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Spreading the risk: Andex, Forest buy into Slugger unit on eastern North Slope Independents get interest in field from BP, Chevron and Phillips by paying drilling costs; produced oil will go to Badami Kay Cashman PNA Publisher
BP Exploration (Alaska) Inc., Phillips Alaska Inc. and Chevron U.S.A. Inc. are farming out part of their working interest in the newly formed Slugger unit to independents Forest Oil Corp. and newcomer Andex Resources LLC.
Operator BP is reportedly relinquishing a significant portion, possibly all, of its working interest in the unit, while Chevron and Phillips are each farming out a portion of their working interest. In exchange for a disproportionate share of the costs of the first Slugger well, Andex and Forest will each receive approximately a 20 percent working interest in the eastern North Slope unit which lies south of the Point Thomson unit.. The percentages were confirmed by only two of the parties to the agreement.
BP is expected to remain unit operator. Close to Badami “One of the reasons we like Slugger is it should ring the cash register faster than our other North Slope exploration prospects since, if successful, the production will likely be processed at the existing Badami facilities,” Corry Woolington, Chevron’s Alaska land manager told PNA Aug. 21.
The Slugger unit is some four miles southwest of the Point Thomson unit and two miles south of the BP-operated Badami unit..
Jim Dodson, executive vice president of Houston-based Andex , told PNA that it is the second time his firm has been involved in a North Slope exploration prospect with BP: “We were a working interest owner with BP in the west Gwydyr well, which was drilled in 1999-2000.” (State records show that West Gwydyr No.1 is south of the Northstar unit was permitted Jan. 14, 2000 as an exploratory well. Its surface location is on lease ADL 0028234 in section 32, township 13N, range 12E, Umiat Meridian . The well was plugged and abandoned Feb. 18, 2000 with a measured depth of 11,030 feet and a true vertical depth of 10,513 feet. See related articles on Andex on pages A1 and B3 of this issue.) Slugger No. 1 well on track BP, Phillips and Chevron recently fulfilled both of the state Division of Oil and Gas’ May 2 conditions for unit approval within the Slugger unit plan of exploration, a state official told PNA.
The first, the presentation of reprocessed 3-D seismic data from the unit to the state, was fulfilled on June 14 in time for the June 15 deadline.
The second, a commitment to drill a well through the Kemik interval by May 15 2003, was extended until July 19.
A state official told PNA that Phillips was concerned about the penalty of $430,000 that would be assessed against the working interest owners if they failed to complete, abandon or suspend the Slugger No. 1 well by the 2003 deadline: “They didn’t want to make the commitment and then be unable to fulfill it because of unexpected stipulations from DEC, which is something they faced at the McCovey prospect.”
Phillips canceled an exploration well last spring at its Beaufort Sea McCovey prospect because of stipulations requested by the state Department of Environmental Conservation that represented a change in state policy. The stipulations rendered the McCovey project uneconomic for Phillips, the company said. State officials are reportedly working with Phillips to resolve the McCovey situation. BP, Chevron to pay Phillips’ share BP and Chevron stepped in and agreed to pay Phillips’ portion of the $430,000 penalty should the Slugger No. 1 well not be drilled by the state’s 2003 deadline.
On July 18, BP, Chevron and Phillips had all submitted letters to the Division of Oil and Gas committing to drill the Slugger unit #1 well.
The May 2 revised plan of exploration for the unit requires a second well to be drilled within four years.
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