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Vol. 12, No. 46 Week of November 18, 2007
Providing coverage of Alaska and northern Canada's oil and gas industry

THE EXPLORERS 2007: XTO more than doubles oil reserves

Kay Cashman

Petroleum News

XTO Energy, operator of the Middle Ground Shoal field in Alaska’s Cook Inlet basin, is a good example of what an independent oil company can achieve in prolonging the life of an aging oil field.

Middle Ground Shoal, produced from two platforms offshore the Kenai Peninsula, began production in 1967.

By the time Cross Timbers Oil Co. (predecessor to XTO) purchased the field in 1998, production was at 3,600 barrels per day and falling.

XTO’s strategy is to handpick complex, aging, producing properties that still contain undiscovered hydrocarbons, and double the reserves. Most of the fields are purchased from major oil companies — in this case Shell Oil — which have a higher overhead that makes many mature fields uneconomic.

The Fort Worth independent brings in a team of top development personnel to develop hidden reserve upsides.

XTO purchased Middle Ground Shoal in 1998, identifying 12 million barrels of reserves upon acquisition. Through XTO’s development program, the property now has reserves of 24 million barrels. Production has ranged from 3,000 to 4500 barrels per day in the 10 years XTO has operated the property.

Better investments outside Alaska

Production began slipping closer to the lower range of that production average in 2006. Unfortunately, XTO had more profitable investment targets outside Alaska, so since late 2005 only one new sidetrack has been drilled in Middle Ground Shoal — for a total of 12 — and only three existing wells received workovers, Kyle Hammond, XTO’s top executive for Alaska, told Petroleum News in October 2007. (There were no workovers in 2006.)

By mid-2007 oil production was down to 3,130 barrels per day.

Nonetheless, under XTO’s ownership reserves were doubled. Hammond said each of the 12 sidetracks averaged about 700,000 barrels.

How do they do it?

Middle Ground Shoal consists of a shallow dipping east flank and a steeply dipping west flank separated by a faulted crest. Production comes from multiple zones within the Tertiary Tyonek formation, “primarily … from the Hemlock member of the Tyonek,” Hammond said.

The complexity of the field presented the kind of challenge that XTO likes to turn into an opportunity. The company focused on developing the more difficult west flank of the field where the strata are essentially tipped on end. XTO has drilled directionally through the formation and then went back and penetrated the formation again on the bottom side of the well, Hammond said.

Constantly doing maintenance

He said the company uses “pressure maintenance to keep production up on an ongoing basis. We filter Cook Inlet water and inject it into the reservoir to maintain pressure. Our focus over the past few years has been maintaining production through coil tubing work on producers, injection well workovers, and artificial lift optimization.”

And even though it hasn’t drilled a sidetrack recently, in 2007 XTO replaced its pipeline surveillance system. “This is a system designed to provide immediate notice of any problem with the pipeline 24 hours per day,” Hammond said. “We are constantly doing maintenance on our facilities to identify, repair or replace worn or aging vessels, equipment, pipes, and/or valves.”

Other Alaska properties

Is XTO interested in buying other mature fields in Alaska?

“We look at deals and/or properties from time to time,” Hammond said, “but we’re not actively pursuing any Alaska deals at this time.”

XTO has periodically talked about testing the Jurassic, but the idea has not resurfaced since 2002, and Hammond said XTO is “not considering the Jurassic in the near term.”

Scott Griffith, based in Kenai, is the top company official in Alaska. He reports to Hammond.



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