Aurora takes another turn at Hanna; Craig assigns 4 leases at prospect

The saga of the Hanna prospect continues.

Aurora Exploration LLC has acquired the four-lease prospect on the west side of Cook Inlet from independent investor Paul L. Craig, according to a recent state lease report.

The transaction gives Aurora 100 percent working interest and 82.5 percent royalty interest in the onshore leases - ADL 391618, ADL 391619, ADL 391620 and ADL 391622. The leases are located at the northern end of the west side, near the mouth of the Susitna River, nestled among the Pretty Creek unit, Otter unit, Lewis River unit, Ivan River unit and Stump Lake unit. The Alaska Department of Natural Resources approved the transaction on July 1, retroactive to the beginning of February 2015.

Even though the Hanna prospect sits among one of the denser concentrations of oil and natural gas activity in the Cook Inlet region, and has attracted the attention of both large and small players over the years, every effort to explore the leases has been thwarted.

Union Oil Company of California abandoned an exploration program at Hanna in the 1980s in light of falling commodity process. Craig first acquired the leases in 1993 through the independent Trading Bay Energy Corp. but found it difficult to raise money for Alaska exploration after Stewart Petroleum Co. filed for bankruptcy protection in 1996. Forcenergy Inc. acquired the leases in 1997 but filed for bankruptcy in 1999.

Craig acquired the leases a second time through a 2001 lease sale but once again found it difficult to organize an exploration program. A proposed deal with U.S. Petroleum Corp. fell apart in 2002 and a farmout with Pelican Hill Oil and Gas Inc. fell apart in 2005.

Aurora acquired the prospect later that year but suspended all drilling operations in late 2006 while it resolved its ongoing litigation with Enstar Natural Gas Co. In early 2009, Aurora arranged a partnership and even received an Alaska Oil and Gas Conservation Commission drilling permit for a Hanna No. 1 exploration well. This time, the delays were regulatory. The Alaska Department of Fish and Game refused to allow the company to build a drilling pad through a marshy section of the Susitna Flats Game Refuge.

The leases expired again. Craig acquired the prospect for the third time in a 2010 lease sale. Escopeta Oil & Gas Co. expressed an interest in exploring the prospect, believing it could sidestep the regulatory problems by drilling in winter. This time, Craig attached performance requirements to the leases. After two years, Escopeta had missed its deadline. In March 2013, Escopeta transferred the leases to an affiliated independent called Galena Energy Corp., which also missed the deadline. In May 2013, Galena Energy transferred the prospect to Craig. The four leases currently expire Feb. 28, 2018.

Aurora is at the beginning of a potential exploration boom. The small independent recently began permitting a wide-ranging exploration venture covering six prospects: Chickalusion, Three Mile Creek Deep, Congahbuna Lake and Nicolai Footwall on the west side of Cook Inlet and Forest Lake and West Eagle on the Kenai Peninsula.

State issues leases

The lease was located in the White Hills area, among a cluster of leases operated by Great Bear Petroleum. The independent investor James A. White operated the lease.

Texaco drilled the Wolfbutton 25-6-9 well on the lease in the winter of 1988 and 1989 and Union Oil Company of California drilled and permitted several other wells nearby.

The state also formalized the Repsol E&P USA Inc.-operated Pikka unit and created eight new leases from acreage that had been segregated from the new North Slope unit.

The state also formally issued North Slope and Beaufort Sea leases to Caelus Alaska Exploration Co. LLC, the Armstrong Oil & Gas subsidiary 70 & 148 LLC and ConocoPhillips Alaska Inc. that were acquired in a pair of lease sales in November 2014.

- Eric Lidji

—A copyrighted oil and gas lease map from Mapmakers Alaska was a research tool used in preparing this story.