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Forest Oil looking to drill under-explored Alaska basin Company’s new farm-in partners, Rutter and Wilbanks, and Delphi, market Copper River acreage to potential investors at NAPE Pat Healy Petroleum News Contributing Writer
If all goes well, Forest Oil will be drilling the first well in Alaska’s Copper River basin since Copper Valley Machine Works drilled the Alicia No. 1 well in 1983. Forest’s here-to-fore unannounced exploration partners — Rutter and Wilbanks Corp. and Delphi International — were shopping for investors in the 398,445-acre Copper River block at the North American Prospects Exposition in Houston in February. The acreage, under an exploration license agreement with the state of Alaska since 2000, lies in the relatively unexplored Copper River basin of southern Alaska, west of the community of Glennallen.
Anschutz Exploration won the five-year Copper River basin exploration license back in August 2000. The license was issued in October of 2000. Kevin Corbett, new ventures manager for Anschutz, told Petroleum News that subsequent to winning the exploration license, Anschutz entered into an agreement with Forcenergy — now Forest Oil — to jointly explore the area. The 50-50 partners recently signed an exploration agreement covering the 398,445 acres with Rutter and Wilbanks and Delphi. Forest will be the operator. Delphi has had a long-term relationship with Anschutz and has been involved in this Alaska project for several years, but is a newcomer to Alaska. Now Rutter and Wilbanks and Delphi are hoping to find partners to share in the deal.
“We understand technology and we understand raising capital,” Bill Rutter III told Petroleum News in March. “We are hoping to bring in some of our investors as partners to help with this deal, but we are contractually obligated to perform under agreement with Anschutz/Forest, with or without partners. This is a risky deal, but we have a long history of taking risks. We have been wildcatters for three generations, and see no reason to stop now. We have a shot at some really big reserves on this deal.” Rutter praised the state of Alaska for their attitude and for the incentives the state provides to businesses. He said he was, “Looking forward to working in Alaska for that reason.” Three-phase project planned According to their North American Prospects Exposition brochure, Rutter and Wilbanks and Delphi are seeking partners to participate in a three-phase gas project to explore the Copper River basin. Compliance with each phase earns investors the right to proceed to the next phase.
Phase I deals with investing in the 2004 seismic program. A 40 percent transferable and saleable state of Alaska tax severance credit is a major selling point for dollars invested in this seismic program.
A 2D seismic program is currently being permitted and PGS Onshore Inc. is scheduled to acquire the data this winter.
Phase II buys the investor an interest in the well. As stated earlier, Forest will be the operator. Investors will have the opportunity to buy a working interest with the obligation to participate in the first test well. Cost to drill to 7,000 feet is estimated to be $3 million to $4 million.
Phase III assumes commercial results from the test well and includes a 3-D seismic program, additional drilling and laying pipelines. The brochure states, “Based on a discovered reserve of 100 BCF, the investors net share would have a finding cost of 7.4 cents/MCF.” Eleven wells drilled in basin Eleven wells have been drilled in the Alaska Copper River basin.
“The Moose Creek No. 1 well had excellent gas shows in very high quality reservoir rock, with a gross sand package of 680 feet,” the companies said in their brochure. Pan American Moose Creek No. 1 was plugged because there was no market for gas in 1963.
A map on the brochure shows a key seismic line running across the Copper Valley Alicia No. 1 and the Pan American Moose Creek No. 1 well locations. The exploration permit area includes the Unocal Tazlina No. 1, the Consolidated Tawawe Lake No. 1 and the Amoco Ahtna No. 1A well locations. The brochure also says that the Mesozoic geology is similar to Cook Inlet and that the structure is located across a major fault with existing seismic showing complex folding and faulting.
Anschutz bid a $1.42 million work commitment for the five-year exploration license it won in August 2000. The company paid 20 percent down on a one-time $1-an-acre rental fee for the 398,445-acre exploration license. Mon-Oil Inc. of Calgary also proposed a license for the area, but Anschutz won the final bid.
Anschutz proposed to spread work over four years. Partner and operator Forest has performed the work to date. In the first year the company proposed to conduct geological field work, mapping, sedimentology and stratigraphy, source rock sampling and geochemical modeling with a work value of $150,000.
Anschutz said it would license and reprocess existing seismic data for the area, also estimated at $150,000, for the second year.
The third year included collection processing and interpretation of gravity data, at a value of $120,000 done by PGS Onshore. New seismic is current phase of project In the fourth year, the company would spend $1 million for new seismic data acquisition, processing and interpretation. Phase I of Rutter and Wilbanks and Delphi’s proposed deal begins at this point.
The Copper River basin oil and gas exploration license area runs west from Glennallen on either side of the Glenn Highway and includes most of the length of the Lake Louise Road to the north. In the east, the boundary is close to the Richardson Highway. The southern boundary is south of Copper Center. Exploration license areas are more likely to yield gas rather than oil, and reserves could provide a source for local energy consumption.
Rutter said, “What really interested us about this project was the potential to find and develop world-class reserves right here in the United States. The costs to operate in Alaska are higher, but we feel the upside in reserves justifies these added costs. And the State of Alaska has really been aggressive at creating incentives for investment in exploration and development of the oil and gas wealth of the state. It is really refreshing to not have the government fighting you every step of the way.”
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