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Vol. 16, No. 26 Week of June 26, 2011
Providing coverage of Alaska and northern Canada's oil and gas industry

Apache big winner

At $8.99 million, independent accounts for 81% of $11 million inlet sale

By Kristen Nelson

Petroleum News

A copyrighted oil and gas lease map from Mapmakers Alaska was a research tool used in preparing this story.

The State of Alaska just held its most successful Cook Inlet oil and gas lease sale in almost 20 years, with apparent high bids totaling some $11 million for more than half a million acres.

The number of bids received, 110, was the largest number of bids received for any Cook Inlet lease sale since 1983, the Alaska Division of Oil and Gas said prior to the sale. The 2009 Cook Inlet sale drew only five bids, the 2010 sale only 37.

In dollar volume, the sale was the most successful for Cook Inlet since the state garnered $65 million in a 1993 sale, held at the height of interest in ARCO Alaska’s offshore Cook Inlet Sunfish discovery.

The June 22 sale was dominated by big Houston-based independent Apache Corp., bidding as Apache Alaska Corp., with apparent high bids of $8.99 million.

Apache entered Cook Inlet last year, acquiring existing acreage; it then acquired Mental Health Trust acreage in a lease sale. Apache bid on some half a million gross acres in this sale, although the final acreage total will be substantially smaller once the division completes title work on the tracts receiving bids, which were listed at maximum possible acreage.

In addition to dominating bidding in part “A” of the sale, which covered most of the available acreage, Apache was the only bidder in part “B” of the sale, which offered three tracts formerly in the Cosmopolitan unit on the Kenai Peninsula. The terms for part “B” of the sale required bidders to bid for the three tracts in a block, set a minimum $50 an acre bid and require a plan of exploration for the tracts within six months of receipt of leases. Apache bid $70 an acre for the block of tracts, a total of $613,690.

Explorers, producers participate

Cook Inlet explorers and producers took a number of tracts: Aurora Exploration bid $465,894 for two tracts, Cook Inlet Energy bid $282,240 for one tract, Marathon Alaska Production bid $65,606 for a single tract and NordAq took a tract for $127,296.

Other apparent high bidders included Monte Allen; Paul Craig; a bidding group of Dan Gilbertson, Nick Stepovich, Paul Gavora and Alaska LLC; James McCurdy; and John Martineck.

The state received no bids in the areawide Alaska Peninsula sale, held in conjunction with the Cook Inlet sale.

Apache has tested seismic technique

Lisa Parker, president of Parker Horn Co., Apache’s contract representative in Alaska, said after the state that Apache had just over 300,000 Cook Inlet acres prior to the sale.

The company’s focus “is on looking for oil,” Parker said. “Apache believes Cook Inlet is underexplored for oil.”

Apache did a technology test on a new wireless nodal seismic technology in March, she said, “to determine whether nodal technology would work in Cook Inlet.” Parker said the technology has been tested in many other places, but hadn’t been tried here.

“So we tried it; it worked.” Apache has already started the process of applying for permits to do seismic exploration starting this fall, and hopes to do year-round seismic using the wireless nodal technology, she said.

The company received its initial leases last August and started the application process for seismic permits in November.

Parker said the company has been in the state for less than a year and has already done a technology test and found that it works and will be continuing with seismic exploration.

Division of Oil and Gas Director Bill Barron said after the sale that the division is excited by the sale results, especially with “players like Aurora, Marathon and Apache and the smaller players coming in.”

He noted that companies like Marathon and Aurora filled “in around areas that they were comfortable with,” while Apache picked up acreage adjacent to Cosmopolitan.

“And then what I think you’re seeing is some basic trendology and some prospectivity from what they’ve seen in some of the general seismic that’s available,” he said.

Barron characterized the sale results as “all good news” for Cook Inlet.

Apache acreage

Apache was apparent high bidder on big blocks of acreage, including some 20 tracts offshore east of the ConocoPhillips North Cook Inlet gas field and Escopeta’s Kitchen Lights unit, essentially between existing acreage and the northern Kenai Peninsula.

Apache also picked up half a dozen tracts along the Susitna River north of Cook Inlet, adjacent to 16 tracts the company already holds. Farther south on the west slide, along Bachatatna Creek, Apache picked up four leases linking acreage the company already holds to the northeast and southwest onshore along Cook Inlet. On the Kenai Peninsula, Apache picked up acreage in the Sterling area and near Kasilof, both areas where the company already has acreage.

At the southern end of the Kenai Peninsula, Apache picked up acreage east and southeast of the North Fork gas field and acreage adjacent to and north of the Union Oil Nikolaevsk unit.

Apache’s largest acreage acquisition, some three dozen tracts, lies offshore the Kenai Peninsula from Anchor Point north, basically available acreage between shore and federal waters from Anchor Point north, surrounding the former Cosmopolitan unit, where Apache picked up three former tracts in part “B” of the sale, and offshore past Marathon’s Ninilchik and Kasilof units as far north as offshore the Kenai gas unit.

The company also acquired acreage along the coast of the Kenai Peninsula from just north of Anchor Point almost to Ninilchik.

Apache’s per-acre bids ranged from $10 an acre to $56 an acre, for an average bid of about $18 an acre.

Westside acreage

Scoff Pfoff of Aurora, bidding as Aurora Exploration, took two tracts onshore the west side, along the Enstar gas pipeline west of the Susitna River with bids totaling $465,894, with bids of $69.44 and $25.75 an acre.

Cook Inlet Energy took one tract on the west side, adjacent to exciting company acreage, for $282,240, $49 an acre.

The bidding group of Dan Gilbertson (12.5 percent), Nick Stepovich (12.5 percent), Paul Gavora (12.5 percent) and Alaska LLC (62.5 percent) took five tracts offshore Tyonek on the west side of Cook Inlet, bidding $11.33 an acre in all cases, for a total of $152,275.

James McCurdy took a tract on the west side, adjacent to Cook Inlet Energy acreage, described as 35 acres, bidding $11 an acre, a total of $385.

John Martineck had the highest per-acre bid in the sale, bidding $105.17 an acre, a total of $605,779.20, also the highest per-tract bid in the sale, for tract 157, adjacent to Buccaneer acreage in the Kenai area. Martineck also bid $35.17 an acre, a total of $67,526.40, for a small tract at Anchor Point.

Marathon bid $11.39 an acre for a tract near Clam Gulch, adjacent to acreage the company holds, a total of $65,606.

Monte Allen bid $10.12 an acre for three tracts at Kalgin Island where Allan holds an existing tract, a total of $174,876.

NordAq bid $22.10 an acre, $183,577, for an onshore-offshore tract at East Foreland, immediately sound of an offshore tract held by the company.

Paul Craig bid $71.71 an acre, $183,577, for a tract offshore the west side northeast of the Spark platform.

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