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Cook Inlet Energy’s ready Tennessee’s Miller Energy brings $4.5M to buy, re-start abandoned Alaska assets Wesley Loy For Petroleum News
Managers for Cook Inlet Energy say they’ve wrapped up the purchase of a package of formerly abandoned oil and gas properties on the inlet’s west side and are moving toward a production re-start.
The company worked the deal with the help of a Tennessee oil and gas company, Miller Energy Resources, which rounded up nearly $4.5 million in financing and which took on Cook Inlet Energy as a subsidiary.
Anchorage-based Cook Inlet Energy was organized earlier this year by former employees of California independent Pacific Energy Resources Ltd., which was forced to abandon the assets in September as part of bankruptcy proceedings.
The properties had become, in the words of the Cook Inlet Energy managers, “wards of the state of Alaska” pending the sale, which a bankruptcy judge approved.
The company said the deal closed on Dec. 10, and now it’s aiming to restore production.
“We’re immediately hiring back many of the employees who lost their jobs due to the shutdown,” said David Hall, chief executive of Cook Inlet Energy and formerly vice president in charge of Alaska operations for Pacific Energy.
“Our initial strategy will be to restore base production at the West McArthur River field by repairing a couple of our champion wells,” Hall said, “but our long-term strategy is to significantly raise oil and gas production at the properties through new drilling. This will allow us to bring proven reserves to market and prove up new additional reserves through sound geological principles and advanced drilling.”
The properties The asset package includes the West McArthur River unit, the West Foreland natural gas field, the Redoubt unit and its shuttered Osprey offshore platform, the Kustatan onshore production facility, a 30 percent stake in the Three Mile Creek field operated by Aurora Gas, and more than 600,000 acres of exploration lands. The Sabre and Valkyrie exploration prospects also were included.
All are arrayed along the rugged west side of Cook Inlet.
Cook Inlet Energy managers said independent auditors in March of 2008 valued the purchased reserves at $327 million.
Company President JR Wilcox, also a former Pacific Energy employee, said “2009 was probably the hardest year imaginable to pull something like this together, given the state of the financial markets.”
“But we’ve received tremendous support and encouragement from a lot of people. We’ve been working closely with the Department of Natural Resources since June in an effort to ensure as smooth a transition as possible, and really appreciate their efforts to help us get people back to work.”
Alan Dennis, of DNR’s Division of Oil and Gas, told Petroleum News that Cook Inlet Energy has met all requirements as an operator.
Production goals From a production standpoint, Cook Inlet Energy and its parent, Miller, will be starting almost from zero with their newly acquired properties.
“Initial production is estimated to be 280 barrels of oil a day,” said Scott Boruff, Miller’s chief executive. The goal is to push production to more than 1,100 barrels daily by the fourth quarter of 2010, he said.
The Cook Inlet Energy managers said the recent small output from the properties was largely due to lack of available capital.
Production from the West McArthur River unit, which Stewart Petroleum developed in 1991, peaked at 4,950 barrels of oil per day, but had declined to less than 250 barrels at the time it was abandoned in September, the managers said.
Redoubt production via the Osprey platform, which Forcenergy and Forest Oil installed early this decade, peaked at 4,850 barrels per day, but had fallen to 20 barrels, they said. Miller’s role Miller, based in Huntsville, Tenn., focuses on the Appalachian basin and bills itself as the largest owner-operator of oil and gas wells in Tennessee. The company also is known as Miller Petroleum Inc.
Its stock price is quoted on the OTC Bulletin Board. By mid-afternoon on Dec. 17, the day after Miller announced the close of the Alaska deal, its shares had spiked by more than 30 percent to $1.27.
Miller said it paid $2.25 million for the Cook Inlet properties, plus an additional $2.2 million to cure contract obligations and cover bonding and other requirements for operating the assets, which sit on state and Native lands.
“Miller raised the money that we used to do the deal,” Wilcox, the Cook Inlet Energy president, told Petroleum News. “They’ve been working closely with an investment firm named Vulcan Capital Management, which is a New York firm not to be confused with Paul Allen’s Vulcan Capital based in Seattle. Vulcan’s done a lot of very large natural resources projects, so they’ve been a good fit.”
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