Cook Inlet Energy is attempting a resurrection. The small independent was created in 2009 to bid for the Cook Inlet properties that came on the market when Pacific Energy Resources Ltd. filed for bankruptcy protection.
With a $2.25 million bid, the local subsidiary of Tennessee-based independent Miller Petroleum picked up several Pacific Energy production assets on the west side of Cook Inlet. Those include the West McArthur River unit and oil field, the West Foreland gas field and the Redoubt unit with its associated Osprey platform and Kustatan facility, as well as a stake in the Three Mile Creek unit and a portfolio of exploration prospects.
The acquisition required considerable work. “Our initial strategy will be to restore base production at the West McArthur River field by repairing a couple of our champion wells,” CEO David Hall said in December 2009, “but our long-term strategy is to significantly raise oil and gas production at the properties through new drilling.”
As of summer 2013, Cook Inlet Energy said it had invested some $41.5 million on the offshore Redoubt unit, and $13.3 million on the West McArthur River unit.
West McArthur River
Cook Inlet Energy spent some $7 million in 2010 working over five West McArthur River unit wells, bringing more than 1,100 barrels of oil equivalent per day online.
The work happened quickly.
Cook Inlet Energy completed the WMRU-5 workover in March 2010 at 578 barrels of oil equivalent per day, the WMRU-6 workover in April 2010 at 584 boe per day and the WMRU-1A in May at 33 boe per day. In June, Cook Inlet Energy completed work on the WMRU-7A well.
Toward the end of the year, Cook Inlet Energy completed its workover of the WMRU-2A well, which had been shut-in since 2001 because of a high water cut. WMRU-2A tested at 37 boe per day, but Cook Inlet Energy planned to use the well for a waterflood pilot program to enhance oil recovery, and also as a backup for its existing injection well.
The WMRU-2A workover involved a coil tubing unit, rather than a traditional rig.
In July 2010, Cook Inlet Energy brought the KF-1 well online at the Kustatan field at 70 thousand cubic feet per day, which it used for fuel operations. The well had been shut-in for a year.
As of summer 2013, West McArthur River was producing some 630 barrels per day from two wells, a 10 percent decline curve from the original 2010 levels, according to the company.
While those efforts significantly increased West McArthur River production — albeit to a level considered small by Alaska standards — Cook Inlet Energy aspires to drill as many as five new wells at the unit, which it said could yield a 2,000 bpd bump in production.
The work requires considerable investment, though. In an August 2013 presentation, Cook Inlet Energy estimated a net well cost of $9 million for West McArthur River.
In early 2013, Cook Inlet Energy began permitting a pad expansion at West McArthur River, looking to add 3.1 acres to accommodate expanded oil and gas operations.
The Redoubt unit
After West McArthur River, Cook Inlet Energy turned its attention to Redoubt.
Forcenergy Inc. installed the Osprey platform over the Redoubt Shoal field in 2000, but it was only producing 20 bpd by the time Pacific Energy shut-in the field in July 2009.
Using a hydraulic snubbing unit, Cook Inlet Energy brought the platform back online in summer 2011 by replacing electric submersible pumps in the RU-1 and RU-7 wells, which allowed the wells to flow at 350 boe per day and 250 boe per day respectively.
By the following summer, Cook Inlet Energy had to shut-in the RU-1 well because of an equipment problem, but the RU-7 well continued to produce some 230 boe per day.
In development plans, the company said it would drill four sidetracks off existing damaged wells, which it expected to produce some 2,000 bpd. The original wells needed to be sidetracked because improper design had allowed the casing to collapse. The company also saw the possibility to drill 13 new wells from the platform, with proper investment.
New rig for Redoubt
Using a line of credit from New York-based Guggenheim Corporate Funding LLC, Cook Inlet Energy paid $19.5 million for Rig 35, a 2,000-horsepower National 1320 model built in Houston and assembled in Alaska by Voorhees Equipment and Consulting Inc.
The rig went to work on RU-1 in August 2012 and after removing 31,000 pounds of junk from the wellbore, brought the well back online at an initial production rate of 482 bpd.
In late 2012 and early 2013, Cook Inlet Energy worked over the RU-3 and RU-4A wells, a pair of natural gas wells the company needed to provide cheap fuel for its operations.
The RU-3 well faced some complications, but RU-4A tested at a peak rate of 1.7 million cubic feet per day, which allowed Cook Inlet Energy to suspend $500,000 in monthly third-party fuel deliveries and by early summer start selling its excess gas into the market.
In June, Cook Inlet Energy more than doubled its total Alaska crude output by bringing the RU-2A sidetrack online at an initial production rate of 1,281 bpd. In August, the company brought the RU-1A sidetrack online at an initial production rate of 700 bpd.
As The Producers went to print, Cook Inlet Energy was sidetracking the RU-5 well, but oil equivalent production from the five reworked oil and natural gas wells was some 2,567 boepd, as of August 2013.
In September 2013, Miller Petroleum terminated its contract with Voorhees over claims of outstanding invoices. The companies are settling the dispute through arbitration.
In September, Miller said it was on track to produce 4,000 barrels of oil equivalent per day companywide by the end of the calendar year, the majority coming from Alaska.
Trans-Foreland Pipeline
On top of its upstream work, Cook Inlet Energy is pushing a major midstream project.
The $53 million subsea Trans-Foreland Pipeline would carry oil from the Kustatan production facility to the existing Tesoro oil refinery in Kenai. The 29-mile pipeline would eliminate the short tanker voyage currently used to move oil across the Inlet.
The 8-inch pipeline would have 90,000-bpd capacity. Installation could begin as early as next summer and wrap up by fall, with some 130 jobs created during construction.
Cook Inlet Energy sees the pipeline as a way to reduce delays and transportation costs.
The Cook Inlet Regional Citizens Advisory Council endorsed the pipeline because it would reduce tanker traffic and sidestep concerns associated with the Redoubt volcano.
Tesoro recently agreed to contribute $1.4 million to the design phase of the project.
Early in its Alaska tenure, Cook Inlet Energy got into a spat with the Cook Inlet Pipe Line system over a 259 percent increase in the tariffs to move oil through the pipeline to the Drift River terminal, but the sides reached a settlement tariff rate in late 2010.
