Oil Patch Insider: Alaska well drilling activity varies somewhat year-to-year

On page 17 of this issue there is a chart showing the number of oil and gas wells drilled in Alaska in the January to September period for 2005 through 2009.

New well numbers are almost the same for 2005 through 2007, but dropped from 61, 58 and 66 in those years to 49 in 2008 and 46 in 2009. That drop was partly offset by an increase in re-drills in 2008 and 2009.

Laterals were 33, 31, 33 and 33 in the first four years, but fell to 16 in 2009.

The only soft numbers in the chart are new wells (wells that start at ground level) and laterals (primarily drilling segments off existing wellbores) in September 2009. According to Steve McMains of the Alaska Oil and Gas Conservation Commission, who prepared the well report for Petroleum News, both the number of new wells and laterals for September could increase by two or three in the weeks ahead because some operators file well completion reports after the due date, which is 30 days after the last day of September.

There are a number of reasons for the changes between years, but industry sources say oil prices and the State of Alaska’s production tax both play a part.

In 2005, a regressive production tax system was in place, commonly referred to as ELF.

On Jan. 1, 2006, a progressive tax based on net profits took effect. Its acronym was PPT.

On Jan. 1, 2007, a revised version of PPT, called ACES, also a progressive tax system, took effect.

The price of Alaska North Slope crude averaged $50.14 in 2005; $61.05 in 2006; $69.75 in 2007; and $98.18 in 2008, although it dropped significantly from mid-summer highs of $150 in the last quarter of that year.

As of Oct. 6, the average ANS price per barrel in 2009 was about $63.

Watch Petroleum News for annual well numbers for 2005 through 2009 in February 2010.

—Kay Cashman