HEX seeks inlet assets
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New Anchorage firm the winning bidder for KLU and facilities in Furie bankruptcy
HEX LLC, a company formed in November which is 100% owned by member manager John L. Hendrix, was the successful bidder for assets of Furie Operating Alaska LLC, according to a Dec. 6 notice filed in the U.S. Bankruptcy Court for the District of Delaware.
HEX bid $15,000,010 for Furie’s assets, primarily the Cook Inlet Kitchen Lights offshore unit, and related infrastructure such as the Julius R offshore platform, onshore processing facility and all related pipelines. The unit lies offshore the town of Nikiski on the Kenai Peninsula.
Furie and two related companies filed for voluntary Chapter 11 bankruptcy in the Delaware court Aug. 9. The debtors listed about $450 million in debt against assets it listed at an estimated value of less than $50 million.
Hendrix was general manager of Apache Corp. in Alaska.
More recently Hendrix was president of NANA Commercial Group - made up of subsidiaries that support resource development projects, as well as other industries throughout Alaska and the Lower 48.
Hendrix brings close to four decades of experience in the energy industry - in Alaska, the Lower 48 and internationally with both Apache and BP.
Prior to the position with NANA, he was on former Gov. Bill Walker’s cabinet as chief oil and gas advisor.
HEX Alaska basedHEX is based in Alaska, headquartered in Anchorage, and Alaska owned, Hendrix told Petroleum News in a Dec. 10 interview.
“It would be great to bring the asset back home to Alaskans,” he said.
The company is committed to hiring Alaskans, Hendrix said.
“Of course,” he said. “Anchorage hire; Alaska hire; peninsula focused.”
Hendrix was raised in the south Kenai Peninsula town of Homer and is a graduate of Homer High School.
“Being from Homer, it’s nice to have a business back on the peninsula again,” he said, adding that the operation is a major contributor of production taxes, and of Kenai Peninsula Borough taxes.
Under the state leases that HEX would assume in the sale, the state will also continue to collect production royalties.
The name HEX derives from the name Hendrix, Hendrix said.
“We want to be visible and easy to pronounce,” he said. “My daughter came up with the name.”
Much to be doneHendrix said there is much to be done to make the Kitchen Lights unit takeover a reality - gaining court approval for the transaction, obtaining financing and solving issues with production that currently bedevil the project.
“This isn’t done yet; we still have a long way to go,” Hendrix said. “I have to go back to New York on the 20th to put the money into our hands, and then we have to purchase it.”
Hendrix said he would love to work with Alaska based lenders if possible, instead of going to the East Coast.
“If the state of Alaska would like to participate with AIDEA, we’d love to see ’em,” he said.
AIDEA - the Alaska Industrial Development and Export Authority - has historically invested in selected oil and gas ventures in the state, including extensive support for a small Australian company that brought a jack-up rig to Cook Inlet in 2012. That company, Buccaneer Oil, filed for Chapter 11 bankruptcy in May 2014, and the jack-up rig is no longer in Alaska.
A number of Buccaneer creditors went unpaid. The city of Homer, Homer Electric Association and several businesses received letters from the company’s trustee saying preferential payments made to them in the 90 days before the bankruptcy filing had to be returned.
In the wake of the bankruptcy, the Alaska Legislature passed new statutes requiring oil and gas companies operating in Alaska to obtain a surety bond or deposit an equivalent amount of cash when obtaining a state business license. The idea behind the bonding requirement was to protect small Alaska service companies from having to refund to secured creditors money received for services rendered to the oil company, in the event of the oil company’s bankruptcy.
Solving production issuesHEX is already at work to find solutions to natural gas production issues at Kitchen Lights, Hendrix said.
In early January, Furie ran into problems when hydrate plugs at its onshore processing facility and in the 15-mile subsea pipeline from the offshore production platform slowed natural gas delivery to a trickle, which put Furie’s contract with utility Enstar Natural Gas in jeopardy. Gas output fell from 739,023 thousand cubic feet to 1,886 mcf in February.
“We need to get the base production fixed and provide our people we sell our gas to with assurances that we will meet their demands, and we need to work with the state, and locals,” Hendrix said.
“We have a tremendous opportunity in the Sterling formation but it makes a lot of water, and with water ... we’ve got to dispose of water,” he said. “That’s going to be the key to unlocking the future potential and future for the state and for HEX.”
“There’s a lot of gas to be had, and unless we can process the water on our platform, it will be tough to expand,” he said. “Right now we can do a lot with just the Beluga formation.”
The Kitchen Light unit is a large unit with a number of prospects for oil and gas beyond the Beluga and Sterling formations currently accessed by wells from the Julius R platform.
While Hendrix was working for Apache in Alaska, Apache collected 1,100 miles of seismic in Cook Inlet, some of which was shot across portions of the Kitchen Lights unit. Hendrix declined to say if the Apache seismic provided insight into the future potential at Kitchen Lights.
“Right now I can’t really comment on that,” Hendrix said. “Right now we’re focusing on the base production, the Beluga formation.”
Hendrix said data that Furie possesses has been hard to find, adding that HEX will be looking into that data between now and the closing of the sale to formulate a plan beyond the base production. “Right now we have to work on the base,” he said.
Apache in Cook InletWhen Apache entered Alaska, it said it was investing for the long haul.
In June 2012, Hendrix told Petroleum News Apache expected to be operating in Cook Inlet “30 years from now.”
“You don’t come in and buy this much acreage with a short-sighted plan,” he said. “We’re not a one-well wonder and we don’t have to bet the farm on one well. … It’s a proven basin and we think it’s been underexplored. But it’s not an easy basin. It’s a very complex basin. It’s very complex to drill and it’s very complex from the geology (standpoint).”
Between 2011 and 2014, Apache commissioned an ambitious three-year 3-D seismic survey from Susitna Flats to Anchor Point and drilled the Kaldachabuna No. 2 exploration well on Cook Inlet Region Inc. leases near the village of Tyonek in November 2012.
The drilling had problems. The drill bit got stuck several times as the well passed through more than 100 coal seams, many thicker than 10 feet. Apache suspended the well in April 2013 at 11,389 feet, according to Alaska Oil and Gas Conservation Commission records.
As of March 2016, Apache was leasing nearly 407,000 acres from the state of Alaska and at peak held some 800,000 acres altogether, including leases from federal, Native and other landowners.
In the same month, the company announced that it would discontinue its program in Alaska due to companywide cuts. The company allowed its acreage to expire.
Hendrix remains undaunted, and optimistic for the future of HEX in Cook Inlet.
“We’ve got good hands out there making sure that we have production, and to keep on doing what they are doing,” he said. “I think it’s a good day for Alaskans, and we’re going to do our part to make sure that we do our part to help the economy ... and hire Alaskans.”