Miller Energy Resources Inc. is involved in a dispute with the supplier of the drilling rig atop its Osprey offshore platform in Alaska’s Cook Inlet.
Miller disclosed the dispute in a July 15 filing with the U.S. Securities and Exchange Commission.
The Tennessee-based company operates in Alaska through its subsidiary, Cook Inlet Energy LLC.
The dispute with Voorhees Equipment and Consulting Inc. centers on outstanding invoices of about $531,000, the SEC filing said.
Miller said it contracted with Voorhees in June 2011 for the custom construction and purchase of the rig for $17.9 million.
Rig 35, as it’s known, was mobilized to the Osprey platform in December 2011, Miller said. It was a terribly cold winter, however, and this delayed rig assembly on the platform.
The rig finally was brought online in August 2012, Miller said.
On Aug. 31, 2012, Miller said it terminated its agreement with Voorhees for the construction and sale of Rig 35.
“We terminated the agreement based on our belief that Voorhees was in breach of its obligations thereunder,” Miller’s SEC filing said.
No lawsuit was filed, and the parties elected to engage a private arbitrator to settle the dispute.
Miller said it expected the arbitration to begin on or before Sept. 17.
Petroleum News was unable to reach a Voorhees representative for comment.
‘Lighthouse mode’Miller, headquartered in Knoxville, Tenn., is a small company whose stock trades on the New York Stock Exchange.
Its subsidiary, Cook Inlet Energy, launched as an Alaska oil and gas producer in late 2009, following the acquisition of a collection of assets out of the bankruptcy of Pacific Energy Resources Ltd.
The Osprey platform, the newest and southernmost of the 16 platforms in Cook Inlet, sits in the Redoubt unit in about 45 feet of water. It was installed in 2000.
By the time Miller and Cook Inlet Energy got it, Osprey was in “lighthouse mode” and in danger of becoming a ward of the state.
Since then, Cook Inlet Energy has focused on restoring production from Osprey’s shut-in wells, some of which were in disrepair. To perform the necessary workovers, and to drill planned new wells, the company elected to contract with Voorhees for Rig 35.
The platform has 21 available slots, eight of which are currently in use, Miller said in its SEC filing. Prior operators drilled six oil wells, plus two injection wells.
Cook Inlet Energy has used Rig 35 to drill sidetracks and restore production from two oil wells, the RU-2 and, most recently, the RU-1. The company also has established natural gas production from two other Osprey wells, RU-3 and RU-4.
Top-performing platformMiller said the RU-1 sidetrack (RU-1A) was completed and brought online on Aug. 17 at an initial production rate of more than 700 barrels of oil per day.
“We are very pleased with the RU-1A sidetrack results yielding more than twice the historical IP rate,” David Hall, Miller’s point man in Alaska, said in an Aug. 26 press release. “Over the last seven days, the average oil production from the Osprey platform has been approximately 2,180 barrels of oil per day and over 2,500 barrels of oil equivalent, including gas production. With the addition of the RU-1A production, we estimate that our Osprey platform is now the single highest producing oil platform in the Cook Inlet.”
The RU-1A sidetrack was drilled to a final measured depth of about 15,050 feet, and “encountered oil throughout the entire prolific Hemlock formation as well as the top of West Foreland formation,” the press release said.
Rig 35 is now sidetracking another Osprey well, the RU-5, the company said.