For Cook Inlet Energy LLC, it’s first things first. The young, Anchorage-based company certainly has big aspirations as an oil and gas explorer.
But to date, Cook Inlet Energy has needed to direct most of its efforts toward restoring production from shut-in assets acquired in late 2009 on the inlet’s west side.
The company operates the West McArthur River oil field, as well as the Redoubt unit with its Osprey offshore platform.
In recent months, production has been modest at less than 1,000 barrels of crude per day. But the company hopes to stoke production now that its new drilling rig is up and running atop Osprey. The rig is working to recomplete several idle wells with problems such as collapsed casings.
Otter shows promiseCook Inlet Energy hasn’t stayed entirely on the exploration sidelines.
In fact, the company this year drilled an exploratory well on its Otter natural gas prospect. Otter is about 10 miles north of the Beluga gas field, which has a long legacy as a major energy source for Anchorage, the state’s largest city.
The Otter No. 1 well was drilled to a depth of 5,680 feet.
“The mud loggers reported two significant hydrocarbon gas shows in the zone of interest,” David Hall, the company’s chief executive, said during a July 25 investor conference call. “We’re very excited about the Otter No. 1.”
Otter has a chance to be “a very prolific gas field,” Hall said. But he noted that additional work was needed to fully evaluate the field. The plans included conducting a chemical treatment, a hydraulic fracture or both to stimulate the well.
Meantime, the Alaska Department of Natural Resources on Aug. 10 published a public notice that the company had applied for an easement to install a buried gas pipeline, 6 inches in diameter, to reach Otter.
In an Aug. 15 interview, Hall told Petroleum News the easement application didn’t necessarily signify a commercial discovery at Otter.
Cook Inlet Energy has more gas prospects on the inlet’s west side, including one known as known as Olsen Creek.
The company is using its own rig 34 to drill these shallow gas prospects. The truck-mounted Atlas Copco RD20 model rig was brought up from Tennessee and extensively modified for work in Alaska.
Company historyWhile Cook Inlet Energy is a youngster, formed in January 2009, its leaders are veterans of the local oil and gas scene.
The company launched as an oil and gas producer in December 2009, when it took over assets that formerly belonged to California-based Pacific Energy Resources Ltd., which went through a bankruptcy liquidation.
Hall and Cook Inlet Energy’s president, JR Wilcox, were well-acquainted with the assets, having previously worked for Pacific Energy. Hall was vice president and general manager of Alaska operations for Pacific Energy.
A Tennessee company, Miller Energy Resources Inc., brought financing to bid for the properties in a bankruptcy sale, and Cook Inlet Energy became a Miller subsidiary as part of the transaction.
Miller has a long history in the Appalachian basin of East Tennessee. Although the company is quite small, its shares trade on the New York Stock Exchange. In its annual report filed with the U.S. Securities and Exchange Commission for the year ended April 30, Miller reported revenue of $35.4 million with an operating loss of $25.1 million.
Most of Miller’s oil production comes from Alaska. During the first eight months of 2012, Cook Inlet Energy’s production averaged as high as 1,604 barrels per day in April.
Raising moneyMiller has worked numerous financing deals to advance its Alaska development and exploration plans.
Most recently, Miller announced Oct. 5 it raised nearly $15.8 million through the sale of 685,000 shares of preferred stock at $23 a share. Prior to the sale, the company said it would use the proceeds for “general corporate purposes, which may include working capital, capital expenditures, development costs, strategic investments and possible acquisitions.”
The company reported spending $19.5 million for the Osprey rig, known as rig 35. The rig gained final regulatory approvals in August and went straight to work.
Hall and Cook Inlet Energy aim to recomplete five Osprey wells, which could greatly boost the company’s oil production and cash flow.
Among the assets acquired in 2009 was the Kustatan production facility, an onshore complex that supports the Osprey platform. Cook Inlet Energy believes the facility, currently oversized, will be valuable in advancing its plans in the region.
Farther north, Cook Inlet Energy holds three state exploration licenses covering about 580,147 acres in the Susitna basin.
The licenses give Cook Inlet Energy the exclusive right over a period of years to search for oil and gas in the lightly explored basin. In exchange, the company has made certain work commitments to the state.
At the state’s Cook Inlet areawide lease sale on May 16, Cook Inlet Energy bid more than $2.7 million to win 74,880 acres.