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THE EXPLORERS 2006 - XTO focused on upgrades in 2006
Kay Cashman Petroleum News
Alaska is used to being the biggest.
But in XTO Energy’s portfolio the northernmost state is one of the company’s smallest assets in terms of oil production — so small Alaska doesn’t warrant a mention in XTO’s 18-page third-quarter 2006 operations report.
An XTO web site search for the word “Alaska” will get you three hits. “Cook Inlet” yields two.
According to XTO, which is based in Fort Worth, Texas, its company-wide daily oil production is 44,438 barrels. Alaska’s contribution is less than 1 percent of that.
But to the Kenai Peninsula Borough, the company’s assessed property value — $41 million — ranks No. 8 among taxpayers. And its employees, like other oil and gas industry employees in the area, make an average of more than twice what the average person makes in the borough.
XTO, which has oil and gas properties in Texas, New Mexico, Arkansas, Oklahoma, Kansas, Wyoming, Colorado, Utah, Louisiana and Mississippi, has just three leases in Alaska. They are offshore in the Cook Inlet basin’s Middle Ground Shoal field where the company operates platforms A and C.
The properties include 39 active production and injection wells and a 100 percent interest in its production pipelines and onshore processing facility.
XTO’s strategy is the same in Alaska as it is elsewhere. The company handpicks complex, aging, producing properties that still contain hydrocarbons to discover and produce.
Most of the fields are purchased from major oil companies which have a higher overhead that makes many mature fields uneconomic.
XTO snaps them up and brings in a team of top geoscientists to develop hidden reserve upsides.
In Alaska, XTO purchased the Middle Ground Shoal assets from Shell in 1998. Since then it has increased reserves and maintained production rates at the field through continued drilling and development.
According to Kyle Hammond, vice president of operations for XTO’s Permian division (which includes Alaska), by late 2005 XTO had drilled 11 sidetrack wells at Middle Ground Shoal, with average reserves of 750,000 barrels per well.
Middle Ground Shoal consists of a shallow dipping east flank and a steeply dipping west flank separated by a faulted crest. Production comes from multiple zones within the Tertiary Tyonek formation.
The relative complexity of the field presented the kind of challenge that XTO likes to turn into an opportunity. The company initially focused on developing the more difficult west flank of the field — Shell, the previous owner, had worked the east flank.
In 2002, an XTO executive said the west flank “is really the big opportunity we’ve been working on for the last three or four years.”
On the west flank, where the strata are essentially tipped on end, XTO drills directionally through the formation and then goes back and penetrates the formation again on the bottom side of the well, Hammond said.
In addition to developing the west flank the company has since drilled into the east flank.
2006 drilling deferred But Hammond said July 6, 2006, that XTO had deferred drilling of more sidetrack wells from 2006 into 2007.
“We’ve definitely decided not to do those this year,” Hammond said, commenting that the deferral stems from a decision to invest in other areas of the country. There is, however, a high probability of drilling the wells in 2007, he said.
Meantime XTO has completed a remodel of the crew quarters on C platform and an upgrade of the fire and gas detection systems on both platforms.
XTO has not provided an update on its Alaska operations since July 2006, but just prior to that interview the company received approval from the Alaska Oil and Gas Conservation Commission to continue water injection in Middle Ground Shoal C24-23 well. According to paperwork filed with AOGCC, XTO is considering a workover of that well in 2007.
Jurassic possibilities There could be additional opportunities in the Jurassic strata deep under Middle Ground Shoal’s Tertiary reservoir. The oil found in the Cook Inlet basin originated from a mid-Jurassic source rock and geologists have long speculated about the possibility of oil remaining within a Jurassic reservoir.
A well was drilled into the Jurassic in the McArthur River field, but while it came on with a very high production, it dropped off very quickly, an XTO executive told Petroleum News in November 2002.
“And we believe that with some different techniques, different completion methods, that maybe you can get something that will produce long term,” he said.
But deep drilling into the Jurassic is likely to be expensive.
“We’re having a little trouble justifying that project — going into the Jurassic — but we’re still hopeful we can do it at some point,” he said.
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