Cook Inlet state lease sale draws $2.2 million from five bidders

The Alaska Division of Oil and Gas received 23 bids from six bidders on 18 tracts at its Cook Inlet areawide oil and gas lease sale May 21, with a total of $2,276,768.20 in apparent high bids.

Once the state has done title work, however, the result may be quite different.

Armstrong Cook Inlet, which bid on a single tract, 797, adjacent to its North Fork field on the southern Kenai Peninsula, had the highest per acre ($273.15) and highest total bid, $1,573,344, or 69 percent of the apparent high bids at the sale.

Brit Lively of Mapmakers pointed out to Petroleum News that as little as 20 acres of tract 797 may actually be available for leasing as the majority of the tract is already held by Armstrong, part under state lease and part in lease from Cook Inlet Region Inc. Chevron also holds a small portion of the tract. At 20 acres, the total due on tract 797 at $273.15 an acre is less than $6,000, dropping the total state take from the lease sale to less than $710,000.

Armstrong is owned by Armstrong Oil and Gas of Denver and prior to today’s sale had some 16,396 acres under lease. Armstrong Oil and Gas, as Armstrong Alaska, has been a substantial acreage owner and explorer on the North Slope, interests which the company sold in 2005.

Armstrong Cook Inlet bought leases in Cook Inlet in 2007, taking over as operator of the North Fork gas unit.

Monte Allen had the highest number of apparent winning bids with seven, and the second highest total bids, $397,657.60, or 17 percent of apparent high bids at the sale. While Armstrong will keep the top per-acre bid, no matter what its actual acreage turns out to be, Allen will likely end up with the largest total bids at the sale as well as the highest bid per tract, $64,972.80 for tracts 101 and 106. Allen’s per-acre bids ranged from $10.12 to $11.28. Six of the tracts on which Allen was apparent high bidder are in the area of Kalgin Island in lower Cook Inlet; the seventh, tract 194, is south of the inactive Dillon platform at Middle Ground Shoal.

Allen is a long-time participant in Alaska lease sales and currently has 11,706 acres under state lease.

Alaskan Energy Alliance was apparent high bidder on six leases, for a total of $187,595.80 — 8 percent of the sale total — and per-acre bids of $11.88 and $12.88. The tracts the company acquired are adjacent to Pacific Energy’s Redoubt unit, Escopeta’s Kitchen unit, Chevron’s Granite Point oil field and ConocoPhillips’ Beluga River gas field.

Newport Beach, Calif.-based Alaskan Energy Alliance was formed by Stan Snyder and his wife Alexis Snyder to enter the Alaska oil and gas business. Stan Snyder told Petroleum News in 2005 that the couple has been in the oil and gas business for nearly 30 years, primarily with gas interests in Colorado. He said land speculation is the focus of the business although they are involved in some exploration and would like to be involved in Cook Inlet exploration.

Webb Exploration and Production was apparent high bidder on three tracts, bidding $11.21 an acre for a total of $86,092.80, or 4 percent of the state’s apparent high bids. Bruce Webb formed the LLC earlier this year.

The tracts on which Webb was apparent high bidder are all in Cook Inlet: One is east of the inactive Dillon platform at Middle Ground Shoal; two are farther north, one northeast of Tyonek — ConocoPhillips’ North Cook Inlet unit is the closest production — and the other is southwest of Tyonek; the closest production is Chevron’s Granit Point oil field.

James White was apparent high bidder on a tract adjacent to a lease White owns at the shoreline of the Northern Kenai Peninsula, north of Chevron’s Birch Hill gas field. White bid $50.12 an acre and a total of $32,077 for the tract.

A sixth bidder, Harold Green, was not successful.

Division of Oil and Gas Acting Director Kevin Banks said this is “the last of the first set of 10-year lease sales, the areawide lease sales,” under the original best interest finding and a new best interest finding, also good for 10 years, will be done before next year’s sale.

Banks said there wasn’t a lot of new acreage available compared to last year because there weren’t a lot of lease relinquishments. “Next year I expect that there will be more acreage available, so the first year of our next 10-year areawide plan should have more attractive land to offer.”

But it’s important not to wait until you have the best acreage to offer, “but rather to keep a steady … predictable sale activity so that people can know when the sale is coming up, when they need to put the effort toward assessing potential property, put it in as part of their normal plan, and then they can come down here and bid on tracts as they become available,” he said.

“And that actually has meant that there’s more land under private lessee ownership than there has ever been before,” Banks said — and not just in Cook Inlet, but on the North Slope and in the Beaufort Sea as well.

Once you have acreage leased, people can start working their prospects, he said “and not have to wait for two or three years for the next lease sale.”

The state formerly offered leases on a nomination basis and companies had to wait for an area to be offered for lease, sometimes for several years, to complete a prospect.

Banks said he knows people remain frustrated that it takes the state a long time to issue the leases, but “we’re now just focusing our title work on the acreage that people have bid on; it’s a constant effort to try to improve that schedule.”

Banks said he would sign leases from the May 2007 Cook Inlet areawide sale May 22.

—Kristen Nelson