Miller Energy Resources Inc. is joining the ranks of Alaska North Slope field operators.
The Tennessee-based company on May 14 announced it had signed a binding agreement to acquire Savant Alaska LLC, operator of the Badami field.
Badami, originally developed by BP, is the easternmost producing oil field on the North Slope.
Miller said it would pay $9 million in cash for Savant. The deal, expected to close by August, would give Miller a 67.5 percent working interest in the Badami unit, with ASRC Exploration LLC remaining as a 32.5 percent working interest partner.
Miller has been active in Alaska since late 2009, operating several oil and gas properties through its Anchorage-based subsidiary, Cook Inlet Energy LLC.
Now Miller is set to become an operator on the Slope, where the vast majority of Alaska crude oil is produced.
“The acquisition of Savant will significantly expand Miller Energy’s Alaskan asset ownership, complementing our existing Cook Inlet operations and providing us with additional wellbore diversification,” said Scott Boruff, Miller chief executive officer. “This transaction increases our profile in the Alaskan oil and gas community, and gives us a credible foothold in the world-class North Slope resource play, including existing production, a developmental runway and substantial midstream assets.”
Miller expects to “significantly enhance the value” of the assets it is acquiring, Boruff added.
Fast-growing companyUnder the pending deal, which is “subject to due diligence and regulatory approval,” Savant would become a Miller subsidiary, the announcement said.
State records show an address for Savant of Castle Rock, Colorado, near Denver.
Miller is a publicly traded company headquartered in Knoxville, Tennessee. Although listed on the New York Stock Exchange, Miller is a small company. Its market capitalization on May 14 was $214 million.
Most of Miller’s oil and gas production is in Alaska.
The company has borrowed heavily for its aggressive campaign to restore and grow production from a collection of shut-in Cook Inlet assets bought in a 2009 bankruptcy sale. These assets include the West McArthur River oil field on the inlet’s west side, and the Osprey offshore platform.
Savant would be the year’s second major Alaska acquisition for Miller, which in February closed a nearly $65 million deal for the North Fork natural gas field on the Kenai Peninsula.
The Badami field is situated along the Beaufort Sea coast roughly midway between Prudhoe Bay and the Arctic National Wildlife Refuge.
The field came on stream in 1998. To celebrate the startup, hundreds of BP employees gathered in the parking lot of the company’s Anchorage office building for a fireworks display.
But Badami, with its difficult compartmentalized reservoir, proved a serious disappointment. The field was idled and restarted a time or two, and BP farmed in Savant.
Savant and ASRC acquired Badami outright from BP in early 2012, with Savant acting as field operator.
Sidetracks plannedThe Badami unit encompasses seven state leases and 17,200 acres, Miller said in its May 14 announcement.
Eight wells currently produce 1,100 barrels of oil per day gross, with 600 bopd net to Savant, Miller said.
In early 2010, Savant drilled an exploration well at Badami, the B1-38, to a depth of 15,245 feet. The well was completed as a discovery in the Killian sand, Miller said.
“Additionally, Savant drilled and completed the first horizontal development well, the B1-18A well, in the Badami field,” the company said.
Savant’s efforts led to Badami’s restart in November 2010, and gross production from the unit has since surpassed 1.55 million barrels, Miller said.
As part of the Savant deal, Miller also would obtain a 100 percent working interest in nearby exploration leases, plus ownership in the 25-mile Badami pipeline that ties into the Endicott pipeline to the west.
Miller cited a number of factors other than future production that seem to sweeten the deal.
The Badami unit is “the only underutilized process train on the North Slope,” Miller said. “Equally important, BP retains decommissioning liability for the plant, facilities, Class 1 disposal well and pipelines.”
The Badami pipeline figures to become more important in coming years, as it will help carry production from ExxonMobil’s remote Point Thomson development now under construction to the east.
Miller said “several prospective horizons” exist within the Badami unit. And Savant has some exploration prospects under lease.
Initial plans for Badami include drilling two sidetracks at an estimated cost of $15 million per well, Miller said.