January 08, 2004 --- Vol. 10, No. 1January 2004

Kerr-McGee buys into Armstrong’s Northwest Mile prospect

Big independent Kerr-McGee Oil & Gas said this morning it has signed a deal with Armstrong Alaska to acquire a 70 percent working interest in the 12,000 acre Northwest Milne Point prospect where Armstrong previously said it will drill one to three wildcats this winter.

The agreement includes the right to acquire interest in 13 additional leases in the area, totaling 54,000 acres.

The companies are in the process of getting the drilling and operational permits transferred to Kerr-McGee, which will be the new project operator. Ice road construction to the prospect, which is located northwest of Prudhoe Bay and offshore the Milne Point unit some three miles north of Oliktok Point, is already under way by Alaska Interstate Construction.

In its press release Kerr-McGee said it would drill at least one well during the first quarter. Michael Stockinger, vice president of drilling for Kerr-McGee, told Petroleum News the exploration plan with the state “requires one well but we can farm into additional acreage to drill additional wells. We’ll likely sit two wells this winter unless we’re totally disappointed with the results from the first well. … There is a possibility of drilling three but it’s fairly unlikely because of our start up time.”

The wells will be drilled by Nabors Alaska Drilling Rig 27E from two locations on Spy Island.

Armstrong Vice President Stu Gustafson said in August that the proposed wells — Nikaitchuq No. 1, No. 2 and No. 3 — “will target multiple objectives. One of the primary objectives is an attempt to extend the favorable productive Jurassic sand fairway which tested 1,300 barrels of oil per day in the Ivik well last year.”

Ivik was one of three wells Armstrong’s partner in the Oooguruk unit, Pioneer Natural Resources, drilled last winter.

In order to insure a smooth transition between the two operators, Gustafson has power of attorney from Kerr-McGee for its winter exploration operations at Northwest Milne, Stockinger said.

ASRC Energy Services is the engineering support operations service company that will be drilling the well for Kerr-McGee and Skip Coyner, the ASRC drilling superintendent who oversaw Pioneer’s three-well exploration program at Oooguruk last winter, is the project manager, Gustafson said.

Alaska Chadux Corp is the spill response contractor for drilling operations.

Houston-based Kerr-McGee Oil & Gas is an affiliate of Oklahoma City-based Kerr-McGee Corp., an energy and inorganic chemical company with global operations and assets of approximately $10 billion.

Note: See full story and background on Kerr-McGee in the Jan. 11 edition of Petroleum News, which will be released electronically on Jan. 9.

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