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NEWS BULLETIN

September 03, 2009 --- Vol. 15, No. 69September 2009

Pacific Energy abandons Trading Bay oil and gas property after sale attempt fails

Financially troubled Pacific Energy Resources Ltd. has abandoned its interest in the offshore Trading Bay oil and gas unit in Alaska’s Cook Inlet.

The Long Beach, Calif., producer surrendered the property as part of its Chapter 11 bankruptcy proceedings in Delaware.

The company’s last-ditch effort to sell its Trading Bay stake never came together and U.S. Bankruptcy Court Judge Kevin Carey in Delaware signed an order Sept. 2 granting Pacific Energy permission to abandon the property and associated contracts.

Pacific Energy said it simply couldn’t afford to hang onto Trading Bay any longer due to “significant operating losses.”

What now becomes of the company’s share in the offshore Trading Bay unit, and the adjacent Trading Bay oil field, is unclear. It appears likely, however, that more court wrangling will be necessary to sort out who ends up with the property and the various obligations and liabilities that come with it.

Presumably the majority owner and operator, Chevron, will continue oil production and maintenance at Trading Bay. It wasn’t known whether Chevron itself made a bid to take over Pacific Energy’s share of the property.

Chevron representatives in Anchorage didn’t immediately return telephone calls Petroleum News placed Aug. 2 seeking comment.

In the days leading up to the judge’s abandonment order, Pacific Energy had attempted to spin off its 46.8 percent stake in Trading Bay to Ocar Energy, a Delaware limited liability company with a business address in Toronto, Canada.

A court exhibit shows Pacific Energy abandoned its working interests in the Trading Bay unit’s 11 state leases, most of them dating back to 1962. Pacific Energy also held an interest in the single lease comprising the Trading Bay field.

In terms of Trading Bay unit equipment, Pacific Energy surrendered interests in four offshore platforms with five drilling rigs plus the onshore production facility, the exhibit shows.

The assets include the Dolly Varden platform with associated infrastructure, pipelines and nine wells; the Grayling platform with 12 wells; the King Salmon platform with four wells; and the Steelhead platform with three wells.

In the Trading Bay field, Pacific Energy abandoned interests in the Monopod platform with a drilling rig and 27 wells.

BLM approves new NPR-A unit, expansion of another

The Bureau of Land Management has approved a new oil and gas unit, called Bear Tooth, and the expansion of the existing Greater Mooses Tooth unit in the National Petroleum Reserve-Alaska.

The BLM actions have the effect of extending several ConocoPhillips leases that were due to expire at the end of August.

In exchange, ConocoPhillips has pledged to drill an exploration well in both the new unit and the expanded unit. It also will test the suspended Scout 1 well, which was spud in 2004.

The 105,655-acre Bear Tooth unit and the Greater Mooses Tooth unit, now expanded to 164,014 acres, are both in the NPR-A’s northeast corner.

The unit decisions are a good deal all around, said Greg Noble, acting chief of BLM Alaska’s energy and minerals branch.

“Units are supposed to be beneficial to both parties,” he said. “The lessees get more time to explore their leases and the government gets a commitment that further exploration will occur.”

While many leases were unitized, ConocoPhillips and partners Anadarko and Pioneer Natural Resources let 43 other leases go covering about 500,000 gross acres, company spokeswoman Natalie Lowman told Petroleum News on Aug. 2.

The surrendered leases didn’t fit the company’s strategic plans based on their potential for development, she said. What’s more, many were in the very remote northwest section of the NPR-A, far to the west of existing production infrastructure at the Alpine field.

No oil has yet been produced from sites within the NPR-A, a remote, Indiana-sized tract of western North Slope land former President Warren G. Harding set aside in 1923 for its oil and gas potential.

Editor’s note: Watch for full stories in the Sept. 6 edition of Petroleum News, which will be available online Sept. 4, at noon Alaska-time, at www.petroleumnews.com

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