Providing coverage of Alaska and northern Canada's oil and gas industry
March 2006

Vol. 11, No. 10 Week of March 05, 2006

Alaska sales net $31M

Big winners: Chevron’s total $6.95M on North Slope, Conoco $5.4M, Beaufort

By Kristen Nelson

Petroleum News

The State of Alaska had two dynamite lease sales March 1, bringing in $14.96 million at the Beaufort Sea sale and $16.29 million at the North Slope sale for a total of $31.25 million on the day.

The North Slope areawide sale drew 153 bids for 145 tracts. Acting director of the Division of Oil and Gas Bill Van Dyke said 599,040 acres received bids, the second-highest sale of acreage the state has had in a North Slope areawide sale. The state’s 2000 North Slope areawide saw sales of more than 652,000 acres.

Total high bids in the North Slope sale were $16,288,966.40. Eni Petroleum Exploration Co. had the highest bid, $1,158,220.89, on tract 471.

The Beaufort Sea sale drew 76 bids for 62 tracts, more than double the number of tracts receiving bids in any previous Beaufort Sea areawide sale. The 231,680 acres receiving bids in the Beaufort sale were more than double the acres receiving bids in any previous Beaufort Sea areawide sale, and almost exceed the combined acreage sold in all previous Beaufort areawide sales, Van Dyke said. The state began holding areawide sales in the Beaufort in 2000. Sales in the first four Beaufort sales averaged less than 30,000 acres. FEX LLC, then bidding as Fortuna Exploration LLC, took 19 tracts in the 2004 sale, kicking acreage for that sale up to 113,570 acres. Total from the first five Beaufort areawide sales was 231,962 acres.

Total high bids in the Beaufort Sea sale were $14,964,077.00 with a high bid of $5,051,724.80 by BP Exploration (Alaska) Inc. for tract 194.

Combined totals: The state received 229 bids on 207 tracts with total high bonus bids of $31,253,043.40.

Top bidders

Chevron, bidding as Union Oil Company of California, took 48 tracts in the North Slope sale for $6.95 million and 276,480 acres.

The company’s Anchorage spokeswoman, Roxanne Sinz, told Petroleum News it “was a very important and significant investment by Chevron, and we are very pleased with our success in this lease sale.”

Eni Petroleum Exploration Co. was also a large presence in the North Slope sale, bidding $5.62 million for a block of 11 tracts southeast of Kuparuk and Prudhoe in an area where the company already has acreage.

ConocoPhillips Alaska topped the bidder’s list in the Beaufort Sea sale with total bids of $5.42 million including a block of seven tracts in the Cross Island area, adjacent to a large block of OCS leases the company already holds. BP Exploration Alaska took two tracts for $5.2 million, paying $5 million-plus for a single tract adjacent to its Liberty prospect. At $1,973.33 per acre, for a total of $5,051,724.80, the tract had the highest per-acre and the highest total bonus bid in either sale.

FEX LP took 25 tracts in Smith Bay for a total or $1.46 million and Patterson Shaw out of Denver took seven tracts adjacent to Liberty for $1.465 million.

All of these sale amounts are as read at the lease sale. Final amounts will be smaller, after final acreage determinations are made for each tract.

Beaufort tracts

The Beaufort Sea sale drew bids on tracts from Smith Bay in the west, north of the National Petroleum Reserve-Alaska, to east of Kaktovik off the Arctic National Wildlife Refuge in the east.

FEX LP, the Talisman Energy subsidiary formerly known as Fortuna Exploration, was apparent high bidder at $1.46 million on 25 tracts in Smith Bay, some adjacent to federal tracts the company holds onshore in NPR-A, bidding from $10.29 to $20.48 an acre.

The company took most of the state acreage in Harrison Bay to the east, also off NPR-A, in the state’s 2004 Beaufort Sea areawide. Anadarko Petroleum was apparent high bidder on six tracts on the edge of Smith Bay to the east of the FEX tracts, bidding just over $320,000 at per-acre prices ranging from $10.11 to $10.26 per acre. Anadarko is a partner with ConocoPhillips Alaska and Pioneer Natural Resources Alaska in NPR-A acreage south of Smith Bay.

A bidding partnership of Paul Craig, 50 percent, and Peter Zamarello, 50 percent, took a tract offshore the Colville River Delta adjacent to Pioneer’s Oooguruk unit, bidding almost $390,000 at $202.99 an acre.

AVCG bid $10.50 an acre, almost $27,000, for tract 317, filling in a block of leases the company holds in Gwydyr Bay north of the Prudhoe Bay unit.

ConocoPhillips Alaska’s $5.4 million bid for nine Beaufort tracts included seven tracts in the Cross Island area. Rick Mott, the company’s vice president of exploration and land, said after the sale that these tracts are adjacent to OCS federal leases the company holds in “an area called the Dinkum Graben.” ConocoPhillips bid $620.51 per acre for tract 227, $511.54 per acre for tract 252, $506.51 per acre for tract 251, $281.16 per acre for tract 253, $236.26 per acre for tract 244, $69.13 per acre for tract 242 and $41.06 per acre for tract 243, paying the higher prices per acre for those tracts adjacent to the federal acreage.

The company bid $40.22 and $36.46 per acre for two tracts north of Point Thomson and adjacent to a federal OCS tract it holds to the north.

BP: Looking to extend Liberty

BP Exploration (Alaska) Inc. bid more than $5 million, almost $2,000 per acre, for tract 194 off the northeast corner of its Liberty prospect acreage, and more than $130,000, $52.63 an acre, for tract 159 off the southwestern edge of Liberty.

BP Exploration (Alaska) spokesman Daren Beaudo told Petroleum News the bids are “obviously aligned with our interest in progressing Liberty.” (See Liberty news in Oil Patch Insider.) He said the company’s current interpretations reflect discovered oil on federal leases only. The leases bid for in the state sale “address upside potential.” Beaudo said technical evaluations are under way including reprocessing 3-D seismic to see how Liberty “might extend onto the state leases.”

The Beaufort Sea sale also featured a new bidder, Patterson Shaw, of Denver, Colo., who bid $1.46 million on seven tracts, with bids ranging from $10.17 to $207.35 per acre. Shaw’s leases are also in the vicinity of Liberty, adjacent to the prospect on the west and south, and then running east to the border of BP’s Badami unit.

Shaw told the Anchorage Daily News he became interested in the North Slope because of the success of his friend Bill Armstrong, also based in Denver. Armstrong assembled an acreage position on the North Slope and brought in Pioneer Natural Resources and Kerr-McGee as partners, then sold the remainder of his acreage position to Eni.

Shaw, president of Savant Resources, said his is a small company with producing properties in the Lower 48.

A bidding group of Samuel Cade (75 percent) and D.K. Donkel (25 percent) were apparent high bidders on nine Beaufort tracts on the central-east side of the sale, bidding from $10 to $20 an acre for a total of $307,200. J.A. Bachner (85 percent), Keith Forsgren (10 percent) and D. Feddersen (5 percent) took one Beaufort lease, a tract off Point Thomson, for $32,051.20. Sunwest (57.5 percent), M. Shearn (25.5 percent) and Spear (17 percent) took a lease off the east side of ANWR for $58,880.

North Slope: two large positions

Big block positions taken by Union Oil-Chevron and Eni were the major story at the North Slope sale, with the 48 Union Oil-Chevron tracts building on an area where Unocal already had 11 tracts. The expanded area covers some 50 miles north to south. The leased area begins in the White Hills in the south and outriders stretch as far as the southern border of Brooks Range’s Whiskey Gulch unit south of Kuparuk. The Unocal bids ranged from $11.06 an acre to $52.15 an acre. Individual tract prices ranged up to $300,384, totaling $6.95 million — some 43 percent of the winning bid amount in the North Slope sale.

The Eni bids, totaling $5.6 million, 34.6 percent of the sale amount, are a block of 11 tracts southeast of 14 existing Eni tracts. This lease block, like the Unocal block, is south of the central developed area. Eni’s top bids were $201.08, $201.09 and $201.11 per acre.

Eni said in a statement after the sale that it currently owns interests in 103 Alaska leases, some 350,000 gross and 275,000 net acres, both onshore and offshore, and including two projects in the pre-development stage and a number of defined exploration prospects.

ConocoPhillips Alaska bid more than $999,000 for nine North Slope tracts, three south of the Colville River and Kuparuk River units and six tracts at the southwest corner of Kuparuk, between the segments of Kuparuk. Mott said the leases in the Kuparuk area are south of Meltwater and are leases the company once held and is re-leasing.

The Bachner-Forsgren-Feddersen bidding group had winning bids totaling $776,448 in the North Slope sale, bidding $10.11 per acre for 30 tracts in the area south of Point Thomson.

Anadarko Petroleum Corp. bid just more than $343,000 on eight tracts, one at the southern border of NPR-A, the other tracts on the eastern side adjacent to existing Anadarko acreage south and southwest of Badami.

The Cade-Donkel bidding group had apparent high bids totaling $665,600 in the North Slope sale, bidding from $10 to $20 per acre for 19 tracts from the southern edge of NPR-A in the west to south of Badami in the east.

The Arctic Slope Regional Corp. bid some $326,400 for eight tracts in two blocks of four: one block west of Kuparuk, the other block southwest of Kuparuk.

AVCG had apparent high bids of slightly more than $285,000 on seven tracts, with a top per-acre bid of $40.05 for a tract east of NPR-A where the company already holds a considerable acreage position; it took five tracts in this area and two on the east side of the sale area south of the Badami area.

Pioneer Natural Resources Alaska picked up a single tract for $191,980 immediately south of its Cronus unit on the west side.

A bidding group of Nick Stepovich 50 percent and Dan Gilbertson 50 percent took two tracts for $52,326 between the Colville River and Kuparuk River units. Arctic Falcon took one tract for $45,197 at the southern edge of NPR-A.

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