
way down to $70.” By January, prices had fallen below $50 per bar- other independent investors. The acreage was scattered across the
rel. Cook Inlet basin, and included onshore and offshore tracts.
Apache made no explicit mention of Alaska in a November
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THE EXPLORERS 17
ASRC Exploration near spudding
first operated well
Exploration arm of Arctic Slope Regional Corp. has spent a decade learning
and permitting across North Slope
By ERIC LIDJI
For Petroleum News NAME OF COMPANY: Arctic Slope
Regional Corp.
A little more than a decade ago, Arctic Slope Regional Corp.

decided to expand the scope of its resource-development
business to include oil and gas exploration and production.
COMPANY HEADQUARTERS: P.O.
Box 129, Barrow, Alaska 99723
TOP ALASKA EXECUTIVE: Rex A. Rock, Sr., president and CEO
So the Alaska Native corporation for the North Slope region TELEPHONE: 907-852-8633 • COMPANY WEBSITE: www.asrc.com
and a mainstay in the oil field services business created a new
subsidiary called ASRC Exploration LLC. While many explo-
River unit led by operator ConocoPhillips. ASRC farmed in the
ration companies begin by accumulating acreage through lease
BP acreage, gaining a 35 percent interest in the Placer No. 1 well
sales or acquisitions, ASRC Exploration started out looking for
that ConocoPhillips drilled in February 2004.
knowledge rather than for oil.
While ConocoPhillips initially seemed enthusiastic about
In March 2003, ASRC entered into a “mentoring” agreement
Placer, and even drilled a second well in April 2004, the com-
with BP Exploration (Alaska) Inc. The agree-
pany eventually backed away from the project. The first well
ment established “a framework for sharing
had encountered some 17 feet of hydrocarbon-bearing sands in
data and technical knowledge,” including in-
the Kuparuk formation. The second delineated the Kuparuk C
formation on unit and near-unit oil and gas
formation slightly to the northeast.
investment opportunities on the North Slope,
ASRC acquired the Placer prospect in a March 2006 lease sale
the two companies told Petroleum News at
and, after years of negotiation, acquired the Placer No. 1 well in
the time.
June 2010. The company also spent a year negotiating a license
The agreement signaled a shift in the de-
over an earlier seismic survey of the region. By early 2011, the
velopment of the North Slope. Negotiations
five-year leases were about to expire, leaving little time for ex-
began in 1999, around the time ARCO Alaska
ploration activities. ASRC asked the state to form the Placer unit
was divesting its holdings in the region. REX ROCK, SR. over four state leases covering some 8,769 acres.
Those conversations resumed around 2002,
The original unit request included a four-year exploration
when BP decided it would no longer conduct frontier explo-
program. The plan called for reprocessing existing seismic by the
ration in Alaska and would instead focus on its existing proper-
end of 2012 and either re-entering Placer No. 1 or drilling an-
ties.
other exploration well by the end of June 2014. According to the
For BP, the arrangement created a way to explore and poten-
company the original well “demonstrated that decent quality oil
tially develop prospects around its existing units that might not
is present in a thin, but high quality reservoir in the Placer area”
otherwise make the cut for funding at the corporate level. “This
particularly in the Kuparuk C sand. The state was skeptical
agreement is … hopefully going to provide an opportunity for a
about the proposal, though. In May 2011 the company acceler-
company like ASRC to invest where BP would choose not to,”
ated its work commitments by one year and shrunk the pro-
former BP Exploration (Alaska) President Steve Marshall said at
posed size of the unit to focus specifically on Placer No. 1.
the time. For ASRC, the agreement promised to become a way to
In September 2011, the state approved a 1,480-acre unit cover-
accelerate economic opportunities for its shareholders. “This
ing a portion of four leases.
agreement provides a critical next step in providing ASRC with
After reprocessing the seismic information, ASRC asked the
access to the tools and knowledge we need to become a competi-
state to expand to unit to the originally requested boundaries.
tive, independent producer in Alaska,” former Arctic Slope Re-
According to ASRC Exploration President Theresa Imm, the seis-
gional Corp. President and Chief Executive Officer Jacob Adams
mic showed that the prospect extended beyond the unit bound-
said in July 2003.
aries and potentially merged with the Brooks Range Petroleum
The Placer unit Corp. Appaloosa prospect to the south.
Because Placer was proving to be “at best, only marginally
Currently, ASRC Exploration’s biggest opportunity is at the
large enough to develop,” a strategic development plan was cru-
Placer unit.
cial. The company also asked the state to extend its work com-
The prospect was among the first outcomes of the company’s
mitments by a year because the company was having trouble
mentoring agreement with BP. In early 2004, BP, Union Oil Com-
securing a rig.
pany of California, ChevronTexaco and ExxonMobil partnered
on an exploration venture at the western edge of the Kuparuk
18 THE EXPLORERS
APACHE continued from page 16 covery well in the region. kept the Alaska seismic survey on hold
The first 130 square miles of seismic while it pursued more immediately prof-
Over the nearly five years since, Apache
identified eight new leads, according to Be- itable projects in its portfolio.
has expanded and refined its holdings in
dingfield, suggesting as many as 650 poten- Given the expansiveness of its seismic
Alaska through lease sales, private deals,
tial leads spread across the leasehold. program, Apache decided to drill explo-
relinquishments and expirations. At its
ration wells over regions it had surveyed as
peak, Apache claimed to hold some 800,000 Delays and challenges it continued collecting information for
acres across the basin. As of January 2015,
A regulatory challenge to the program other areas.
the company was leasing some 419,493
in early 2012 slowed those efforts. In April 2012, the company announced a
acres from the state of Alaska and more
As Apache prepared to move the survey two-well program — the Aspen well on the
from private owners.
into more fragile transition zones and off- west side in the summer and the Captain
‘An oil museum’ shore regions, a coalition of environmental Boomer well on the east side that fall or
groups challenged a favorable National winter.
Apache came to Alaska to look for oil. Taking a long view, Apache planned to
Marine Fisheries Service opinion about the
As it had done in other mature basins drill the wells as deep as 16,000 feet, which
potential impacts of the program on beluga
such as the western desert of Egypt and the would have allowed the company to test
whale or Steller sea lion populations in
Forties field in the North Sea, the company intervals beneath the Tertiary strata of the
Cook Inlet. By the time a May 2013 court
intended to begin its tenure in Alaska with basin.
order upheld a portion of the appeal, the
seismic. “We don’t want anybody coming back
authorization had expired. The parties
The company launched a small, prelimi- behind us and saying ‘look what I’ve got,’”
agreed to close the case.
nary 2-D seismic survey in early 2011 cov- Hendrix told Petroleum News in June 2012.
A delay over a different authorization
ering onshore, offshore and “transition “You’re down there. You’re drilling. You
for a seismic survey in the Kenai National
zone” targets. To gauge the effectiveness of might as well go the extra mile, or a thou-
Wildlife Refuge forced Apache to suspend
wireless nodal recorder technology in the sand feet, or whatever it is.”
its program in September 2012. Shutting
Cook Inlet basin, the company ran the Ultimately, Apache scaled back its ef-
down the $50 million operation cost
newer technology alongside a conventional forts, planning a one-well program on the
Apache $10 million and delayed the overall
seismic recorder. The results intrigued the west side of Cook Inlet, where its seismic
program by at least a year, Apache Alaska
company. “It’s an exploration play but the activities had so far been focused. In No-
General Manager John Hendrix said in Feb-
guys have wowed me enough for me to be-
ruary 2013. Even after Apache got the nec-
lieve that it’s a real opportunity,” then-CEO
essary approvals to continue, the company continued on next page
Steve Farris said during a conference call in
August 2011.
A few months later, Apache Senior
Commercial Advisor Paul Abokhair told
state lawmakers that the company was “on
a 25- to 30-year plan for the Cook Inlet.”
By that point, Apache had commis-
sioned an ambitious three-year 3-D seismic
survey.
The wide-ranging program was sup-
posed to run north to the Susitna Flats and Where coverage matters
south to Anchor Point. The three-year
timetable and the wireless technology
would have allowed Apache to work year
round: onshore from September to April,
offshore from April to November and in
transition zones from September to Decem-
ber and March to May.
After a few months, the company was
impressed.
“When you go up there, it’s kind of like
going back into time. It’s like an oil mu-
seum, is kind of how I’d describe it,”
Apache Vice President for Exploration and We’ve been serving
New Ventures John Bedingfield told ana-
lysts in June 2012. “It’s interesting, but the North Slope since 1981.
things have just been frozen for 40-plus
years.” To make the claim even more in- Go A S TAC
triguing, Bedingfield added that Apache 1 - 800- 478- 6409 | www.astac.net
believed there was as much oil still to be
discovered in the basin as has already been
produced in the 55 years since the first dis-
THE EXPLORERS 19
ASRC continued from page 18
APACHE continued from page 19
The state denied the request, saying that the company could
proceed with exploration work without expanding the unit. The vember 2012, Apache drilled the Kaldachabuna No. 2 well on
company appealed the decision in February 2013, saying that Cook Inlet Region Inc. land near Tyonek.
any well drilled within the smaller unit would be a “twin” of Simasko Production Co. had drilled the 12,890-foot Sim-
Placer No. 1. pco Kaldachabuna No. 1 well nearby in 1980. Despite finding
With the additional time, ASRC believed it might be able to oil and gas in the Tyonek formation, Simasko abandoned the
piggyback on other development opportunities within the “bil- well because of “low permeabilities and low structural posi-
lion-dollar fairway” between the Kuparuk River unit and the tion” and large quantities of water in the formation. Apache
Colville River unit, particularly a public private partnership to wondered whether a generation of advances in well stimula-
develop basic infrastructure to support Brooks Range Petro- tion techniques would have more success producing oil from
leum’s nearby Mustang prospect. the formation.
After the state met with officials from ASRC and Brooks Kaldachabuna No. 2 passed through more than 100 coal
Range Petroleum, who presented a “unified position” for Placer seams, including many thicker than 10 feet. The drill bit be-
exploration, then-Alaska Department of Natural Resources came stuck several times. Apache suspended the well in
Commissioner Dan Sullivan conditionally approved the expan- April 2013 at 11,389 feet, according to Alaska Oil and Gas
sion and the extension, requiring ASRC to post a $5.4 million Conservation Commission records.
bond to backstop its commitments. Apache declined to offer any well results but later slowed
In late 2013, Brooks Range Petroleum began permitting a two- its exploration plans. “Frankly, we were disappointed in the
well exploration program at Placer to get a head start on the up- well results that we had there,” Farris told analysts during an
coming season, should a joint plan materialize. After several August 2013 conference call. “We drilled the well and actu-
months, though, the two parties were unable to agree to final ally got too close to a fault, so we really didn’t evaluate that
terms for a deal. well.” The company would continue seismic efforts while
By that time, in early 2014, the geography of the region had waiting on future drilling. “I am personally still very positive
grown more complicated. about the Cook Inlet,” he said. “Obviously we’re directing
Brooks Range Petroleum asked the state to expand its cash to different things right now. So, we’ve slowed down
Kachemach unit to include the Placer prospect. Repsol E&P USA that activity but in terms of its prospectivity, I still think it has
Inc. wanted to form the Tapqaq unit nearby. good value.”
With those developments, “three lessees intend to drill multi-
Renewed interest
The promise of seismic came true.
After getting a U.S. Fish and Wildlife Service special use
permit in July 2013, Apache started its onshore survey in the
Kenai National Wildlife Refuge in February 2014.
And in March, after getting new approval from the Na-
tional Marine Fisheries Service, the company resumed its off-
shore seismic survey. But in May 2014, CIRI Senior Vice
President of Land and Development told the U.S. House
Committee on Natural Resources that a lack of coordination
between federal permitting agencies had caused Apache to
scale down a planned major 3-D seismic program in the
Cook Inlet basin, to a smaller, discontinuous 2-D program.
Apache declined to comment on the announcement.
Apache alleviated some of the uncertainty around its
Cook Inlet program through two filings in the second half of
2014. In August, the company applied for National Marine
Fisheries Service authorization for a five-year offshore seis-
mic program running from March 2015 to February 2020. The
request covered 1,863 square miles of upper Cook Inlet, from
south of Kalgin Island to an area west of the northern Kenai
Peninsula. The authorization was released for public com-
ment in March 2015. In December, the company applied for a
U.S. Army Corps of Engineers permit to build three gravel
pads and associated access roads within the Kenai National
Wildlife Refuge.
In both cases, the permits would merely give the com-
pany options as it budgets exploration activities over the
next five years. The company has yet to sanction activities.
Contact Eric Lidji at ericlidji@mac.com
20 THE EXPLORERS
BlueCrest plotting course
at Cosmopolitan unit
Independent acquired prospect from partner Buccaneer, now pursuing
development while evaluating exploration
By ERIC LIDJI
For Petroleum News NAME OF COMPANY:
Blue Crest Energy Inc.
B lueCrest Energy Inc. graduated into an operator in 2014. The

Fort Worth, Texas-based independent came to Alaska in Feb-
ruary 2012, when Buccaneer Energy Ltd. acquired the Cosmopoli-
COMPANY HEADQUARTERS: 1320 South
University Dr., Ste. 825,
Fort Worth TX, 76107
tan prospect in the Cook Inlet basin. TOP EXECUTIVE: J. Benjamin Johnson, director,
Through the deal, BlueCrest became a 75 percent, non-operat- president, and CEO
ing owner of the offshore oil and gas prospect off the coast of An- TELEPHONE: 817-731-0066
chor Point in the southern Kenai Peninsula. COMPANY WEBSITE: www.bluecrestenergy.com
Originally, the two companies planned a two-well program
using the Endeavour jack-up rig — Cosmopolitan No. 1 in Febru- drilled the Hansen No. 1 well directionally to an offshore target.
ary 2013 and Cosmopolitan No. 2 in April 2013. The well confirmed the presence of oil in the Starichkof sands and
A series of technical issues delayed the pro- found productive sands in the deeper Hemlock formation.
gram. In May 2013, the companies drilled Cos- Following a merger, ConocoPhillips Alaska Inc. assumed con-
mopolitan No. 1 to 7,599 feet, some 400 feet trol of the unit. In 2003, the company drilled Hansen No. 1A, a
shallower than intended. The well encountered
oil and condensate at 5,600 feet, in the Lower
Tyonek, much shallower than expected. A pair
of flow tests yielded peak rates of 7.2 million
cubic feet and 7.3 million cubic feet per day
from the Tyonek but technical restraints pre-
vented an oil flow test.
J. BENJAMIN JOHNSON
In early 2014, as the companies were permit-
ting Cosmopolitan No. 2, Buccaneer sold its interest in the project
to BlueCrest for some $41.25 million. The deal initially required
BlueCrest to use the Endeavour rig for at least 50 working days
each winter for the next three winters, at a rate of $175,000 per day.
To backstop the deal, BlueCrest had to file a $5 million letter of
credit that would remain in effect until it used the rig for 150 days.
The provision became moot when the owners of the rig sold
their stake.
Now, BlueCrest is pursuing a multi-faceted approach at Cosmo-
politan: developing deep oil deposits while it creates a strategy for
exploring the shallower oil and natural gas.
An enticing prospect
BlueCrest is the sixth company to try its hand at Cosmopolitan.
Pennzoil discovered the field in 1967 with the 12,112-foot verti-
cal Starichkof State No. 1 well. A pair of drill-stem tests at approxi-
mately 6,800 and 6,900 feet produced a small amount of oil but the
deeper Hemlock formation was wet. The down-dip Starichkof
State Unit No. 1 well, drilled to the north, collected full cores in the
upper Tyonek and Starichkof sands, finding good-quality sands
but not potential for natural gas production.
ARCO Alaska began a second exploration effort at Cosmopoli-
tan in the 1990s. In 2001, after acquiring the Alaska assets of
ARCO, Phillips Inc. formed the Cosmopolitan unit over seven state
leases and two federal leases. Using an onshore pad, Phillips
THE EXPLORERS 21
Saluting Alaska’s Explorers
JUDY PATRICK
A Cook Inlet Energy . . . . . . . . . . . . . . . . . . . .49
Cruz Construction . . . . . . . . . . . . . . . . . . . . .2
North Slope Telecom . . . . . . . . . . . . . . . . . . 54
Olgoonik . . . . . . . . . . . . . . . . . . . . . . . . . . . .79
Afognak Leasing . . . . . . . . . . . . . . . . . . . . .62
Delta Leasing . . . . . . . . . . . . . . . . . . . . . . . . .6 Parker Drilling . . . . . . . . . . . . . . . . . . . . . . .75
Air Liquide . . . . . . . . . . . . . . . . . . . . . . . . . .21
DET-TRONICS . . . . . . . . . . . . . . . . . . . . . . . .49 Pathfinder Aviation . . . . . . . . . . . . . . . . . . .61
Alaska Airlines/Alaska Air Cargo . . . . . . . . .29
Doyon, Limited . . . . . . . . . . . . . . . . . . . . . . .25 PDC Inc. Engineers . . . . . . . . . . . . . . . . . . . .59
Alaska Clean Seas (ACS) . . . . . . . . . . . . . . .16
Era Helicopters . . . . . . . . . . . . . . . . . . . . . . .14 PENCO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Alaska Dreams . . . . . . . . . . . . . . . . . . . . . . .38
F. Robert Bell and Associates . . . . . . . . . . .60 Petroleum News . . . . . . . . .8,13, 24,31, 60,66
Alaska Executive Search (AES) . . . . . . . . . .33
Fairweather . . . . . . . . . . . . . . . . . . . . . . . . .13 PND Engineers . . . . . . . . . . . . . . . . . . . . . . .35
Alaska Frontier Constructors . . . . . . . . . . . . .9
Flowline Alaska . . . . . . . . . . . . . . . . . . . . . .47 Polyguard Products . . . . . . . . . . . . . . . . . . .45
Alaska Metrology & Calibration . . . . . . . . .55
Fountainhead Hotels . . . . . . . . . . . . . . . . . .40
Alaska Resource Education . . . . . . . . . . . . .16 PRA (Petrotechnical Resources of Alaska) . . . .4
Price-Gregory International . . . . . . . . . . . .39
Alaska Rubber & Rigging Supply . . . . . . . .58 G-M ProComm Alaska . . . . . . . . . . . . . . . . . . . . .52
Alaska Steel . . . . . . . . . . . . . . . . . . . . . . . . . 30 GCI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
American Marine . . . . . . . . . . . . . . . . . . . . . .3 Production Testing Services (PTS) . . . . . . . .23
Global Geophysical Services . . . . . . . . . . . .56
Arctic Slope Telephone Assoc. . . . . . . . . . . .19 Greer Tank & Welding . . . . . . . . . . . . . . . . .67
Arctic Spine . . . . . . . . . . . . . . . . . . . . . . . . . . 5 INTECSEA . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Q-Z
Armstrong Oil & Gas . . . . . . . . . . . . . . . . . .20 RDC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Judy Patrick Photography . . . . . . . . . . . . . . 57
ASRC Energy Services . . . . . . . . . . . . . . . . . .7 Lynden . . . . . . . . . . . . . . . . . . . . . . . . . . . . .84 Repsol . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53
Michael Baker Jr., Inc. . . . . . . . . . . . . . . . . .74 Sophie Station Suites . . . . . . . . . . . . . . . . .40
B-F Steelfab . . . . . . . . . . . . . . . . . . . . . . . . . . . .46
Bald Mountain Air . . . . . . . . . . . . . . . . . . . .64 N-P Taiga Ventures/PacWest Drilling . . . . . . . . . .3
Brooks Range Petroleum . . . . . . . . . . . . . . .26 Nabors Alaska Drilling . . . . . . . . . . . . . . . . .32 Tanks-A-Lot . . . . . . . . . . . . . . . . . . . . . . . . .50
Cameron . . . . . . . . . . . . . . . . . . . . . . . . . . . .33 Nalco Champion Co. . . . . . . . . . . . . . . . . . .61 TTT Environmental Instruments . . . . . . . . . 62
CHI Aviation – Helimax Aviation . . . . . . . . .11 NANA WorleyParsons . . . . . . . . . . . . . . . . . .12 UIC Oil & Gas Support Services . . . . . . . . . .31
Colville . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17 Nature Conservancy . . . . . . . . . . . . . . . . . .82 Vigor Alaska/Kvichak . . . . . . . . . . . . . . . . . .15
CONAM Construction . . . . . . . . . . . . . . . . .27 NC Machinery/Harnish Group . . . . . . . . . . .83 Waters Petroleum . . . . . . . . . . . . . . . . . . . .37
22 THE EXPLORERS
Well Testing & Subsea Test Trees
ARCTIC
WELL TESTING EXPERTS
Production Testing Services Inc.

Alaska & Sales Office
440 East 100th Avenue, Anchorage, AK 99515
aksales@ptssite.com
907.344.2024
THE EXPLORERS 23
ASRC continued from page 20
In addition to Placer and Badami, ASRC has participated in
ple wells in adjacent leases which are already unitized, or pro- several other exploration programs over the past decade,
posed to be unitized, and those wells may be targeting the same
potential reservoir or reservoirs,” then Natural Resources Com-
including Jacob’s Ladder and the Nenana basin.
missioner Joe Balash wrote to Imm in March 2014. To avoid inef-
ficient development, “I have decided to defer unit decisions in Other endeavors
this area until the end of the drilling season,” Balash added.
In addition to Placer and Badami, ASRC has participated in
Finally, in November 2014, under a new administration, the
several other exploration programs over the past decade, includ-
state approved an expansion of the Placer unit, requiring ASRC
ing Jacob’s Ladder and the Nenana basin.
to post a $2.5 million performance bond by mid-January 2015
In 2004, ASRC joined a four-company joint venture led by
and meet a series of commitments culminating in a well by May
Andex Resources to explore for natural gas in the Nenana basin, in
2016.
the Interior region southwest of Fairbanks.
The state formally expanded the unit in March 2015, after
The group commissioned a 2-D seismic survey over an explo-
ASRC met early conditions.
ration license region in early 2005 but postponed the program in
The Badami unit 2006 as lawmakers debated the state fiscal system.
Andex left the joint venture in 2007 and the other companies
While ASRC was in the middle of its long ordeal over Placer, it spent some time finding a replacement before finally drilling the
also became involved in another BP property — the troublesome Nunivak No. 1 exploration well in 2009. The results of the $15 mil-
Badami unit on the eastern North Slope. lion well were less than satisfactory to the partners, who left the
Conoco Inc. discovered the Badami oil pool in 1990, and BP program. Operator Doyon Ltd. has continued to explore the re-
brought the field into production in August 1998. But oil produc- gion independently.
tion peaked a month later and BP spent the next decade starting And in 2006, ASRC and London-based BG Group joined opera-
and stopping production in an effort to recharge field pressure. tor Anadarko Petroleum Corp. on an exploration program at the
In mid-2008, the state approved a plan where Savant Alaska Jacob’s Ladder prospect south of Badami.
LLC would restart production on the field on behalf of BP. As part The prospect targeted a geologic featured relatively unexplored
of the mentoring arrangement, BP asked Savant Alaska to bring in the North Slope: Karst topography, where water has eroded
ASRC Energy Services into the project as a minority partner. near-surface limestone to form extensive underground caves.
“If the Savant program is successful, and we are hopeful that it These caves can be excellent for trapping oil and gas, as proven by
is, then we will have revitalized exploration options on the east- the similar features in the epic Permian basin. The partners com-
side of the North Slope and we will be a player in its future,” pleted an exploration well in early 2008 but found “no commercial
Mark Kroloff with ASRC wrote to Petroleum News in September hydrocarbons” and abandoned the prospect.
2008. As a major North Slope landowner, Arctic Slope Regional Corp.
The two partners aimed to rejuvenate the unit by bringing has also been involved in two pioneering exploration efforts: a 2-D
modern hydraulic fracturing techniques to horizontal wells in the seismic program and exploration well in the Arctic National
Brookian formation. Savant drilled several development wells and Wildlife Refuge in the 1980s and Anadarko’s natural gas explo-
an exploration well and has managed to stabilize production. ration program in the foothills of the Brooks Range Mountains
Eventually, BP bowed out, transferring the operatorship to Sa- over the past decade.
vant Alaska. Toward the end of 2014, Miller Energy Resources Ltd.
acquired Savant, making it a subsidiary.
ASRC continues to hold its minority stake in the project. Contact Eric Lidji at ericlidji@mac.com
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24 THE EXPLORERS

THE EXPLORERS 25
BLUECREST continued from page 21
In March 2015, BlueCrest applied to form a new
sidetrack of the original well. The sidetrack provided a deviated Cosmopolitan unit over seven leases covering some 22,535
penetration into the Starichkof and a lateral penetration into the acres off Anchor Point.
Hemlock. A flow test produced some 1,000 barrels of oil per day
and 14,851 barrels cumulatively.
In 2005, Pioneer Natural Resources Alaska Inc. joined Cono- By June 2014, BlueCrest had proposed a two-pronged develop-
coPhillips on a seismic program at Cosmopolitan. The partners ment program for Cosmopolitan. The company decided it would
commissioned a 3-D survey covering some 40 square miles of the use extended reach drilling to target oil accumulations in the Hem-
region. They kept quiet about the results. But according to a recent lock and Starichkof formations from an existing onshore drilling
BlueCrest filing, the seismic program “provided a clear view of the pad and install two offshore platforms to develop the natural gas
perimeter flanks of an anticlinal structure, but the crestal view of reservoirs.
the structure was obscured by a gas cloud, rendering a conclusive BlueCrest expects its onshore development program to come into
description of the reservoir structure unobtainable at the time.” production by early 2016. The future offshore development program
After the joint seismic program, Pioneer Natural Resources ac- is currently at a much more preliminary stage.
quired the remaining working interest at Cosmopolitan and be- In March 2015, BlueCrest applied to form a new Cosmopolitan
came the operator of the exploration program. unit over seven leases covering some 22,535 acres off Anchor Point.
In 2007, Pioneer plugged the original Starichkof and Hemlock The unit would include ADL 18790, ADL 384403, ADL 391899, ADL
completions on the Hansen No. 1A sidetrack and drilled Hansen 391900, ADL 391902, ADL 391903 and ADL 391904.
No. 1A-L1, another sidetrack off the original Hansen well. The The application included an August 2014 proposed plan of de-
“long-reach undulating lateral well” ran through the upper portion velopment calling for 44 wells: 20 onshore oil production wells, 10
of the Starichkof 8 sub-interval of the sands and tested a 300 barrels onshore injection wells and two onshore disposal wells and 12 off-
per day. shore wells divided between the proposed monopod platforms.
After a hiatus caused by the collapse of the financial system in The application, though, listed other targets worth exploring. The
2008, Pioneer returned to the prospect in 2010 to fracture stimulate prior exploration activities at Cosmopolitan discovered potentially
the interval from Hansen No. 1A-L1. An extended flow-test pro- commercial hydrocarbons within 10 Tyonek formation intervals, ac-
duced 250 barrels per day and more than 33,000 barrels, cumula- cording to BlueCrest. Those include oil in the Hemlock, the
tively, which the company trucked to the Tesoro refinery under a Starichkof and the Lower Tyonek and gas in the Lower Tyonek and
pilot program. Upper Tyonek.
The company even went so far as to propose a development Under the proposed program, BlueCrest would evaluate a gas
program for Cosmopolitan, but in early 2011 Pioneer decided that development program on leases ADL 391899, ADL 391900 and ADL
“subsequent flow test results and engineering studies indicated 391902 in 2015 and 2016. Previously, BlueCrest had said gas devel-
that the resource potential was not as large as originally esti- opment would depend on “a suitable market for gas in the Cook
mated.” Inlet basin, additional information gained from drilling the first off-
As such, Pioneer terminated the Cosmopolitan unit, relin- shore delineation wells, and receipt of all required governmental ap-
quished all the leases at the prospect except the two held by wells, provals from the offshore program.”
which it sold to Buccaneer and BlueCrest. In early 2015, BlueCrest announced a partnership with WesPac
The state offered three of the relinquished leases under special Midstream LLC.
terms. Apache Corp. acquired the leases and proposed seismic and “What we’re planning to do is design these facilities where the
exploration drilling. But regulatory delays over a basin-wide seis- shallow part is (with) WesPac and the deeper part, where the oil lies,
mic program prompted the company to delay its plans. Apache ul- is with BlueCrest,” President and CEO J. Benjamin Johnson told the
timately sold the three leases to Buccaneer and BlueCrest in August Kenai Peninsula Economic Development District. “WesPac would
2013. get 100 percent ownership of the gas sands, while BlueCrest will
continue to operate them,” he said. “Then, at some point, after
Development now they’ve reached the minimum terms and get their money back,
Those previous exploration efforts identified numerous leads. BlueCrest will come back in and begin owning the gas.”
The program would give WesPac a supply for a proposed two-
phase liquefied natural gas project at Port MacKenzie. The first
phase would involve a small-scale plant processing 25 million cubic
feet per day of Cook Inlet gas for shipment to Alaska communities
by rail, truck or boat. The second phase would involve a 150 million
cubic foot per day system with tanker-loading facilities for export, in
addition to shipments within Alaska.
The August 2014 plan also called for drilling the offshore Cosmo-
politan State B1 exploration will this year on ADL 384403 to test oil
and gas zones. The oil zones would be plugged and the gas zones
suspended for future development, according to the plan.
BlueCrest asked the state to approve the plan for a one-year term,
which would allow the company to amend the plan easily based on
information gleaned this year. Such amendments would include
more detailed plans for delineation and exploration activities.
26 THE EXPLORERS
Brooks Range Petroleum
finally in development
As the company focuses on development campaign, its once-prolific
exploration efforts have slowed
By ERIC LIDJI
AVCG/Brooks Range
H ere are headlines from the three previous editions of The

Explorers:
In 2011, “BRPC shifting to development mode.”
Petroleum Corp.
COMPANY HEADQUARTERS: 510 L St., Ste. 601,
Anchorage, AK 99501
In 2012, “Brooks Range on road to development.” TOP ALASKA EXECUTIVE: John J. “Bo” Darrah, Jr.
In 2014, “Brooks Range Petroleum moving toward develop- PHONE: 907-339-9965
ment.” COMPANY WEBSITE: www.brooksrangepetro.com
This year, the story is slightly different. Instead of being in
“development mode,” “on the road to devel-
opment” or “moving toward development,” by 2016, the deal also included the exploration prospects.
Brooks Range Petroleum Corp. is actually “in
development.” Earlier this year, the company The Beechey Point unit
drilled its first wells at the Mustang field, Alaska Venture Capital Group was among the first independ-
which is the initial development project at its ent companies to see opportunity in the aging of the North
Southern Miluveach unit. Slope. The company was created explicitly to develop fields
The current schedule calls for bringing the
unit into production in April 2016. continued on next page
As those three previous headlines suggest,
the Mustang development project has con- JOHN J. “BO”
sumed much of Brooks Range Petroleum’s re- DARRAH, JR.
sources over the past four years.
The company’s last exploration well in
Alaska was Mustang No. 1, in early 2012,
which appraised a discovery the company
had previously made with its North Tarn No.
1 well in early 2011. The last exploration well
the company drilled outside of its Mustang
project was the North Shore No. 3 well, in the
Gwydyr Bay region, in early 2010.
Today, Brooks Range Petroleum and its af- BART ARMFIELD
filiate Brooks Range Development Corp. op-
erate three units: Southern Miluveach and Tofkat in the fairway
between the Kuparuk River and Colville River units and
Beechey Point north of the Prudhoe Bay unit.
The company also holds two un-unitized blocks — one be-
tween the Kuparuk River and Colville River units and the other
between the Badami and Point Thomson units.
To pursue its Mustang development, Brooks Range Petro-
leum formed a multi-party joint venture with MEP Alaska LLC,
TP North Slope LLC and Caracol Petroleum LLC. The joint ven-
ture entered into a public-private partnership to fund initial
project infrastructure.
To create the joint venture, Alaska Venture Capital Group
LLC and its partner Ramshorn Investments Inc. sold a 90 percent
stake in their Alaska holdings and 100 percent interest in their
operating arm Brooks Range Petroleum Corp. to the three-com-
pany consortium for $450 million. Although the new joint ven-
ture is currently focused on bringing Mustang into production
THE EXPLORERS 27
BROOKS RANGE continued from page 27 That summer, the joint venture acquired the nearby Pete’s
Wicked prospect, a discovery BP made in 1997 and Pioneer Nat-
passed over during the first decades of North Slope develop- ural Resources Inc. acquired in a 2003 lease sale. The acquisition
ment. provided an additional opportunity for bundling several
The Kansas-based company initially struggled to find part- prospects together.
ners to share the cost of exploration activities and to negotiate ac- After forming the Beechey Point unit in 2009, and settling a
cess agreements with existing facility operators on the North dispute between partners that prevented drilling that year,
Slope, although in 2004, after forming an operating arm called Brooks Range Petroleum returned to Gwydyr Bay in early 2010.
Brooks Range Petroleum Corp., the company established a The company drilled the Sak River No. 1A sidetrack and the
multi-party joint venture. North Shore No. 3 delineation well. TG Energy World reduced
The joint venture became among the most prolific exploration its presence in the joint venture following the results of Sak River
outfits on the North Slope, drilling in the Gwydyr Bay region No. 1A. The remaining partners suspended North Shore No. 3.
north of Prudhoe Bay and the fairway between the Kuparuk “Sak River No. 1A was truly an exploration project with a pre-
River and Colville River units and amassing leases south of drill risk factor of 1 in 5, unfortunately the well encountered
Point Thomson. mainly water from the Kuparuk formation,” Brooks Range Petro-
The joint venture started its exploration efforts in the Gwydyr leum Chief Operating Officer Bart Armfield wrote in a comple-
Bay area in 2007. tion report for the season, which was released after a mandatory
The Alaska Venture Capital Group had initially picked up a two-year delay. Although the company had plugged and aban-
minority working interest in several leases in the Gwydyr Bay doned the original Sak River No. 1 well, it decided to suspend
area through a 2001 land swap with Phillips Petroleum and the sidetrack, which would allow it to be used to provide pres-
formed the Sakonowyak River unit that summer with majority sure maintenance for future wells in the Sag River formation.
interest owner BP Exploration (Alaska). The partners planned to The company said it was considering plans for a second side-
drill two exploration wells by May 2004. track, which would aim for an “up-dip target of the Kuparuk,”
After a year and a half of challenges — searching for partners Armfield wrote.
to defray costs, negotiating access to existing infrastructure and North Shore No. 3 “identified a common oil/water contact
finalizing farm-in agreements and licensing for seismic — Alaska between the Sag and Ivishak formations and presents a reduced
Venture Capital Group cancelled the program and disbanded the reserve base for the North Shore development,” Armfield wrote,
unit. adding that the company had now discovered reserves at North
The company acquired the acreage again in 2005. “Initially we Shore No. 1, North Shore No. 3 and Pete’s Wicked, which would
were just going to drill in one prospect,” former President Ken guide future activities.
Thompson told Petroleum News at the time. “We then acquired By the following winter, though, the joint venture was fo-
seismic and reviewed well records and identified a second cused on the North Tarn prospect, which became the basis for its
prospect.” current development at Southern Miluveach.
The company planned a two-well exploration program for
early 2007. Terminate or proceed?
The 10,319-foot North Shore No. 1 targeted an oil accumula-
The Beechey Point unit is currently in limbo.
tion in the Ivishak formation that was first tested by Mobil Oil
The state formed the unit in 2009. The unit included 25 leases
with the Gwydyr Bay South No. 1 well in 1974. The well encoun-
covering some 52,876 acres along the coastline north of Prudhoe
tered “approximately 70 feet of oil-charged Ivishak sandstone
Bay. The unit contained five exploration blocks, and the initial
formation.”
unit agreement required Brooks Range Petroleum to drill at least
The 11,348-foot Sak River No. 1 followed up on a prospect
one well in two different exploration blocks by December 2010
previously included in the BP-operated Sak River unit. The well
and December 2012, respectively.
proved to be a dry hole, although the results were intriguing
The North Shore No. 3 well satisfied the first work commit-
enough for the joint venture to consider returning to drill a side-
ment. The state subsequently extended the deadline for the sec-
track.
ond work commitment, giving the company until 2014.
That winter, the joint venture also commissioned a 130-
With the Mustang development increasingly occupying the
square-mile 3-D seismic survey.
company’s attention, Brooks Range Petroleum relinquished
The results “identified two small satellite prospects to North
some 42,119 acres on the western side of the Beechey Point unit
Shore No. 1 that can be reached from the North Shore No. 1
in September 2012, leaving a seven-lease unit covering some
drilling pad,” according to a partner TG World Energy Inc. Those
10,757 acres.
results started the company along its current path — finding a
The company focused on other project for the next two years.
way to string together several marginally economic prospects
In September 2014, the state initiated termination proceedings
into a single, profitable development. TG World Energy de-
for the unit because the company had failed to meet its work
scribed the strategy as “establishing a threshold” for develop-
commitments before the end of its initial five-year plan of devel-
ment. Potential solutions included two production pads or
opment, according to then-Natural Resources Commissioner Joe
extended reach drilling.
Balash.
In early 2008, Brooks Range Petroleum re-entered North
Balash said he was unable to justify an extension because the
Shore No. 1 to test the Ivishak and the shallower Sag River for-
unit had neither a well certified as capable of economically pro-
mations. The Ivishak flowed at 2,092 barrels of oil per day. A me-
ducing oil or gas or an approved plan of development beyond
chanical problem downhole compromised the Sag River test,
the initial term, either of which can serve as ground for exten-
although TG World estimated that an unencumbered test could
sion.
have flowed at 1,000 barrels per day.
28 THE EXPLORERS
BROOKS RANGE continued from page 28 company asked the state to reconsider the requirement. The state
never responded, according to the company, which is why the
The company disagreed. In a late September letter, Vice Presi- two sides now disagree.
dent for Exploration Larry Vendl named two certified wells at The Beechey Point unit agreement required the company to
the unit and asked for a chance to negotiate a plan of develop- file annual reports with the state, permit a North Shore Develop-
ment. The company could potentially start work as early as 2015, ment Project, apply to form an initial participating area and drill
Vendl wrote. two wells. Brooks Range Petroleum met the first three require-
The area contained within the Beechey Point unit undeniably ments, although the state had yet to rule on the participating
includes two wells certified as capable of producing hydrocar- area application at the time the termination proceedings began.
bons in commercial quantities: Gwydyr Bay South No. 1 from Failure to drill the second well was the sticking point.
1974 and North Shore No. 1 from 2007 and 2008. Both wells, Given that it had invested more than $85.5 million in the unit,
though, were drilled before the state approved the Beechey Point Brooks Range Petroleum felt it should be given the opportunity
unit. To the state, that made them irrelevant for extending the to negotiate an extended plan of development.
terms of the unit. To the company, it made no difference. “The potential for successful exploration and development in
The state certified the North Shore No. 1 well in July 2008, ap- this area requires the compilation of several prospects with
proved the Beechey Point unit in August 2009 and told the com- known reservoir reserves in close proximity to one another,”
pany to apply for a recertification by August 2010. Vendl told the state. “The smaller prospects need to be a part of a
To Brooks Range Petroleum, this request for a “recertification” larger program; each independent prospect does not support an
signified a changing standard. No other operator had been asked economic development model.”
to perform a similar task, according to the company. In 2010, the
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people and cargo where they need to be.
THE EXPLORERS 29
BROOKS RANGE continued from page 29
The second major area of exploration for Brooks Range
The current strategy involves combining various prospects in Petroleum is the region between the Kuparuk River and
the region, including the East Shore prospect at Beechey Point,
the ConocoPhillips-operated Kup Delta lease and the UltraStar
Colville River units, also known as the “billion-dollar
Exploration-operated Dewline unit, all of which are in the imme- fairway.”
diate vicinity. At the time of the letter, in September 2014, Brooks
Range Petroleum was involved in discussions with both Cono-
acres. The nine remaining leases stayed un-unitized.
coPhillips and UltraStar, according to Vendl.
The Tofkat unit agreement required Brooks Range Petroleum to
Another opportunity, Vendl noted, was the 3-D seismic sur-
complete a Tofkat No. 2 well and Tofkat No. 2-A sidetrack into the
vey BP Exploration (Alaska) Inc. commissioned for the northern
Kuparuk formation by May 2013, and sanction a Tofkat develop-
end of Prudhoe Bay, including Beechey Point.
ment by October 2013. The Putu unit agreement required the com-
In October 2014, Balash agreed to reconsider the termination.
pany to post a $10 million bond to backstop a four-well drilling
The decision came shortly before the election of Gov. Bill Walker,
commitment.
which prompted a turnover of the cabinet. The new commis-
Although the company floated the possibility of drilling the de-
sioner, Mike Myers, had yet to issue a ruling when Explorers
lineation well and sidetrack at the Tofkat prospect in early 2013 to
went to print.
confirm the size of the previous discovery in the Kuparuk forma-
The Tofkat unit tion and to test a deeper target in the Jurassic formation, the Mus-
tang project delayed those drilling plans. As of April 2015, the
The second major area of exploration for Brooks Range Petro- state had yet to decide whether to advance termination proceed-
leum is the region between the Kuparuk River and Colville River ings or extend the term of the unit.
units, also known as the “billion-dollar fairway.” The company relinquished the Putu unit in September 2012,
The name reflects the potential of the region, rather than the ac- saying it wanted to focus its resources on bringing Mustang into
tual payout. Wedged between the second and third largest fields production and exploring other prospects.
on the North Slope, and the infrastructure associated with those
fields, the region is thought to be primed for oil development. The Kachemach unit
In early 2008, Brooks Range Petroleum conducted a major ex-
Over the 2011 and 2012 exploration seasons, Brooks Range Pe-
ploration program in the area near Nuiqsut. The company drilled
troleum drilled the North Tarn No. 1 exploration well, the North
the 13,174-foot Tofkat No. 1 exploration well and two sidetracks
Tarn No. 1-A sidetrack and the Mustang No. 1 delineation well.
deviating to the northeast and southwest, respectively. All three
The wells tested the Brookian formation and deeper Kuparuk for-
encountered oil in the Brookian formation and “secondary targets
mation.
above the Kuparuk.”
During that time, the company also merged its seismic data for
The company estimated that the Tofkat prospect held about 40
the region with data purchased from ConocoPhillips to consoli-
million barrels of recoverable oil in the Kuparuk C sands and an-
date some 570 square miles of 3-D seismic.
other 20 million in the Jurassic sands.
The exploration work confirmed a discovery in the range of 40
Brooks Range Petroleum also commissioned a 210-square-mile
million barrels of recoverable oil from the Kuparuk, which was
3-D seismic survey, which Vice President of Land Jim Winegarner
much bigger than expected. The discovery prompted the company
said the company intended to analyze before it would decide
to seek public financing for initial project infrastructure and a new
whether, when and where it would drill another well. The com-
joint venture to fund ongoing development activities, which are
pany was still analyzing by early 2009 and exploring other
currently under way.
prospects by early 2010.
As the project advanced, Brooks Range Petroleum asked the
To avoid losing acreage to expiration, the company applied to
state to form the Southern Miluveach unit. Instead, the state
form the Putu unit in mid-2011. The proposal included 39 leases
formed two smaller units: the 8,960-acre Southern Miluveach unit
covering some 39,993 acres of state and Native land. The state ulti-
over five leases and the 16,487-acre Kachemach unit over 11 leases.
mately formed two units. The Tofkat unit included 21 leases
The Kachemach unit agreement split the area into two explo-
owned jointly by the state and ASRC covering some 9,131 acres.
ration blocks and required the company to complete two wells in
The Putu unit includes nine state leases covering some 21,946
Block A by May 31, 2013, and a third well in Block B by May 31,
2014. Those wells were competing with other prospects for financ-
ing. “Decisions on proceeding — or not proceeding — with some
or all of these wells will be made in the next few months and will
be based on working interest owners’ technical and capital budg-
eting priorities,” Thompson told Petroleum News in mid-2012.
After discussing the project with Department of Natural Re-
sources officials toward the end of the year, the company said it
was continuing to “re-process and merge acquired seismic data to
identify optimal drilling location and target” and planned to drill
an exploration well in early 2014, after discussing the project with
working interest owners.
By that point, the unit was in default, which occurred in mid-
6180 Electron Drive
2013 when Brooks Range Petroleum missed the deadline for its
Anchorage, AK 99518
initial two wells. As is common in Alaska land management, the
www.alaskasteel.com
30 THE EXPLORERS
BROOKS RANGE continued from page 30 leases which are already unitized, or pro- units. The proposed unit included the
posed to be unitized, and those wells may Friezen, Red Dog and Telemark prospects.
state gave the company a chance to cure be targeting the same potential reservoir or The proposal included plans for two 3-D
the default by drilling both wells by May reservoirs,” Balash wrote in a March 2014 seismic surveys in advance of exploration
31, 2014, with a year extension for the sec- letter. Given the potential for inefficient de- and development.
ond if the first was a dry hole. velopment, “I have decided to defer unit Brooks Range Petroleum ultimately
The state initiated termination proceed- decisions in this area until the end of the withdrew the application in September
ings in June 2014, after the company failed drilling season,” he added. That decision 2011 and surrendered approximately
to cure the default. The company proposed failed to protect Kachemach, which the 100,000 acres in the area in order to focus
four alternatives, which involved various state terminated in October 2014. on a smaller area.
configurations to either shrink the unit or
In early 2012, Brooks Range Petroleum
enlarge it to encompass nearby prospects. The South Thompson prospect proposed the Telemark unit over nine
Specifically, Brooks Range Petroleum
The other prospect in the Brooks Range leases covering some 16,235 acres. The pro-
wanted to coordinate exploration activities
Petroleum portfolio is the eastern North posal included plans to commission a 3-D
at Kachemach with those at the nearby
Slope. seismic survey by the end of 2012 and drill
Placer unit, operated by ASRC Exploration
By early 2006, the company was touting an exploration well by the end of March
LLC.
the Slugger prospect south of the Point 2014.
ASRC Exploration and Brooks Range
Thomson unit as one of many prospects it The company deferred Telemark explo-
Petroleum executives had met with state
hoped to pursue in the years to come. The ration until early 2014 “pending negotia-
officials in September 2013 to present “a
company picked up additional leases in tions for a joint drilling agreement with
unified position” for exploring the greater
the area the following year. Low snow Savant Alaska in the adjoining Badami
Placer area.
cover in early 2008 led the companies to unit.” By late 2012, Savant and Brooks
The meeting convinced the state to give
postpone a 130-square-mile 3-D seismic Range Petroleum proposed expanding the
ASRC Exploration some leeway for its ef-
program. Badami unit to include the East Mikkelsen
forts.
The six years since then have mostly prospect, with plans for Savant to drill an
The joint program never materialized,
seen administrative issues. exploration well in early 2014.
though. By early 2014, Repsol E&P USA
In early 2011, Brooks Range Petroleum Administrative delays have kept that
Inc. was discussing plans to form the
proposed the Greater Bullen unit including project from advancing.
Tapqaq unit in the region. With the Placer
68 leases covering some 200,179 acres be-
unit, the nearby Kachemach unit and the
tween the Point Thomson and Badami Contact Eric Lidji at ericlidji@mac.com
proposed Tapqaq unit, “three lessees in-
tend to drill multiple wells in adjacent
TMI? UIC
OIL & GAS SUPPORT SERVICES
page Q&A: Giessel has ambitious plans,

sees plenty of work for interim
Some call it harsh, we call it home.

Vo
ol. 20, No. 20 • www.Petr oleumNews.com A weekly oil & gas newspaper based in Anchorage, Alaska We
eek of May 17, 2015 • $2.50
E X P L O R AT I O N & P R O D U C T I O N
This week’s Mining News
Shell plan approved

BOEM issues its conditional go ahead to planned Chukchi Sea exploration drilling
page Tang
ge : Conggress moves
ADVANCING ARCTIC DEVELOPMENT

on definitioon of WOTUS
w w w. M i n i n g N e w s N o r th . c o m
The weekly mining newspaper for Ala
By ALAN BAILEY
COUR TESY SHELL
ska and Canada's North

Week of May 17, 2015
NEWS NUGGETS E X P L O R AT I O N
Bok
kan REE resource gets an upg
Comp
piled by Shane Lasley
Palmer doubles in size Petrrooleum News
rade Touggh marrkets faill to slow reesoou
urce expanssion at SE Alaska VMS proj
O
Ucore Rare Metals Inc. May 11 reporte
upgrade and expansion of the mineral
d a significant ect
Dotson-Ridge deposit of its Bokan Mo
ized resources at the By SHANE LASLEY
n May 11 the Bureau of Ocean Energy
S LT D.
untain rare earths project Mining News

in Southeast Alaska. The deposit now
C O N S TA N T IN E M E TAL R E S O U R C E
contains an estiimated indicated resour

of 4.79 million metric tons averaging
percent (63.54 million pounds) total ra
ce
0.6
re
W hile many of its peers are struggling
money to contiinue exploration a
promisiing mineral prospects a
to find
t the ir
nd deposits,
Management announced its conditional
earth
h oxides, a roughly 63 percent Constantiine Metal Resources Ltd
increase over the 2.94 million metric
of indicated resource included in a 20
estiimate. Additiionally, the deposit has
tons
13
forg
ge ahead with hefty
d. has managed to
y programs at its copper- and
zinc-rich Palmer project in Southeas
t Alaskka. This
approval of Shell’s plan to drill up to six exploration
includes C$7.13 million invested in
FOR GENERATIONS.
exploriing the
1.05 million metric tons of infe f rred
resource averaging 0.6 percent (13.96
million lbs.) TREO. About 39 percent
volcanogenic massive sulphide depo
Last year's program, funded by Dowa
Mining Co. Ltd., along with
sit in 2014.
Metals &
wells in the Chukchi Sea, starting this year. The
of JIM M MCKENZIE h drilling completed at
thhe TREO in both
er valued heavy
h categgoriies are th
y rare earthhs. “W
he high-
We’re pleased to announce th
important resource upgrade as Ucore his
Palmer in 2010 and 2013, have culm
percent expansiion of the resource, co
last time a calculatiion was comp
inated in a 97
mpared to the
company wants to search for oil in the Burger
contiinues its progress leted for the
toward d production,” saiid Ucore Presiident an
McKenzie. “T
d CEO Jim
This resource upgrade, together with o
advances in molecular recognition tec
ur recent
deposit in 2010.
The results of the resource estimate
by Constantine on May 11 outline
published
prospect, about 70 miles northwest of the Chukchi
hnology for refining s an inferred
applicatiions, makes for a compelling m
Bokan.”
ine-to-metal story y at
resource of 8.125 million metric to
1.41 percent (2
ns averaging
( 52.6 million pounds) copper, 5.25
percent (940.4 million lbs.) zinc, 0
coastal village of Wainwright.
a The BOEM approval
Insiders back US$1.5M Zazu f .32 grams per
inancing
Zazu Metals Corp. May 8 reported co
tranche of a US$1,497,800 million no
n-b
mpletiion of the final
brokered private place-
metric ton (83,600 ounces) gold and
million oz.) silver for Palmer.
“T
The resource estiimate significantly
31.7 g/t (8.3
increases
Drilling at Palmmer in 2014 cut copper- and z
m neralization at a 400-squa
re-m
inc-rich
meter conductive
is subject to several conditions, including Shell
th
he size of the deposit, highlighting th plate identified with downhole
ment financing. In a second tranche, Z
million common shares of th
azu sold more than 3.46
he company at US20 cents each for success of recent drill campaigns an
e tremendous
d thhe growing a Pacific Rim deep-sea port at Haines,
geophysics.
obtaining all of the permits needed for its operations
gross proceeds of
US$692,800. Zebra
potentiial of th he project,” said Constantine Palmer would be
President and CEO Garfield MacVei
a mine at
well-situated to proviide zinc and The drill ship Noble Discoverer
Holdings and Investments
S.a.r.l., a company con-
Zazu intend
proceeds
ds to use
ceeds from the offffering
to expansion in most areas with the t
the deposit located at the current down
gh. “IIt is open copper concentrates to Dowa’s st
hickest part of smelters in Japan.
-dip limit of For its part, Constantine is benef
ate-of-the-art
and the company complying with the requirements
trolled by a trust settled by
th
he late Adolf H. Lundin,
purchased more than 2.16
for developm
e ent
expenditures related to its
th
he South Wall Zone where minera
geophysics support potential for a h
per core wiithin a more extensive are
l zoning and Dowa’s vast VMS experiience and a
igh-g grade cop- deal that is structured in a way that allo
itiing from
partnership
ws it to of the Marine Mammals Protection Act and the Sea,, recognizing the significant environmentall,
Lik zinc-llead-silver a of zinc-cop- complete multimillion-dollar explo
ration pro-
million of th
Zebra, wh
hese shares.
hich previiously
owned or controlled
project in Northwest
Alask
laska and general
per-barite mineralizatiion.”
Constantiine and Dowa are contiinuing
this growth
grams, while avoiding a significant
to explore selling shares in a market th
h potential wiith a US$5 million prog
dilutiion from
hat has been unkind to Endangered Species Act. social and ecological resources in the region and
ram junior mining companies.
8,860,280 Zazu sh working capital purposes. budgeted for this year.
hares,
owns roughly 19.9 percent
of the company’s issued and outstandi
ng shares upon comple-
Good deal
“It has been very refreshing to be ab
near 100 percent of our efforts at
building thhe asset at Palmer, and avoid th
le to focus
growing and “W
We have taken a thoughtful approach to careful- establishing high standards for the protection of this
tion of the offering. Zazu Chairman an Most of the new resource re he distrac-
d CEO Gil Atzmon ported by tion of constantly chasin
g financings, which in th
bought 1 million of th he shares offered in the second tranch
Atzmon, which previiously owned or c e.
Constantine has been added since D
a funding partner at Palmer in 2013.
owa joined as market has become a
Herculean task,” Green said.
his
ly considering potential exploration in the Chukchi
shares, owns roughly 12.3 percent of
outstanding shares upon completion o
ontrolled 5,789,500 Zazu
th
he company’s issued and
f the offering. Zazu
Accordiing to an agreement inke
Dowa and Constantine in February o
f thhat year, th
As part of the agreement, Constanti
d between annual cash paym n e
ments totaling US$1.25 million
he over four years. This, along with
receives
see SHELLL PLAN page 19
intends to use proceeds from th Tokyo-based smelting and mining h any other optiion
he offering for development company can payments and man
expenditures related to its Lik zinc-lea earn a 49 percent stake in Palmer agement fees received, has
d-silver project in by investiing allowed th he company to maintain a healthy
North hwest Alaska and general working cap US$22 millliion in the VMS project ove bank
ital purposes. r a four-year account.
span.
Rup
ptured line spills tailing “W
We are currently cash-flow positive,

gs at Pogo At the tiime, some analysts felt that C wh hich is a
GOVERNMENT
onstantiine bizarre and priiviileged p
was givin i g up too large a portion of th osiition to be in,” observed
Sumitomo Metal Mining Pogo he Palmer Green.
May 7 reported to Alaska project for th he money. Following two years o
Thhe 8-iinch line f At th he end of January, th
Department of Enviironmental resource expansion in tough equity he company had
delivers paste backfill, markets, how- C$636,135 in cash a
ever, the deal has worked out well fo nd its working capital totaled
Conservatiion th
hat a ruptured line r both partiies. C$664,811.
Notley rattles industry

a mixture of tailing gs “WWe felt from the beginning the scale
spilled roughly 90,000 gallons of of invest-
paste backfill at th
and cement, into the ment Dowa is making to earn 49 p Continued expansion
he Pogo gold ercent would
mine in Interior Alaska. The 8- undderground mine for give us a good chance to establish
a resource at Over the previo i us two ye
y ars, Dowa has invested
inch line delivers paste backfill, a dispossal. Palmer with h potential for mine via roughly US$10 million in advanc
i bilityy,” ing the VMS
mixture of tailings and cement, Constantine Vice President of Explo deposit and has agreed to invest anot
ratiion Darwiin her US$5 mil-
into the underg Green told Mining News. lion in 2015.
ground mine for disposal. Once under
ground, th
he Dowa, wh hich got its start from mining Kurok This work
concrete created from th he taiilings fills mined-out areas, provii o k is primarily targeting expansion
d- deposiits in northern Japan, has m of
ing support for contiinued mining. The ore than 120 Glacier Creek, a region of th he project that consists
backfill materiial is years of experience exploring for
repported to contain 1-3 parts-p per-million cyanide but is ren- , mining and of five inter-related subzones of m
smelting ore from VMS deposits li assive sulfide
deredd inert by th
he high pH of the concrete mixture. O ke th he one at mineralization – RW East, RW We W st, and South
nce hard- Palmer. This makes the South Wall zones 1, 2 and 3.
ened, the spilled tailings are being rem heast Alaska project
oved wiith
h heavyy equip- an ideal fit for the Tokyo-b
ment and hand tools. based company’s expert- The South h Wall zones are parallel layers of ne
ise. ar-
ly vertiical VMS mineralization. At th
Additiionally, being located only 33
miles from see PALM
e upper extent
MER DOUBLES page 10
New Alberta premier ponders royalty
o review
w, chooses pipeline
p winners, losers
Tough markets fail to slow resource expansion at Southeast
By GARY PARK trouble
Alaska’s Palmer VMS project. More in North of 60 Mining, page 9.
For Petrroleum
o News Her campaign promise of a royalty
review has the industry flailing in all
Thumbs down to LNG offer; First
Nations has salmon concerns C anada’s Calgary-based petroleum
industry is foaming at the mouth
over the stunning election of a left-of-
directions, unaccustomed to not getting
its way with the Alberta government in
the 65 years since the province entered
Chances of a breakthrough in relationships between LNG center New Democratic Party govern- the oil-producing age.
NORTH SLOPE EXPERTISE:

proponents and British Columbia First Nations have been ment in Alberta, while incoming Premier During the 44 years of Progressive
snuffffed out almost as fast as they surfaced. Rachel Notley is trying to tiptoe between Conservative administrations that ended
A small aboriginal community in the province’s northwest introducing a new style of government RACHEL NOTLEY May 5, the industry was able to wield a
unanimously spurned an offffer of C$1.15 billion in cash and and accepting the reality that energy con- club over the government, threatening
5,400 acres of land in return for endorsing the Petronas-led tributes 25 percent of her province’s gross domes- and, occasionally even delivering on those threats,
Pacific NorthW West
e LNG project. tic product. to withdraw billions of dollars in capital invest-
Other members of the Lax Kw’alaams nation living in If she is unable to pull offf that high-wire act,
Prince Rupert and Vaancouver have yet to hold their votes Alberta could find itself in even deeper economic see NOTLLEEYY ERA page 15
ahead of a May 12 membership meeting in Vancouver.
It took only a few days from the initial cash-and-land offffer
for 180 members off Lax Kw’alaams living in the Port
UTILITIES
t Deadhorse Operations Center
see LNG OFFER page 14
MEA moves to new plant
t
BP challenging Oliktok rates;
issue over expected gas volumes
BP Exploration (Alaska) Inc. is challenging a rate increase on
the Oliktok Pipeline.
Utility has own power supply after transition into new gas-fueled Eklutna plant
By ALAN BAILEY
Petrrooleum News
Mainly because of the cost of the gas
supply for the Eklutna plant, Matanuska
North Slope Project Logistics
The North Slope producer wants state regulators to investigate
Electrric customers will see rate increases
the proposed increase, which BP called “unsupported, unjust and
M
t
ay 1 was something of a red-letter day for
unreasonable.” The changes propose a more than six-fold
increase in the rate to ship natural gas through the pipeline
between the Prudhoe Bay unit and the Kuparuk River unit.
According to BP P, owner Oliktok Pipeline Co. assumed “unrealis-
tically low” throughput on the pipeline and may have failed to
power utility Matanuska Electric
Association, as the utility finally switched over to
supplying its own electricity from its new power
plant at Eklutna, northeast of Anchorage.
After several years of planning, design and con-
as a consequence
liin
ce of the plant comi
comin
ne, the utiliitty has said.
Petroleum News.
ng on
Operations and Maintenance Contract Support

accurately calculate costs that have already been recovered struction, the Eklutna plant actually started to ramp Delay in startup
t North Slope Equipment Services

through earlier shipping fees. up its operations in December, when the first of its
“There may be other reasons why the dramatic increases in the The electric utility had originally planned on a
10 massive Wartsila reciprocating engines fired up.
revised rates are not just and reasonable which will become full startup of the power plant at the end of 2014,
By Jan. 31 four of the engines became commer-
apparent upon investigation,” attorneys for BP wrote to the the time at which a previous arrangement expired,
cially available, with all 10 engines then being
under which the utility had been purchasing much
see OLIKTOK RAATES
T page 18 operational on March 27, Julie Estey y, Matanuska
Electric’s director of public relations, has told see MEA PLANT page 20
MOST LIKEL
LIKELY.
ELLY. Prudhoe Bay Operations: 907-887-5196
907-677-8220 6700 Arctic Spur Road Anchorage, AK 99518
o subscribe call: 907-522-9469
To
T www.uicprofessionalservices.com
A MEMBER OF THE UKPEAĠVIK IÑUPIAT CORPORATION FAMILY OF COMPANIES Believe. Commit. Achieve.
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oleumNews.com
THE EXPLORERS 31
nabors.com
Safer. Smarter.
Better.
32 THE EXPLORERS
Caelus sanctions Nuna;
acquires exploration acreage
Royalty relief leads to Nuna development; exploration focused
on acquisition of leases on eastern North Slope
By ERIC LIDJI
Caelus Energy Alaska LLC
E xploration begins with lease sales, field-

work, seismic surveys and wells and, ide-
ally, ends in development. Caelus Energy
COMPANY HEADQUARTERS: Dallas, Texas
TOP EXECUTIVE: James C. Musselman,
president and CEO
TELEPHONE: 214-368-6050 • WEBSITE: www.caelusenergy.com
Alaska LLC is currently working on two ven-
tures at the opposite ends of that spectrum. Ear-
lier this year, the company officially sanctioned an opportunity the company deliberately pursued by submitting
a development at the Nuna satellite of its some $15 million in high bids on some 322,795 fairly contiguous
Oooguruk unit. At the same time, the company acres in the North Slope and Beaufort Sea areawide lease sales in
has been quietly preparing to explore acreage it November 2014.
JAMES MUSSELMAN The Dallas-based Caelus Energy LLC is a relatively young com-
recently acquired through lease sales.
The former is a project at the threshold between exploration and pany created by principals with a history of guiding two independ-
development. The latter is more of an opportunity than an explo- ents through short-term projects.
ration venture with publicly defined details. Jim Musselman and various colleagues acquired a struggling in-
The former is a project Caelus inherited when it acquired the dependent called Triton Energy in the 1990s and sold it to Amerada
Alaska assets of Pioneer Natural Resources Inc. in 2014. The latter is
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THE EXPLORERS 33
CALEUS ENERGY continued from page 33 a little bit worried or a bit scared of doing financing necessary to go forward with
business in hostile places, you’re done.” some good-sized developments on the
Hess in 2001 for $3.2 billion on the strength The parties originally agreed to make the North Slope,” Musselman told Petroleum
of several projects, particularly a quick ef- sale for $550 million and dropped the price News at the time.
fort to bring a West Africa discovery online. to some $300 million in March 2014, clear-
Next, Musselman and his team founded Royalty relief
ing the way for the deal to close in April
the independent Kosmos Energy, which 2014. When Caelus announced its arrival in
made a discovery in offshore Ghana that Through its first year in Alaska, Caelus Alaska, in October 2013, Musselman said
propelled the company to a public offering started the process Musselman has under- the company would begin work on devel-
in 2011. taken twice before. When Caelus an- oping the Nuna satellite “pretty much im-
In both cases, Caelus executives high- nounced the acquisition in October 2013, mediately.”
light similar accomplishments: quickly rais- Musselman said his company would spend And after the company finally closed on
ing large sums of money on the private at least $300 million developing the Ooogu- the acquisition, Musselman said the com-
market, making exceptionally quick turn- ruk unit, specifically its Nuna satellite, pany was aiming to bring the field into pro-
arounds from discovery to development in which Pioneer had spent considerable duction by mid-2016. “We’ve got the funds
difficult operating environments and pro- money appraising. committed and we’re moving forward as
ducing large profits for investors by eventu- But, Musselman added, the company quickly as we can,” Musselman said, esti-
ally taking a company public or selling it to hoped to raise more than $1 billion for fu- mating some $550 million on new facilities
a larger company. ture development work and saw the poten- and $800 million to $900 million for drilling
In 2011, instead of staying with Kosmos tial to spend as much as $1.5 billion in wells.
after taking the company public, Mussel- Alaska over a five-to-six-year period. When By the time Caelus submitted its latest
man formed another privately held inde- it closed on the sale in April 2014, Caelus plan of development for Oooguruk in June
pendent called Caelus Energy. The also formed a strategic partnership with the 2014, though, the company told state offi-
company made its first big move in October international investment company Apollo cials it was still determining the economics
2013 when it struck a deal with Pioneer Nat- Global Management, which provides short- of Nuna.
ural Resources, which decided to sell its term funds and an avenue for future bor- Through a previous appraisal program,
Alaska assets to free up capital for its opera- rowing. Pioneer Natural Resources had estimated
tions in West Texas. “We feel very comfortable that we can that the Torok formation reservoir contained
Showing his willingness to tackle Alaska, do several billion dollars-worth of develop- between 75 million and 100 million barrels
Musselman said, “If you’re not nervous and ment and have the requisite equity and debt of oil.
The reservoir, though, is too far south to
be developed economically from the exist-
ing Oooguruk Island, which means Caelus
would need to construct new onshore facili-
ties near Oliktok Point. “There’s a tremen-
dous amount of oil in place,” Caelus Senior
Vice President for Alaska Operations Pat
Foley told an industry audience in Novem-
ber 2014. “And the question on Torok is:
What is the recoverable portion going to
be?”
In July 2014, Caelus asked the state to
modify the royalty structure at Nuna, say-
ing it would be unable to proceed with de-
velopment without help. The company
requested a flat 5 percent royalty rate on 11
leases associated with the satellite until the
project reached payout — meaning rev-
enues covered upfront costs. At that point,
rates would increase by 1.875 percent annu-
ally, for four years, and then returned to
original levels.
Instead, the state offered a 5 percent roy-
alty rate on five Nuna leases if Caelus met
various sanctioning, spending and develop-
ment targets through early 2017. The pre-
liminary decision came as Gov. Sean Parnell
lost a re-election bid, which prompted Rep.
Les Gara to ask the state to give the final de-
cision to incoming Gov. Bill Walker.
In late January, the state approved the
34 THE EXPLORERS
CALEUS ENERGY continued from page 34
“That’s one of the main reasons we’re in Alaska. We do
royalty reduction. The ruling required Caelus to sanction the project want to explore. We think there are tremendous
by the end of March 2015, begin spending money by the end of Sep- opportunities remaining.”
tember 2015, spend at least $260 million and bring the field into sus-
tained production by the end of September 2017. The final decision —Jim Musselman, Caelus Energy President and CEO
also retained early requirements for Caelus to provide public re-
ports to extend knowledge about developing similar geology. erty unit, the Badami unit and the Point Thomson unit.
In a March 2015 letter to Alaska Department of Natural Re- There has been relatively little previous exploration in the re-
sources Deputy Commissioner Marty Rutherford, Foley wrote that gion, although the eastern North Slope has always attracted ambi-
the Caelus Energy Alaska board of directors had, in September tious companies, particularly independents. The pending
2014, sanctioned the project and committed $76 million of its 2014 development of the Point Thomson unit and the recently stability
capital budget to it, subject to the approval of its pending request of the Badami unit operation could make the eastern North Slope
for royalty modification. With the favorable January 2015 ruling, the more economic for marginal fields.
company had “fully sanctioned” the Nuna project. “One thing you’ll find about Caelus: We’re not going to let the
As such, Caelus began initial construction activities earlier this grass grow under our feet,” Foley said at the Resource Develop-
year. The work primarily consisted of gravel mining for an access ment Council’s annual meeting on Nov. 18, the day before the
road, drill site and pad expansion. The company told state officials lease sales. “Pace is everything. We’re not going to be careless, but
it has already “prepared and executed” 16 authorizations for expen- we’re going to go as fast as we can.”
diture totaling more than $480 million and intended to prepare an- Using nearly $1 billion in available funding from Apollo,
other 31 authorizations for well activities, totaling, in aggregate, Caelus planned a $500 million capital for Alaska this year. The ma-
more than $800 million. jority of that funding is going toward expanding the existing facil-
ities serving the Oooguruk unit and developing new facilities for
Exploration prospects
Nuna.
While much of its first year in Alaska was publicly focused on But Caelus also earmarked some money for exploration. The
Nuna, Caelus was also eyeing potential exploration opportunities company commissioned two 3-D seismic programs, including
on the other side of the North Slope. one targeting the acreage grabbed at the lease sales.
“I don’t have anything I can tell you specifically about where Caelus is keeping an eye out for potential partnerships,
our first exploration well will be,” Musselman told Petroleum Foley said at the meeting.
News in April 2014, when the company closed on its purchase. “I
would like to think that we would drill two to three exploration Contact Eric Lidji at ericlidji@mac.com
wells per year, starting hopefully this coming winter. … That’s one
of the main reasons we’re in Alaska. We do want to explore. We
think there are tremendous opportunities remaining.”
In November 2014, through a month-old subsidiary called
Caelus Alaska Exploration Co., the company acquired 322,795
state-owned acres, comprising more than half of the acreage re-
ceiving bids in the North Slope and the Beaufort Sea areawide
lease sales. The total acquisition included 263,674 acres from the
North Slope sale and 59,120 acres from the Beaufort Sea sale. Prior
to the sales, Caelus held some 40,373 acres of state leases.
The leases mostly stretch across a somewhat contiguous area
running from south of the Prudhoe Bay unit to south of the Point
Thomson unit, mostly east of the Dalton Highway.
The large block includes several former prospects.
The region south of the Prudhoe Bay unit includes the Toolik
No. 1 well, which was a dry hole ARCO drilled in the 1960s to de-
termine how far south the Prudhoe Bay field extended. Some 10
miles to the east is the Jacob’s Ladder C well and Jacob’s Ladder
C-A sidetrack, which Anadarko Petroleum Corp. drilled in 2007
and 2008 to evaluate Karst topography. The wells found “no com-
mercial hydrocarbons,” according to Anadarko.
About a mile northeast of the Jacob’s Ladder wells is the Lake
79 No. 1 well, a Shell operation from early 1968 that also unsuc-
cessfully tried to piggyback on Prudhoe.
The results of those wells might lead one to wonder what
Caelus saw in the region south of Prudhoe Bay. The answer per-
haps lies much deeper than those early efforts thought to explore
— in the stacked geology thought to contain the source rocks for
Prudhoe Bay.
The remaining acreage Caelus acquired in the sales is set back
slightly from the coast line south of the Duck Island unit, the Lib-
THE EXPLORERS 35
ConocoPhillips staying close
to home for the time being
The company is appraising accumulations in existing units
and saving NPR-A development for a later date
By ERIC LIDJI
ConocoPhillips Co.
S ince ConocoPhillips Alaska Inc. was created through a 2002

merger, the company has been looking for oil and natural
gas in two general directions — outward and inward.
Houston, Texas
ALASKA OFFICE: 700 G St., Ste. 1950, Anchorage, AK 99501
“Outward” characterizes the exploration activities designed TOP ALASKA EXECUTIVE: Joe Marushack
to extend North Slope development to the west of the Prudhoe PHONE: 907-276-1215
Bay unit. “Inward” characterizes a quieter inclination to increase COMPANY WEBSITE: www.conocophillipsalaska.com
development activities within producing oil and gas units.
ConocoPhillips has generally been the most active explo- pursuing development of viscous oil in the West Sak formation.
ration company in Alaska over the past Of those, the second is closest to what is traditionally consid-
decade. This year, though, the company has ered “exploration.”
been focused on existing units. Sinclair Oil and Gas discovered the Kuparuk River oil pool in
ConocoPhillips operates four North Slope 1969. ARCO Alaska sanctioned development about a decade
units: the Kuparuk River unit and the Colville later, prompted by rising international oil prices.
River unit on state land and the Greater Through mergers and acquisitions between 1999 and 2002,
Mooses Tooth unit and Bear Tooth unit on ConocoPhillips became the operator of the Kuparuk River unit.
federal land. The company also holds consid- Today, ConocoPhillips owns a 55.3 percent interest in the main
erable exploration acreage in the Chukchi Sea. field, with BP Exploration (Alaska) Inc. owning 39.2 percent,
And ConocoPhillips is a major working inter- Chevron U.S.A Inc. owning 4.9 percent and ExxonMobil Alaska
JOE MARUSHACK
est owner in the Prudhoe Bay unit. Production Inc. owning 0.6 percent. The same four companies
The projects ConocoPhillips completed last year and funded own the Kuparuk satellites, albeit in slightly different percent-
for this year are relatively risk averse and generally develop- ages.
ment oriented. At the Kuparuk River unit, the company is in- Since Kuparuk production peaked at 339,386 barrels per day
creasing development drilling, building a new drilling pad and in December 1992, activities have included infill drilling, satellite
conducting some appraisal drilling at an undeveloped accumu- development and enhanced oil recovery.
lation within the unit. At the Colville River unit, the company is The current appraisal activities at Kuparuk emerged from re-
finishing the long-delayed CD-5 drilling satellite of the Alpine cent seismic activity. The company commissioned the Western
field. Kuparuk 3-D seismic survey in 2011, which led to an “infrastruc-
Those two units already have production. ture-led exploration strategy” focusing on drilling opportunities
ConocoPhillips was more cautious at its two units without near existing infrastructure. That strategy is the opposite of the
production. The company postponed activities for the first de- wildcat exploration ConocoPhillips conducted in the early 2000s
velopment in the Greater Mooses Tooth unit for the year and in the far-flung corners of the NPR-A.
proposed no work for the Bear Tooth unit. And the company has In early 2012, ConocoPhillips drilled Shark Tooth No. 1 to ap-
generally put any Chukchi Sea exploration on hold pending praise an oil discovery in the southwest corner of the unit.
more regulatory and legal certainty. ARCO had discovered the accumulation in the Kuparuk reser-
ConocoPhillips is also one of the most important producers in voir in the late 1980s with the KRU 21-10-08 well but never pur-
the Cook Inlet basin — operating the legacy Beluga River and sued development.
North Cook Inlet units and the associated Kenai liquefied natu- Toward the end of 2012, ConocoPhillips said the well had
ral gas export terminal. But it has been several years since the “discovered hydrocarbons in the Kuparuk sands, in accordance
company drilled development wells at either unit and much with expectations, and confirmed mapped volumes.”
longer since the company conducted traditional exploration ac- Developing Shark Tooth from any of the three existing drill
tivities — drilling or seismic — anywhere in the basin. sites in the southwest corner of the unit — 2L, 2M and 2K —
would have pushed the limits of existing drilling technology, ac-
The Kuparuk River unit
cording to ConocoPhillips. Therefore, the company proposed the
ConocoPhillips’ current activities at the Kuparuk River unit first new drill site at the Kuparuk River unit in nearly 12 years,
can be divided into three general categories: delineating existing
accumulations, appraising recent discoveries within the unit and continued on page 38
36 THE EXPLORERS
THE EXPLORERS 37
CONOCOPHILLIPS continued from page 36
ConocoPhillips proposed no exploration for the Colville River
Drill Site 2S. The company began laying gravel early in 2014 and unit in its current plan of development and said it was
officially sanctioned the project in November 2014. “evaluating exploration opportunities to conduct in 2016.”
The $500 million project includes a pad, a new gravel road
and associated power lines, pipelines and surface facilities. Pad
construction occurred over the winter, with drilling expected to The current project involved drilling two wells to appraise the
begin this summer and startup planned for the end of the year, commerciality of the Moraine interval. The first was the DS3S-
according to a company timeline. The site is expected to produce 620 Moraine well drilled from an ice pad on ADL 025528 and
some 8,000 barrels per day at its peak. connected back to Drill Site 3S using a 2.5-mile ice road. The sec-
In late 2014, ConocoPhillips began permitting a similar ap- ond was the Moraine No. 1 well “to acquire core, logs and fluid
praisal project to the north, near the Palm satellite, (which had samples,” which will be used “to delineate the Moraine reser-
been the newest drill site, before the 2S project). voir” in the region, according to a December 2014 filing.
Phillips Alaska Inc. discovered the Palm satellite at the west- ConocoPhillips had intended to commission a 3-D seismic
ern edge of Kuparuk in 2001. survey this year over some 103 square miles near Oliktok Point,
ConocoPhillips brought the satellite online in November 2003 at the northern end of the unit, but postponed the project, saying
from Drill Site 3S. The accumulation is in a Kuparuk C4 interval the area was too crowded with activity this winter to guarantee a
now known to be in communication with the main Kuparuk quality shoot. The company said it would consider the project
reservoir. Palm is generally managed as part of the main Ku- again in a future budget cycle.
paruk field.
Over the winter of 2012-13, ConocoPhillips conducted a pilot The Colville River unit
test on DS 3S-19, one of the original Palm development wells
The Colville River unit continued the westward expansion of
drilled in 2003. The test involved adding a perforation to the well
the North Slope.
and performing hydraulic fracturing operations to gauge the po-
ARCO Alaska discovered the Alpine oil pool in 1994 and
tential of developing the overlying Cretaceous Brookian Moraine
brought the field online in November 2000. ConocoPhillips now
interval.
operates and owns a 78 percent working interest in the unit.
“Any development would, of course, require adequate ap-
Anadarko Petroleum Corp. owns the remaining 22 percent inter-
praisal and study to prove commerciality,” the company told
est. Similar to its strategy at the Kuparuk River unit, Cono-
state officials in its 2013 plan of development, a sentiment the
coPhillips has been expanding development drilling at the main
company reiterated in its 2014 plan of development this past
June.
38 THE EXPLORERS
Alpine field while bringing a series of satellites into production.

ConocoPhillips initially developed Alpine from the CD-1 and
CD-2 pads. In 2003, the company proposed five Alpine satellites
— called Fiord, Nanuq, Lookout, Spark and Alpine West — and
hinted at 10 potential satellites within 30 miles of the Alpine
field.
ConocoPhillips brought the Fiord satellite (CD-3) and the
Nanuq satellite (CD-4) online in 2006 and brought the Qannik
satellite online from an expanded CD-2 pad in 2008.
Those three satellites brought the company to the edge of the
Colville River.
A proposal to cross a channel of the river to develop the
Alpine West satellite with the CD-5 pad first yielded local oppo-
sition and then, after ConocoPhillips had addressed local con-
cerns, federal obstacles. The U.S. Army Corps of Engineers
finally approved a bridge across the channel in late 2011 and
now ConocoPhillips is completing site work and fabrication in
advance of installation in early 2015 and first oil in late 2015.
ConocoPhillips proposed no exploration for the Colville River
unit in its current plan of development and said it was “evaluat-
ing exploration opportunities to conduct in 2016.”
The NPR-A
The remaining Alpine satellites are now treated as NPR-A
projects.
In May 2001, Phillips Alaska Inc. announced the first NPR-A
JUDY PATRICK
discoveries since the federal government re-opened the region

to exploration in 1999. The company had drilled six wells and a
sidetrack over the previous two seasons. Spark No. 1 and Spark
No. 1A, Moose’s Tooth C, Lookout No. 1, Rendezvous A and
Rendezvous No. 2 all encountered hydrocarbons. The sixth
well, which had targeted a different interval, was a dry hole.
“These discoveries mark an important milestone in the
Alaska oil industry,” Phillips Alaska President Kevin Meyers
said. “Though the results are preliminary, we’re confident the
discoveries will prove to be of commercial quantities. We be-
lieve that the five successful wells have encountered three sepa-
rate hydrocarbon accumulations.”
The development of CD-5 should make it easier to pursue
those NPR-A prospects, which are also on the other side of the
Colville River from the Alpine processing facilities.
The GMT-1 project is a modified version of the former Look-
out satellite, which would have been the CD-6 pad. The com-
pany changed the name and the scope of the project after the
U.S. Bureau of Land Management formed the Greater Mooses
Tooth unit in 2008. The revised application described an 11.8-
acre gravel pad with the capacity for 33 wells, although the
company has initially planned an eight-well development pro-
gram.
The $890 million development was expected to come online
by late 2017, producing some 30,000 bpd and employing at least
400 people plus support positions at its peak.
In late January 2015, ConocoPhillips deferred the project.
“The project is challenged by permitting delays and require-
ments, as well as the current oil price development. In 2015, we
will continue to shoot seismic over the GMT1 area and progress
engineering,” ConocoPhillips Alaska President Trond-Erik Jo-
hansen said in a statement. As of mid-February, the company
said seismic was nearly done and engineering work continued.
THE EXPLORERS 39
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THE EXPLORERS 45
As it is currently doing at the Colville River unit,
Also in February, the BLM issued a record of decision for the ConocoPhillips appears to be pursuing a step-out strategy at
project and selected the development strategy proposed by
the Greater Mooses Tooth unit.
ConocoPhillips and approved by the U.S. Army Corps of Engi-
neers. The BLM had previously endorsed a different develop-
ment alternative. work, ConocoPhillips spent some $504 million in high bids on
As it is currently doing at the Colville River unit, Cono- 98 tracts in a federal lease sale in the Chukchi in early 2008.
coPhillips appears to be pursuing a step-out strategy at the ConocoPhillips later sold a 25 percent working interest in its
Greater Mooses Tooth unit. The company drilled two explo- Devil’s Paw prospect to Statoil of Norway and farmed out a 10
ration wells west of GMT-1 in early. The Rendezvous No. 3 well percent working interest of its leases in the Chukchi to OOGC,
was on lease AA-81784, and the Flattop No. 1 well was on lease the U.S. subsidiary of the Chinese National Offshore Oil Corp.
AA-87896. The former delineated one of the original May 2001 A legal challenge to the lease sale delayed a drilling program
discoveries. The latter fulfilled a work commitment related to a proposed for 2011. The company later outlined a drilling pro-
2009 expansion of the unit. The company has yet to release re- gram for 2014, although it later canceled those plans.
sults from either well. “While we are confident in our own expertise and ability to
In 2009, the BLM formed the Bear Tooth unit over 23 leases safely conduct offshore Arctic operations, we believe that more
covering some 105,655 acres in the area northwest of the Greater time is needed to ensure that all regulatory stakeholders are
Mooses Tooth unit. The company staked seven well and side- aligned,” Johansen said at the time. At an earnings call around
track locations in the Bear Tooth unit in late 2012 and drilled the the same time, Executive Vice President of Exploration and Pro-
Cassin No. 1 well in early 2013. The well, which the company duction Matt Fox said ConocoPhillips had been “on the cusp of
had referred to as a “wildcat,” made “a new oil discovery,” ac- having to make some very significant commitments” for equip-
cording to the company. Additional details have been scarce. ment, but felt unconfident about making those commitments
without more regulatory certainty. “We felt that the prudent
The Chukchi Sea thing to do was to take a pause there and let things evolve a lit-
After Shell, ConocoPhillips is the second-most active com- tle bit before decide to drill those wells.”
pany in the Chukchi Sea. A large discovery in the Chukchi Sea would extend infra-
The distinction is faint praise, especially given the regulatory, structure across the NPR-A, which would improve the econom-
legal and logistical matters that have delayed activities off the ics of many marginal fields throughout the reserve.
northwest coast of Alaska over the past seven years.
After acquiring some seismic and conducting some field- Contact Eric Lidji at ericlidji@mac.com
When oil was discovered at Prudhoe Bay,

we’d already been in business for 20 years.
Alaska’s fully integrated steel fabricator, service center and coatings facility.
SteelfabAK.com
46 THE EXPLORERS
Doyon adds oil to its targets
for Nenana exploration
The results of exploration for natural gas have yielded
some intriguing possibilities for finding oil
By ERIC LIDJI
For Petroleum News NAME OF COMPANY: Doyon Ltd.
COMPANY HEADQUARTERS: 1 Doyon Pl.,
D oyon Ltd. began searching for natural gas in the Nenana

Basin in the 2000s, hoping to alter the existing dynamics
for fueling homes and businesses in Interior communities.
Ste. 300, Fairbanks, AK 99701
TOP ALASKA EXECUTIVE: James Mery,
Doyon Ltd. senior vice president,
The Interior is largely dependent on oil for space heating. A lands and natural resources
small discovery in the Nenana basin would provide a local PHONE: 888-478-4755 • COMPANY WEBSITE: www.doyon.com
source of relatively cheap fuel. A large discovery would be hun-
dreds of miles closer to Outside markets than North Slope reser-
voirs. Exploration license
Geology, politics and economics have changed that plan As with all exploration activities outside of the North Slope or
somewhat. Cook Inlet, the current program in the Nenana basin started
To date, the company has drilled two exploration wells in the through the Alaska exploration license program.
region and recently commissioned a 2-D and a 3-D seismic pro- The program allows companies to nominate regions for explo-
gram in the area surrounding its two wells. ration activities and creates the opportunity for turning portions of
In March 2015, Doyon Vice President of Lands and Natural the license area into traditional mineral leases.
Resources Jim Mery told state lawmakers that the company was
“looking hard” at drilling a third well in 2016.
This time, though, the company would also be looking for oil.
“We view the chance of success in the next well for oil as
somewhere between one in five and one in 10,” Mery said. The
minimum economically viable field size would be between 25
Keeping our oil
f lowing
million and 50 million barrels, depending on the price of oil,
Mery said.
The company is still optimistic about finding gas. “Gas is so
de-risked at this point, we believe, based on work that we’ve
done, that there is 50-50 chance of commercial success next time
we drill,” Mery told lawmakers. But current plans to truck North
Slope natural gas into the Interior could strand Nenana gas for a
decade or longer, according to Mery.
A future large-diameter gas pipeline coming down from the
North Slope could potentially grab Nenana production along the
way but would require some technical considerations.
The current Nenana exploration program follows previous
forays into the region by other companies. Unocal drilled the
3,062-foot Nenana No. 1 well in 1962. ARCO drilled the 3,590-
foot Totek Hills No. 1 well in 1984. “Except for minor amounts of At Flowline Alaska, we’ve spent
gas associated with coal beds no hydrocarbon shows were ob- decades helping to keep oil flowing
served in the wells,” the Alaska Division of Oil and Gas reported on the North Slope.
in 2002. “Reports of oil seeps in the basin are unconfirmed.”
It’s a record we’re proud of, and we
Given the considerable coal quantities in the region, the state ex-
look forward to a future where we
pected the basin to be gas-prone.
can provide the service and support
Doyon was created through the Alaska Native Claims Settle-
necessary to grow and expand
ment Act of 1971. Seeing the opportunities both for revenues and
Alaska’s energy industry.
for a cheaper local energy source for the Interior, the company
took an interest in the resource potential of the region. When in- Because we want to keep Alaska’s
dustry interest in exploration dimmed in the late 1990s, Doyon oil flowing, today and tomorrow.
began organizing an exploration program.
flowlinealaska.com
THE EXPLORERS 47
DOYON continued from page 47 Prudhoe Bay
!
P Well Sites
Doyon State O&G Leases
Doyon and the Houston-based Yukon Flats Exploration Areas
independent Andex Resources LLC Map
Fairbanks Yukon Flats Basin Oil and Gas Basins
12,000 sq miles Doyon Owned O&G Interests
formed a joint venture in late 2001 Area
Available 2D Seismic
Anchorage
FORT YUKON
to explore a section of the Nenana
Valdez
3D Seismic "
Roads
basin. The partners intended to 0 50 100 200
Miles
300 400 500
Access Roads
National Geographic, Esri, DeLorme, NAVTEQ, UNEP-WCMC, USGS, NASA, ESA, METI, NRCAN, GEBCO, NOAA, iPC
commission a seismic survey in the Railroad

BEAVER BIRCH CREEK North Slope Gas Line Route
winter of 2002 and 2003 and drill in "
"
Trans Alaska Pipeline System
early 2004. Electric Transmission Lines
At the time, Doyon estimated
that the Nenana basin contained STEVENS CIRCLE
"
"
250 million barrels of recoverable oil VILLAGE
and between 250 billion and 1 tril- TAPS Pump )

"
Station 6
lion cubic feet of recoverable natu-
ral gas, enough to meet the needs of
LIVENGOOD
Fairbanks with some potential left-
overs for Anchorage. "
)
TAPS Pump
“When industry explored the Station 7
basin in the early ’80s, their focus MINTO

"
was oil but they knew it was a gas-

MANLEY HOT SPRINGS
prone basin and thought there was "
FAIRBANKS
also a good shot at oil. Andex’s Nenana Basin
1,200 sq miles Oil
focus is gas,” Andex Resources Ex- Refineries
ecutive Vice President Jim Dodson Unocal Nenana #1

P !
! P ! P NENANA
(1963)
Nunivak #1
(2009)
O
Nenana ROW
Nunivak #2
told Petroleum News in August (2013)
2001. “We’d be happy if we found 0 10 20 30 40 50
oil, but our focus is traditional natu- !

P
Miles
Totek Hills #1
ral gas.” (1984)
The Alaska Department of Natu-

ral Resources issued a seven-year license to Andex Resources in Vice President of Exploration for the Northern Region Bob Mason
August 2002. The license covered 482,942 acres in the Nenana basin told Petroleum News in March 2005. In addition to the thermo-
and required Andex to post bonds and spend at least $2.525 million genic supplies, he said, “We know that there’s biogenic gas in this
exploring. The joint venture grew its land position several months basin.”
later when the Alaska Mental Health Land Trust leased it 9,500 The U.S. Geological Survey had estimated that central Alaska
acres adjacent to the exploration license area in January 2003. contained some 500 billion to 7.3 trillion cubic feet of technically re-
coverably reserves with a mean of 2.8 tcf.
Early optimism Early wells were shallow. The joint venture planned to drill
deep, at least 10,000 feet. “I want to take a look at structures that
Even though Andex was initially bullish about the program,
preserve a very thick layer for my initial well,” Mason said. “We
telling state lawmakers in January 2002 that it expected to spend
are evaluating structures deeper in the basin where we don’t have
$18 million to drill three exploration wells and $6 million for seis-
to worry about flushing, we don’t have to worry about section
mic, a series of obstacles prevented drilling for a number of years.
missing — that sort of thing.”
Andex wanted state lawmakers to extend a 10-year gas explo-
ration incentive program set to expire in 2004. The program offered Political obstacles
credits in return for geophysical information. That provision had
scared one exploration company away and made another ineligible As the financial and technical components of the program were
but proved enticing for the Nenana basin. The state agreed to ex- coming together, the joint venture faced a series of political obsta-
tend the program until 2007. cles, which delayed the program for years.
In December 2004, Andex and Doyon partnered with the Usi- Andex postponed its 2006 exploration program while lawmak-
belli Coal Mine affiliate Usibelli Energy LLC and the Alaska Native ers debated the Petroleum Profits Tax and postponed its 2007 pro-
corporation Arctic Slope Regional Corp. gram after the Petroleum Profits Tax became law.
Eager to get started, the joint venture commissioned a 2-D seis- Evolving state policy overlooked the Interior. The Petroleum
mic survey from PGS Onshore for early 2005 with the intention of Profits Tax excluded the Interior from a tax break for Cook Inlet
drilling as soon as 2006. The $3 million campaign covered some 218 production. At the same time, a proposed contract for producing
square miles of the region. Andex said it planned to spend another and marketing North Slope natural gas also excluded the Interior
$3 million acquiring information from previous seismic surveys basins.
over the region. The Alaska’s Clear and Equitable Share law, approved in late
Even before the seismic program was complete, Andex was 2007, expanded the Cook Inlet tax credit to include any gas pro-
growing optimistic about the region. Measuring just the thermo- duced for use within Alaska. By then, though, Andex had lost in-
genic gas, Andex believed the basin could contain 3 trillion cubic terest, leaving Doyon and its two partners to search for another
feet of recoverable reserves and 10 tcf of total reserves. “That num- partner.
ber was based on some very, very conservative inputs,” Andex
48 THE EXPLORERS
DOYON continued from page 48
In March 2015, Doyon Vice President of Lands and Natural
The delay created a regulatory obstacle. The seven-year explo- Resources Jim Mery told state lawmakers that the company
ration license was set to expire in September 2009. In late 2008, the
was “looking hard” at drilling a third well in 2016.
state approved a three-year extension.
The Denver-based independent Babcock & Brown Energy be-
came the operator of the joint venture in early 2009 and announced the North Slope and lawmakers talked about uniting the Railbelt
plans to drill at least one 10,500-foot well that summer. Babcock & utilities, Doyon postponed its seismic program until it had more
Brown subsequently changed its name to Rampart Energy Co. certainty about its position in the statewide energy market.
Andex executive Jim Dodson even returned to Alaska as an execu- Doyon also began searching for additional investors. The other
tive for Rampart. four joint venture partners in the program had lost interest after the
A fifth company, Cedar Creek Oil and Gas Co., also joined the lackluster results of the Nunivak No. 1 well.
joint venture. Ultimately, Doyon decided to go it alone. The company com-
missioned its 2-D seismic survey in the northern end of the basin in
Going it alone the winter of 2011 and 2012 and announced plans to drill the Nuni-
By scheduling its program for summer, the joint venture was vak No. 2 exploration well some seven miles west of its first well.
able to secure the Arctic Wolf No. 2 rig after the end of the winter The state helped by approving an incentive program specifically
exploration season of the North Slope. for “frontier basins” in early 2012. The program included explo-
The joint venture drilled the Nunivak No. 1 well about three ration credits and lower production taxes.
miles west of the town of Nenana in July and August 2009 to a total Once again, though, Doyon was nearing the end of its explo-
depth of 11,100 feet. The roughly $15 million well failed to find ration license. The company began converting sections of the area
commercial volumes of gas, but information collected during the into traditional leases, which it still maintains.
drilling suggested that the basin was much deeper and cooler than In mid-2013, Doyon drilled the 8,667-foot Nunivak No. 2 well
previously expected and offered tantalizing clues about high re- using the Nabors rig 105.
source potential in the basin, Doyon said. As before, the well encountered encouraging geology but no
To get a wider understanding of its large license area, Doyon commercial volumes of oil or gas. “The Nunivak No. 2 drill pro-
commissioned a seismic survey over the northern end of the basin. gram was only the second deep test of this basin,” Doyon CEO
“Other than a few gravity measurements at the northern end of the Aaron Schutt said in a November 2013 statement. “Despite the dis-
basin, there really isn’t any exploration,” Mery said in April 2010. appointment of a non-commercial effort, other results from the
The program ran into political obstacles. well clearly indicate the potential for significant commercial dis-
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THE EXPLORERS 49
Furie developing and exploring
simultaneously
The company is continuing its exploration work at Kitchen Lights
as it moves toward first oil at the unit
By ERIC LIDJI
Furie Operating Alaska LLC
I f all went well, Furie Operating Alaska LLC began installing a

natural gas production platform in waters of the Cook Inlet this
spring, after The Explorers went to print.
League City, Texas
ALASKA OFFICE: 1029 W. Third Ave., Ste. 500,
Although the company had originally planned to install the Anchorage, AK 99501
platform last summer, the parts only arrived in Alaska in Septem- TOP ALASKA EXECUTIVE: Lars Degenhardt
ber 2014 — too close to the onset of winter. The company eventu- TEXAS TELEPHONE: 281-957-9812
ally moved the components for the platform to Seattle for the ALASKA TELEPHONE: 907-277-3726
winter.
Installation is now planned for early 2015, after the breakup of
from the private equity firm Energy Capital Partners to finance the
sea ice in Cook Inlet.
development operations. The company recently asked the Alaska
The installation will bring the total number of offshore plat-
Industrial Development and Export Authority for as much as $50
forms in the region to 17 and will allow the Alaska subsidiary of
million in financing.
the German independent Deutsche Oel & Gas AG to begin devel-
The loan would cover the remaining costs to install the offshore
opment drilling and eventually bring its Kitchen Lights unit into
platform, the subsea pipelines and the onshore production facility.
production.
“Getting the AIDEA financing allows us to shift some of our pres-
Many projects in Alaska move from exploration to develop-
ent equity over to the exploration side,” Vice President for Govern-
ment then into an extended effort to delineate producing reser-
ment and Regulatory Affairs Bruce Webb told Petroleum News in
voirs. The Kitchen Lights unit is somewhat unique.
January 2015.
The state created the unit in 2009 by combining three smaller
The Kitchen Lights unit exploration plan expires in early 2016.
prospects. The unit is currently the largest in the Cook Inlet basin.
In a March 2015 plan, Furie said it would drill two development
The current development project covers only a portion of the total
wells this year but postpone completion to 2016. The delay will
area. The remainder requires further exploration and develop-
allow the company to accommodate changes in its schedule for in-
ment.
stalling the production platform, will result in “significant cost sav-
The current plan of exploration divides the unit into four explo-
ings by focusing on drilling operations” and will improve the
ration blocks: North, Corsair, Central and Southwest. The produc-
effectiveness of completion activities by giving the company a
tion platform targets the Corsair block.
chance to analyze the results of its 2015 drilling plans, according to
As Furie nears the third-quarter target for starting production, it
Furie.
is studying ways to finance both the development and future ex-
The plan also calls for Furie to either drill another exploration
ploration activities at Kitchen Lights.
well in one of the unexplored blocks at the unit or to acquire 3-D
Furie is currently using equity from its parent company, from
seismic information over the entire unit.
private German funds and through a $160 million credit facility
Getting into the Kitchen
L C DESIGN AB ENT The optimistic situation at the Kitchen Lights unit is remarkable
www.tanks a lonc.com given its history.
For Orders Call: CUTTING BOXES The Houston-based independent Escopeta Oil & Gas Co. spent
907-283-0580 BOTTLE RACKS more than a decade acquiring a lease position in upper Cook Inlet,
DRUM RACKS securing a jack-up rig and bringing the rig to Alaska to conduct an
EN BS-12079 TANKS exploration program. All the while, the company had to contend
AECCA 2012.1
STANDARD GPS with the regulatory consequences of missing deadlines. Although
PALLET RACKS successful, the company had many bumps and bruises by the time
CARGO BOXES it was ready to start drilling.
CARGO BASKETS For one, a corporate shuffle in 2011 essentially divided Es-
42134 Kenai Spur Hwy (Yard) ON-SITE SPILL
copeta’s assets between operator Furie Operating Alaska LLC and
14896 Kenai Spur Hwy, Suite 107-A (Office) UNITS
primary working interest owner Cornucopia Oil and Gas Co. Also,
1913 tal.office@tanksalonc.net continued on page 53
50 THE EXPLORERS
FURIE OPERATING ALASKA, LLC
Furie’s Spartan 151 jack-up drilling rig, seen in the background,

is moved into in position in May for the operation of threading
the field’s gas gathering pipeline through an underground
borehole to the onshore facilities.
121 West Fireweed Lane, Suite 250, Anchorage, AK 99503

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THE EXPLORERS 51
DOYON continued from page 49 The program described in permitting results of the 3-D survey will determine
papers included both 3-D and 2-D compo- whether and where Doyon will drill in the
coveries of oil and gas and we consider it a
nents. The 3-D survey would cover some basin in the future. The 2-D surveys
success. Follow-on studies are under way
30 square miles in an area just west of the would expand on previous 2-D surveys
which will assist us in the development of
town of Nenana where it drilled its two and give Doyon a better picture of the
our forward program.” The reasons for op-
wells. The 2-D survey would cover two depths of the basin in the area north of its
timism included “excellent potential reser-
transects to the northeast. wells, Mery told Petroleum News.
voirs, competent top seals, source rocks
The 3-D survey was targeting a geo- In March 2015, Mery said the wells had
actively expelling wet gases and similar
logic feature identified in previous 2-D encountered propane, butane and pen-
shows of likely migrated gas which are in-
surveys, according to Mery. “The feature tane, which typically indicate a petroleum
dicative of an oil and/or gas-condensate
is certainly large enough to potentially system conducive to oil. “We have all the
system,” Doyon said.
hold the minimum field size … for an eco- elements of an active and prolific wet gas,
New seismic nomic project. So we’re going to image it condensate and hopefully oil system,” he
and hopefully go out and drill it,” Mery said. “Through modeling we really be-
Still optimistic, Doyon began permit- told Petroleum News in August 2014. The lieve that the basin, given the thick pack-
ting another seismic program in mid-2014. ages of source rock, really could have
produced billions of barrels of oil and tril-
lions of cubic feet of gas.”
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2020, Doyon is focusing its exploration re-
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are currently on hold while Doyon pur-
sues its Nenana leases.
A 2004 USGS study of the 13,500
square mile lowland between the trans-
Alaska oil pipeline and the Canadian bor-
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rels of oil, 127 million barrels of natural
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52 THE EXPLORERS
FURIE continued from page 50 And previous estimates of the former Northern Lights prospects
were in the range of 111 million to 358 million barrels of oil equiva-
the federal government hit the company with $15 million fine for
lent.
violating the Jones Act, which regulates foreign ships such as the
Corsair and Northern Lights are now exploration blocks in the
heavy lift vessel Escopeta used to transport its jack-up rig. Furie
Kitchen Lights unit.
has been fighting the fine in court.
One benefit to all the wrangling, though, was the actual unit. KLU No. 2 through No. 6
In July 2009, the state and the company resolved an ongoing
dispute over missed work commitments by forming the Kitchen Toward the end of it first season of drilling, Furie realized it
Lights unit. The 83,394-acre unit combined 40,733 acres from the would be unable to complete all its work commitments before the
Escopeta-operated Kitchen unit, 15,930 acres from the Renaissance Kitchen Lights unit agreement expired in early 2012.
Alaska LLC-operated Northern Lights prospect and 26,721 acres The company sought a four-year extension, through early 2016.
from the Corsair prospect previously owned by the bankrupt Pa- The state approved the extension, which came with a four-to-
cific Energy Resources Ltd. into one unit. five-well plan of exploration as well as talk of a future plan of de-
Using the Spartan 151 jack-up rig, Furie drilled the Kitchen velopment with an offshore platform.
Lights Unit No. 1 well in 2011 and 2012. Because the jack-up ar- The exploration component of the plan proposed spreading out
rived in Cook Inlet in summer 2011, Furie stopped drilling at ap- the wells to assess various small prospects across the unit area. The
proximately 8,805 feet when the end of the drilling season neared. initial Kitchen Lights Unit No. 1 and No. 2 wells would be in the
The company had intended to drill to 16,500 feet. The company Corsair prospect. The Kitchen Lights Unit No. 3 well would be in
suspended operations, in part, because the state asked the com- the central block. The Kitchen Lights Unit No. 4 and No. 5 wells
pany to slow the pace of its operations to ensure safety. would be in the southwest block. A proposed Kitchen Lights Unit
Even though the first well was only halfway to total depth, No. 6 well would be in the north block.
Furie announced a major discovery: approximately 46.7 billion The actual wells have been spread out in a different configura-
cubic feet of gas in place, which, extrapolated over a larger area, tion. Furie drilled Kitchen Lights Unit No. 1, No. 2, No. 2A and No.
suggested some 3.5 trillion cubic feet of natural gas present at the 3 in the Corsair Block, drilled Kitchen Lights Unit No. 4 in the
unit. If correct, those figures would rank among the largest discov- North block and Kitchen Lights Unit No. 5 in the Central Block.
eries ever for the Cook Inlet basin. Some state officials and industry The Spartan 151 returned to Kitchen Lights in late April 2012.
watchers expressed skepticism, saying that the announcement By August, drilling had stopped at 15,298 feet, more than 1,000
pushed the upper limits of what geologists expected the basin to feet shy of the target depth and also shy of the target pre-Tertiary
contain. rock, to leave time to begin a second well.
Speaking to lawmakers in March 2012, Furie President Damon The Kitchen Lights Unit No. 2 well reached some 9,000 feet by
Kade estimated probable gas reserves of 750 billion cubic feet and continued on next page
peak production of 30 million cubic feet per day from Kitchen
Lights, far lower than the blockbuster November 2011 estimate.
Bringing new
The lower figure was based on a smaller geographic drainage area,
Kade later told Petroleum News.
The announcement made sense, given that Kitchen Lights had
unified several smaller prospects. Kade said a deeper well might
encounter additional gas, as well as oil.
energy to Alaska’s
In early 2013, Deutsche Oel & Gas released an assessment of
“roughly one ninth of its production area in Kitchen Lights unit.”
North Slope
The assessment estimated a mid-case scenario of 72.1 million bar-
rels of oil and 543.8 billion cubic feet of gas “classified as ‘probable’
and ‘prospective’ exploitable reserves.” Under generally accepted
definitions, “probable” indicates 50 percent likelihood and
“prospective” indicates 10 percent likelihood. The company subse-
quently pulled the release and never responded to requests for
comment.
Such assessments would be interesting for any undeveloped
field. But the intrigue is increased at Kitchen Lights because of pre-
vious grand predictions. In 2001, Escopeta President Danny Davis
announced that a new analysis of old seismic information sug-
gested that Cook Inlet contained a major undiscovered resource
potential in the Kitchen and East Kitchen prospects. He named the
prospects “kitchen” after the geological nickname for the superhot
source rocks that produce oil and gas supplies.
Previous leaseholders in the region have also offered thoughts.
Before forming the Corsair unit over a portion of the current
Kitchen Lights unit in 2003, Forest Oil estimated that the prospect
might contain 137 million barrels of oil and up to 480 billion cubic
feet of gas. Pacific Energy Resources Ltd. acquired the unit in 2007
and later estimated that recoverable reserves might be as high as www.northamerica.repsol.com
100 million barrels of oil and 500 billion cubic feet of natural gas.
THE EXPLORERS 53
FURIE OPERATING ALASKA, LLC
FURIE continued from page 53
the end of the season, according to Petroleum News sources.

Around October 2012, Furie told the state it had finished sidetrack-
ing the well and planned to test several gas-bearing zones in the
Beluga.
In mid-2013, Furie drilled the 10,393-foot Kitchen Lights Unit
No. 3. The company completed the well with “mini-frac packs” in
two Sterling zones and two Beluga zones to delineate the initial
Kitchen Lights Unit No. 1 discovery. “We had a good test,” Presi-
dent Damon Kade told Petroleum News in July 2013. Kade de-
clined to release results at the time. In a November 2014 plan of
development, Furie said the well had produced 15.83 million cubic
feet during a four-point test, which confirmed a commercial dis-
covery. The samples taken during the test were 99 percent
methane, according to the company.
The well was the justification for sanctioning a development
program and will become the first development well at the unit
when production begins later this year. The company has said ex-
pects the well to produce 15 million to 18 million cubic feet per day.
Soon after testing Kitchen Lights Unit No. 3, Furie began
drilling Kitchen Lights Unit No. 4. The company suspended the
well when the summer drilling season ended.
Saying it had “encountered potential oil and gas reserves,”
Furie permitted a 3-D seismic campaign as it completed the well.
The campaign would “characterize the subsurface geological struc-
ture and confirm exploration and drilling targets and reservoirs.”
Several months later, SAE Exploration began permitting a sepa-
The Spartan 151 jack-up rate 3-D seismic survey — independent of Furie — covering a simi-
drilling rig under tow in lar region around the Kitchen Lights unit.
Cook Inlet in May. Furie drilled the 11,800-foot Kitchen Lights Unit No. 5 well in
mid-2014. The well was a dry hole, according to information in a
November 2014 unit plan of development.
The company plans to drill Kitchen Lights Unit No. 6 in the
southwest block this spring.
The exploration work planned for this year — either drilling or
seismic — will guide future activities at the unit, according to
Furie. The working interest owners will either commit to drilling
“one or more delineation or exploration wells in one or more ex-
ploration blocks outside the Corsair block” or will sanction a de-
velopment for “one or more” blocks outside the Corsair block.
Those activities would occur in future years.
That said, the results of the exploration activities planned for
this year “may be the basis for redefining or contracting portions of
exploration blocks” before the end of the year, according to Furie. If
the company fails to meet any of the work commitments described
in the plan of exploration, the company will contract one explo-
ration block from the unit.
Is there a market?
All exploration is predicated on the promise of future sales.
In early 2015, Furie announced that it had previously secured a
multiyear contract to supply more than 4 billion cubic feet per year
to an unnamed utility starting Jan. 1, 2016.
With the unit expected to come online in August 2015, the com-
pany is looking for a short-term or interruptible contract to pro-
vide cash flow through the end of the year.
In addition to the 2016 contract, Furie said it has negotiated
term sheets for two other contracts. Ideally, the company wants
to contract some 85 million cubic feet per day.
54 THE EXPLORERS
Great Bear returning
to exploration drilling
A need to bolster existing knowledge of its leases led the company
to conduct two years of intense fieldwork
By ERIC LIDJI
For Petroleum News NAME OF COMPANIES:
Great Bear Petroleum Ventures
A fter several seasons of fieldwork and evaluations for its

North Slope exploration program, Great Bear Petroleum
Operating LLC returned to drilling wells this year.
(three LLC entities, I, II and III)
Great Bear Petroleum
Operating LLC
In late 2014, the Alaska-based independent permitted a Note: Leases formerly held by
three-well exploration program along the Dalton Highway, its Great Bear Petroleum LLC
first drilling activity since drilling a pair of wells in 2012. ALASKA HEADQUARTERS:
The company had spent the interim eval- 601 W. Fifth Ave., Ste. 505, Anchorage, AK 99501
uating well results and conducting field- TOP ALASKA EXECUTIVE: Edward A. Duncan, president and
work. chief operating officer
This year, the program targeted both con- PHONE: 907-868-8070
ventional and unconventional accumulations COMPANY WEBSITE: http://greatbearpetro.com
simultaneously. While Great Bear remains
committed to its long-term goal of launching
a source rock development program in principals of Great Bear formed the company to develop the
Alaska, that goal is complex. It would resource rock potential of the North Slope. Great Bear President
quire the company to adapt still-evolving and COO Ed Duncan had met Vice President of New Ventures
ED DUNCAN Bob Rosenthal while working at the BP-predecessor Sohio dur-
Lower 48 development techniques to the
unique environment of the North Slope. A conventional discov- ing the early 1980s and gained insights about North Slope pe-
ery would provide cash flow in the near term and would allow troleum systems. “We believe that there are expansive new
the company to start building infrastructure on its leases. plays and we’ve captured a very significant piece of what we
The Great Bear program sits close to existing infrastructure, came here to do,” Duncan said in October 2010.
which has allowed the company to continue working after most While most North Slope independents have been pursuing
companies have packed up their supplies for the winter. As a re- relatively large conventional reservoirs passed over by the
sult, the program was unfinished when The Explorers went to
press. continued on next page
In a lease plan of operations submitted to the state in Octo-
ber 2014, Great Bear detailed plans to use Nabors rig 106AC to
drill the Alkaid No. 1, Phecda No. 1 and Talitha No. 1 wells just
west of the Dalton Highway and trans-Alaska oil pipeline corri- ALASKA METROLOGY
dor. The proposed locations were southwest of the two vertical
wells Great Bear drilled in 2012.
& CALIBRATION
Great Bear began drilling the Alkaid No. 1 well in mid-Feb- 929-8052 670-1099
ruary, which was later than the company had intended to start Anchorage Prudhoe Bay
the program. As such, the company said it would likely drill www.akmetcal.com
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The size of the leasehold and the location of the leases sug-
gested the company was pursuing something unique. The five
THE EXPLORERS 55
GREAT BEAR continued from page 55
Great Bear Petroleum commissioned 3-D seismic surveys
major companies, Great Bear saw an opportunity to develop the over various portions of its large leasehold in 2012, 2013 and
source rocks responsible for the giant oil fields of the North
Slope — just as other industrious independents were doing with
2014 in search determining “sweet spots” for drilling and
the Eagle Ford shale formation of south Texas. said it expected to commission another survey over the area
A conventional reservoir is usually the result of oil and natu- this year.
ral gas migrating through porous rocks until they reach a seal.
Exploration companies use surface geology, previous wells and
seismic surveys to make informed guesses about where to drill To illustrate this model, Duncan said Great Bear wanted to
wells. Some wells are dry holes, some encounter non-commer- use 20 rigs to drill some 200 wells each year over three 15-year
cial volumes and some lead to big finds. phases targeting two of the three source rock formations. Those
An unconventional exploration program, such as the one wells would produce 200,000 barrels per day by 2020, 350,000
Great Bear is undertaking, targets the source of the oil in those bpd by 2035, 450,000 bpd by 2041 and peak at 600,000 bpd in
reservoirs. The North Slope contains three stacked source rock 2056 before dropping to a sustained long-term production rate
intervals at depths between 8,000 and 13,000 feet. They are, from of 450,000 barrels per day out as far as 2074. This system would
deepest to shallowest, the Shublik, the Kingak and the require some $2 billion each year in capital, Duncan told law-
HRZ/Hue shale system. The Prudhoe Bay and Kuparuk River makers.
oil fields are believed to have migrated from these source rocks. In terms of rigs operating, wells drilled, oil produced and
Instead of drilling wildcat wells in search of a “gusher,” capital spent, those figures would make the Great Bear program
Great Bear is trying to devise an economic way to tackle a mas- the largest development on the North Slope.
sive resource. That means searching for “sweet spots” where the At the time, then-Gov. Sean Parnell had set an ambitious goal
slow geologic process of making hydrocarbons, known as “ther- of increasing throughput on the trans-Alaska oil pipeline to 1
mal maturity,” has converted organic materials into oil but not million barrels per day within a decade. When policymakers
yet converted the oil into natural gas. asked whether Great Bear could single-handedly produce 1 mil-
If successful, the Great Bear program — and similar efforts lion barrels per day from its leases by drilling as many as 1,000
by other companies, particularly Royale Energy Inc. — would wells each year, Duncan said, “Two hundred wells a year is a
bring a new development model to Alaska. lot, but it’s scalable. If the capital is there, if the development in-
Testifying before state lawmakers in February 2011, Duncan frastructure is there, and the ability to move that produced oil
presented “a factory type drilling” model, where development into the pipeline is there — all of those are challenges — but if
wells would be drilled and completed quickly. all of those are there, it can be done. There’s nothing that we’re
waiting for from a technology perspective. The ability to drill
and complete these wells is proven. It will be better a year from
now than it is today.”
Slowing down
The Great Bear exploration program has moved slower than
the company would like.
Eager to start, the company figured it could drill two test
wells in the winter of 2010 and 2011 by starting the permitting
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the know-how and capacity to get it done, no matter the job. ary 2011, logistics appeared to be dictating a slower timeline.
The proven efficiency and reliability of our crews are matched only by that of The state had said it expected to issue the leases in April or May.
our technology. With AutoSeis® we are able to achieve record-setting Great Bear pushed its plans to late 2011.
production levels, with minimal environmental impact, in the arctic climate of Once Great Bear discovered it could drill year round, its am-
the North Slope. The 32-bit technology also captures the faintest seismic bitiousness accelerated. The company decided to drill as many
emissions (ambient seismic) that, when processed using our patented as three vertical wells between October and December 2011 and
method, directly map fracture networks with incredible detail.
return the following spring to drill a horizontal sidetrack from
For more information about our arctic expertise contact us at arcticnodal@- each vertical.
globalgeophysical.com. A September 2011 lease plan of operation outlined a yearlong
program to determine a “proof of concept” for commercial
source rock development. The plan proposed six drill sites along
a 15-mile industrial area along the Dalton Highway. The com-
pany named the proposed wells after the stars in the Ursa Major
(or “Great Bear”) constellation: Alcor No. 1, Merak No. 1, Mizar
No. 1, Megrez No. 1, Dubhe No. 1 and Alioth No. 1.
By November 2011, Great Bear had announced a technical
partnership with the oil field services company Halliburton Co.
With a successful proof of concept program, Duncan said, the
tel +1 907-336-2801 companies could initiate a pilot development by late 2012. By
January 2012, Great Bear had obtained preliminary permits but
www.globalgeophysical.com/arcticnodal
56 THE EXPLORERS
GREAT BEAR continued from page 56
still needed a rig. The company eventually scaled back its plans
to a three well program for the second half of 2012.
Once drilling began, Great Bear became somewhat tight-
lipped about the results.
By July 2012, the Alcor No.1 well had almost reached the
HRZ, and crews were preparing to take core samples. At a shale
conference, in August 2012, Duncan said, “The results to date
are within our expected outcome.” Looking ahead, he added,
“We expect to be testing and producing and … selling produced
hydrocarbons potentially by the end of the year, and certainly
early next year.” With good results, Duncan believed Great Bear
could produce at least 100,000 barrels per day in five years. By
September, when the company was drilling the Merak No. 1
well, he said, “I can tell you with absolute confidence that
where we thought we would find oil in these source rocks, we
found oil.”
Great Bear suspended its drilling operations for the season in
December 2012, having drilled the vertical sections of two wells
and conducted a small 3-D seismic survey around the well loca-
tions. At the time, Duncan expressed confidence in the initial re-
sults of the program. “We have drilled through all of our
targeted source rock units,” he said. “We’ve proven those (to be)
present at the depths predicted and in the state of thermal stress
or thermal maturity, certainly within the range of expected out-
comes.”
Collecting data
In early 2013, Great Bear said it needed to complete a techni-
cal analysis of its drilling results and its 3-D seismic acquisition
On Location
Wherever. Whenever. Whatever.
before deciding the next steps for its program.
The same held true that fall. “We are right on the original Creative photography
timeline. So our hope would be that you’ll see us sanction a full-
for Alaska’s oil and gas industry.
field development in the next year or so,” Duncan said.
Great Bear Petroleum commissioned 3-D seismic surveys
over various portions of its large leasehold in 2012, 2013 and
2014 in search determining “sweet spots” for drilling and said it
expected to commission another survey over the area this year.
The company also commissioned two LIDAR, or Light Detec-
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THE EXPLORERS 57
Hilcorp exploring
at two Cook Inlet units
Although primarily interested in development, some units
are thought to contain undiscovered accumulations
By ERIC LIDJI
For Petroleum News NAME OF COMPANY: Hilcorp
Energy Co.
H ilcorp Alaska LLC amassed much of its Alaska leasehold

through three purchases: acquiring the Cook Inlet assets
of Union Oil Company of California in 2011,
Houston, Texas
ALASKA OFFICE: 3800 Center-
the Cook Inlet assets of Marathon Oil Co. in point Dr., Ste. 100, Anchorage AK 99503
2012 and a large portion of the North Slope TELEPHONE: 907-777-8300
TOP ALASKA EXECUTIVE: John Barnes
assets — not including the massive Prudhoe
COMPANY WEBSITE: www.hilcorp.com
Bay field — of BP Exploration (Alaska) Inc. in
2014.
To date, the Texas-based independent has tivities.
been focused on revival. The company has But previous operators appear to have underinvested in some
been repairing existing development wells fields, leaving Hilcorp with the opportunity to conduct explo-
and drilling new development wells to either JOHN BARNES ration work within existing units and near infrastructure.
improve production rates at producing fields In terms of exploration, Hilcorp has been most active at two
or restore production at suspended fields. Cook Inlet units in the southern Kenai Peninsula — the
That strategy has left little time for traditional exploration ac-
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HILCORP continued from page 58
Ninilchik unit and, to a lesser extent, the Deep Creek unit. The work on leases at the north end of the unit.
company closed on its acquisition of the North Slope properties Inspired by its efforts at Susan Dionne, Hilcorp built the Bar-
in late 2014 and had yet to present any firm exploration plans by tolowitz pad just south of the Falls Creek pad in August 2013
the time The Explorers went to print. and later drilled the Frances No. 1 well to look for oil.
As with Susan Dionne No. 8, the well was non-commercial
Ninilchik in 2013 for oil, but showed “strong potential” for gas production from
The current program at Ninilchik involves expanding exist- the Tyonek and Beluga formations. The Falls Creek No. 5 well
ing participating areas and exploring potential oil and gas accu- encountered gas in the Tyonek and Beluga. Hilcorp brought
mulations contained within the unit boundaries. both wells into production from an undefined Tyonek reservoir
The unit follows a section of coastline between Clam Gulch in the second and third quarters of 2014 and intends to expand
and Ninilchik. The slender unit currently includes three non- the Falls Creek participating area to include the Beluga forma-
overlapping participating areas with accumulations in the terti- tion.
ary Tyonek formation: Falls Creek, Grassim Oskolkoff and
Susan Dionne-Paxton. Ninilchik in 2014
In June 1961, Chevron discovered a Tyonek gas field in the The company initially proposed a six-well exploration pro-
area, which became the Falls Creek unit. Marathon discovered gram at Ninilchik for 2014, although toward the end of the year
two nearby fields in 2001 and 2002 and pursued development. it expanded the program to include 11 wells.
The state formed the Ninilchik unit in 2001 and expanded it to The initial program called for two wells at the Paxton pad.
include the old Falls Creek unit in 2003. Also in 2003, the state The 10,000-foot Paxton No. 6 and Paxton No. 7 wells would tar-
formed the three participating areas. get the Tyonek and Beluga formations, south of the Paxton pad.
The unit currently includes eight drilling pads with plans in Paxton No. 6 would be an “appraisal” well and Paxton No. 7
the works for a ninth. would “follow up” on the results of Paxton No. 6. The expanded
Hilcorp drilled four exploration wells at the Ninilchik unit program added an 11,000-foot Paxton No. 8 to test the structural
under its 2013 plan of development: Susan Dionne No. 8, Paxton apex of an undefined Tyonek formation northeast of the pad.
No. 5, Frances No. 1 and Falls Creek No. 5. The company completed Paxton No. 7 in November 2014 and
The 12,000-foot Susan Dionne No. 8 well was the first explicit Paxton No. 8 and No. 9 in January 2015, according to Alaska Oil
attempt at oil exploration at the unit in decades. Although and Gas Conservation Commission records.
Hilcorp ultimately deemed the well as non-commercial for oil, The expanded program also called for building a Kalotsa pad
the company completed the well as a producer from both the this year to support a two-well exploration program. The
Tyonek formation within the Susan Dionne participating area Kalotsa No. 1 and Kalotsa No. 2 exploration wells would test
and from the Beluga formation on a tract basis. Paxton No. 5 the Tyonek and Beluga formations between the Susan Dionne
was a shallow well from the Paxton pad to the south of the and Paxton pads.
Susan Dionne pad. Hilcorp completed the well as a producer At the other end of the unit, the 2014 program included the
from the Beluga formation on a tract basis. Given the Beluga 10,000-foot Frances No. 2 and Frances No. 3 “appraisal” wells
production from the two wells, Hilcorp told the state it planned targeting the Tyonek and Beluga. The former would be east of
to form the Susan Dionne/Paxton Beluga participating area the Falls Creek participating area and north of the Bartolowitz
sometime this year. pad. The latter would be south of the Falls Creek participating
Those activities took place in the southern end of the unit. area and east of the Bartolowitz pad.
Toward the end of 2013, Hilcorp also conducted exploration The 9,000-foot Falls Creek No. 6 would follow Frances No. 2
to further appraise the Tyonek and Beluga formations area north
of the Falls Creek pad. The expanded program included a sec-
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surveyors an 11,000-foot “delineation” well to prove up a Beluga reservoir
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60 THE EXPLORERS
HILCORP continued from page 60
The company closed on its acquisition of the North Slope
north of the Falls Creek pad. properties in late 2014 and had yet to present any firm
Hilcorp permitted a Falls Creek No. 6 well in October 2014
and completed the 9,060-foot gas development well before the
exploration plans by the time The Explorers went to print.
end of the year, according to AOGCC reports.
While those wells and proposed wells all expanded upon ex- plan of development, from December 2010, Unocal offered no
ploration activities Hilcorp launched in 2013, the expanded 2014 plans for further exploration but said it wanted to farm out ex-
plan also called for work in the vicinity of the Grassim Os- ploration acreage in the south of the unit.
kolkoff participating area, between Susan Dionne-Paxton and Believing the unit to contain additional accumulations,
Falls Creek. Alaska Division of Oil and Gas Director Bill Barron required the
The initial program included plans for drilling a 6,500-foot ninth plan of development to include plans for exploring parts
GO No. 8 well to target the Sterling and Beluga formations of the unit outside the Happy Valley participating area. By the
above the existing, west of the existing GO pad. The expanded time Hilcorp acquired the unit, the state and CIRI were on the
program called for building a Blossom pad just north of the ex- verge of contracting it. Instead, they extended the eighth plan of
isting Grassim Oskolkoff pad to support a 12,000-foot Blossom development to give Hilcorp time to make plans for the unit.
No. 1 exploration well. The state approved the pad and a two- The extension gave the company until February 2013 or six
well gas exploration program toward the end of 2014. months after closing, whichever came first, to file a ninth plan of
In its 2015 plan of development, filed in March 2015, Hilcorp development with exploration plans.
proposed three grassroots wells for the Ninilchik unit: a 12,000- To start, Hilcorp drilled three development wells at the unit:
foot Blossom No. 1 (originally planned for 2014), a 12,000-foot The 2,005-foot Happy Valley B-14 tested the Sterling formation
GO-8 (deeper than the 2014 proposal) and a Kalotsa No. 1 devel- shallower than the existing participating area; the 3,069-foot
opment well. Happy Valley B-15 tested the Upper Beluga formation, also shal-
lower than the existing participating area; and the 4,857-foot
The Deep Creek unit Happy Valley B-16 well targeted the Beluga formation, although
Hilcorp has also been exploring at the Deep Creek unit, to “rig limitations” prevented it from reaching its target depth. In
the southeast. early 2013, Hilcorp acquired some 50 square miles of 3-D seis-
Following successful exploration by Standard Oil Company mic over the unit.
of California in 1958, Unocal brought the unit online in 2004 at 3 The program discovered commercial quantities of gas in the
million to 4 million cubic feet per day and drilled some 13 wells Sterling and Beluga formations, shallower than the producing
between 2003 and 2009. Then, investment flagged. In an eighth
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THE EXPLORERS 61
HILCORP continued from page 61 The 2014 plan called for completing would have required a new road and
the B-16 well, potentially using a side- pad, plus associated facilities and
Beluga/Tyonek pool. Speaking in June track, and drilling two exploration wells pipelines to access the area.
2013, Senior Vice President John Barnes from a newly constructed C pad. The Ultimately, Hilcorp drilled none of
said the field was “making more now 6,000-foot Happy Valley C-17 well and those wells last year. However, the com-
than it was shortly after Unocal discov- the 5,000-foot Happy Valley C-18 well pany processed preliminary data from
ered and developed it” and estimated would both target the Sterling and Beluga the seismic survey between March and
that the resource at Happy Valley is formations outside the Happy Valley par- October 2013 and conducted “pre stack
“probably three to four times larger than ticipating area. If successful, the explo- depth mitigation” processing in 2014. As
the current participating area.” ration program would likely justify a new of March 2015, “interpretation of the 3-D
With the successful program, Hilcorp participating area, Hilcorp has said. data is in progress and will be used to es-
said it would expand its exploration ac- The plan also called for drilling the tablish the Deep Creek unit’s exploratory
tivities for two years and has asked the Middle Happy Valley No. 1 well in 2015. and development drilling program
state to defer contraction of the unit until The well would have targeted the Ster- throughout 2016,” according to the most
the end of 2015. ling, Beluga and Tyonek formations and recent plan of development. The plan also
proposes drilling the Middle Happy Val-
ley No. 1 well, which would require the
construction of a new drilling pad at the
unit.
“The LEADING PROVIDER In July 2014, Hilcorp proposed con-
struction of a Happy Valley C pad and an
of remote camps on accompanying four-well appraisal pro-
Alaska’s North Slope” gram to prove up and possibly develop a
shallow natural gas accumulation. If suc-
cessful, Hilcorp said it would initially de-
velop the pad using existing facilities at B
pad and potential construct new facilities
at the C pad.
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62 THE EXPLORERS
Linc pursuing two complex
exploration projects
One effort would develop the Umiat oil field; the other would generate
synthesis gas from coal seams
By ERIC LIDJI
Linc Energy Ltd.
I n some ways, the future of the Umiat oil field has never been
more certain.
Having completed the first flow test at the field in decades,
Brisbane, Australia
ALASKA OFFICE: 3000 C St., Ste. 103, Anchorage, AK 99503
the Australian independent Linc Energy Ltd. is currently compil- TOP EXECUTIVE: Craig Ricato, CEO and managing director
ing information for an environmental impact statement, which PHONE: 907-868-8660
the company will need before it can develop the North Slope COMPANY WEBSITE: www.lincenergy.com
field.
In other ways, though, the future of the clusion from the testing is that although gas is trapped within
field has never been more uncertain. the coal, there is not sufficient natural fracturing in the coal to
Linc has yet to announce whether it in- allow for the recovery of commercial quantities of gas,” the com-
tends to develop the field independently, pany said. While “disappointed,” CEO Peter Bond expressed op-
bring on a joint venture partner or sell the timism in Alaska, calling exploration “a numbers game,”
field to an interested third party. The current adding, “the more smart wells you drill the more likely you are
stretch of low oil prices further complicates a going to be successful.”
remote and technically challenging project. The expiration of much of the initial lease acquisition, in 2012,
And a recent decision by the state to abandon more or less eliminated the possibility of pursuing Cook Inlet
CRAIG RICATO
plans for a road to the isolated region in the gas without acquiring additional leases elsewhere.
foothills of the Brooks Range Mountains have made an expen-
sive project even costlier. Umiat obstacles
While those decisions and evaluations continue, Linc is also
By that time, though, Linc was already pursuing a much big-
moving forward on exploration drilling for a potential under-
ger project.
ground coal gasification program in Cook Inlet.
In June 2011, the company acquired Renaissance Alaska LLC
Early gas exploration for some $50 million. The small independent company held an
84.5 percent interest in Renaissance Umiat LLC, which owned
When Linc Energy acquired 123,000 acres in the Cook Inlet re- the main leases at the Umiat oil field. The deal gave Linc some
gion from San Francisco-based GeoPetro Resources in March 19,358 gross acres over two federal leases and one state lease
2010, the company saw the potential to use conventional gas straddling the Colville River.
production to finance unconventional exploration and develop- The Umiat oil field is among the largest known yet undevel-
ment. oped oil fields in Alaska. The U.S. Navy discovered the field in
The acreage was split between two blocks — one near Point 1946, during an exploration campaign in the National Petroleum
MacKenzie along the western bank of Knik Arm and the other at Reserve-Alaska to find more domestic oil supplies following
Trading Bay on the west side of Cook Inlet. World War II.
By that summer, Linc was already moving forward on a well Even though early resource estimates were high, the initial
in the Point MacKenzie region, building on rudimentary permit- exploration campaign encountered two obstacles that still pres-
ting and infrastructure work from GeoPetro. The goal was to ent challenges for developing the field.
bring the Point MacKenzie acreage into production quickly and The first was isolation.
proceed to an exploration and development program at the Developing the field would likely require standalone process-
Trading Bay acreage in the near future. ing facilities and a 100-mile road and pipeline bundle to reach
Using pre-existing seismic information and a handful of pre- the Dalton Highway and trans-Alaska oil pipeline.
vious exploration wells going back to the 1960s, Linc drilled the Eager to spur resource development in the region, then-Gov.
6,323-foot LEA No. 1 well in October 2010. Frank Murkowski proposed a state-sponsored road to Umiat as
The well encountered “a number of gas bearing horizons” part of his Roads to Resources program. Preliminary permitting
and “a number of significant coal seams,” the company an- efforts on the project continued under the Palin and Parnell ad-
nounced in November. But, after additional testing, Linc decided ministrations.
the structure was “too tight” to be developed without “swab- The project came under political pressure from Native groups
bing” the well with large amounts of formation water. “The con-
THE EXPLORERS 63
LINC ENERGY continued from page 63 mud had thawed the permafrost, allowing the company to defer a five-well explo-
water into the formation, which froze the ration program in the region. By August,
concerned about impacts to subsistence
sand and plugged the well. Linc had announced an “aggressive time-
activities in the region and politicians con-
The U.S. Navy returned to Umiat in line” to bring Umiat into production in
cerned about “corporate welfare.”
1979 to drill Seabee No. 1, a deeper test five to seven years, estimating peak pro-
In mid-2013, the Alaska Department of
well in the vicinity. That was the last ex- duction of 50,000 barrels per day.
Transportation and Public Facilities
ploration work conducted in the region In early 2013, light snowfall combined
backed away from the project. The U.S.
for nearly 30 years. with extreme cold snaps once again de-
Army Corps of Engineers closed the proj-
Those obstacles, although formidable, layed exploration. Instead of a four-to-five
ect in January 2015.
seemed surmountable by 2001, when Col- well program with a pair of side-by-side
Although Linc was certainly in favor of
orado-based independent Arctic Falcon wells designed to directly compare com-
the state footing the bill for the expensive
Exploration acquired the Umiat leases pletions from vertical and horizontal
project, the company always said the
from a sister company. Through a series of wells, Linc was forced to scale back the
Umiat field would be economic regard-
deals, Renaissance Alaska LLC and Rutter program to two wells: Umiat No. 18 and
less.
and Wilbanks Corp. acquired a stake in Umiat No. 23H.
The second obstacle was geology.
the leases in 2007, and created Renais- The limited program would still allow
The unusually shallow reservoir at
sance Umiat LLC. the company to meet its “key objectives”
Umiat is partially embedded in per-
A combination of historically high oil for the season: providing a side-by-side
mafrost, which reduces reservoir pressure
prices and 70 years of advances in drilling comparison and searching for a deep gas
and complicates efforts to produce from
technologies made the companies believe supply.
oil-bearing rocks.
they could economically develop the field. Umiat No. 18 collected 300 feet of core
“Behavior of the wells during testing
and encountered 100 feet of net oil pay in
was unpredictable,” U.S. Bureau of Mines Ambitions and setbacks the Lower Grandstand, but mechanical
petroleum engineer Oren C. Baptist wrote
Ultimately, they handed the task over problems prevented a flow test. After at-
in a 1960 study of 11 U.S. Navy wells
to Linc Energy in mid-2011 tempts to clear the blockage were unsuc-
drilled at Umiat between 1945 and 1952.
The four years since have proceeded in cessful, Linc suspended operations for the
“For example, one well was abandoned as
bursts. season. The company cold stacked the
a dry hole after all tests failed to recover
In early 2012, “logistical and weather Kuukpik No. 5 rig at the permanent
any oil, yet an offset well, only 200 feet
issues,” including “low snow levels which Seabee drilling pad in order to get a head
from the dry hole, produced 400 barrels of
affected snow road development,” forced start on drilling in early 2014 and avoid
oil a day.” He hypothesized that drilling
more weather-related delays.
Technical breakthrough
The limited program yielded impor-
tant technical information.
To avoid thawing permafrost, Linc
used a chilled mineral oil based mud sys-
tem for drilling and a “progressive cavity
There are only four words to describe travel pump” for its flow test “in order to pre-
vent heat in the borehole from establish-
in the Great Land: Bald Mountain Air Service.
ing a ‘thaw bubble’ in the permafrost and
potentially destabilizing the well bore and
Owned and operated by lifelong Alaskans, surface facilities,” said Linc President of
we provide safe, experienced aviation Oil and Gas Operation Scott Broussard.
services throughout Alaska and Canada. “We were also careful to make sure that
Whether it is aerial survey work, passenger the pump was below the perforated zone
DQGIUHLJKWGHOLYHU\VFLHQWLÀFVXUYH\VXSSRUW in order to make sure that heat was not in-
or oil exploration, we are ready to serve you! troduced at the perforated zone,” he
added.
• An Alaskan Native • 19 passenger STOL De Even so, Linc said it intended to use an
Heritage company Havilland Twin Otter open-hole completion technique on future
wells, as the U.S. Navy had at its original
• Safe and comfortable • 10 passenger Super STOL wells at the field. By drilling without cas-
De Havilland Single Turbine Otters ing or lining, an open-hole technique al-
• Gravel runway capable
• Deadhorse, Anchorage and lows fluids from a reservoir to flow
• 9 passenger King Air B200,
Homer hangar facilities directly into a well bore.
belly pod capacity of 500 lbs.
A subsequent analysis of Umiat No. 18
rock samples gave the company consider-
$VNXVDERXWWKH&$6$DGGLWLRQWRRXUÁHHW able optimism about the quality of the
Available for 24-hour callout. Lower Grandstand formation, which
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64 THE EXPLORERS
LINC ENERGY continued from page 64
In early 2014, Linc drilled the Umiat No. 23H well to
Bond described as being “completely saturated with hydrocar- target depth of 4,100 feet, the first horizontal well at the
bons.” The company cancelled the Umiat No. 18 flow test in
field.
favor of drilling a horizontal well at the field as quickly as possi-
ble.
Even so, Linc eased slightly from its timeline for the project. Soon thereafter, in an annual report, Linc said it had wrapped
The company had initially said it intended to bring Umiat online up the “select engineering” for a potential Umiat development.
by late 2017. By October 2013, the company was saying it “plans That first phase “identifies and analyses road options, pipeline
to aggressively develop this field once commerciality is deter- routes, and environmental assessments of various development
mined.” options.” The report estimated that an initial development pro-
In early 2014, Linc drilled the Umiat No. 23H well to target gram could include as many as 70 wells.
depth of 4,100 feet, the first horizontal well at the field. A subse- The current phase involves incorporating the results of the
quent flow test produced a sustained rate of 250 barrels per day flow test into a reservoir simulation model, collecting additional
— or 650 barrels total during four flow tests over a seven-day pe- information for a future environmental impact statement and de-
riod at the field — and a peak rate of 800 bpd, according to the ciding whether it needed to bring on a partner to assist with de-
company. The company estimated the well would have pro- velopment.
duced as much as 2,000 bpd with a gas drive installed. The third phase involves completing the environmental im-
On-site analysis suggested that the well produced light, sweet pact statement, choosing a development scenario, building infra-
38.5-degree API oil with no water. Linc said it intended to per- structure and figuring out project financing.
form more in-depth analyses in a laboratory setting.
The flow test also proved the efficacy of the completion Still pursuing UCG
method the company had proposed during its work on Umiat Even though the company has been more public about its ef-
No. 18. “We have now proved that the oil flows easily from the forts at Umiat, Linc Energy has also been quietly appraising the
Umiat reservoir with very good permeability and that the feasibility of developing deep coal deposits.
drilling process of utilizing horizontal wells with slotted liners Coal gasification is a relatively common industrial process.
with ESP down well pumps as per our commercial design has Linc is pursuing “underground coal gasification,” which in-
been a success,” Bond said. “And with this success and the volves igniting underground coal deposits and injecting air and
knowledge gained from last year’s drilling program, Linc En- water into the seams. The mixture of heat and oxygen converts
ergy now has clear a path for the commercial development of the the carbon in the coal into methane, which is the primary ingre-
billion barrel (original oil in place) Umiat field.” dient in natural gas.
Early on, Linc envisioned a three-phase program: a single
How to develop gasifier on a 90-day trial monitored for one year, a panel of three
Given the daunting size and isolation of Umiat, Linc began to six gasifiers on a one year trial and finally a working under-
studying the best way to proceed with such a development — ground coal gasification project combined with surface gas-to-
from both a corporate and a technical standpoint. liquids technology to produce some 20,000 barrels per day of
In September 2014, Linc said it had received “unsolicited ex- various synthetic diesel products.
pressions of interest” to sell the Umiat field and conventional as- In February 2011, the Alaska Mental Health Trust Land Office
sets in Wyoming. In response, Linc launched “a formal process gave Linc an underground coal gasification exploration license
to work with additional parties who have expressed an interest over 181,414 acres. The license covered three contiguous areas:
in the potential acquisition of the company’s entire USA based on the east side of Cook Inlet near Nikiski, on the west side of
oil and gas portfolio.” Cook Inlet near the Beluga Power Plant and in the Interior region
“There is no assurance that these activities will result in a for- around Healy and Nenana.
mal offer or binding arrangement,” the company warned, noting Linc drilled the TYEX01 well in late 2011 and the associated
that any sale of “core assets” would require the approval of TYEX01X well in early 2012 in the Tyonek area. The 1,450-foot
shareholders. Bond added a cautiously optimistic note: “It is stratigraphic core hole targeted coal seams previously encoun-
early days on the oil asset negotiations but it is always nice to re- tered in the nearby Phillips Petroleum North Tyonek State 58848
ceive unsolicited approaches on our assets that reconfirm the un- No. 1 well from 1973 and the nearby Superior Oil Three Mile
derlying value and provide third party validation. We will work Creek No. 1 well from 1967.
with the parties and update the market if we can agree final and The company called the results of the core hole “very encour-
binding terms.” aging.”
Linc initially expected to make a decision by the end of 2014. In 2011 and 2012, Linc acquired 2-D seismic over all three ex-
Those efforts have gone more slowly than expected. In an early ploration license areas.
2015 financial statement for the second half of 2014, Linc said it Using a custom rotary-core rig from Buffalo Custom Manu-
“continues to engage with these parties in confidential negotia- facturing, Linc drilled the KEEX02 well on the west side of Cook
tions while continuing to progress its permitting and develop- Inlet in 2012. After delays caused by inclement weather, Linc
ment plans for the field.” completed the 1,700-foot hole in December 2012, according to the
The company has given no reason for the delay. One mitigat- state.
ing circumstance might be executive. In late 2014, Bond stepped In mid-2014, after taking a year off from drilling, the company
down to become executive chairman of the board and general began permitting a five-well exploration program on its two ex-
counsel. Company secretary Craig Ricato moved into the leader- ploration license areas on the west side of Cook Inlet. The com-
ship position.
THE EXPLORERS 65
LINC ENERGY continued from page 65 whether Linc drills the TYEX03 well nearby.
Now, the company is considering marketing options. This
pany planned to drill the first well in the program — TYEX02 —
year, the company expects to finalize a commercial pathway for a
in 2014.
proposed synthesized natural gas hub in the region and to enter
“The main objectives of the TYEX02 core hole are to provide
“several supplier agreements” to provide both synthesized natu-
confirmation of the geological structure, provide geotechnical in-
ral gas and carbon dioxide. The company estimates there is 35
formation about the coal seams and surrounding rock, provide
billion cubic feet of local demand for synthesized natural gas in
gas content and whole coal analysis of the two prospective target
the region “with the potential for export in the form of liquefied
coal seams, obtain hydrological characteristics from geophysical
natural gas further increasing demand,” the company said in Oc-
logs and perform drill stem tests in and adjacent to the targeted
tober 2014.
coal seams,” Linc said in its application.
According to state records, the company completed the
TYEX02XX well last year. The results of that well will determine Contact Eric Lidji at ericlidji@mac.com
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66 THE EXPLORERS
Miller focusing on gas
in current price climate
Ambitious exploration company operating at all four
corners of Cook Inlet as well as on the North Slope
By ERIC LIDJI
Miller Energy Resources
M iller Energy Resources Ltd. is among the most ambitious

explorers in Alaska.
Through its subsidiary Cook Inlet Energy LLC, the Ten-
9721 Cogdill Road, Ste. 302, Knoxville, TN 37932
TOP EXECUTIVE: Scott M. Boruff, executive chairman of the
nessee-based independent is exploring three regions in Cook board of directors
Inlet — at its developments near Trading Bay on the west side, at PHONE: 865-223-6575
the producing North Fork unit in the southern Kenai Peninsula COMPANY WEBSITE: www.millerenergyresources.com
and in the Susitna basin exploration license region. The com-
pany is also seeking an exploration license in the Iniskin Bay re- An early list included prospects investigated in a wide-rang-
gion, to the south. Through its subsidiary ing 3-D seismic survey across the region, such as Tutna, Tazlina,
Savant Alaska LLC, Miller is planning an ex- North Alexander, Stingray, Olsen Creek and Otter.
ploration program at the Badami unit on the In July 2012, three Cook Inlet Energy leases expired at the
North Slope. North Alexander prospect, near the mouth of the Susitna River,
Whether a small independent company although the company kept other leases nearby.
can pursue all those projects with oil prices at
$50 per barrel remains to be seen. “Given the continued on next page
continued pressure on oil prices, we’re redi-
recting our drilling effort towards lower-risk
and predominantly gas wells,” recently ap-
SCOTT BORUFF
pointed Miller CEO Carl Giesler said in a De-
cember 2014 statement. “We’re fortunate — and we think unique
— as a company to have a solid inventory of gas wells and the
ability to sell gas at a price greater than $6 per mcf. Because of
the closed-loop nature of the Cook Inlet area in which we oper-
ate, gas trades for north of $6 per mcf and the state of Alaska
shares via cash tax credits in 35 percent to 65 percent of our well
costs.”
Otter and Olsen Creek

The principals of Cook Inlet Energy LLC formed the com-
pany in 2009 to acquire Cook Inlet assets made available during
the bankruptcy of Pacific Energy Resources Ltd.
The company initially focused on reviving older Cook Inlet
properties, which included investment and activities at the West
McArthur River oil field, the West Foreland gas field, the off-
shore Redoubt unit and its Osprey platform and the onshore
Kustatan production facility, as well as a minority stake in the 907.452.1711
Three Mile Creek gas field.
“Our initial strategy will be to restore base production at the
1(800)770.8265
West McArthur River field by repairing a couple of our cham-
pion wells, but our long-term strategy is to significantly raise oil
and gas production at the properties through new drilling. This 1(800)725.8108
will allow us to bring proven reserves to market and prove up
new additional reserves through sound geological principles
and advanced drilling,” CEO David Hall said in December 2009.
The company always kept an eye on exploration opportuni-
ties, though.
THE EXPLORERS 67
MILLER ENERGY continued from page 67 of the region, Cook Inlet Energy also began contemplating
prospects farther south along the west side coast.
Cook Inlet Energy has yet to pursue drilling at the Tutna or Ta-
In September 2012, the company farmed in a 30 percent inter-
zlina prospects.
est in the Sabre and Sword prospects from Hilcorp Alaska LLC.
Cook Inlet Energy began permitting a three-well Stingray explo-
Combined with its previously held 70 percent interest, the deal
ration program in late 2010 to test shallow gas targets on the West
gave Cook Inlet Energy total control over the prospects near the
Foreland peninsula near the Trading Bay production facilities on
West McArthur River unit. “Sword and Sabre prospects show
the west side of Cook Inlet. The program never materialized,
great potential,” Hall said, touting estimates of up to 20 million
though, and the company ultimately relinquished some of the
barrels of oil and 14.3 billion cubic feet of gas.
acreage without drilling.
Using the Patterson-UTI Drilling Co. rig 191, Cook Inlet En-
Instead, in mid-2012, Cook Inlet Energy used its Rig 34 to drill
ergy drilled the 18,475-foot Sword No. 1 well from June to Octo-
the 5,680-foot Otter No. 1 well. The well tested gas targets in the
ber 2013. The extended-reach directional well targeted an
Beluga and Tyonek in the northwest corner of the Susitna Flats
offshore structure adjacent to the West McArthur River unit
State Game Refuge. Even though mud pump problems prevented
thought to contain some 800,000 barrels of recoverable oil, ac-
the $7 million well from testing the Tyonek, and some of the Bel-
cording to the company. After bringing the well into production
uga, the company said that mud loggers reported “two significant
in November 2013, the company began talking about developing
hydrocarbon gas shows in the zone of interest.”
additional intervals and perhaps even drilling a Sword No. 2 fol-
“We’re very excited about the Otter No. 1,” Hall said at the time.
low-up well.
The company touted a third-party engineering reserve report esti-
Instead, Cook Inlet Energy turned its attention to the nearby
mating 45 billion cubic feet of gas at Otter.
Sabre prospect. The company believed the prospect would even-
In early 2013, as it was preparing for a deeper follow-up, Cook
tually require a six-well development program at a cost of some
Inlet Energy applied to form the Otter unit over some 5,855 acres at
$25 million to 30 million for the first well. The cost perhaps
portions of four leases at the prospect. The state rejected the appli-
proved to be an impediment because in September 2014, and
cation in May 2013, saying Cook Inlet Energy had failed to prove it
again in December 2014, the company said it was “evaluating
had a viable reservoir and should proceed with exploration lease-
joint venture offers for participation in the project.”
by-lease. Following a back and forth, the state approved the unit,
In early 2015, the state approved a simultaneous contraction
but required Cook Inlet Energy to post a $1.2 million bond and
and expansion of the West McArthur River unit. The change
provide drilling dates, surface locations and bottomhole locations.
brought the Sword and Sabre prospects into the unit and elimi-
By November 2013, the company had met those terms, accord-
nated some unproductive acreage from the southernmost lease
ing to the state.
at the unit.
The initial plan of exploration required Cook Inlet Energy to
The 23rd plan of development for the unit, from early 2014,
drill two wells. The first would either be a deepening of Otter No. 1
envisioned drilling a Sword No. 2 well and a Sabre No. 1 well by
using a coiled-tubing unit by March 31, 2014, or a grass roots explo-
April 30, 2016, depending on rig availability. In its development
ration well slightly to the east of the original well by March 31,
plan for 2015, Cook Inlet Energy said it might drill a Sword No. 2
2015. The second well would have been a delineation of either well
appraisal well in April 2017. The company also said it was “still
by March 31, 2016.
evaluating” a Sabre well, although, as an extended reach explo-
The company met the first requirement by completing the 7,021-
ration well, the prospect conflicts with the current strategy of
foot Otter No. 1A sidetrack in December 2013. Plans for the second
“developing lower risk targets.” The company said it expects to
well were delayed when the company realized it would need a
delay any work until after it has finished developing proven
larger rig, which in turn required a pad expansion. The current
prospects and may seek out a partner.
plan of exploration calls for drilling a well from the expanded pad
by March 31, 2016. Susitna basin exploration
While it was exploring Otter, Cook Inlet Energy was also con-
Through its acquisition from Pacific Energy, Cook Inlet En-
sidering Olsen Creek.
ergy inherited a 471,474-acre exploration license in the Susitna
The gas prospect is some seven miles northeast of Otter. The
basin, west of the Parks Highway, south of Talkeetna.
company saw the potential for a 24-well development program
The Susitna Basin Exploration License No. 2 was nearing the
that could produce as much as 84 billion cubic feet according to
end of its seven-year term when the sale closed. In late 2010, the
company estimates, Hall told Petroleum News. The company ini-
Alaska Division of Oil and Gas agreed to a three-year extension
tially planned to drill an exploration well in late 2012 but pushed
in return for $750,000 in work commitments. The extension al-
the schedule to mid-2013.
lowed Cook Inlet Energy to either collect additional 3-D seismic
After striking a deal with the Alaska Mental Health Trust to add
or drill an exploration well.
some 1,660 acres to the prospect, Cook Inlet Energy drilled the
In April 2011, the company picked up Susitna Basin Explo-
7,500-foot Olsen Creek No. 1 well in June 2013.
ration License No. 4, a 10-year license covering 62,909 acres with
The company drilled the Olsen Creek No. 2 follow-up well in
a $2.25 million work commitment. The following April, the com-
late 2014. The two wells proved to be disappointments, though,
pany picked up Susitna Basin Exploration License No. 5, a five-
prompting a $13.4 million write off. The failure at Olsen Creek
year license covering 45,764 acres with a $250,000 work
prompted a bit of soul searching from Miller CEO Carl Giesler in
commitment. “We elected to pursue the new license in the
December 2014. “Simply put, our operational credibility is low at
Susitna Basin based on its proximity to our existing acreage and
best and we get that,” he said.
the potential to leverage our onshore drilling program in this
Sword and Sabre area,” Boruff said in April 2012. “We are currently evaluating the
acreage and developing a work program.”
As it was pursuing Otter and Olsen Creek at the northern end
68 THE EXPLORERS
MILLER ENERGY continued from page 68
In August 2014, the company made a $1.5 million work
By early 2013, Cook Inlet Energy was preparing a two-well commitment in return for an exploration license over
exploration program at the Kroto Creek prospect in Susitna
Basin Exploration License No. 2. The company was interested in
168,581 onshore and offshore acres in the Alaska Peninsula.
the prospect because Kroto Creek infrastructure could improve
access to other prospects the company holds in the region, like
time, the field went undeveloped for decades, until Armstrong
Moose Creek and Big Bend. The company constructed a winter
Oil and Gas LLC acquired the property from an independent op-
access trail and a two-well pad at Kroto Creek that year.
erator.
Toward the end of the year, Cook Inlet Energy changed its
With four partners, Armstrong drilled the North Fork 34-26
plans to a three-well program, with two wells at Kroto Creek and
well in June 2008.
the third farther west at Moose Creek. Having met its spending
“I am 100 percent positive we have a gas well — in any other
commitments in the region, the company converted some of the
part of the world that’s what I would say, but we still have to get
license area to conventional leases, which is a common step in
a pipeline to it,” Armstrong Vice President of Land and Business
the exploration license program. With the conversion, the state
Development Ed Kerr told Petroleum News in September 2008.
officially terminated Susitna Basin Exploration License No. 2.
Kerr publically estimated that North Fork contained between
In mid-2014, Cook Inlet Energy changed its plans again. This
7.5 billion and 12.5 billion cubic feet of gas reserves, with the “re-
time, the plan called for exploring three prospects in the Susitna
alistic” possibility of reserves as high as 20 billion to 60 billion
basin — Kroto Creek and Moose Creek on ADL 390078 and
cubic feet. But Kerr also said that the company would need to
Kahiltna on nearby acreage in Susitna Basin Exploration License
negotiate a price between $7 and $10 per thousand cubic feet to
No. 4.
make the prospect economic.
Toward the end of the year, the company began permitting
After securing a favorable contract with Enstar Natural Gas
the 6,000-foot Kahiltna No. 2 exploration well to follow-up on
Co., Armstrong drilled additional wells, built a pipeline and
the 7,265-foot Pure Kahiltna Unit No. 1 well drilled in the early
brought the unit into production in March 2011.
1960s. The state approved the Kahiltna exploration program in
With North Fork, Miller acquired six wells and 15,465 acres,
early 2015.
the associated transmission subsidiary Anchor Point Energy LLC
Iniskin Bay exploration and the existing supply contract with Enstar.
After completing the acquisition in February 2014, Cook Inlet
Cook Inlet Energy is also pursuing exploration through an- Energy became operator of the onshore unit in the southern
other license. Kenai Peninsula and filed an updated development plan.
In August 2014, the company made a $1.5 million work com- Soon after taking over, the company proposed short-term and
mitment in return for an exploration license over 168,581 on- long-term plans. A proposed drilling inventory for fiscal year
shore and offshore acres in the Alaska Peninsula. The work 2015 included working over the existing NFU 14-25 and NFU 32-
commitment stemmed from a competitive bid the state hosted 35 wells, sidetracking the existing NFU 23-25 well and drilling
that summer. the new NFU-07 and NFU 32-35 wells to increase gas produc-
The state accepts exploration license proposal once each year. tion. A proposed fiscal year 2016 program called for drilling
The special process gives the applicant anonymity and gives three new gas wells: NFU-08, NFU-09 and NFU-10.
other companies the chance to make a better deal. At the time of the sale, the company also said it saw the po-
The state received an application for an Iniskin Bay explo- tential to drill as many as 24 additional wells at the unit. While
ration license in April 2013 and the subsequent public comment many of those would expand gas production at North Fork, the
period yielded a competing proposal and then the auction. company also saw the potential for oil development and claims
Although the region remains undeveloped, it is among the to have had “encouraging preliminary results” from an evalua-
oldest exploration regions in Alaska, with observable oil seeps tion of the oil potential in the deeper Hemlock formation at the
recorded as early as 1853 and a well drilled in 1902. field, conducted while working over an existing gas well.
More recently, SAExploration Inc. conducted a 41-mile 2-D The original NFU No. 41-35 well tested minor amounts of oil
seismic survey between Chinitna Bay and Iniskin Bay on behalf in the Hemlock but not enough to convince Socal to develop the
of Hilcorp Alaska in the summer of 2013. reservoir. Armstrong came up empty-handed when it extended
Any plans for exploration remain tentative until the state fi- one of its natural gas wells to test the oil potential of the Hem-
nalizes the license, although Miller officials have said they might lock.
pursue independent exploration or find a partner. In a 50th plan of development for the field, submitted to the
In a March 2015 presentation, Miller listed Sword, Sabre and state in late December 2014, Cook Inlet Energy said it had spent
the Susitna and Iniskin basin as “long-term” projects that could the year analyzing existing seismic and well data and planning
be developed independently or in a joint venture. an appropriate drilling program. The company said it intended
to drill three wells — NFU No. 24-26, NFU No. 42-35 and NFU
North Fork gas
No. 31-3 — from the existing North Fork pad using the recently
In recent years, Miller has picked up two properties with ex- purchased Glacier Rig 1, which is now known as Rig 37.
ploration potential. As of March 2015, the company had completed the NFU No.
Miller acquired the North Fork unit from Armstrong Cook 24-26 and NFU No. 42-35 on time and on budget and was
Inlet LLC for nearly $65 million in late 2013 and acquired Savant preparing to drill three workovers planned for the unit.
Alaska LLC for some $9 million in early 2014. For the current plan of development, which runs through
Standard Oil of California discovered the North Fork field in March 2016, Miller said it intended to continue the delineation
1965 while searching for oil. Given the low value of gas at the continued on page 72
THE EXPLORERS 69
NordAq pursuing targets
in two Alaska basins
Small independent is looking for gas on both sides of Cook Inlet
and looking for North Slope oil
By ERIC LIDJI
For Petroleum News NAME OF COMPANY: NordAq Energy Inc.
ALASKA OFFICE: 3000 A St., Ste. 410,
N ordAq Energy Inc. is one of only four companies actively

working in the two major Alaska basins — the North
Slope and Cook Inlet — and almost certainly the smallest.
Anchorage, AK 99503-4040
PHONE: 907-646-9315
TOP ALASKA EXECUTIVE: Bob Warthen,
This winter, the Anchorage-based company launched a one- president
well exploration program at the Tulimaniq prospect in Smith COMPANY WEBSITE: www.nordaqenergy.com
Bay off the coast of the National Petroleum Reserve-Alaska
while progressing two programs in Cook Inlet — the Shadura as the HRZ. That would put the Smith Bay “area squarely in be-
prospect in the Kenai National Wildlife Refuge and the Tiger Eye tween the kitchen and the seeps,” Decker told Petroleum News
prospect in the Trading Bay region. at the time. “So you probably have a pretty good plumbing story
NordAq arrived in the Cook Inlet region to be able to charge this with nice light oil.”
with a wave of independents in early 2010 by All told, the acquisition bucked the recent trend of companies
picking up state acreage at lease sales and ac- pursuing relatively small accumulations near existing develop-
quiring Cook Inlet Region Inc. leases. The ments in favor of a larger and more difficult find.
principals of the company have been well The Talisman Energy Inc. subsidiary FEX explored a similar
known in the Alaska oil industry for years. region in the 2000s, commissioning a seismic survey in Smith
NordAq President Bob Warthen boasts nearly Bay and drilling three NPR-A wells — Amaguq No. 2, Ak-
45 years of Cook Inlet experience, including a laqyaaq No. 1 and Aklaq No. 6. The company found oil at all
quarter century of senior management for three wells, and later touted a sizeable reserve potential, but left
Union Oil Company of California. the state toward the end of the decade without pursuing devel-
After pulling together its two Cook Inlet BOB WARTHEN opment. The company was disheartened by the challenging lo-
exploration programs, NordAq is now being gistics of the region and an inconsistent federal leasing program.
funding through a partnership with the Chinese private invest- The company plugged and abandoned Amaguq No. 2 and sus-
ment group Chinanx. The firm agreed to invest $90 million and pended Aklaqyaaq No. 1 and the Aklaq No. 6.
provide a $150 million debt facility to help NordAq develop While FEX considered Amaguq No. 2 to be “subcommercial
“gross unrisked potential recoverable reserves” of 1.2 billion bar- given current infrastructure,” the company pegged the “initial
rels of oil and 115 billion cubic feet of gas across its Alaska port- estimate of contingent resources present” at the two suspended
folio, according to the companies. wells between 300 million and 400 million barrels net to FEX,
Following FEX which had an 80 percent working interest in the leases. The wells
had encountered more than 225 feet of net hydrocarbon-bearing
After several years focused exclusively on its Cook Inlet sandstones, according to FEX. Talisman also touted “significant
properties, NordAq began amassing its leasehold across the follow-up potential on many similar structures on Talisman’s
North Slope at lease sales in 2011, 2012 and 2013. acreage if commercial productivity is proven,” based on log
The acreage was concentrated in Smith Bay and the north- analysis and “strong gas and oil shows, including oil staining
west planning area of the NPR-A. Those areas are far from exist- and free oil in the drilling mud in one of the wells.”
ing North Slope infrastructure. Smith Bay is roughly 150 miles NordAq permitted an eight-well program running over two
from Kuparuk River unit Drill Site 2P and some 70 miles from winters — 2013-14 and 2014-15. The proposal included 14 poten-
Barrow. The NPR-A leases were even more remote, with some as tial well locations: 10 Tulimaniq wells in Smith Bay and four
far as 200 miles from Drill Site 2P. NPR-A wells — Aklaq Nos. 2A and 6A, Aklaqyaaq No. 1 and
Exploration in the region would be hard to justify if not for its Amaguq No. 2A. While the company hoped to begin drilling in
impressive geology. the region in early 2014, logistical issues forced the company to
In 2006, Division of Oil and Gas geologist Paul Decker de- delay its exploration work by one year.
scribed the area as a natural oil trap where Brookian topset In late 2014, NordAq proposed a one-well program for the
sands come up against shale in an ancient incised canyon. The coming winter. The Tulimaniq No. 1 exploration well near the
region is famous for oil seeps in the Cape Simpson area, which delta of the Ikpikpuk River would be a vertical stratigraphic test
Decker said were likely to have originated from an “oil kitchen”
to the north in the lower Cretaceous source rock system known continued on next page
70 THE EXPLORERS
COURTESY NORDAQ
NORDAQ continued from page 70
well to collect rock samples and conduct a

vertical seismic profile, according to the
company. Should the well encounter liq-
uid hydrocarbons, the company said it
would conduct a flow test to evaluate hy-
drocarbon performance characteristics.
The results of the first well would de-
termine future drilling, the company said.
The proposal drew opposition from a
coalition of environmental groups wor-
ried about the potential impact of explo-
ration in the Teshekpuk Lake region,
among other concerns.
The Alaska Oil and Gas Conservation
Commission issued a permit for Tuli-
maniq No. 1 in late February 2015. Nor-
dAq is using the Doyon Arctic Fox rig to
drill the well.
Headway at Shadura
As it pursues that big North Slope
prize, NordAq is also working on two
projects in Cook Inlet: Shadura in the
Kenai National Wildlife Refuge and Tiger
Eye near Trading Bay. as long as two years, because the 16,000- Service believed that both were “feasible.”
The Shadura prospect is west of the foot directional well would require a In July 2013, the agency allowed NordAq
Swanson River field, on subsurface land fairly large rig, he appeared to be serious to pursue its preferred development
owned by Cook Inlet Region Inc. The about moving forward. scheme.
Alaska National Interest Lands Conserva- “We wouldn’t be here if it’s not a go. The decision allowed NordAq to start
tion Act created a mechanism for CIRI to Going through an EIS process is not inex- on the Shadura No. 2 appraisal well,
allow access to lands within the refuge for pensive,” he said, referring to the feder- which the company believes is key for de-
resource development. ally mandated environmental impact termining the viability of the project. With
After building an ice road through the statement process. an eye toward seasonal restrictions in the
Kenai National Wildlife Refuge, NordAq The comment proved to be prescient. refuge, the company had said it intended
spud the Shadura No. 1 exploration well A draft EIS presented a two-phase de- to start building the gravel road in mid-
in February 2011 using the Glacier No. 1 velopment plan. NordAq would build a July and start drilling in mid-September,
drilling rig. short gravel access road and a “minimal” according to the company.
The well primarily targeted natural gas pad to support one well in June 2013, Those plans were delayed for un-
objectives in the upper and middle Ty- which the company would either expand known reasons. In late September 2014,
onek formation between 11,000 and 14,500 or remove and remediate, depending on the Alaska Oil and Gas Conservation
feet, and included a secondary target in the results of the well. The goal was to Commission issued a drilling permit for
the shallower Beluga formation between bring the field into production by June the well. As of early 2015, the Shadura No.
6,000 and 11,000 feet, according to state 2014, selling the gas into the pipeline con- 2 (23-19) well had yet to appear as “com-
filings. necting the Tyonek A platform to the pleted” in AOGCC reports.
Toward the end of the year, rumors Kenai liquefied natural gas plant.
The 538-page final EIS proposed five Tiger Eye moving slowly
swirled about a potentially large discov-
ery. NordAq announced a “significant alternatives for development, including Around the time NordAq announced
natural gas discovery” in November 2011 NordAq’s preference. Among the remain- the Shadura discovery in late 2011, it also
and later suggested that the prospect ing alternatives were plans for accessing launched an exploration program at the
could produce up to 50 million cubic feet the prospect from the south or the east, re- Tiger Eye prospect, located on the west
per day over 30 years. The company later spectively, out of the Hilcorp-operated side of Cook Inlet.
tempered any excitement by saying that Swanson River unit. The company initially proposed a one-
the 50 million cubic feet per day figure NordAq believed these options would well program targeting the Tyonek and
measured the “facility design volume,” have made the project economically or lo- Hemlock formations in an area about 1.8
rather than the actual production volume. gistically unfeasible, which would have miles southwest of the Trading Bay facili-
By April 2012, NordAq was proposing violated the ANILCA provision allowing ties. In May 2012, the company expanded
a flow test and an appraisal well to assess development. the program, proposing two exploration
the discovery, followed by a six-well de- While acknowledging that the two al- wells toward the end of summer and com-
velopment program. Although Warthen ternatives were “not ideal from NordAq’s missioning a 3-D seismic survey over the
warned that the appraisal well might take perspective,” the U.S. Fish and Wildlife
THE EXPLORERS 71
NORDAQ continued from page 71 drocarbon accumulation to be included in the unit.”
The adjacent Apache leases expired at the end of their pri-
area in early 2013. mary term in May 2013. The leases included Shell’s Kustatan
With its leases set to expire at the end of September 2012, Nor- River No. 1 and PanAm’s Bachatna Creek No. 1.
dAq asked the state to form the Tiger Eye unit over two leases Shortly after getting the unit, NordAq used Nabors Alaska
covering some 8,480 acres. The application proposed a two-well Drilling Rig 106AC to drill the Tiger Eye Central No. 1 well, tar-
program — the Tiger Eye Central No. 1 well in the second quar- geting the Tyonek and Hemlock formations.
ter of 2013 and the Tiger Eye North No. 1 well in the second The company amended the Tiger Eye unit plan of operations
quarter of 2014. The wells would have started from the same pad in early 2013 to include additional exploration and development
to different bottomhole locations, one in each lease. activities. The changes envisioned expanding the TEC-1 pad to
The company revised its application in August 2012, switch- accommodate a 60-man camp and production facilities, con-
ing out Tiger Eye North No. 1 for the Tiger Eye Central No. 2 structing the TEC-2 pad and connecting the two pads by road, as
well, which had a bottomhole location slightly to the east. The well as conducting exploration activities. The plan called for
revision also sped up the deadlines by nine months to a year — drilling as many as eight 4,000-foot wells on the TEC-1 pad be-
the third quarter of 2012 for Tiger Eye Central No. 1 and the sec- fore expanding it and potentially bringing the pad into produc-
ond quarter of 2013 for Tiger Eye Central No. 2. The revised ap- tion by October 2013.
plication maintained the early 2013 timeline for shooting seismic. The NordAq portfolio includes other prospects, including
The Alaska Department of Natural Resources approved a Anakema and Akema.
7,680-acre unit in October 2012 and required NordAq to drill an Anakema is located offshore of the Kenai Industrial Center,
initial well at the unit by the end of the year. roughly halfway between Shadura and Tiger Eye. The two leases
As part of the application process, Apache Alaska Corp. asked in the prospect are set to expire in February 2018.
the state to include three of its adjacent leases into the unit, say- Akema is southeast of Shadura. The one lease in the prospect
ing they shared a reservoir. The state rejected the request, saying expires in April 2017.
Apache did “not conclusively prove that the potential hydrocar-
bon accumulation” extended onto its leases, which meant there
was “no evidence that Apache has an interest in the potential hy- Contact Eric Lidji at ericlidji@mac.com
MILLER ENERGY continued from page 69 the time. “I think it gives us a good launch pad for the North
Slope. We’ve been eying that field for a while and think there’s lots
program while also analyzing results within an eye toward a po-
of room for growth within the Badami field and also, too, some of
tential drilling program outside the North Fork Gas Pool No. 1
the exploration acreage that comes along with the acquisition.”
participating area. Lower risk gas targets at North Fork are a
Initial plans called for sidetracking the existing B1-14 and B1-28
major focus for Miller in 2015, given the attractiveness of gas
wells, at a cost of some $15 million each, according to Miller. The
compared to oil in the current commodity price environment.
company estimated the wells contained some 2 million barrels of
The Badami unit recoverable oil reserves between them. After closing on the deal in
December 2014, the company announced plans to drill two
With its acquisition of Badami, Miller became one of only three Badami wells this summer.
companies to operate production both on the North Slope and in The company is also touting exploration acreage south of the
Cook Inlet, along with ConocoPhillips and Hilcorp. ExxonMobil-operated Point Thomson unit to the east, although it
While Miller acquired the North Fork unit from Armstrong and has not yet made any definitive plans for the region.
its partners, it acquired Savant Alaska outright, making the small Low oil prices have dulled the luster of the unit for the time
independent a wholly owned subsidiary. being.
The biggest component of the acquisition is control of the In its March 2015 presentation, Miller placed its activities at
Badami unit on the eastern North Slope. The deal also came with Badami “on hold” for this year and said it would look for “well
pipelines and associated exploration acreage. enhancements” opportunities “in the interim.” The company
Conoco Inc. discovered Badami in 1990, and BP Exploration listed the project as a potential for a joint venture, farm-out or sell-
(Alaska) Inc. brought the field online in August 1998. While BP down.
had high hopes for the field, oil production peaked a month later
at 7,450 barrels per day. The next decade involved a series of starts Hungry for prospects
and stops, during which time BP upgraded facilities and allowed
Those exploration projects (and its development work) will
field pressure to improve.
likely keep the company busy, but Miller has shown a willingness
In mid-2008, Savant Alaska and ASRC Exploration LLC agreed
to pursue available opportunities in Alaska.
to take on the challenge of restarting Badami in return for a stake
In September 2014, Miller signed a non-binding letter of intent
in the unit. After years of development work, the partners ac-
to buy the Alaska assets of Buccaneer Energy Ltd., which had filed
quired the field outright in early 2012. Savant became the newest
for bankruptcy protection earlier in the year.
and smallest operator on the North Slope. In early 2014, BP sold
Ultimately, Cook Inlet Energy bid $35 million through a bank-
the Badami pipeline system to Nutaaq Pipeline LLC, a partnership
ruptcy auction. Although it was the largest cash bid, Buccaneer
of Savant and Arctic Slope Regional Corp.
sold its assets to its largest creditor, AIX Energy LLC, for a $44 mil-
Through its acquisition of Savant, Miller acquired a 67.5 per-
lion “credit bid,” which involve bidding debt against other cash
cent interest in Badami with ASRC Exploration LLC holding the
offers.
other 32.5 percent. At the time, the unit was producing some 1,100
barrels per day. “We’re excited about that acquisition,” Hall said at Contact Eric Lidji at ericlidji@mac.com
72 THE EXPLORERS
Repsol finishes fourth
Alaska exploration season
The company has spent nearly $1 billion drilling a dozen wells
and permitting at least three seismic programs
By ERIC LIDJI
For Petroleum News NAME OF COMPANY: Repsol E&P USA Inc.
A year ago, Repsol E&P USA Inc. seemed to be on the verge of

development.
The American subsidiary of Spanish supermajor Repsol SA had
2001 Timberloch Pl., Ste. 3000,
The Woodlands, TX 77380
PHONE: 832-442-1000
announced three discoveries following its third season of explo- TOP ALASKA EXECUTIVES: Greg Smith, director U.S. Business
ration activities in Alaska. Officials described development as being Unit, and Bill Hardham, Alaska Project Manager
something of an inevitability, to be delayed only by the uncertain- ALASKA OFFICE: 1029 W. Third Ave., Ste. 260,
ties of regulatory systems and taxation. With voters subsequently Anchorage, AK 99515
upholding a fiscal system favored by the company, what else could PHONE: 907-375-6900 • WEBSITE: www.repsol.com
possibly stand in the way?
Over the past year, though, instead of sanctioning development, America, until it maintained upstream, midstream and down-
Repsol continued its exploration program. The company con- stream assets in more than 50 countries.
ducted a large 3-D seismic survey over the region and permitted Over the next decade, though, Repsol shifted its focus. The com-
three new wells among a cluster of nine previous wells and side- pany increasingly looked for opportunities to pursue oil develop-
tracks. ment in developed economies, which is why the company
That this program is the most geographically concentrated Rep- partnered with Shell and Eni on a block of federal leases in the
sol has conducted to date in Alaska suggests the Beaufort Sea in 2007 and bid $15.6 million on 104 tracts — includ-
company is narrowing its focus as it decides ing $14.4 million in high bids on 93 tracts — in the record-breaking
how best to develop the region. Added to that federal lease sale in the Chukchi Sea in early 2008.
are recent comments from Chief Executive Offi- A combination of regulatory uncertainty and legal challenges
cer Josu Jon Imaz, who told analysts, during a has prevented either of those offshore programs from coming to
March 2015 earning call, that there was “a high fruition. The company later claimed to have turned down other op-
probability” of Repsol making a final decision portunities in Alaska due to an “uncompetitive tax structure.”
and drafting a development plan in early 2016. Some opportunities are too interesting to pass up, though. In
But, he warned, any decision depended on the March 2011, with the same tax structure in place, Repsol acquired a
results of the current drilling season. 70 percent working interest in North Slope leases held by the Arm-
Toward the end of March, Repsol applied to GREG SMITH strong Oil & Gas subsidiary 70 & 148 LLC and its fellow Denver-
form the Pikka unit over 31 state and Arctic based independent GMT Exploration LLC. The joint venture
Slope Regional Corp. leases covering some 63,304 acres in the covered 494,211 acres in the White Hills region south of the Ku-
Colville River Delta and the shallow waters of Harrison Bay. In an paruk River unit and near the Oooguruk unit.
initial plan of exploration, the company said unitization would The $768 million deal earmarked some $750 million for explo-
allow for “the orderly development of four discovered reservoirs.” ration, according to Petroleum News sources, suggesting that all
Through its first three seasons, Repsol spent approximately $650 three parties were eager to get to work.
million drilling nine wells and conducting two 3-D seismic sur-
veys, according to the company. The three-well program and asso- Four seasons
ciated seismic planned for this winter were estimated at $240
The exploration program recently completed its fourth season.
million.
For its first season, in early 2012, Repsol’s ambitions outpaced
In November 2014, Ed Kerr, who is vice president of the Repsol
its activities. The company wanted to drill five wells, permitted
partner Armstrong Oil & Gas said, “In 10 or 15 years people will
four to accommodate local concerns and ultimately completed only
talk about Repsol the same way they talk about BP and Cono-
two because a blowout delayed operations for weeks. The two
coPhillips today, in terms of … contributing to Alaska’s economy.”
were the Qugruk No. 4 well in the Qugruk unit, north of the
Sniffing around Colville River unit, and the Kachemach No. 1 well, southeast of the
Meltwater satellite of the Kuparuk River unit.
After the state owned Repsol was privatized in the 1980s and For its second season, in early 2013, Repsol again attempted its
acquired the Argentinean company YPF in 1999, it became one of original ambitions. The company planned a three-well program,
the largest oil companies in the world. which included the Qugruk No. 1 well proposed the year earlier,
The company quickly expanded, particularly throughout Latin
THE EXPLORERS 73
REPSOL continued from page 73
the Qugruk No. 6 well near the site of the

blowout and the Qugruk No. 3 well. The
first two wells were near the coast. The
third was some 10 miles inland, to the
south. All three wells found hydrocarbons.
Repsol performed drill stem tests on
Qugruk No. 1 and Qugruk No. 6 and per-
formed some early geotechnical work
needed for development.
For its third season, in early 2014, Repsol
appraised those discoveries with a two-
well program. The company drilled the
Qugruk No. 5 well and Qugruk No. 5A
sidetrack and the Qugruk No. 7 well about
halfway between Qugruk No. 1 and
Qugruk No. 3. (The company also drilled
the Tuttu No. 1 well on a lease just south of
the Prudhoe Bay unit.)
The Qugruk wells “finished with posi-
tive results,” Chief Financial Officer Miguel
Martinez said in May 2014. “We are work-
ing toward defining the most economical
way to develop the area,” he said, adding
that it was too soon to provide further de-
tails.
COURTESY REPSOL
As he spoke, Repsol was completing a
major 3-D seismic program. In its 2013-14
plan of exploration, the company told the
state it planned to collect 140 square miles
of 3-D seismic across its onshore holdings,
with the potential to add an offshore sur-
vey. In reality, the company ended up col-
We Make a Difference lecting 208.4 square miles across its coastal
holdings.
In an August 2014 letter, Repsol told the
state it was working to “fast track” its
analysis of the seismic information to iden-
tify the best location for an appraisal of
Qugruk No. 4.
Toward the end of 2014, the company
began permitting five locations for a three-
well exploration program, saying it wanted
flexibility as it evaluated previous well re-
sults.
The proposed Qugruk No. 101 and
Qugruk No. 9 wells were nestled between
Qugruk No. 1 and Qugruk No. 6 drilled in
early 2013 and Qugruk No. 5 and Qugruk
No. 7 drilled in early 2014. The other three
Serving Alaska since 1942

locations are clustered around previous ex-
ploration. The proposed Qugruk No. 301
well was nearly identical to Qugruk No. 3
Engineering • Environmental • Mobile & Aerial LiDAR • GIS and Mapping drilled in early 2013. The proposed Qugruk
Permafrost • Surface Hydrology • Geotechnical • Pipelines • Transportation No. 8 and Qugruk No. 801 wells were
NEPA • Regulatory • Fish & Wildlife • Wetlands • Water Resources • Permitting roughly one mile and five miles to the
south, respectively, into as-yet-unexplored
3900 C Street, Suite 900, Anchorage, Alaska 99503 • 3605 Cartwright Court, Fairbanks, Alaska 99701 sections of the leasehold.
Ultimately, Repsol selected Qugruk No.
8, Qugruk No. 9 and Qugruk No. 301 and
74 THE EXPLORERS
Lawsuit delays Royale
exploration program
Financial dispute between partners pushes source
rock exploration program into 2016 at the earliest
By ERIC LIDJI
For Petroleum News NAME OF COMPANY: Royale Energy, Inc.
COMPANY HEADQUARTERS: 3777 Willow
T his year, Royale Energy Inc. was supposed to become the

second company to drill wells explicitly targeting source
rocks on the North Slope. Instead, a lawsuit between partners
Glen Drive, El Cajon, CA 92019
TOP ALASKA EXECUTIVE: Stephen Hosmer,
Co-president, Co-CEO and CFO
forced the San Diego-based company to postpone its plans until PHONE: 619-383-6600 • WEBSITE: www.royl.com
next year, at the earliest.
In 2014, Royale began permitting a two-year exploration pro-
COURTESY ROYALE
gram. The company planned to drill as many as four wells over
two North Slope prospects: the Aki prospect south of the
Colville River unit and the Central prospect south of the Ku-
paruk River unit. In late July 2014, Royale cancelled a contract
with Kuukpik Drilling after its partner, Rampart Energy Inc., de-
clined to fund a cash advance on the rig, according to the com-
panies.
The financial matter spawned legal claims and counterclaims
between the partners.
“Because the case is only a number of months old, we are un-
able to provide an evaluation of the likelihood of an unfavorable
outcome nor can we estimate the amount or range of potential
loss,” Royale wrote in its most recent annual report, filed on
March 31, 2015.
Sohio legacy
Although new to Alaska, Royale is building on old creden-
tials.
Vice President for Exploration and Production Mohamed
Abdel-Rahman came to Alaska in the early 1980s, while working
as a geologist for Sohio. He initially focused on the southern half
of the state and eventually became the district geologist for the
entire state.
Abdel-Rahman was working for Sohio in 1983, when the
company drilled the Mukluk well in Harrison Bay. The $1 billion
well was the most expensive dry hole in history.
Abdel-Rahman led a post-mortem investigation. “At the time
it was not fashionable to talk about biomarkers — organic com-
pounds that are characteristic of the organisms from which the
oil is generated — but we did biomarkers work in Mukluk and
wanted to get a sufficient amount of “internal infrastructure” in
compared it to all the other oils that had been discovered on the
place before bidding on acreage. But after Great Bear Petroleum
North Slope. We found an astounding match of the Mukluk oil
LLC took some 500,000 acres of source rock prospective acreage
and Kuparuk oil,” Abdel-Rahman told Petroleum News in early
in an October 2010 lease sale, Royale decided it had better make
2012, adding, “In my view there is no doubt that the Mukluk oil
its move if it wanted to enter the region. “We were caught by
went to Kuparuk.”
surprise when Great Bear Petroleum took that much acreage. It
The work convinced Abdel-Rahman about the nature and lo-
forced us to move quickly,” co-CEO Stephen Hosmer told Petro-
cation of the North Slope source rocks, which would have
leum News in early 2012.
“charged” Prudhoe Bay, Kuparuk and other big fields.
In December 2011, the company spent $2.7 million on nearly
With Royale, Abdel-Rahman decided to pursue a source rock
exploration program on the North Slope. The company initially continued on next page
76 THE EXPLORERS
REPSOL continued from page 74 company completed the Qugruk No. 4 well by June 30, 2012, and
increased rental rates on four leases set to expire in August 2012.
proposed micro-seismic fracture mapping on the Qugruk No. 301 In mid-2013, taking advantage of a recently passed law, Repsol
and Qugruk No. 8. asked the state to extend the primary terms of five un-unitized
The process uses the vibrations that occur during drilling opera- leases in the Qugruk area by three-to-four years. The state ulti-
tions to conduct seismic operations. “This micro-seismic fracture mately gave Repsol two additional years on the leases but required
mapping will allow Repsol to understand the azimuth orientation the company to drill an additional well, post a $100,000 bond and
of the maximum principal stress within the productive reservoir,” collect new seismic.
the company told state officials in an October 2014 plan of opera- Over 2014, Repsol also toyed with the idea of forming a second
tions. “This azimuth orientation will ultimately dictate the trajec- unit. Apparently, the company asked the state to form the Tapqaq
tory of the horizontal laterals planned for production wells to unit over the segment of its leases containing Qugruk No. 5. The
optimize reservoir production over the life of the reservoir.” application never reached public notice and was only mentioned in
passing as part of unit decisions for other leaseholders in the some-
Qugruk, Tapqaq, Pikka
what crowded region.
Alongside field work, Repsol has been making administrative Instead, in early 2015, Repsol applied to form the Pikka unit.
moves. The proposed plan of exploration called for drilling three wells
In October 2011, the company applied to form the 98,852-acre over the next five years. All three wells mentioned in the applica-
Qugruk unit over 49 leases in the T-shaped bundle running up the tion — Qugruk No. 8, Qugruk No. 9 and Qugruk No. 301 — were
narrow fairway between the Kuparuk River and Colville River wells Repsol permitted in January 2015 for the recently completed
units and then spreading along the state waters of the Beaufort Sea. season.
The state ultimately approved a 12,065-acre unit over six leases
but required Repsol to post a $20 million bond to be returned if the Contact Eric Lidji at ericlidji@mac.com
ROYALE continued from page 76 Rampart said that the results also suggested some source rock
potential.
100,000 acres of North Slope leases prospective for source rock
“The preliminary results available to date are showing excel-
development. The leases were in the Franklin Bluffs region,
lent data quality and clearly highlight the key interpretable inter-
south of Kuparuk and south of Nuiqsut along the Colville River.
vals such as the Brookian and HRZ packages, and near top
The central North Slope has three stacked shales: the Triassic-
Kingak Formation,” Rampart CEO Torey Marshall said in an
age Shublik formation, the Jurassic-age Kingak shale and the
April 2014 statement, referring to the Brookian formation that is
Cretaceous-age Hue, or HRZ, shale. Of those, Royale has been
producing at various places across the North Slope and also to
most excited about the Shublik, which the company believes is
two of the three source rock formations present in the region.
similar in its composition to the booming Bakken formation of
North Dakota. “Everything we picked is optimum for oil genera- Permitting and delays
tion — in all three shales,” Abdel-Rahman said in 2012.
After the survey, Rampart committed some $50 million to up-
As with Great Bear, Royale intends to pursue conventional oil
coming exploration.
targets on its acreage, which would allow the company to earn
In an oil discharge prevention and contingency plan released
some revenue while it pursues the larger target.
for public comment in August 2014, Royale described “plans to
The small company also holds interests in the Sacramento
conduct a regional, multi-year onshore oil and gas exploration
basin and San Joaquin basin of California, as well as in Utah and
drilling program during the winter months on the North Slope.”
Texas, and produces some 15 million cubic feet of natural gas per
The Aki and Central Exploration Drilling Program included
day from its wells. After testing the concept with the Monterey
plans for two areas.
shale of California, the company wanted to take another stab at
The company said it had identified locations for eight poten-
unconventional resources, which is what led it to consider the
tial wells at its Aki prospect along the Colville River south of the
possibilities of the three Alaska source rocks.
village of Nuiqsut and for six potential wells on its Central
Seismic results prospect south of the Kuparuk River unit. The company said it
intended to “drill up to four exploratory well locations during
In early 2012, Royale announced plans to look for a joint ven-
the two winter seasons between 2014 and 2015; with potential
ture partner to help fund a six-well program — two wells on
additional locations drilled within the lease blocks in future
each of its three lease blocks — for the following winter. In early
years.”
2013, Australia-based Rampart Energy agreed to spend $43 mil-
The Aki wells would have been drilled from a temporary ice
lion on exploration in return for a large stake in the Royale land
pad accessed by a snow/ice road from Kuparuk River unit Drill
position on the North Slope.
Site 2P. A separate snow-ice road from the Franklin Bluffs staging
The deal allowed Rampart to acquire between 10 percent and
area along the Dalton Highway would have accessed the Central
75 percent working interest in the western block of leases and a
wells.
75 percent working interest in the Central Block by making vari-
The Aki and Central prospects have “both conventional and
ous payments and funding various seismic programs by specific
unconventional formations,” according to Royale, which listed
deadlines.
the conventional formations as Upper Jurassic, Kuparuk and
The partners commissioned SAE Exploration to conduct a 3-D
Brookian and the unconventional as Shublik, Lower Kingak and
seismic survey over 120 square miles of the North Slope. A pre-
shale.
liminary interpretation “identified a large conventional target,
covering an area of up to 20,000 acres,” according to Royale. continued on page 81
THE EXPLORERS 77
Shell pressing ahead
in Chukchi after setbacks
Company is mobilizing fleet after three-year hiatus, still waiting
for final approval of exploration plan
By ERIC LIDJI
For Petroleum News NAME OF COMPANY: Shell
A fter a tiny step forward and many large leaps backward,

Royal Dutch Shell plc is once again planning to explore its
Burger prospect in the Chukchi Sea this summer.
The Hague, The Netherlands
ALASKA OFFICE: 3601 C St., Ste. 1334,
Anchorage, AK 99503
“We have retained a very significant capability to be ready this TOP ALASKA EXECUTIVE: Laurie Schmidt,
year to go ahead,” CEO Ben van Beurden said during a January vice president
earnings call. “And we’ve kept all our capability in place, tuned it, PHONE: 907-770-3700 • COMPANY WEBSITE: www.shell.com
upgraded it just to be ready to drill this coming summer season.”
By “capability,” van Beurden was referring to the fleet required
for conducting drilling operations in the remote Chukchi Sea off ours are very well suited to,” Global Exploration Director
the northwest coast of the Alaska. Matthias Bichsel said in September 2004.
If Shell moves ahead, the program would The current campaign started in 2005, when Shell spent some
cost more than $1 billion, Shell Chief Financial $44 million on 86 tracts in a federal Beaufort Sea lease sale. The
Officer Simon Henry said. If the company is acreage included two fields discovered between 1986 and 1992:
once again stymied, as it has often been in the the Hammerhead field off the coast of the Point Thomson unit
past, the program would still cost nearly $1 bil- and the Kuvlum field farther east. Shell initially intended to drill
lion, as all the drilling ships must be mobilized as early as 2007, although a legal challenge prevented the com-
early in the season to meet timelines. pany from mobilizing equipment until early 2010.
Following the announcement, Shell took Subsequent legal and regulatory challenges delayed the pro-
several steps toward the program. gram until 2012, when the weather took over as the primary ob-
The company asked the National Marine stacle. By the end of the 2012 drilling season, the company had
Fisheries Service for authorizations to disturb LAURIE SCHMIDT managed to complete only the 1,500-foot top-hole of the Sivulliq
marine mammals in the Chukchi and Beaufort well.
seas by aircraft. The company wants to conduct as many as five Shell greatly expanded its Arctic ambitions in Alaska in Febru-
fixed-wing flights covering a total distance of 1,500 nautical miles ary 2008 when it spent $2.1 billion on high bids at a record-break-
in the Chukchi Sea or the Beaufort Sea between June and July to ing federal lease sale in the Chukchi Sea.
observe freeze up. The 275 blocks included acreage where Shell had drilled in
Shell also asked the U.S. Department of Transportation for per- 1989 and 1990. The company intended to explore the Burger,
mission to use a foreign-flag anchor handling vessel, the Tor Crackerjack and Southwest Shoebill prospects in 2010, but a fed-
Viking, in the Beaufort Sea or Chukchi Sea. eral moratorium on offshore drilling imposed in the aftermath of
The company cleared another hurdle in late March, when the the Deepwater Horizon oil spill in the Gulf of Mexico ended those
Department of the Interior upheld the 2008 lease sale where Shell plans. A lawsuit in the Beaufort expanded to include the Chukchi,
acquired its leasehold in the Chukchi Sea. which prevented the company from exploring in 2011.
During the weather contracted 2012 season, Shell completed
Old history, recent history the top-hole for Burger-A.
The two top-holes represented the most exploration activities
Shell was among the first companies to explore Alaska, includ-
undertaken in either the Beaufort Sea or the Chukchi Sea in
ing pioneering work across the Chukchi Sea, the Beaufort Sea, the
decades, which made the company optimistic about its prospects
Gulf of Alaska, the Bering Sea and Cook Inlet.
for exploring the two regions going forward. “We would have
The company left the state in 1998, only to acquire additional
liked to have drilled through the objectives (in 2012), but I think
leases in 2001 and relinquish those in 2004 with the promise of re-
we have done some really important things with respect to setting
turning when the offerings were justified.
the precedent about being able to work safely in Alaska,” Shell
Officials made it clear that the company wanted to pursue
Vice President for Alaska Pete Slaiby told Petroleum News in Sep-
giant targets in complex environments around the world. “You
tember 2012. “Overall it’s clearly the most success we’ve had in
have a bit of a theme there — Sakhalin, West Siberia and Alaska
Alaska in the last six years.”
— which is the Arctic, which requires big funds, which requires
technology, tenacity, staying power, which I think companies like
78 THE EXPLORERS
SHELL continued from page 78
Problems and delays

BOEM approves Shell’s Chukchi Sea plan
But later in the year, while being towed from Dutch Harbor to The Bureau of Ocean Energy Management announced its
the U.S. West Coast for maintenance work, the Kulluk drillship ran conditional approval of Shell’s Chukchi Sea exploration
aground at Sitkalidak Island to the southeast of Kodiak Island. An plan May 11. Starting this year, the company proposes
emergency team managed to get the Kulluk to Kodiak Island with- drilling up to six wells in the
out reporting any fuel or oil spills, although some seawater had en- Burger prospect, about 70 miles BREAKING NEWS
tered the vessel. northwest of the Chukchi
Shell also had to tow its Noble Discoverer drillship to a more ro- coastal village of Wainwright. The
bust shipyard to fix its propulsion systems, as well as equipment BOEM approval is subject to several conditions, including
related to safety and pollution prevention. Shell obtaining all of the permits needed for its operations
In late February 2013, Shell canceled its upcoming exploration and the company complying with the requirements of the
program while it addressed the problems with its rig fleet. “We’ve Marine Mammals Protection Act and the Endangered
made progress in Alaska, but this is a long-term program that we Species Act.
are pursuing in a safe and measured way,” Shell Oil Co. President Shell hopes to start moving its drilling fleet into the
Marvin Odum said. “Our decision to pause in 2013 will give us Chukchi in early July. An approved exploration plan is a
time to ensure the readiness of all our equipment and people fol- key requirement for implementing the drilling program.
lowing the drilling season in 2012.” Among the permits and approvals Shell still needs are
An initial 60-day review from the U.S. Department of the Inte- permits to drill from the Bureau of Safety and Environmen-
rior placed most of the blame for the incident on Shell, saying that tal Enforcement. Shell has also applied to the National Ma-
the company had inadequately prepared for the program and mis- rine Fisheries Service for approval for minor unintended
managed its contractors. “We’re asking them to go another step disturbance of marine mammals.
and to provide us with a great deal of detail around their entire op-
eration in an integrated way, including not only drilling operations
means that I am not prepared to commit further resources for
but their maritime operations as well,” said Tommy Beaudreau,
drilling in Alaska in 2014,” van Beurden told investor in January
principal deputy assistant secretary for land and minerals manage-
2014. “We will look to relevant agencies and the Court to resolve
ment.
their open legal issues as quickly as possible.”
In late 2013, Shell began planning another program, which it
By that time, Shell had spent more than $5 billion on its recent
soon cancelled in the face of legal and regulatory challenges. “This
is a disappointing outcome, but the lack of a clear path forward
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THE EXPLORERS 79
SHELL continued from page 79
Shell was among the first companies to explore Alaska,
venture into the Arctic OCS, with only two top holes to show for it. including pioneering work across the Chukchi Sea, the
“There’s a clear capital ceiling in the company and so we need to
take some hard choices, and this means looking more closely at our
Beaufort Sea, the Gulf of Alaska, the Bering Sea
options at an earlier stage and asking ourselves ‘are these indeed and Cook Inlet.
the projects? Are these projects really a good fit for Shell?’” Van
Beurden said in March 2014. He suggested that the company might
ter Horizon oil spill in the Gulf of Mexico in 2010 and immediate
forgo other opportunities around the world for the sake of pursu-
relevance after a Shell drilling ship ran aground.
ing its target in the Alaska Arctic. When the company announced
The Bureau of Safety and Environmental Enforcement began
its $1 billion program for Alaska this year, it also said it would re-
preparing new regulations for Arctic exploration in the wake of
duce spending outside Alaska.
Deepwater Horizon. In September 2014, in a meeting with officials,
Given all those delays over the past decade, Shell recently asked
Shell criticized the nature of the changes as being too prescriptive,
the federal government for a five-year extension of its offshore
rather than giving operators the freedom to meet performance-
leases in the Alaska outer continental shelf. The government had
based safety targets.
yet to rule on the request by the time The Explorers went to print.
Specifically, the company questioned three features of the pro-
Given the long lead-time needed in the Arctic, Shell filed its
posed regulation. The first would require operators to have a back-
plan with the Bureau of Ocean Energy Management in late August,
up rig available for drilling a relief well before the end of a drilling
before it had decided whether to proceed.
season, if needed. The second would impose a drilling blackout pe-
The plan called for deploying the Noble Discoverer drillship
riod at the end of each season to provide time for drilling a relief
and the Polar Pioneer semi-submersible rig to the Chukchi Sea. An
well, if needed. The third would require an operator to have the re-
earlier plan had called for stationing the Polar Pioneer in Dutch
sources necessary to mechanically recover all the oil spilled during
Harbor in the Aleutian Islands as a backup rig. While each rig
a worst-case scenario. The company believes these three provisions
would be capable of backing up the other, the plan allows Shell to
would increase exploration costs without necessarily improving
drill two wells simultaneously.
safety.
The exploration program will target the Burger prospect, which
For the first two provisions, Shell questions the efficacy of relief
is known to contain a large natural gas reservoir and which Shell
wells, which the company believes are less effective at stopping a
believes also contains oil. The administrative issues surrounding
spill than simply capping the well.
the appeal of the lease sale delayed approval of the exploration
For the third provision, Shell believes in-situ burning or oil dis-
plan.
persants might be a more effective and efficient way to remove oil
Other changes spilled in open water than mechanical recovery.
The federal agencies released proposed regulations for public
The past year has seen other developments for Shell.
comments in late February.
In mid-2014, Shell formed a joint venture with Arctic Inupiat
The proposal would require offshore operators to file an inte-
Offshore LLC.
grated operations plan for their proposed operations, acquire a
The Native corporations Arctic Slope Regional Corp., Uk-
capping stack and containment dome for responding to an out-of-
peagvik Inupiat Corp., Tikigaq Corp., Olgoonik Corp., Kaktovik
control well and have a second rig on hand for drilling a relief well.
Inupiat Corp., Atqasuk Corp. and Nunamiut Corp. formed Arctic
The operations plan would essentially provide specifications for
Inupiat Offshore to pursue economic opportunities in the Chukchi
the program, in order to give regulators a sense of the activities and
Sea.
equipment. The capping stack would need to be available with 24
“Our region has always been a leader in strategic partnerships
hours and the containment dome within seven days. The agency
that provide meaningful benefits to our shareholders, to our peo-
also stood behind its endorsement of a relief well. “We understand
ple,” ASRC President and CEO Rex A. Rock Sr. said in a statement
that the same-season relief rig is somewhat controversial,” BSEE
in late July 2014. “I am humbled to acknowledge that this arrange-
Director Brian Salerno said in late February. “From our perspective
ment balances the risk of OCS development borne by our coastal
that sets a level of protection for the Arctic that is necessary.”
communities with the benefits intended to support our communi-
The proposed regulations also mandate mechanical recovery in
ties and our people.”
the event of a spill.
Through the deal, Shell would assign Arctic Inupiat Offshore an
Given that the regulatory process won’t be completed by sum-
overriding royalty interest in oil and natural gas produced from
mer, the new rules won’t apply to the exploration program Shell is
specific Chukchi Sea leases. Arctic Inupiat Offshore also would be
hoping to complete this year. However, the current regulation
able to participate in project activities by acquiring a working inter-
structure includes various provisions that mirror those in the pro-
est whenever Shell decides whether to proceed with development
posal.
and production.
“We support regulations that further these imperatives in the
In March 2015, Shell appointed Laurie Schmidt as its top execu-
Arctic, provided they are clear, consistent and well-reasoned,” Shell
tive in Alaska. She replaced Pete Slaiby, who took a new position
spokeswoman Megan Baldino told Petroleum News in late Febru-
with the company in its Houston office.
ary. “While we review the draft Arctic regulations put forward by
What about the regs? the Department of Interior, we will continue to work with federal
agencies, the State of Alaska, local communities, and contractors
As a company committed to the Arctic, Shell is at the center of a to develop a 2015 drilling program that achieves the highest tech-
larger debate about the best way to regulate and monitor (or even nical, operational, safety and environmental standards.”
allow) offshore exploration in the icy north.
Those conversations gained general relevance after the Deepwa- Contact Eric Lidji at ericlidji@mac.com
80 THE EXPLORERS
Usibelli drills first
coalbed methane well
Venerable coal mine company exploring for natural gas
on its lands near Healy to look for a cheap fuel source
By ERIC LIDJI
For Petroleum News NAME OF COMPANY: Usibelli Coal Mine Inc.
COMPANY HEADQUARTERS: P.O. Box
U sibelli Coal Mine Inc. completed the HC No. 1 exploration

well in September 2014.
The 1,265-foot well followed more than a decade of regula-
1000 Healy, AK 99743
TOP EXECUTIVE: Joseph E. Usibelli Jr.,
president
tory and legal wrangling over the coalbed methane program in PHONE: 907-683-2226 • WEBSITE: www.usibelli.com
the Middle Tanana basin, near the town of Healy.
Although the company has been engaged primarily in coal allowed Usibelli to proceed with exploration.
mining operations since Emil Usibelli and his partner T.E. San-
ford began operating in the region in 1943, the company has re- Four-well program
cently been interested in using the nearby methane in coal seams
In July 2014, Usibelli permitted a four-well program along an
to fuel operations.
abandoned airstrip seven miles east of Healy to explore shallow
In April 2004, the company requested an exploration license,
natural gas prospects in the region. The plan called for drilling
which allows for exploration in areas excluded from the annual
one well toward the end of summer and returning the following
areawide lease sales. In an August 2005 preliminary best interest
summer to conduct additional testing of the initial well and drill
finding, the Department of Natural Resources determined that
as many as three delineation wells.
the potential benefits of exploration outweighed the possible ad-
The company said it would conduct the program on lands
verse impacts.
mined in the 1950s and 1970s and would utilize existing roads to
The decision came as a different coalbed methane exploration
reach the proposed Healy Creek Site No. 1 pad. The 150-foot by
program was abandoned in the Matanuska Valley over concerns
150-foot pad was built on a fill area previously used as an
about the potential for environmental harm. In 2006, the Denali
airstrip to support mining operations. The pad is smaller than
Borough Assembly banned natural gas exploration over some 40
most gas exploration pads because shallower coalbed methane
percent of the proposed exploration license area, an action the
exploration wells require smaller rigs, according to the company.
state considered to be illegal. The Denali Citizens Council asked
While Usibelli is primarily interested it reducing its internal
the state to exclude all lands west of the Nenana River.
energy costs, the company has said it would consider selling gas
In June 2010, the Department of Natural Resources approved
to other companies if it found large enough volumes. A major
the program, under its original specifications — and even easing
discovery would be a boon to the Interior, which currently relies
some of requirements for mitigating impacts.
heavily on diesel fuel and heating oil and has been the center of
The Denali Citizens Council appealed the ruling to the Alaska
state-backed efforts to truck liquefied natural gas from the North
Superior Court, saying that the state failed to show why shrink-
Slope until a major pipeline is completed.
ing the proposed license area would render the project uneco-
nomic and challenging the changes to the proposed mitigation
measures. The court rejected the appeal in February 2014, which Contact Eric Lidji at ericlidji@mac.com
ROYALE continued from page 77 ing the joint venture and there is no guarantee that a mutually
acceptable resolution will be reached. As a result, the board is
After Royale cancelled the rig contract, Rampart launched
considering all options regarding its future involvement in the
a “Strategic Partnering Process” to “identify funding part-
project.”
ners” for the program. The company said it wanted to per-
Royale placed a lien against Rampart in November 2014.
form additional technical work “to present the true potential
Rampart filed a counterclaim against Royale in December, “al-
of the opportunity to prospective industry and financial part-
leging breach of contract, violation of the covenant of good
ners, and secure favorable commercial terms.”
faith and fair dealing, unjust enrichment, defamation, viola-
By late October, discussions on how best to advance the ex-
tions of the Alaska Securities Act and seeking to undo the fil-
ploration program were still “continuing,” according to Ram-
ing of the lien claims,” according to Royale.
part. In a statement at the time, the company said, “The
parties have differing views on a number of key issues regard- Contact Eric Lidji at ericlidji@mac.com
THE EXPLORERS 81
In Alaska,
the environment
is the economy
The business leaders supporting our Corporate
Council on the Environment value innovative science,
creative solutions and a sustainable future for
Alaska’s natural wealth of fish and wildlife.
Corporate Council on the Environment

Corporate Catalysts $50k+ ConocoPhillips Alaska Inc.
Corporate Leaders $25k+ Alaska Airlines & Horizon Air . BP . Petroleum News
Corporate Partners $1k+ Jenner & Block LLP
ABR Inc. LGL Alaska Research Associates Inc.
Alaska Rubber & Supply Inc. NANA Development Corporation
Alaska Wildland Adventures Northern Economics Inc.
Bristol Bay Native Corporation Pacific Star Energy
Fairweather LLC Stoel Rives LLP
Flint Hills Resources Alaska Trident Seafoods Corporation
Fred Meyers Udelhoven Oilfield System Services Inc.
We thank these businesses for sharing our vision of a healthy
environment and a vibrant economy for many generations to come.
Photo: Volunteers from ConocoPhillips help to restore a salmon stream in the Mat-Su. © Clark James Mishler
Conserving the lands and waters on which all life depends

715 L Street . Suite 100 . Anchorage, AK 99501 . alaska@tnc.org . 907-276-3133 . nature.org/alaska
82 THE EXPLORERS
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THE EXPLORERS 83
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