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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: Taking a step back from Alaska?

Kay Cashman

Petroleum News

Rutter and Wilbanks Corp. has not been able to secure a reasonably priced drilling rig for its Ahtna 1-19 well in Alaska’s undeveloped Copper River basin, Bill Rutter III told Petroleum News Oct. 31, 2007. The well is 12 miles west of Glennallen and 180 miles north and east of Anchorage.

“We are hoping to partner with another company to mobilize a rig to Alaska and share that cost. The lack of competition in Alaska among the service providers (and the resultant unreasonable pricing) is the largest single impediment for independents to develop the state’s resources, in my opinion,” Rutter III said.

Started drilling in 2005

The Midland, Texas-based independent first started drilling the Copper River wildcat in February 2005 but high geologic pressures at a depth of 1,200 feet caused delays and cost increases in the drilling program. And when the well finally hit its planned depth of 7,500 feet the results proved disappointing.

“We never got enough gas to light a cigarette,” Bill Rutter Jr. said at the time.

Rutter Jr. speculated that the well might have proved to be one of the most expensive onshore gas wells ever drilled in Alaska.

“We ended up drilling most of that well with 20 pound mud. Many would say that was impossible, but it wasn’t impossible, just expensive,” Rutter III said.

But the heavy drilling mud had damaged a potential gas reservoir formation part way down the well, effectively sealing that formation from possible gas production and thus leaving uncertainty about whether the well might in fact have encountered gas.

Another stab at it in 2006

In the fall of 2006 the company made an unsuccessful attempt to penetrate the damaged section of the reservoir rock adjacent to the well bore, using a Cad Pressure Central snubbing unit.

“They got stuck again. … They couldn’t make the Perf Drill work; they couldn’t get more than 3 or 4 feet out into the formation,” Rutter III told Petroleum News in October 2006. “It was an expensive experiment and it didn’t work. We’re coming back in the spring with a drill rig.”

Back in spring 2007

And the company did return in the spring of 2007, to drill a sidetrack well using a coiled tubing unit.

“It looks like we have a gas discovery in the upper Nelchina, which was our main objective. We’re getting some real good gas flows,” Rutter III told Petroleum News in late June 2007 after the first sidetrack well hit gas at a depth of about 4,350 feet.

But excessive amounts of water flowing from the well raised question marks about the viability of the find, Rutter Jr. said — although the sidetrack was producing gas, the well was also producing water at the rate of about a barrel per minute. That rate of water production would render the well uneconomic to develop.

However, it was impossible to say how much of the water was coming from the reservoir formation and how much was coming from higher up in the well.

“We know water was coming before we hit the gas,” Rutter Jr. said. “After we hit the gas we’re not sure whether there was any additional water or not.”

Again, fall 2007

The company decided to resolve the problem by drilling a second sidetrack in August and to case it down to the Nelchina reservoir. That would determine how much water was flowing from the reservoir and enable a decision on whether to continue drilling.

There are several potential reservoir sands in the Nelchina and the second sidetrack would initially target sands low down in the upper Nelchina, Rutter Jr. said. Since water tends to sink below gas, excessive water in that part of the formation would indicate that excessive water also exists in the lower Nelchina.

“If it’s making an uneconomic amount of water we’ll probably just plug it,” Rutter Jr. said.

If, on the other hand, the water production isn’t excessive, drilling will continue down into the lower Nelchina, to test the sands there.

But the upper Nelchina definitely contains high-pressure gas — gas which reached the surface in the June discovery had to overcome 4,000 pounds of pressure applied by well fluids and the back pressure required to circulate water, Rutter Jr. said

To drill the second sidetrack, the company would need a conventional drilling rig.

That’s where the Rutters plans fell apart. They couldn’t find rig at a day rate they could justify.

So what about the risks and costs entailed in Rutter and Wilbanks’ Glennallen drilling marathon?

“This is a risky deal, but we have a long history of taking risks. We have been wildcatters for three generations and see no reason to stop now,” Rutter Jr. told Petroleum News in 2005.

He obviously wasn’t kidding.

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In and out of Cook Inlet

Between October 2005 and the end of 2006, Rutter and Wilbanks bought — and sold — a “large leasehold” in the Cook Inlet basin, Bill Rutter III told Petroleum News in October 2007.

The company’s sale of more than 110,000 acres in the Cook Inlet basin was to Renaissance Alaska. Rutter said he is hopeful Renaissance “will make some discoveries and add a lot of value to our retained interests there.”

Rutter and Wilbanks has retained “overriding royalty interests on much” of the Cook Inlet acreage, and has a “working interest on the first well drilled on the offshore Northern Lights prospect.”