Although it has been one of the most active operators in Alaska over the past five years, Hilcorp Alaska LLC has only drilled five wells classified as “exploratory” by the state.
The local subsidiary of the Texas-based independent has been focused more or less entirely on reviving aging fields since it arrived in Alaska. Through three purchases of properties from Marathon Oil Corp., Union Oil Company of California and BP Exploration (Alaska) Inc., as well as some smaller acquisitions, the company has become the dominant operator in Cook Inlet and increasingly important on the North Slope.
The five exploration wells have all been located within or near three units that the company operates in the southern Kenai Peninsula: Ninilchik, Deep Creek and to a lesser extent Nikolaevsk. The wells were attempts to expand into underdeveloped corners of those existing units, or to develop acreage just beyond those unit boundaries. In many cases, the wells allowed the company to avoid losing acreage to automatic contractions.
For those reasons, the line between exploration and development drilling can be less sharp for Hilcorp than for other operators. While the Alaska Oil and Gas Conservation Commission lists five “exploratory” wells for the company, the company listed many more in planning documents. The AOGCC classified the others as “development” wells.
Either way, the two sets of categories tell the same story: of an operator using exploration drilling in a limited and targeted way to expand development around its existing units.
Deep Creek
The current and future exploration activity at the Deep Creek unit is focused on areas outside of the Happy Valley participating area - both geologically and also aerially.
Hilcorp drilled the 2,005-foot Happy Valley B-14 well in July 2012.
The company drilled the well from the existing B-pad at the Deep Creek unit. The well was likely classified as exploratory because it targeted formations shallower than the previously producing formations at the unit. Since then, Hilcorp has drilled the Happy Valley B-15, B-16 and B-17 wells at the unit, all of which were labeled “development.”
At the time Hilcorp acquired Deep Creek from Unocal, the state was prepared to contract the unit unless either operator explored outside of the Happy Valley participating area.
By targeting the Sterling formation, the Happy Valley B-14 well met the letter of that requirement, if not the spirit. The state wanted a company to explore the Middle Happy Valley prospect in an area south of the Happy Valley participating area, where previous data from Unocal had suggested the potential of a significant natural gas accumulation.
Over the past few years, Hilcorp has proposed and even permitted portions of a new Happy Valley C Pad and a Middle Happy Valley No. 1 exploration well at Deep Creek.
Both projects have been regularly deferred.
“Hilcorp remains committed to building the road and pad required to drill the Middle Happy Valley well, but cannot commit to drilling this exploratory prospect under the current economic and market climate,” Hilcorp wrote in a March 2016 plan of development. Instead of exploration drilling, Hilcorp said it would commission a 2-D seismic survey in the southern end of the unit for the second quarter of 2016.
Ninilchik
The exploration activity at Ninilchik has also focused on areas between existing pads.
The coastal nature of the unit necessitates more pads than an onshore development, because the company is often using directional drilling to reach targets located offshore.
Hilcorp drilled three exploration wells at the Ninilchik unit in late 2013 and early 2014.
Hilcorp completed the 2,618-foot Paxton No. 5 well in November 2013 from the Paxton pad and completed the well as a producer from the Beluga formation on a tract basis.
At the time, the company said that the well could become the basis for future development drilling and also for administrative changes. Specifically, the company proposed a new Susan Dionne/Paxton Beluga participating area. In mid 2014, the AOGCC used the Paxton No. 5 and previous Paxton No. 1 wells to define the Ninilchik Beluga/Tyonek Gas Pool, which the company had applied for earlier in the year. Hilcorp eventually completed three more Paxton development wells in late 2014 and early 2015.
In early 2014, Hilcorp completed the Susan Dionne No. 8 and Frances No. 1 wells. The two wells represented the first oil exploration in the Ninilchik region in several decades.
Although the 12,000-foot Susan Dionne No. 8 well was non-commercial for oil, the company completed the well for gas production from the Tyonek formation in the Susan Dionne participating area and from the Beluga formation on a tract basis within the unit.
The results convinced the company to build a new Bartolowitz pad and drill the Frances No. 1 well. The first Frances well was also non-commercial for oil and promising for gas.
Greystone
In early 2016, Hilcorp began permitting the Greystone No. 1 well from a new drilling pad built on Cook Inlet Region Inc. leases between the Deep Creek and Nikolaevsk units.
The company completed the 13,500-foot deviated well during the second half of the year and has since been producing natural gas from it, according to AOGCC well reports.
The well was the first time the company had drilled outside of its existing units in Alaska, although its proximity to Deep Creek suggests that it is closely connected to unit activity.
