Evergreen waits on results from Alaska core holes

Kristen Nelson

Petroleum News Editor-in-Chief

Alaska was a topic of some interest at the Evergreen Resources fourth-quarter conference call Feb. 19.

The Denver, Colo.-based independent has a substantial coalbed methane development in the Raton basin, and is testing to determine if coalbed methane can be developed commercially on its Alaska acreage.

Evergreen had a $7 million capital budget for Alaska in 2003, but has budgeted only $2.3 million for Alaska in 2004, $1.5 million in the first quarter, $700,000 in the second quarter, $100,000 in the third quarter and zero in the fourth quarter.

The company is drilling five core holes to evaluate coalbed methane potential on its Alaska acreage, 300,000 acres in the Matanuska-Susitna Borough north of Anchorage.

Evergreen said in its Feb. 18 fourth-quarter results statement that it is drilling the five stratigraphic cores on its Alaska acreage “to obtain additional petrophysical data, including information on coal quality and gas content.” Based on results, the company said, it “will determine potential locations for additional core holes or multi-well pilots.”

“In Alaska, we’ve reduced the cost of the five stratigraphic wells we plan to drill in 2004 … to about $2.3 million,” Kevin Collins, the company’s chief financial officer, told the conference call.

Mark Sexton, Evergreen’s president and chief executive officer, said that “given our inability to acquire the data we want in Alaska and Kansas, we’ve simply decided to scale back the operations until we have the data necessary to go forward as bullishly as we had originally projected.”

Sexton said that in Alaska the company has “had requests from the administration, the regulators and the legislators, to go slowly while they work out the new rules in Alaska and we’ve agreed to accommodate them and we’re going out and getting the geologic data that’s necessary for us to be more aggressive about where we want to drill in the future on the 300,000 acres approximately that we have under lease in Alaska.”

He said Evergreen had to set surface casing first at the core holes, through the glacial till zone, to assure regulators and residents that there would be no contamination of local water well or water supplies.

Drilling the core holes is “going slow,” he said, with about a half of the first hole completed by Feb. 19.

“But once we have those five cores, we will evaluate them … get the geophysical and petrophysical data analyzed, and figure out where” the company will drill next, Sexton said, adding that he expects to know something by the end of the year.

He said Evergreen is using an experienced drilling contractor in Alaska to drill the core holes. But, he said, if the company goes “into full development mode, given how slow things are going, we’ll probably have to purpose build equipment … specially designed for Alaska’s geology.”