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Rutter and Wilbanks eyes 2006 inlet spud With ink barely dry on closing documents, independent seeks jack-up rig — with crew, for upcoming season at Northern Lights By Steve Sutherlin For Petroleum News
Now that Midland, Texas-based independent oil and gas company Rutter and Wilbanks Corp. has closed on the purchase of the Northern Lights prospect in the upper Cook Inlet basin of Southcentral Alaska, the company is actively in talks to secure a jack-up rig to drill the prospect, Bill Rutter III told Petroleum News Feb. 21.
“It’s a closed deal,” Rutter said, referring to Rutter and Wilbanks’ purchase of the 36,000-acre prospect from Irving, Texas-based independent Prodigy Alaska. “Lease assignments are being sent to Alaska as we speak.”
Finding a jack-up rig — or rigs — that can be utilized economically in Cook Inlet will be the next challenge the company faces, and it is involved in discussions with a variety of parties on the issue, Rutter said, adding that recent discussions the company has had on the subject have raised hopes that a rig will be available to drill the Northern Lights prospect in 2006, one year earlier than the company’s previous spud target of 2007.
“We’re talking to some people about drilling rigs, and keeping our eyes and ears open,” he said.
While day rates are at a historic high, rigs are out there to be had, Rutter said, but he added that he sees a bottleneck looming due to a severe shortage of drilling hands in the industry.
“They have the iron but they don’t have the people,” Rutter said.
The Northern Lights leases, offshore on the North Cook Inlet anticline, will bring Rutter and Wilbanks’ total acreage in the inlet to 96,000 acres, Rutter said.
Rutter and Wilbanks has partners on the new prospect, and it might add several more partners before drilling commences, Rutter said, adding that while his company isn’t qualified to operate offshore, one of his partners would consider being the operator at Northern Lights. 100 million BOE plus In 2004, Prodigy President Paul Fenemore told Petroleum News that the company’s Northern Lights project has “estimated gross recoverable oil reserves and resource potential in the range of 111-358 million barrels of oil equivalent.”
All of the leases are in water depths of 100 feet or less and are close to pipelines and oil and gas infrastructure, Fenemore said.
The North Cook Inlet anticline was previously drilled by ARCO Alaska and Phillips and it is known to contain oil and gas. Northern Lights is about a half mile from ARCO’s North Foreland State No. 1 well, Mark Landt, Prodigy vice president of land told Petroleum News in 2003, adding that the well tested at about 3,600 barrels per day from three zones, on a sustained test.
Landt said that all the wells drilled on the Northern Lights anticline, once called Tyonek Deep and before that Sunfish, had oil shows or tested oil.
Of the 17 wells drilled into Tyonek Deep, the deep oil field in the North Cook Inlet structure, 15 were deemed productive, and eight tested at initial rates of up to 3,600 barrels of oil per day, per zone, Fenemore said
The anticline is approximately 23 miles long, three to six miles wide, and is characterized by pronounced, steep-sided domes at both ends, he said. Northern Lights is near the center of the structure. Prodigy held a 100 percent working interest in the project.
“The northern dome of the North Cook Inlet structure contains the Tyonek Deep oil field and in the opinion of Prodigy, there is strong technical support for a significant extension of this undeveloped field into the Northern Lights project area,” Fenemore said.
Landt worked at ARCO Alaska from 1992 to 1997, and was its district land manager for Cook Inlet. He said ARCO and Phillips spent $300 million on the project, but then the companies walked away, perhaps in part because they had spent too much on it.
Landt said in the 2003 Petroleum News interview that due to improved technology and higher oil prices, the project looked far more attractive then it did when ARCO and Phillips drilled Tyonek Deep. When the companies quit drilling, he said, oil prices were in the $10 to $14 per barrel range, and falling.
“Clearly an offshore development in the Cook Inlet would be hard to make work at those kinds of price levels,” Landt said. Awakening coming Rutter said the company is planning to participate in the Cook Inlet areawide sale planned for May. He thinks the time has come to wake up the oil industry in Cook Inlet.
“Cook Inlet has been dormant for nearly 40 years,” he said. “At sixty-dollar oil, it’s screaming to be developed.”
Rutter said he actually thinks Cook Inlet needs two jack-up rigs, rather than one — with two jack-ups in the inlet, there would always be a relief rig standing by.
“Rigs need to be in pairs,” he said, adding that availability of an extra jack-up rig would help support new efficient drilling technologies such as subsea completions of peripheral wells.
If more companies get active in the inlet, the economies of scale will be there to help support the needed equipment, but in the meantime it might be appropriate for the state to assist in bringing up a second jack-up rig as an economic development investment, Rutter said.
Rutter said he is watching with interest for an announcement from Chevron Corp. about what it will do with the Unocal Alaska Cook Inlet assets it acquired last year when it took over Unocal Corp. in an Aug. 10 stock and cash deal valued at approximately $18 billion.
If a large player like Chevron began a drilling program in the inlet, the operating environment would likely get smoother for smaller operators in the field.
No matter whether Chevron moves, Rutter and Wilbanks is going to move ahead on Northern Lights, and it has some other possible acquisitions targeted in the Cook Inlet area.
“We’ve got some ideas there we’d like to pursue, and three prospects onshore on the Kenai Peninsula we’d like to acquire,” he said. “Cook Inlet is our major focus in Alaska now.”
“It’s good news for Alaska, and more evidence that Cook Inlet is going to become the province of the independents,” Rutter said.
Rutter and Wilbanks was the largest bidder at the state of Alaska’s Cook Inlet areawide lease sale in Anchorage last year, spending more than $314,000 of the $1.5 million bid for 55 tracts in the inlet.
The company took a block of onshore leases on the eastern side of the southern Kenai Peninsula, adjacent to the Kenai National Wildlife Refuge. In Cook Inlet the company took tracts to the east and west of Forest acreage south of Redoubt Shoals, and also picked up leases east of ConocoPhillips Alaska’s North Cook Inlet gas field.
Rutter and Wilbanks burst onto the Alaska drilling scene in 2004 with a gas well near Glennallen in the Copper River basin.
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