Without further development, a pair of Cook Inlet fields operated by Aurora Gas LLC will become uneconomic within the next three years, according to company estimates.
In a pair of revised plans of development submitted to state authorities in early June, the Alaska-based independent said that the Three Mile Creek field would become uneconomic in early 2018 and the Nicolai Creek unit would become uneconomic in late 2020 or early 2021 unless Aurora or another owner undertakes new development work.
Aurora expressed interest in undertaking the work. But an ongoing bankruptcy proceeding has created uncertainty about what work might be done and who might do it.
According to the revised Nicolai Creek unit plan, the resolution to the current bankruptcy case “will be either purchase of the all membership (‘stock’) of the company by a new owner or shut-in and abandonment of the wells. Two prospective purchasers have made proposals for the purchase, but neither have made firm offers. If the sale of the membership is not successful, the wells will be shut-in and abandoned,” Aurora wrote.
To give the company additional time to complete the bankruptcy proceedings, the state is giving Aurora until Oct. 1 this year to submit new plans for the west side Cook Inlet fields.
Aurora initially submitted plans of development for the two fields in October 2016 but quickly withdrew the plans and asked the state for an extension, citing the bankruptcy.
The revised plans, submitted in early June 2017, added little in the way of actual work plans, also a result of the uncertainty surrounding the bankruptcy. But the revised plans offered more information about the various paths that the upcoming year might take, including a potential sale of the company or of the assets, or abandoning the fields.
What needs to be done
The Three Mile Creek field is currently producing from one of three wells - Three Mile Creek No. 1. The well was producing only 186,000 cubic feet per day as of August 2016, down 10 percent from the year prior, according to company figures included in the plan.
The company suspended production from the Three Mile Creek No. 2 well in 2011, after equipment became lodged in the wellbore during maintenance activities. Attempts to resolve the problem in November 2013 and again September 2014 both failed. Given that plugging the well would require a rig workover, Aurora is considering plans to clean out and test the well prior to officially abandoning it, to make the most of unavoidable costs.
The company drilled the Three Mile Creek No. 3 well in November 2011 but subsequent completion activities were “very disappointing” and the well has never produced. The company wants to continue testing the well before approving abandonment plans.
In the revised plan of development, Aurora said it wants to proceed with the Three Mile Creek No. 2 and No. 3 plans this year, if it can secure a rig. If the work fails to resolve the issues with the two wells, the company intends to plug all three wells in mid-2018.
The Nicolai Creek unit was producing from six wells as of August 2016, according to the revised plan. The company is considering plans to convert the Nicolai Creek Unit No. 2 and Nicolai Creek Unit No. 9 wells into storage operation with 2.5 billion to 3 billion cubic feet of capacity, and also wants to remediate problems at the Nicolai Creek Unit No. 10 and Nicolai Creek Unit No. 11 wells. The company believes a proposed Nicolai Creek Unit No. 12 well could access a potential Nicolai Creek North accumulation.
Without the drilling, remediation or conversion, though, the company expects the unit to become uneconomic within three years and would abandon the unit in mid-2021. The results of the bankruptcy proceedings could expedite those plans, according to Aurora.
In filings with the U.S. Bankruptcy Court in Anchorage in April, Aurora proposed a liquidation sale running through October as a way to recover nearly $1.5 million in debts.
