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Providing coverage of Alaska and northern Canada's oil and gas industry
February 2008

Vol. 13, No. 7 Week of February 17, 2008

Savant, True North Energy ink new deal

Savant gets interest in neighboring lease, True North will get interest in future production from Beaufort Kupcake project

Eric Lidji

Petroleum News

After a deal between the two companies fell apart earlier this year, Savant Alaska LLC and True North Energy Corp. signed a new deal on Jan. 23 for the Kupcake project in the Beaufort Sea off Alaska’s North Slope.

Under the deal, True North will give Savant an interest in a state lease near Kupcake in return for a small working interest in a future production unit should test drilling at the site prove to be successful.

The True North lease — ADL 390839 — sits immediately to the west of the lease Savant is using to set up ice roads and an ice island for drilling the Kupcake No. 1 well in Foggy Island Bay.

Savant’s leases are east of Prudhoe Bay, adjacent to BP’s Liberty oil project, and extend east towards BP’s offshore/onshore Badami oil field along the Mikkelsen Bay fault zone.

No upfront payment under new deal

This lease was originally the centerpiece of a pooling agreement True North entered into with Savant last November, but the companies terminated that deal in January after True North failed to raise its share of the test well drilling costs in time.

For the new deal, True North will not pay for any part of the test well.

Instead, upon drilling the test well, Savant will get a 75 percent undivided working interest and a proportionate 78.33 percent net revenue interest in the True North acreage at ADL 390839.

Savant will also share certain well information — including geology, reservoir data, logs and core analysis — with True North.

The agreement requires Savant to drill a test well by March 15. The well will be to a depth of 11,000 feet or into the Kemik formation, whichever proves to be shallower. Savant officials have previously said they expect to spud Kupcake No. 1 by the end of February.

True North looks to seismic, sales, maybe partnerships

True North owns leases on 10,000 acres of the North Slope and 25,000 acres in the Cook Inlet basin, acquired during lease sales in January and May of 2006.

In recent SEC filings, True North said it did not plan to drill in Alaska this year, but would “focus on acquiring additional seismic data, conducting further technical evaluation of our Alaska leases, and exploring opportunities to sell a portion of our Alaskan working interests in an effort to reduce our risk and financial exposure.”

Forecasting increased commodity prices and demand for natural gas nationally, True North branched out beyond Alaska in 2007, acquiring leases in Colorado and Texas to “aggressively pursue new unconventional gas resource plays with potentially substantial upsides.”

In SEC filings, the company said it planned to “engage in low to medium risk exploration and development of oil and gas reserves with sophisticated, industry-leading partners.”






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