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True North plans summer permitting Company fine-tunes Harriet Point Prospect reserves, plans summer permitting regimen, hopes to start drilling next year Eric Lidji Petroleum News
Fresh off a new deal on the North Slope with Savant Alaska LLC, True North Energy Corp. will turn its eyes south this summer.
“Our focus has always been, in the near-term, in Cook Inlet,” True North CEO John Folnovic told Petroleum News on Feb. 19.
The Houston-based independent oil and gas company purchased around 25,000 acres of Cook Inlet leases back in 2006. Those leases center around the Harriet Point prospect, more than 17,000 acres of onshore and offshore land in Redoubt Bay owned completely by True North.
Folnovic said the company bought all of the seismic data it could find. At the time True North bought the Cook Inlet leases, a geological and geophysical assessment estimated recoverable reserves between 180 million and 700 million barrels of oil at Harriet Bay.
True North recently commissioned Rose & Associates to survey the area, pinning down the reserves to around 125 million barrels of recoverable oil. That’s about five times the amount the company believed it needed to make the project economic, Folnovic said.
True North hopes to permit a Cook Inlet well this summer and drill next year.
Savant deal “good utilization” of North Slope acreage The move to return focus to Cook Inlet follows a new deal inked in late January between True North and Savant over Savant’s Kupcake prospect in waters off the coast of the North Slope.
Under the deal, True North will give Savant an interest in a state lease near Kupcake in return for a small working interest in a future production unit should test drilling at Kupcake prove to be successful.
That state lease was originally the centerpiece of a pooling agreement True North entered into with Savant last November, but the companies terminated that deal in January after True North failed to raise its share of the test well drilling costs in time.
Savant eventually signed a separate deal with the Canadian independent Bordeaux Energy Inc.
“They moved quite a bit faster than we thought,” Folnovic said about Savant. “We were able to procure the financing, but it was not in time.”
True North owns 10,000 acres over four onshore and offshore leases on the North Slope, picked up in 2006.
True North doesn’t have any immediate plans to drill on the North Slope, and Folnovic said the company never did, planning instead to take advantage of the proximity to Kupcake through a deal like the one completed in January.
“For our shareholders, that’s a really good utilization of the acreage,” Folnovic said.
Alaska fills exploration role in portfolio While True North began as an exclusively Alaska operation, the company picked up leases in northwest Colorado in June 2007 and along the Gulf Coast of Texas in August 2007. The Texas leases were acquired through a subsidiary, ICF Energy Corp.
While True North is “specifically focused” on oil in Alaska, the company is looking for natural gas in its Lower 48 leases.
Folnovic called the Colorado prospect an “unconventional gas play” purchased to provide “predictable and sustainable growth” for True North. The Texas leases are “proven reserves” designed to provide cash flow to the company in order to avoid using investment funds for administrative expenses.
“We look at Alaska as really the true exploration part of our portfolio,” Folnovic said.
Still in the market for Cook Inlet land While Folnovic did not say whether True North would bid in the upcoming state lease sales in the foothills of the Brooks Range and on the Alaska Peninsula, he did say the company is always in the market for land, especially in Cook Inlet.
“We are satisfied with the leases we have in the Beaufort Sea. We are always on the lookout for additional acreage in Cook Inlet,” Folnovic said.
He said True North liked Cook Inlet because of the established infrastructure and easier access.
Small company in a risky business In recent Securities and Exchange Commission filings, True North included a financial audit from July 25, 2007 expressing doubt over the ability of the company to continue as a going concern, or a company with the ability to continue operations.
The accounting firm Malone and Bailey PC conducted the audit and based the determination on the fact that, according to the filings, True North has had “minimal revenues” since becoming an oil company and “accumulated a net loss of approximately $19.4 million.”
“They’re just continuing the assessment from our last annual report ... I think that’s a prudent thing for them to do and people should be aware of that when they invest in micro-capped companies,” Folnovic said, referring to tiny companies with small market capitalization. “It’s a risky investment, particularly in oil and gas.”
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