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THE INDEPENDENTS 2003: Prodigy seeking Cook Inlet partners Land position swells to 34,000 acres at Northern Lights prospect in northern inlet Kay Cashman Petroleum News
Prodigy Alaska is looking for partners to help drill its Northern Lights oil prospect in northern Cook Inlet, formerly known as the Tyonek Deep prospect and, before that, Sunfish.
Mark Landt, Prodigy’s vice president of land and new business ventures, said Waterous Securities of Calgary is in charge of the marketing effort to bring a partner.
Waterous is advertising Northern Lights’ oil reserves as follows:
• P-10 488 million barrels
• P-50 240 million barrels
• P-90 104 million barrels
Although the designations do not directly correlate with percentages, Landt said P-10 means the geological data shows there is “roughly a 10 percent chance of finding” 488 million barrels; P-50 is equivalent to a 50 percent chance and “is usually what you expect to find; and P-90 indicates there is essentially about a 90 percent chance of finding” 104 million barrels.
Targeting Tyonek Deep The reserve numbers are based on the Tyonek Deep, a deep oil zone drilled by ARCO Alaska and Phillips with wells ranging in the 14,000-14,500 foot range.
“We think there is reserve potential in the Hemlock, which is deeper, but that is more speculative,” Landt said.
“There have been 16 wells drilled on the Northern Lights anticline … and all the wells had oil shows or tested oil. We’re about a half mile from ARCO’s North Foreland State No. 1 well which tested from three zones, on a sustained test, at about 3,600 barrels per day,” he said. “It was after drilling that well that ARCO and Phillips in a joint venture said they had 750 million barrels out there.”
Landt worked for ARCO Alaska from 1992 to 1997, initially as district land manager for Cook Inlet. He and Dave Doherty, Prodigy Alaska’s exploration manager, brought the Cook Inlet prospect to the attention of Dallas financier Shawn Bartholomae, president, CEO and sole owner of Prodigy Oil & Gas.
Doherty spent 14 years in Alaska with ARCO Alaska and was responsible for taking a new look at the geology of the Cook Inlet basin.
“Sunfish and North Foreland were my wells,” he said in a 2001 interview. “I saw an opportunity south of the North Cook Inlet field but ARCO walked away from it.”
Following the May 2001 lease sale, the men put together a team to work the Cook Inlet leases and formed a limited liability company, Prodigy Alaska, to own and manage them.
The team consists of Bartholomae, who holds an 83 percent interest in Prodigy Alaska, and Landt, Doherty, and Paul Lokke, a petroleum engineer, who each have a 5 percent interest. Former Prodigy Vice President Lee Higgins has a 2 percent interest.
What went wrong at Sunfish? Why did both ARCO and Phillips back out of the Sunfish/Tyonek Deep prospect?
“I can’t speak for ARCO but in my opinion the project was overcapitalized. Between ARCO and Phillips they had something like $300 million invested in that project — $67 million in the leases alone. … Some of the same leases we’ve acquired for a lot less,” Landt said May 7.
“They brought another jackup in and drilled another well down south (of North Foreland State No. 1) and got less than expected results; plus, at that time oil prices were coming down. They were in the $10 to $14 per barrel range. Clearly an offshore development in the Cook Inlet would be hard to make work at those kinds of price levels,” he said.
But technology has changed since ARCO and Phillips drilled Tyonek Deep and the costs of doing business in the inlet have come down,” Landt said.
A state official said $125 million for a Cook Inlet platform was the norm 10 years ago as compared to the $35 million Forest Oil spent on its Osprey platform for Redoubt Shoal.
Jackup rig next, Jones Act a problem Prodigy is eager to drill delineation wells at Northern Lights.
“Our plans are to drill as soon as we can get funding … and a jackup rig,” Landt said.
Prodigy, Fairweather and Forest Oil were looking at bringing a jackup rig into the inlet for the summer of 2003, but “we both (Prodigy and Forest) needed partners before we could commit to a rig. We’re hoping we can drill in 2004,” Landt said.
The biggest sticking point in bringing a jackup rig to the inlet is the cost to mobilize and demobilize it, Mark Meyers, director of the Alaska Division of Oil and Gas, said recently. The “Jones Act is what kills you: You can’t get a lift barge to take a rig out of Louisiana, they actually have to take it from a foreign location to get it over here” because the only vessels capable of bringing in a jackup are foreign flagged vessels and, according to the Jones Act, they can’t go from U.S. port to U.S. port.
Cook Inlet explorers can’t go to the Gulf of Mexico where day rates for jackup rigs are the most reasonable, Landt said. Instead they are forced to get a rig from Southeast Asia or Africa.
“It could cost $10-12 million to bring a rig in — that includes the going day rate, which is higher overseas. … Plus you have to commit to paying the demobilization costs … maybe $5 million, and that’s all before you spend a penny to drill in the inlet,” Landt said.
Because of the mobilization cost, “you need multiple companies” and “about two years of activity to justify the economics,” Myers said.
“You could cut your mobilization and de-mob costs in half if you could bring a jackup in from the Gulf of Mexico,” Landt said, adding that he’d like to see Alaska’s congressional delegation secure an exception to the Jones Act for bringing a jack-up rig into Cook Inlet.
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