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ExxonMobil in Alaska: Third time’s the charm Thanks to Exxon’s influence, Point McIntyre started producing oil in 1993 Steve Quinn & Kay Cashman For Petroleum News
ExxonMobil has a reputation for making sound business decisions when it comes to oil and gas development, which sometimes makes it pushy with its partners about getting petroleum resources out of the ground and to market as soon as the technology and economics match the geology of a prospect. If Exxon hadn’t been so pushy, Alaska’s Point McIntyre field, the largest North American oil discovery of the 1980s, might not have been developed as soon as it was.
After Gulf Oil drilled two dry holes in the North Slope prospect in 1977, it sold the majority of its interest in the 5,000-acre Point McIntyre prospect, leaving ARCO the new operator.
ARCO had no interest in drilling another well on the acreage, but by 1985, its partner Exxon did.
Exxon’s interest stemmed from a smart company policy of having every geologist who joined a regional team revisit the area’s geology; essentially build a new geologic base map for Exxon’s leases.
“Two new Exxon geologists had just completed logging school and brought fresh, innovative theories to the drawing board,” Stu Gustafson told Petroleum News in a 2010 interview. A geologist by education and often mistaken for a landman or exploration manager, Gustafson was a scout for Exxon in Alaska from 1979 until 1995 when the company closed its exploration office in the state.
The two geologists “saw something different” in the Point McIntyre well logs, Gustafson said. “There was an awful lot of gas for the type of rock. This isn’t just gas, they said: This is gas and oil.
“Anytime a new geologist is assigned to an area they’ve got to go through and do their own regional geological base map,” Gustafson said. “In other words, don’t assume everyone else in the past got it right. They looked at the logs for Point McIntyre wells No. 1 and 2, and said, ‘we’ve got a great prospect here.’”
By that time ARCO and Exxon held 90 percent of the two Point McIntyre leases, each with half, but ARCO was the operator, so Exxon shared its information and asked ARCO to drill a well, this time with a new target.
“Gulf had gotten stuck in first well, when they finally got free, they pulled out of hole, and blew through the pebble shale and the Kuparuk. They were targeting the Saddlerochit, Prudhoe Bay’s main producing formation; that was the most desirable target at the time. So they drilled another one. They drilled right through it again: Their mud was too heavy.”
ARCO said no to drilling in 1985, but offered to sell its Point McIntyre interest to Exxon.
“Exxon liked the prospect, but not that well,” Gustafson said.
Exxon asked for a well again in 1986. The answer was still no.
In 1987, ARCO, tired of being badgered, said no to drilling, but was willing to sell its share of Point McIntyre to Exxon. Unfortunately its asking price was too high.
ARCO finally agreed to drill a Point McIntyre well, targeting the Kuparuk, if Exxon secured controlling interest in the prospect’s leases by the end of the year.
So in mid-1987, Exxon signed a purchase agreement with Chevron, which had acquired Gulf, for Chevron’s percent interest, giving Exxon 53 percent of Point McIntyre.
Four days to get their approval Exxon seemed to have everything in place when Gustafson took a late December call from his company’s headquarters in Houston.
He learned Exxon had to get approval to buy Chevron’s interest from three Alaskans — Clifford Burglin, Thomas Miklautsch and Chuck Hamel — who held 2 percent of the Point McIntyre leases AND had the veto power on any sale of Chevron’s eight percent interest.
Exxon had to secure the three signatures at a time when there were no cell phones, overnight delivery service or e-mails to expedite deals.
Gustafson had four days to get all three to agree, and he was nowhere near Alaska when he got the word. Rather, he was enjoying time with his family in Florida.
“We were supposed to close the deal and at the 11th hour, Chevron said ‘we can’t sell to you without 100 percent consent from these three people.’
“We had already told ARCO we were going to get controlling interest but if we couldn’t get Burglin, Miklautsch and Hamel to agree, we wouldn’t have it by the deadline.”
Hamel an easy sell, Miklautsch not Gustafson said Hamel, then living in Washington, D.C., was an easy sell, taking advantage of the airline industry’s counter-to-counter service to forward his signed document to Exxon.
Burglin, too, agreed verbally, but Miklautsch proved challenging.
Burglin and Miklautsch were not on speaking terms at the time. To make things worse, Miklautsch was purposefully living off the radar in a California hotel.
Even though Gustafson told him that Burglin had agreed to Chevron’s sale to Exxon, Miklautsch wanted Burglin to call him before he would sign off on the deal.
After successfully imploring Burglin to call Miklautsch — it took four phone calls from Gustafson — Exxon had its deal.
Getting Burglin’s signature Here’s what Gustafson remembers about working with Burglin:
“Cliff Burglin and I always got along quite well, so I called Cliff, and Cliff said ‘I knew you would be calling.’
“I told him, ‘the best way to beat us is to join us. If it’s good for us, then it’s great for you.’”
Entrusting a colleague to bring the paperwork to Miklautsch, Gustafson boarded a red-eye to Fairbanks.
“Cliff picked me up at the airport and we went to his house for a bite to eat,” Gustafson recalls. “He kept talking and talking and I had a package in front of him to sign. I told him, ‘I’m going to need to get a hotel room because I’m going to miss my flight.’
“He finally called his daughter who was a notary, and she came over. He pulled the package out and said, ‘I don’t have to read it. You and I both know what it says.’ He signed it and hauled me out to the airport. That’s how we did business back then.”
Gustafson a straight shooter Burglin’s son Brian remembers Gustafson as being a straight shooter who brought credibility to the deal.
“He was more like me in that he was the landman, but he got to go on drilling locations and on the rigs, so he had a good feel for everything from start to finish,” Burglin said.
“The bigger companies like that, he’s just a landman and that’s all they do,” he said. “Stu was pretty hands on. It made him more down to earth. He didn’t have the air that I work for the biggest oil company in the world.
“He got his hands dirty working. I think that made him unique.”
Exxon eventually bought Burglin, Miklautsch and Hamel’s two percent interest in Point McIntyre.
The Point McIntyre oil field, which lies northwest of Prudhoe Bay, on and off shore, was discovered in March1988 by the ARCO-Exxon Point McIntyre No. 3 well.
The discovery well was tested at a sustained rate exceeding 2,500 barrels of oil per day.
The field, which was originally estimated to hold 800 million barrels of oil with 400 million barrels recoverable, went online in 1993.
By mid-2009 Point McIntyre had produced more than 415 million barrels of oil.
Under the radar Looking back, what does Gustafson think of Exxon?
“Exxon’s strength is doing its job well; on time and on budget and, most of all, without fanfare,” he said.
“We had the largest discovery in the 1980s for North America, but Exxon didn’t need for anybody to know that. Even when they are the operator, they prefer to work under the radar.”
Editor’s note: Stu Gustafson returned to Alaska as a consultant with independent Armstrong in 2001 to help develop the Oooguruk, Nikaitchuq and Tuvaaq prospects. He is best known in Alaska for his ability to work with locals and move projects quickly and efficiently from lease acquisition to development.
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