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Craig making another go of Hanna Independent investor picks up west side Cook Inlet leases for the fourth time in 20 years; Savant finds new partner Eric Lidji For Petroleum News
With admirable loyalty and persistence, long-time Alaska oil industry investor Paul L. Craig is making his fourth attempt in 20 years at developing the Hanna prospect.
In May, the Alaska Department of Natural Resources allowed Galena Energy Corp. to transfer the four leases in the 6,800-acre onshore Cook Inlet prospect to Craig.
The leases are ADL 391618, ADL 391619, ADL 391620 and ADL 391622. The prospect is on the west side of Cook Inlet, nestled between the Pretty Creek and Ivan River units.
Craig is still working on his plans for the leases, he told Petroleum News.
The leases reach the end of their primary terms in 2018.
The prospect comes with a long history.
Union Oil Company of California planned to drill in the area in the early 1980s, but abandoned the program in light of falling prices. Craig acquired the leases in 1993 as Trading Bay Energy Corp., but told Petroleum News in 2011 that the bankruptcy of Stewart Petroleum Co. in 1996 made it difficult to raise money for Alaska exploration.
Forcenergy Inc. acquired the leases in 1997, but failed to explore the prospect before filing for bankruptcy in 1999. The leases subsequently expired and Craig acquired them again in a 2001 lease sale. A proposed deal with U.S. Petroleum Corp. fell apart at the last minute in 2002 and a farmout with Pelican Hill Oil and Gas fell apart in 2005.
Aurora Gas acquired the prospect later that year, but in late 2006 the company suspended all drilling operations while it dealt with ongoing litigation with Enstar Natural Gas Co.
With the legal issues resolved, Aurora returned to the prospect in early 2009. The company found partners to help fund the program and received an Alaska Oil and Gas Conservation Commission drilling permit for a Hanna No. 1 well, but the exploration program was delayed when the Alaska Department of Fish and Game refused to allow the company to build a drilling pad on a marshy section of the Susitna Flats Game Refuge.
Then the leases expired again.
Craig acquired the prospect for the third time in a 2010 lease sale and Escopeta Oil & Gas Co. quickly expressed an interest. This time, Craig tied performance requirements to the leases. “If they were going to buy them, I wanted them to get drilled,” Craig said in June 2011. “They didn’t balk at the terms, which says to me they intend to drill them.”
Escopeta planned to sidestep the Susitna Flats problem by drilling in the winter, but it was unable to meet the commitment to drill through the gas-prospective Tyonek formation within two years. In March 2013, Escopeta transferred the leases to Galena Energy, which was also unable to meet the performance requirement by the deadline.
According to state filings, Escopeta President Danny Davis formed Galena Energy in 2006. Currently, Vladimir Kadic owns 100 percent interest in the small company.
New Savant partner In other leasing news, the state is allowing Savant Alaska LLC to transfer a 10 percent working interest and 8.75 percent royalty interest in deep zones at four leases in the eastern North Slope Badami unit to the new independent Red Wolf Exploration LLC.
The leases are ADL 367005, ADL 367006, ADL 367010 and ADL 367011.
Red Wolf Exploration is a Wyoming-based independent created in April 2012 by eight small firms. The largest members, each with 25.54 percent ownership, are Nerd Gas Co LLC and Jonah Gas Co. LLC, two companies that are also partners on the Armstrong Oil & Gas Inc. program to develop the North Fork field in the southern Kenai Peninsula.
The other six investors are WRW Hi-Lo LLC with 19.57 percent, Castle Rock Resources II LLC with 13.59 percent, TBOG1 LLC with 7.77 percent, TBOG2 LLC with 5.82 percent, BABA Resources LLC and Chicken Creek LLC each with 1.087 percent.
Savant Alaska has been conducting an exploration program at the Red Wolf prospect for several years, in addition to its work to bring the Badami unit back into production.
In early 2010, Savant drilled the B1-38 well into the Red Wolf prospect and found oil in two horizons — the late Cretaceous Killian sands and the deeper Kekiktuk formation — but the Red Wolf No. 2 exploration well in early 2012 turned out to be a dry hole.
In late 2012, Savant Alaska President Greg Vigil said the company did not have plans to keep pursuing Red Wolf and might focus on other exploration targets in its portfolio.
The transfer gives Red Wolf Exploration an interest in “Segment A” of the four leases, defined as “all depths below the stratigraphic equivalent of the top of the highly radioactive zone as encountered in the Red Wolf No. 2 well at a depth of 11,375 feet.”
Other leasing news Galena Energy also wants to transfer a 2.999998 percent overriding royalty interest in eight Kitchen Lights unit leases to Kay Reick. The leases are ADL 389507, ADL 389513, ADL 389514, ADL 389196, ADL 389197, ADL 389198 and ADL 389923.
William Hutto transferred a small royalty interest (each in values less than 1 percent) in two segments of a lease in the North Fork unit — ADL 2095 — to Kita D. Wilcher.
The state also issued seven Cook Inlet leases to Cook Inlet Energy LLC and three Cook Inlet leases to Hilcorp Alaska LLC. Apache Alaska Corp. forfeited one lease — ADL 392224. The offshore lease was south of the Kitchen Lights unit near Nikiski.
Armstrong Oil & Gas subsidiary 70 & 148 LLC transferred a 70 percent working interest and 58.333331 royalty interest in ADL 391459 to partner Repsol E&P USA Inc.
A ConocoPhillips lease on the North Slope reached the end of its primary term at the end of April. The lease, ADL 391905, sits along the western boundary of the Kuparuk River unit and was created in September 2011 when the state segregated a previous lease.
At the Point Thomson unit, Edward H. Leede transferred a 10.09756 percent working interest and a 8.8353652 percent royalty interest in ADL 47560 in Colt Alaska LLC.
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