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Aurora Gas acquires Moquawkie, remainder of Anadarko’s inlet holdings Company expands acreage five-fold; existing Moquawkie gas well will be put into production as soon as six-mile gas pipeline in place Kristen Nelson PNA Editor-in-Chief
Aurora Gas LLC, operator at the Nicolai Creek gas field on the west side of Cook Inlet, is well on its way to expanding its lease acreage position in the basin to five times what it currently holds and hopes to see its gas production grow by tenfold next year.
Aurora closed a transaction Oct. 3 with ConocoPhillips Alaska Inc. to acquire a 50 percent working interest and leasehold at Moquawkie on the west side of the Cook Inlet.
And, Aurora said in an Oct. 18 statement, it has reached an agreement with Anadarko Petroleum Corp. to acquire Anadarko’s entire Cook Inlet oil and gas lease holdings, which include the remaining 50 percent at Moquawkie and approximately 40,000 acres on the Kenai Peninsula.
Purchase price was not disclosed for either transaction.
The Moquawkie area holdings include approximately 43,000 acres.
The west side acreage includes onshore and offshore tracts and centers around Moquawkie. The Kenai Peninsula acreage is more spread out. Aurora Gas President Scott Pfoff told PNA Oct. 18, that the east side acreage the company is acquiring is “as far north as Birch Hills and as far south as Anchor Point.”
Identifying, funding prospects Aurora Gas spent its first two years developing Nicolai Creek, Pfoff said, “proving that it could be done and simultaneously identifying a lot of other similar opportunities.” The company then went out for financing and partnered with Kaiser Francis Oil Co. earlier this year. Kaiser Francis agreed to fund Aurora Gas up to $25 million to acquire the properties Aurora has identified, “do the well work, install the production facilities and gathering lines that we need to start monetizing all that opportunity,” Pfoff said. The company’s capital budget for 2002 is $11.6 million, and the anticipated budget for 2003 is $13.4 million.
At least part of this year’s expenditures were for the acquisitions, he said, and next year money will be spent on seismic, drilling, facilities and pipelines.
A year in the works Pfoff said Aurora gas began talking to Phillips (now ConocoPhillips) more than a year ago about acquiring the acreage. He said the purchase and sale agreement has been signed with Anadarko, but hasn’t closed. “That is still subject to some more due diligence because of the additional acreage that we’re acquiring from them.” Aurora said it anticipates obtaining approvals on the Anadarko transaction shortly.
CIRI and Tyonek Native Corp. have approved the Moquawkie acquisition. Tyonek Native Corp. will also allow Aurora to use their existing roads and construct new roads to access various well locations, the company said.
Ed Jones, Aurora Gas vice president of operations, said that between state, Mental Health Trust and private acreage the company had a little more than 20,000 acres before the acquisitions from Anadarko and ConocoPhillips: the company now has about 105,000 acres, a five-fold increase in its land position.
Most of the acreage in the Moquawkie acquisition is CIRI-leased acreage, a lot of which was slated to expire in early 2003, Pfoff said. “So getting CIRI on board with this was a critical part of the deal, because part of the negotiation with them was to get them to agree to extend the term of the leases, in exchange for a financial commitment on our part to spend money exploring for an developing natural gas.”
Moquawkie includes Lone Creek discovery well The Moquawkie acreage includes the Lone Creek No. 1 discovery well drilled in late 1998 by Anadarko and ARCO Alaska Inc. (now ConocoPhillips). ConocoPhillips and Anadarko subsequently signed a gas sales agreement with Enstar Natural Gas Co. and Aurora will take over the rights and obligations pursuant to that contract, the company said.
Anadarko, operator at Lone Creek, said in October 1998 that the well tested 10.6 million cubic feet of natural gas per day from 53 feet of perforations at approximately 2,400 feet. “This represents one of the best shallow gas tests in the vicinity for a reservoir of this age and type,” the company said. Several other gas zones, approximately 180 feet, were encountered but not initially tested.
Anadarko plugged and abandoned a second well, the Lone Creek No. 2, in 2000 at 5,000 feet measured depth and true vertical depth.
What’s next? Jones said Aurora is working on permitting now for seismic and is evaluating bids from several contractors. The seismic would be shot on both sides of the inlet, he said.
“We’d actually be doing some shooting on the Kenai Peninsula and some on Moquawkie,” Jones said, with probably more seismic shot at Moquawkie than on the Kenai.
Aurora hasn’t yet determined how many miles of seismic will be shot, he said. “As far as number of wells, we’re confident we’ll do at least six wells next year and probably more — and we could do six to 10 pretty easily, workovers and drilling new wells.”
The company includes several prospects on its west side acreage map: Nicolai Creek is in production and Lone Creek, Kaloa and Moquawkie are listed as proved but undeveloped.
In addition to the Lone Creek well, which is ready to be produced, Jones said there are a lot of old wells in the Moquawkie area, “some of which we might re-enter at some point.”
David Boelens, vice president of Aurora Well Service LLC, said the company will probably “spend the winter going through and prioritizing which of those wells make sense to do in what order and then over the next couple of years” workover the wells, either re-completing them or sidetracking them. The Aurora Well Service rig is basically a workover rig with drilling capability, it can drill shallow gas wells and do sidetracks, he said.
Boelens said the number of wells in the area “with workover potential is pretty amazing. …
“If this was anyplace else — in the Lower 48 — this would have been done a long time ago. … but it’s on the wrong side of the Cook Inlet in Alaska.”
“These are not going to be huge fields,” Pfoff said, “but for a company our size, we can make the economics work, going back in, essentially targeting missed pay, or pay that was identified and never really tested because of lack of a gas market, lack of economics at the time.”
Nicolai Creek in production The No. 3 well at Aurora’s Nicolai Creek unit on the west side has been in production for about a year, Jones said. Alaska Oil and Gas Conservation Commission reports show 1.8 billion cubic feet produced through August and an average production rate for that month of more than 1 million cubic feet a day.
“We’ve done work at two wells at Nicolai Creek” this year, Jones said, “reentered two suspended wells.” One of the wells was re-completed in shallower horizons than the original completions and the other was sidetracked to a new location and completed in the zones originally tested plus an additional zone.
A new well, the Nicolai Creek No. 8, was deferred to 2003.
Also planned for 2003 are installation of gathering lines and surface production facilities to get the gas from the No. 2 and No. 1B wells to market.
Aurora plans to put Moquawkie on production in early 2003. Jones said there is still a lot of work to be done and they’re up against a weather window, but “we’re going to do what we can this winter.”
He said Moquawkie will probably come on a bit ahead of the next two wells at Nicolai Creek, and when all those producible wells are on stream, the company will go for another round next year of probably twice as many.
Pfoff said that within a year the company hopes to be producing 10 million cubic feet a day, and possibly as much as 20 million cubic feet a day.
Not a major core area for Anadarko Once the paperwork closes, Anadarko will have no more oil and gas leases in the Cook Inlet area. Anne Vincent, manager of communications for Anadarko Petroleum, told PNA Oct. 18 that Cook Inlet isn’t a core area of interest for the company in Alaska.
“We have a very large core interest on the North Slope that is really our current focus for Alaska and we have an ongoing program throughout the company of selling areas that are not major core areas for us and reapplying those resources into our highest possible opportunities.”
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