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Vol. 13, No. 43 Week of October 26, 2008
Providing coverage of Alaska and northern Canada's oil and gas industry

Alaska takes in $9.1M

New Armstrong subsidiary mystery bidder in North Slope, Beaufort Sea lease sales

Kristen Nelson

Petroleum News

The State of Alaska brought in more than $9.1 million in apparent high bids at two oil and gas lease sales Oct. 22, more than $2.6 million at the Beaufort Sea areawide sale and more than $6.5 million at the North Slope areawide sale.

These could have been relatively small sales since many of the state tracts on the North Slope and Beaufort Sea are already under lease, but a large number of bids by “70 & 148 LLC” of Denver — a total of almost $6.9 million — kicked up the total acreage receiving bids, as well as the state’s high bonus bid take, accounting for 75 percent of the dollar value of high bids.

Who was this mystery bidder?

Petroleum News learned after the sale from Bill Armstrong of Armstrong Oil and Gas of Denver that 70 & 148 LLC is “another Armstrong affiliate.” Armstrong sold its North Slope and Beaufort Sea interests to Eni Petroleum in 2005 and has since acquired Cook Inlet basin acreage (see Armstrong story on page 1 of this issue).

The state received 72 bids from seven bidders or bidding groups for 60 tracts in the North Slope sale, and 38 bids from nine bidders or bidding groups for 32 tracts in the Beaufort Sea sale.

“Many tracts offered in yesterday’s sales were relinquished to the state in the ordinary course of our management of our oil and gas lands,” Kevin Banks, director of the Division of Oil and Gas, said in an Oct. 23 statement.

“I believe that new entrants in the Alaska oil and gas industry are motivated to try new concepts to develop prospects that may have been overlooked to date. The economy of Alaska is enhanced when these newcomers can join those active companies already here as part of a vibrant, diversified industry,” he said, noting that half of the bonus bids received, approximately $4.55 million, would be deposited in the permanent fund.

The $9.1 million in apparent high bids compares favorably with 2007 and 2006 sales in these areas, which brought in $2.1 million and $2.6 million respectively. Big sales in early 2006 — actually the 2005 areawide sales deferred — brought in $23.4 million. In 2004 the state garnered $11.8 million from the two sales and $4.9 million in 2003.

Interest in Kuparuk area

The 70 & 148 LLC bids accounted for 77 percent of the dollar value of apparent high bids in the North Slope and 71 percent of the apparent high bids at the Beaufort Sea sale — $5 million of $6.5 million in North Slope bids and $1.86 million of the $2.6 million Beaufort Sea high bids. The company placed 20 of the 38 bids in the Beaufort Sea sale, and was apparent high bidder on 19 of the 32 tracts receiving bids. In the North Slope sale, 70 & 148 placed 51 of the 72 bids the state received, and was apparent high bidder on 49 of the 60 tracts receiving bids.

Armstrong told Petroleum News that 70 &148 picked up acreage, “In and around where we picked up leases when we first came to Alaska in 2001, northeast and northwest of Kuparuk and south of Kuparuk, generally in the Kuparuk area — actually in every direction from Kuparuk except east of the unit.”

When asked how many prospects his company had identified in the acreage it picked up at the lease sale, Armstrong said there were “a lot of prospects that we identified in the old days, as well as some new ones.”

Beaufort Sea bidding

The 70 & 148 high bids in the Beaufort Sea sale included $146.17 an acre for tract 414, the highest per-acre bid in that sale. Tract 414 is on the western edge of the Pioneer Natural Resources Alaska-operated Oooguruk unit, in which Armstrong sold its interest to Eni. Pioneer also bid on that tract, Pioneer’s only bid in the Beaufort Sale.

The 70 & 148 bids were all on the western side of the Beaufort Sea sale and included five tracts north of Oooguruk — three of those contiguous with the unit’s northern border — and 10 tracts west of Oooguruk, three of those, including tract 414, contiguous with the western border of Oooguruk.

The company also had high bids on four tracts west of Oooguruk and north of the Colville River unit.

Samuel H. Cade (75 percent) and Daniel K. Donkel (25 percent) had apparent high bids of $280,992, 10.75 percent of high bids in the Beaufort Sea sale, on five tracts. Cade-Donkel bid $10.02 an acre for four of the tracts. They bid $21.21 an acre for tract 75, the site of ARCO’s Stinson well and the only tract in this eastern area of the Beaufort sale to draw competing bids.

These five tracts were among the six most easterly receiving bids in the sale, stretching across the top of the Arctic National Wildlife Refuge from east of Point Thomson almost to the Canadian border.

In the central part of the Beaufort Sea sale a bidding group of the major Prudhoe Bay owners (BP Exploration (Alaska), ConocoPhillips Alaska, ExxonMobil Production Co. and Chevron) bid $150,048 for a tract on the northern edge of the Prudhoe Bay unit in the area of Niakuk. To the west, ConocoPhillips Alaska bid $106,316.80 for a tract on the edge of the Colville River unit.

AVCG LLC had high bids totaling $83,200 on two adjacent tracts east of Badami, one contiguous to the unit. J. Andrew Bachner had the high bid on two tracts for a total of $52,582.40, both contiguous to Badami—one to the north, one to the northwest.

A bidding group of Sun-West Oil & Gas, Michael Shearn and Shane Spear took a single tract for $52,281.16—the farthest east tract receiving a bid.

Savant Alaska took a single tract for $27,673.60, a tract at the eastern end of a Savant block west of Badami and south and southwest of Liberty.

North Slope bidding

The 49 tracts that 70 &148 took in the North Slope areawide sale begin in the north and form a block with the tracts west of Oooguruk that the company took in the Beaufort Sea sale, extending south along the western edge of the Kuparuk River unit

Where the North Slope and Beaufort Sea sales meet, 70 & 148 took 12 tracts between the Oooguruk and Colville River units. Farther south, between the Kuparuk River and the Colville River units, the company took nine tracts. The company took five tracts on the southern borders of Kuparuk and 10 tracts south of Kuparuk.

To the south and east of Meltwater, a southern extension of the Kuparuk River unit, 70 & 148 took nine tracts. South of the North Slope royalty line, in the southwestern portion of the sale area, the company took four tracts.

Pioneer Natural Resources Alaska had the second-highest North Slope bid total, $783,027.20 — the company’s bid for a single tract, 1211, adjacent to the Pioneer-operated Oooguruk unit. That bid had the highest per-acre bid in the sale, $305.87 as well as the highest tract bid. Tract 1211 also drew a $161.17 per acre bid from 70 & 148.

Talisman subsidiary FEX LP bid $590,400 for six tracts in the southwestern portion of the sale, three adjacent to a four-tract FEX block between the Itkillik and Kuparuk rivers at the southern boundary of the lease sale area, a block which contains the 1960s Itkillik Unit well, the other three tracts farther east, adjacent to a seven-block FEX prospect west of the trans-Alaska oil pipeline, a block which contains the 1960s Richfield Susie well.

J. Andrew Bachner took two tracts immediately south of Badami on the eastern side of the sale area for $52,582.40.

AVCG took a single tract for $45,440 immediately west of the Colville River unit and Savant Alaska LLC took a single tract for $27,673.60 immediately south of Badami.

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