Cook Inlet Energy, parent company buy Inlet, Slope assets

Cook Inlet Energy Inc. expects to complete its acquisition of Armstrong Oil and Gas Co. natural gas properties on the Kenai Peninsula, giving the company its first operations on the Kenai Peninsula. Cook Inlet Energy now produces oil and gas on the west side of the Inlet.

The company is now waiting for approval from the Regulatory Commission of Alaska to purchase an eight-mile pipeline owned by Anchor Point Energy, an Armstrong subsidiary, Cook Inlet Energy CEO David Hall said.

In a related development, Miller Energy Resources, which is the parent company of Cook Inlet Energy, has purchased Savant Alaska, which owns two-thirds of the small Badami oil field on the North Slope.

Savant, under Miller’s ownership, will remain as operator of the field, and operations will be kept separate from the company’s Cook Inlet activity.

ASRC Exploration, a subsidiary of Arctic Slope Regional Corp., owns the other one-third of Badami.

The purchase of the small North Fork gas field, which supplies gas to the pipeline, was completed by Cook Inlet Energy earlier this spring for a purchase price of $65 million. Armstrong, a Denver-based independent, developed North Fork after gas had been discovered in early Cook Inlet exploration.

Cook Inlet Energy, or CIE, now produces oil and gas at the Redoubt Shoal and West MacArthur River fields on the Inlet’s west side.

The RCA has no real issues with the pipeline acquisition but the regulatory agency’s approval takes time, Hall said, and it is expected soon.

The pipeline carries gas from the field to Anchor Point and a junction with a 10-inch pipeline owned by Enstar Natural Gas Co.

North Fork is now producing about 10 million cubic feet per day of gas from five producing wells, Hall said.

“We are planning new wells at North Fork but will first do ‘workovers’ of one or two of the existing wells as part of an overall evaluation,” Hall said.

There is capacity on the production pad for 24 wells, he said.

The company is meanwhile busy on its west Cook Inlet operations. The small offshore Redoubt Shoal oil field, which is supported by the Osprey platform, is now producing about 2,500 barrels per day, Hall said. The nearby onshore West MacArthur field, also operated by CIE, is producing an additional 1,250 barrels per day.

The company is drilling new delineation wells at both West MacArthur and Redoubt Shoal, Hall said. The West McArthur well, WMRU-2B is targeting potential untapped resources in the Hemlock formation.

The Osprey platform well is RU-9.

“The well is targeting potential resources at the southern extremity of the Redoubt Shoal formation,” Hall said.

Other wells from the Osprey platform have been drilled to the eastern part of the formation. RU-9 will be the first well to tap possible resources to the south and west.

Meanwhile, CIE is also working with Tesoro Corp. on the planned new cross-Cook Inlet eight-inch oil pipeline, which is now scheduled for completion next year. Cook Inlet Energy now ships its oil to the Drift River for loading on shuttle tankers operated by Tesoro, which buys the oil.

Moving the oil by pipeline will reduce costs relative to the tanker-shuttle operation. Hall wouldn’t give an estimate the potential savings but said they will be “substantial” for west Cook Inlet oil producers.

At the Badami field on the North Slope, Miller officials said they expect to enhance the value of the assets. The company is reported to have paid $9 million for its share of the field.

Badami has had a troubled history. The field is about 25 miles east of Prudhoe Bay and was first developed by BP in 1998. However, the production wells drilled into Badami’s complex reservoir failed to produce at expected levels and BP eventually shut in the field.

The field was acquired by Savant and ASRC in early 2012. New drilling was done and the field was restarted. It now produces about 1,100 barrels per day.

Facilities built by BP for the field, however, have a capacity of processing 38,500 barrels per day. The 12-inch pipeline built from Badami to Prudhoe Bay, also being acquired by Miller, has a capacity to handle 70,000 barrels per day.

Beginning in 2016 the Badami pipeline will also be used to transport about 10,000 barrels per day of condensate from the Point Thomson gas field east of Badami.

ExxonMobil Corp. is building a 22-mile, 12-inch pipeline from Point Thomson to Badami this year. That pipeline will also be capable of transporting 70,000 barrels per day.

05/28/2014 - 10:01am