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Vol. 17, No. 48 Week of November 25, 2012
Providing coverage of Alaska and northern Canada's oil and gas industry

Explorers 2012: UltraStar hopes to drill Dewline

Petroleum News

UltraStar Exploration LLC, sister company to Winstar Petroleum LLC, is looking to drill a second well in its Dewline unit, which consists of four leases wedged into the coastline of the Prudhoe Bay unit.

The Alaska-based independent consists essentially of one man — Jim Weeks — and a group of investors.

Weeks helped found Winstar Petroleum LLC in the late 1990s, UltraStar in 2002 and Dewline Petroleum LLC in 2008 with an overlapping group of investors. Today, UltraStar holds some 4,533 acres over the four-leases that make up the Dewline unit.

Weeks was hoping to drill the North Dewline No. 1 well last winter, but rig availability was an issue.

This winter rig accessibility is less of a problem but Weeks said the company still needed half the money for the well.

As of Oct. 29, 2012, he was still chasing a couple of investor leads, but Weeks was doubtful they would materialize by early December, which is the latest point in time for mobilizing to drill this coming winter.

First Dewline well ‘typical’

Weeks and his people decided to pursue the oil-prone Dewline Deep prospect, believed to hold between 5 million and 20 million barrels of oil in the Ivishak and Sag River formations, after obtaining 3-D seismic over their leases west of Point McIntyre.

The seismic showed several prospects.

Following years of negotiations that included talk of possibly expanding the Prudhoe Bay unit to include Dewline Deep, UltraStar and BP came to terms on a framework for access to the drill site and for the future use of Lisburne facilities. UltraStar drilled the Dewline No. 1 well near Point Storkersen in early 2009 using the Akita-Doyon Arctic Wolf rig.

The 9,990-foot vertical well encountered its target in the Ivishak formation. Weeks declined to offer detailed results but called Dewline “a typical exploration well. Not a train wreck. We came pretty close to the operational amount we expected to spend.”

Up against a deadline

The Alaska Department of Natural Resources formed the Dewline unit in June 2009 and expanded the unit in March 2011 to include an offshore section. Under the existing five-year plan of exploration, UltraStar must drill a second well at Dewline by May 31, 2013.

North Dewline No. 1 will be a 14,000 to 15,000-foot directional well with a 6,000-foot displacement to reach an offshore target from an onshore pad.

Like its predecessor, the North Dewline No. 1 well will target the Ivishak formation, but could also explore potential targets in the Sag River and Kuparuk formations, Weeks said.

The only other well drilled to date in the area now included in the Dewline unit is the Point Storkersen No. 1 well drilled by the Hamilton Brothers in 1969 to a measured depth of 11,473 feet. That well tested an oil target in Sag River formation, flowing at 315 barrels per day and 735 bpd from two different depths in the Ivishak Sandstone.

Tiny company, big voice

Through UltraStar, Weeks advocates for small independents in Alaska, be the issue facility sharing or taxes.

As former long-term senior vice president for ARCO Alaska, his opinion and experience carries weight with legislators and his colleagues in the state’s oil and gas industry.

Weeks sees a document called the Charter for the Development of the Alaskan North Slope, signed between the State of Alaska, BP and ARCO in 1999, as critical for small companies wishing to explore on the slope.

The charter obligates BP and ConocoPhillips to provide access to their North Slope facilities for third-party satellite fields on “reasonable commercial terms.”

And there’s a requirement for binding arbitration in the event of stalled negotiations.

“Without the charter we wouldn’t even be here,” Weeks said.

The charter also requires BP and ConocoPhillips to purchase oil from small producers, thus enabling these producers to avoid the need to establish costly shipping arrangements for their oil.

Another provision of the charter, a requirement that BP and ConocoPhillips make seismic data available for license, has proved vital for Winstar and UltraStar.

It’s simply too expensive for a small company to shoot 3-D seismic over a small lease area on the North Slope, Weeks said.

The seismic provision proved critical for Dewline, since UltraStar was able to obtain seismic from the Prudhoe Bay owners.

But don’t expect another major oil field from UltraStar’s Dewline unit.

Although the prospect shows good potential, the oil accumulations are likely to be modest in size — the drilling isn’t going to find 100 million barrels, Weeks said.

But what’s considered a very small field on Alaska’s North Slope — the 5 million to 20 million barrel range — is a big coup anywhere else in the country. And at today’s oil prices, he said.

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