Cook Inlet Energy LLC’s new drilling rig has arrived in Alaska — sort of.
Rig components are coming up by ship to the Port of Anchorage. The rig fills about 40 truck trailers.
“Part of it is here,” David Hall, chief executive of Cook Inlet Energy, told Petroleum News on Oct. 19.
From Anchorage, Carlile Transportation is hauling the trailers to Nikiski. From there, the components will go to the Osprey platform out in Cook Inlet, where Hall aims to put the rig to work on well workovers and sidetracks.
The new rig is a major step for fledgling Cook Inlet Energy, which organized in January 2009 and operates a collection of oil and gas properties on the west side of the inlet. The company is a subsidiary of Miller Energy Resources Inc., a small, publicly traded independent based in Tennessee.
August was a record-setting month for Cook Inlet Energy, which reported 46,882 barrels of oil shipped for an average of 1,512 barrels per day. That’s significant in a basin that averaged 11,991 bpd overall in August.
Osprey plans
Rig 35, as the company calls it, is a 2,000-horsepower National 1320 model designed for both offshore and onshore drilling. Voorhees Equipment and Consulting Inc. fashioned the $19.5 million rig in Houston.
The rig builders are scheduled to arrive at the end of October to begin the 60-day job of assembling the machine on the Osprey platform, Hall said.
Osprey is the newest and southernmost of the 16 platforms in Cook Inlet. It sits in the Redoubt unit.
Forcenergy Inc. completed installation in 2000, but production from the platform proved a serious disappointment.
It was in “lighthouse mode” and in danger of becoming a ward of the state when Cook Inlet Energy acquired the platform in late 2009. Its previous operator, Pacific Energy Resources Ltd., had filed for bankruptcy.
Hall wants to turn around Osprey’s fortunes.
One problem was that wells on the platform had design problems, with casings that were too light for the formation pressure, Hall said. As a result, the casings collapsed.
Hall intends to sidetrack four wells, which should restore the 2,000 bpd that the original wells once produced, he said.
Hall isn’t sure yet who will operate the rig. He’s been soliciting for a labor contractor.
To limber up both the rig and crew, Hall said he might start out with a couple of well workovers before mounting an actual drilling operation.
Focus on Susitna basin
The company has been outfitting another rig brought up from Tennessee to target shallow gas prospects on Cook Inlet’s west side. Rig 34 is a truck-mounted Atlas Copco RD20 model.
Cook Inlet Energy has done “intensive renovation” on the rig, adding eight modules to house the mud system, tanks and the like, Hall said. The rig also was winterized.
The company soon will use the rig to workover a natural gas well at the company’s Kustatan onshore production facility, he said.
Aside from Osprey, Cook Inlet Energy operates the West McArthur River oil field.
Another big focus for Cook Inlet Energy is the Susitna basin.
In September 2010, the state Division of Oil and Gas granted Cook Inlet Energy a three-year extension of its Susitna basin exploration license in exchange for $750,000 in work commitments.
The license gives the company exclusive exploration rights on 471,474 acres in the Susitna basin north of Cook Inlet, near the Willow community.
Hall said he recently gave a technical presentation to the Division of Oil and Gas on the company’s Susitna basin progress.
Cook Inlet Energy has a collection of 2-D seismic data Forest Oil shot in the basin in 2006, Hall said. Over the past year, the data has been under review with help from a third-party engineering firm, he said.
The company also did a “boots on the ground” field study, looking for outcrops and other signs of hydrocarbons.
Ultimately, the goal is to drill a hole in the basin, though nothing is firm yet, Hall said. More work is needed, perhaps a 3-D seismic shoot. Hall said he sees the Susitna basin as a potential company changer.
Miller’s legal troubles
While Cook Inlet Energy has made steady strides over its short history, parent company Miller Energy has had a tougher go.
Beginning in July, Miller began to encounter trouble including a crash of its stock price and accusations of securities fraud.
After its acquisition of Cook Inlet Energy in late 2009, the small Tennessee company’s star began to rise rapidly. Miller’s shares went from the OTC Bulletin Board to the Nasdaq exchange to the New York Stock Exchange. The company’s stock price soared from around 30 cents in mid-2009 to as high as $8.02 on July 15.
By early August the stock had plunged to $2.36 after online reports suggested Miller had overstated the value of its Alaska holdings, and after the company advised the U.S. Securities and Exchange Commission that it needed to correct erroneous financial statements.
The stock slide precipitated the filing of several lawsuits in Tennessee against Miller. The suits generally claim that Miller’s stock traded at artificially inflated prices due to false statements by the company, and investors were hurt when the price fell.
Miller has stood by the valuation of its Alaska assets, saying their worth was independently verified. Miller said it hired global law firm DLA Piper to defend the lawsuits, which appear headed for consolidation.
—Wesley Loy
