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March 2008

Vol. 13, No. 11 Week of March 16, 2008

Minority Point Thomson owners support plan

Leede Operating’s Brusenhan tells Department of Natural Resources small owners, with less than 1 percent, have money in play

Kristen Nelson

Petroleum News

It’s not just ExxonMobil, Chevron, BP and ConocoPhillips arguing in support of acceptance of a 23rd plan of development for the Point Thomson unit — and against unit termination.

There are also minority interest owners, holding collectively just more than 1 percent in the unit.

Those minority interest owners were represented at the Department of Natural Resources’ remand hearing the week of March 3.

Using ExxonMobil’s figure of $800 million spent to date, the minority interest owners have plunked down $8 million — and if the 23rd plan of development is approved, they’ll pay 1 percent of the $1.3 billion estimated cost of that plan.

Rusty Brusenhan, land manager for Leede Operating, spoke for the minority interest owners at the remand hearing. Edward H. Leede and Leede & Pine are the largest of the minority interest owners.

In a letter of support for the 23rd plan, entered as an exhibit at the hearing, Edward H. Leede said signatories to the letter in support of the POD were mostly privately owned, independent oil and gas producers or exploration and production companies. Each has been in existence for more than 50 years, he said, and collectively they are responsible for drilling and producing thousands of oil and gas wells, primarily in the Lower 48. Leede said the minority interest owners support the 23rd POD and believe the “proposal is a mutually beneficial and constructive resolution of the current conflict between the State of Alaska and the lessees within the PTU.”

“This aggressive POD will immediately start working to put the PTU into production,” Leede said.

Eleven of 12 minority interest owners signed the Leede-drafted letter; the twelfth minority interest owner submitted its own letter in support of the plan.

First Point Thomson well

The Leede ownership interest in Point Thomson is a little more than one quarter of 1 percent, Brusenhan said. Leede involvement in Point Thomson dates to 1969. Initially there was interest in one lease which was eventually split into three leases, he said. The original well, PTU No. 1, was drilled on the Leede lease.

If the unit is terminated, the minority interest owners will lose their investment, he said. If the 23rd POD is approved, the minority interest owner share in the additional cost will be $13 million, but they also stand to get a return on their investment.

Brusenhan said the minority interest owners approve of the delineation drilling in the 23rd plan, and believe the information would be useful in further determining the size of the reservoir and reserves available for production.

They also support the new voting arrangement which reduces voting approval to a simple majority, preventing a single major interest owner from blocking progress.

A number of the minority interest owners have participated in Point Thomson working interest owner meetings over the years, Brusenhan said. Minority interest owners were consulted on the 23rd POD and have been very involved in the plan’s development for 14-15 months, he said.

“This is a genuine POD that we think satisfies the objectives of the state,” he said.

Leede has not done its own analysis of Point Thomson data. Brusenhan said that would be a lot of work for a company the size of Leede, which although it has geoscientists on staff, would have to add staff and devote 100 percent of its time to Point Thomson. He said geoscientists at Leede have reviewed analysis done by the operator on Point Thomson and have not expressed any concerns about the plan.

Leede active in Texas, Oklahoma

Brusenhan said Leede is a smaller independent focused primarily in western Oklahoma and West Texas, although the company has also worked in other states.

In the early to mid-1980s, he said, Leede drilled what were at the time the two deepest wells ever drilled in North America, more than 25,000 feet, in Oklahoma. Some bigger companies had been unable to drill and complete the wells, and Leede took a farm out and drilled the wells, completed them and developed the gas field.

Last September, Brusenhan told Petroleum News, BP asked Leede to share expertise on how it drilled those deep gas wells and the company spent the better part of a day sharing expertise on how Leede was able to design the wells and understand the geoscience.

Brusenhan said at the hearing that the minority interest owners feel that development of Point Thomson will increase oil and gas infrastructure in the state and should help encourage more independents to come to Alaska.

He told Petroleum News that long range Leede is interested in other things in Alaska. “Long range, we like Alaska,” he said. “We think they’ll be other opportunities in Alaska and we would like to do more in Alaska.” For Leede, Brusenhan said, Alaska is “like an international play … but it’s the United States of America: And that’s what its appeal is to us.”






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