Swift: Alaska will likely develop into ‘significant play area’

In March 2006, Aurora Gas and Houston-based independent Swift Energy, then new to Alaska, announced a joint venture for Aurora’s Cook Inlet acreage, a deal that earned Swift an average working interest of 37.5 percent in approximately 54,500 gross acres in seven areas of mutual interest, which represented half of Aurora’s working interest in those areas. The agreement called for Aurora to operate the JV’s first exploration well, but gave Swift the option to take over as operator, something it does on 96 percent of its reserves, which Swift’s Executive Vice President and CFO Alton D. Heckaman Jr. said, “allows us to move on a dime.”

On March 14, 2007, Swift’s vice president of exploitation and development, Tom Schmidt, told analysts the company expects Alaska to develop into a “significant play area” for the mid-sized independent.

“There’s an opportunity here,” Schmidt said, referring to Alaska. “We have some very good quality reservoir rock up there; we have more than one pay zone. We have a number of different structures and trapping elements that exist up there. So it is a part of our portfolio that probably will not generate a whole lot of interest initially, but we hope over time will develop into a significant play area.”

The opportunity in Alaska, exists “because people left the area because of other things going on,” he said, telling a story that has been told about the inlet many times by industry and government representatives alike since the discovery of Prudhoe Bay in 1967.

“The Cook Inlet area back in the late 60s early 70s was a very hot area for drilling activity and production. Shell Oil was one of the majors up there, and there were others as well. However, shortly thereafter the North Slope Prudhoe Bay area came into play, a lot of the majors left this area. … What it did was … strand opportunities there,” Schmidt said.

The Southcentral Alaska basin was “never fully developed,” he said.

In a March interview with Aurora Gas, company President Scott Pfoff said the Swift joint venture was very much alive. He said Swift has an interest in various packages of Aurora acreage outside of producing gas fields. And after drilling the Endeavour well in 2006, a dry hole, Swift has first pick on where to drill a second well. Participation in Endeavour, Pfoff said, earned Swift the right to an interest in Aurora’s other oil prospective acreage.

“The agreement that we signed with them contemplated at least two wells,” Ed Jones said in the same interview. Jones is Aurora’s executive vice president of engineering operations. Swift, he said, “probably (has) … some economic incentive to see that at least one more well gets drilled. …At this point they can choose what one they want to go after next.”

Pfoff said that since the drilling of the Endeavour well Swift has been preoccupied with an acquisition in Louisiana. “I think they’re back (now), taking a serious look at the inlet and what prospect they want to drill next.”

Potential oil prospects include Aspen, just west of Tyonek on the west side of Cook Inlet, where Aurora Gas drilled the 2005 gas exploration well.

“There are a couple of potential locations there, and they are interested in those,” Jones said.

—Kay Cashman & Tim Kikta