Glacier Oil & Gas Corp. is getting back into exploration.
As this issue of The Explorers was going to print, the independent company was permitting a proposed exploration program at its Sabre prospect in the Cook Inlet region.
If the company follows through with the offshore project during the current open-water drilling season, it would represent a return to exploration drilling after a two-year hiatus where the company entered bankruptcy protection and emerged under new ownership.
Its predecessor company Miller Energy Resources Ltd. was one of the most ambitious small exploration companies in Alaska. Over a period of a few years, it acquired a slate of properties on the west side of Cook Inlet through operator Cook Inlet Energy LLC, acquired the North Fork unit from operator Armstrong Cook Inlet Inc. and acquired a stake in the Badami unit on the eastern North Slope through operator Savant Alaska LLC.
Through its various subsidiaries, Miller Energy Resources also pursued several exploration licenses throughout the Susitna basin and another in the Iniskin Bay region.
All those exploration and development projects overextended the company, and the drop in oil prices starting in late 2014 eventually forced the company into bankruptcy.
The company emerged from reorganization in early 2016 as a new privately held company called Glacier Oil & Gas Corp. Although its two subsidiaries still exist, Glacier prefers to be thought of as a single independent operator pursuing multiple projects.
In addition to a new name, the reorganization brought a more cautious approach.
Glacier slowed exploration and development plans at the North Fork unit and Badami unit, surrendered all of its exploration licenses and relinquished its Otter unit, which had been an early exploration prospect for the company but had yet to reach development.
The company also devoted considerable time and resources to closing the processing facilities at the West McArthur River unit and shifting operations to the Kustatan facility.
Sabre
Those activities suggested a company with a greater interest in maximizing existing development than pursuing exploration. But over the past year Glacier has been creating a new exploration strategy that fits within its new cautious and measured approach.
Sabre is the most immediate exploration project on the agenda.
Through its subsidiary Cook Inlet Energy, Glacier amended its oil discharge prevention and contingency plan in May 2016 to add use of the Spartan 151 jack-up rig to drill the Sabre exploration well in offshore Trading Bay region on the west side of Cook Inlet.
The amendment signaled renewed interest and a new approach to an old project.
Cook Inlet Energy acquired a 70 percent interest the Sabre and nearby Sword prospects in its initial acquisition of Alaska properties from the bankruptcy proceedings of Pacific Energy Resources Ltd. in 2009, and farmed-in the remaining 30 percent from Hilcorp Alaska LLC in September 2012. A former executive had touted estimates as high as 20 million barrels of oil and 14.3 billion cubic feet of natural gas for the two prospects.
The company brought the Sword No. 1 well into production in November 2013 and began discussing plans to either develop additional intervals or drill a second Sword well.
Instead, Cook Inlet Energy began considering the nearby Sabre prospect. The company described the project as a potential six-well development with the first extended reach well costing between $25 million and $30 million. By late 2014, the company was “evaluating joint venture offers for participation in the project,” to defray the cost.
Although the program never came to fruition, the company incorporated the Sword and Sabre prospects into the boundaries of the existing West McArthur River unit in 2015.
Cook Inlet Energy continued to include both prospects as potential near-term projects in its unit plans of operation for West McArthur River. A plan from early 2014 envisioned a Sword No. 2 and Sabre No. 1 well by April 2016. A plan from early 2015 pushed the Sword well into 2017 and said the Sabre well was still being evaluated. As an extended-reach well, Sabre conflicted with a new strategy of “developing lower risk targets.” The company expected to delay exploration until it had finished drilling proven prospects.
In a late January 2016 plan of development for West McArthur River, the company said it would drill a second Sword well by April 30, 2018, “if appropriate to increase recovery, and if economic conditions warrant.” The company reiterated its plans to postpone work at the Sabre prospect until it finished developing proven prospects.
By its next plan of development in January 2017, Glacier said it was “seeking partners in the Sabre prospect to reduce risk factors associated with drilling the Sabre No. 1 well.”
Around the same time, Glacier continued its permitting activities by applying to the U.S. Army Corps of Engineers for permission to drill the Sabre No. 1 well. The application proposed an estimated 70-day drilling schedule starting in late March or early April.
The application proposed using the Spartan 151 jack-up rig, rather than drilling extended reach wells from onshore facilities, which the company had proposed back in 2014.
North Fork and Badami
Although the natural gas production at the North Fork unit is somewhat shielded from the currently depressed oil markets, it is challenged by supply agreements in Southcentral.
For that reason, Glacier announced a year of “small ball” development projects at the onshore unit in the southern Kenai Peninsula, rather than new exploration activities.
But in mid-2016, Glacier announced plans to take the lead as operator on an exploration project at the nearby West Eagle prospect on behalf of lessee Aurora Gas LLC.
The project was announced as part of bankruptcy proceedings and has yet to appear in any publically available permitting documents or any recent regulatory filings.
Buccaneer Energy Ltd. drilled a dry hole at West Eagle in early 2014.
The Badami unit on the eastern North Slope presents a similar situation to the North Fork unit: a small producing field with the potential for exploration activity in the vicinity.
In its last plan of development for Badami in mid-April 2016, Savant announced plans to undertake a review of the exploration and development opportunities at the Badami unit.
A range of immediate development opportunities was stymied by oil prices and the bankruptcy proceedings and also because of delays bringing equipment to the region.
And the most promising exploration project at the region has been tied up in a long-running administrative dispute with the Alaska Department of Natural Resources.
The project involves drilling an exploration well through the Canning formation and into the Hue Shale on leases adjacent the eastern boundary of the unit to evaluate the potential of the Killian interval as previously encountered in the East Mikkelsen Bay No. 1 well.
