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Vol. 19, No. 19 Week of May 11, 2014
Providing coverage of Alaska and northern Canada's oil and gas industry

$5.2M Cook Inlet sale

State receives 40 bids on more than 100,000 acres in inlet; 3 in Alaska Peninsula

Kristen Nelson

Petroleum News

The Alaska Division of Oil and Gas took in more than $5.25 million at two areawide oil and gas lease sales, Cook Inlet and Alaska Peninsula, May 7, based on preliminary results from bids as read at the opening.

The majority, more than $5.2 million, came from 35 tracts at the Cook Inlet areawide sale, some 108,000 acres which brought in an average of almost $48 an acre.

Alaska Division of Oil and Gas Director Bill Barron said after the bid opening that the division was pleased to have another strong Cook Inlet sale. In a statement after the sale Barron said the sale results “show continued optimism among investors about the hydrocarbon resource potential of these two regions, and that state-owned acreage is considered highly prospective for oil and gas development. The sale results also demonstrate continued growth in the market potential for Cook Inlet oil and gas.”

As bids were opened for the Alaska Peninsula areawide sale, Barron noted that these were the first bids the state has received for an Alaska Peninsula sale since 2007.

In the Cook Inlet areawide sale the minimum bid was $25 per acre, the leases have 10-year terms and the rental rate is $10 an acre in years one through seven of a lease, and $250 an acre in years eight through 10.

The state has been holding Cook Inlet areawide sales since 1999, when the minimum bid per acre was $5. The minimum bid went to $10 an acre for Cook Inlet in 2006 and to $25 an acre in 2012.

In recent Cook Inlet sales the state sold 545,050 acres in 2011, 128,300 acres in 2012 and 100,322 acres in 2013, bringing in almost $11 million in the 2011 sale, $4.6 million in the 2012 sale and $3.1 million in the 2013 sale.

Apache, Hilcorp account for some $3M

Apache Alaska was the top bidder in the Cook Inlet sale with apparent high bids totaling almost $2 million, taking 30,103 acres for $1,918,256, an average of $63.72 per acre.

Lisa Parker, Apache’s Alaska government relations manager, told Petroleum News after the sale that the company was filling in around areas where it has acreage and is shooting seismic. Five of the seven tracts on which Apache was apparent high bidder are offshore, west and northwest of the Ninilchik unit adjacent to a large block of existing Apache leases. One small tract is on the northwestern shore of the Kenai Peninsula, adjacent to a more northerly block of Apache leases and the seventh lease is onshore on the southern Kenai Peninsula, southeast of the Ninilchik unit.

Apache is in the exploration phase and has no current Cook Inlet production.

Hilcorp Alaska, which has consolidated acquisitions from Union Oil/Chevron and Marathon into a dominant production position in the inlet, also appeared to be filling in around its existing lease position, taking 13 tracts for $1.16 million, an average of $34.95 per acre.

Hilcorp took an offshore tract west of Nikiski, seven tracts along the shoreline — four south of Clam Gulch east of the Ninilchik unit and three along the shoreline from Anchor Point north. The company also took five onshore tracts on the southern Kenai Peninsula, two west of existing Hilcorp acreage on the eastern edge of the sale area, one near Hilcorp’s Nikolaevsk unit and two farther northeast, north of the North Fork unit.

Cook Inlet Energy, Nordaq

Cook Inlet Energy LLC, also a Cook Inlet producer, took four tracts for $763,315.20, bidding an average of $33.13 an acre. Three of the Cook Inlet Energy tracts are on the east side, near where Bachatna Creek enters the inlet; the fourth is on the southwestern edge of the company’s offshore Redoubt Shoal unit.

Nordaq Energy, a Cook Inlet explorer which doesn’t yet have production, took four tracts offshore East Foreland, paying $314,470 for 10,240 acres, an average of $30.71 per acre.

Woodstone Resources of Houston took 5,120 acres for $783,360, paying the highest per-acre price in the sale, $153. Woodstone already has almost 27,000 acres of state leases — one Cook Inlet tract, the remainder on the North Slope — but has no production. The tracts Woodstone took in this sale are adjacent to the ConocoPhillips Alaska-operated North Cook Inlet unit.

Others taking acreage in the sale included China-based Pacific West Energy, which took three tracts, two onshore east of Kenai and one farther north east of Nikiski, a total of 2,600 acres for $26,380, an average of $27.48 per acre.

W.J. Kennedy took a 5,760-acre tract for $237,715.20, $41.27 per acre in the vicinity of the Cook Inlet Energy-operated North Fork gas field on the southern Kenai Peninsula and William Crawford took a 100-acre tract for $25 an acre, a total of $2,500, at West Foreland.

None of those three bidders has existing acreage.

Alaska Peninsula sale

The bidders in the Alaska Peninsula sale, which brought in $51,400 for 10,280 acres, were Auxillium Alaska out of New York City and Novus Terra Ltd. out of China. Each bid the $5 minimum per acre, Auxillium for one 880-acre tract, and Novus Terra for two tracts totaling 9,400 acres, for a total of $4,400 for Auxillium and $47,000 for Novus Terra. Neither of the companies holds any existing Alaska oil and gas lease acreage.

The Novus Terra tracts are in and north of Nelson Lagoon; the Auxillium tract is north of Port Moller.

Prior to this sale there were no active leases on the Alaska Peninsula. The Alaska Peninsula leases have a 10-year term with rental rates of $1 an acre in year one, $1.50 an acre in year two, $2 in year three, $2.50 in year four and $3 an acre in years five through 10.

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