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Accumulate gets lease rental reductions
Alaska’s Division of O&G grants rent reductions on North Slope due to work, including drilling wells, seismic, done by independent
Kay Cashman Petroleum News
On Jan. 16, Alaska’s Division of Oil and Gas accepted two applications for lease rental reductions from Houston, Texas-based Accumulate Energy Alaska, essentially a subsidiary of 88 Energy Ltd. The applications were filed by Accumulate on behalf of the working interest owners, or WIOs, for the leases, which include Accumulate and Burgundy Xploration.
When an application for multiple leases is filed, the leases must all have the same effective date, primary term and rental rate structure, which is the reason two separate applications were filed.
Sustained production has not begun on any of the leases.
On May 6, the division approved the rental reductions requested in both applications
Leases south of Talitha One of the applications was for 12 state leases south of the Great Bear Pantheon-operated Talitha unit in an area where Accumulate has drilled two Icewine project wells (see map in the pdf and print versions of this story).
All the leases have a July 1, 2015, effective date with a 10-year primary term.
The 12 leases, which consist of 17,115.00 non-contiguous acres, are approximately 27 miles southwest of Prudhoe Bay, along the Dalton Highway. The leases are as follows ADL 392756, 392759, 392770, 392771, 392773, 392779, 392780, 392781, 392782, 392783, 392784 and 392785.
In years 1-7, the lease rental charge was $10 per acre.
Accumulate asked the division for a reduction in years 8 to 10, dropping the price to $10 per acre from the $250 per acre that was the amount that would otherwise have been charged.
The division can reduce the rental amount if the WIOs can show they have exercised reasonable diligence to explore and develop the leases during the primary term.
Accumulate listed the following activities as part of the due diligence:
* Toolik/Kuparuk 2D seismic was acquired in 2016, reprocessed, and new interpretation performed on lands that encompass the leases and adjacent acreage during the primary term, noting the work completed on the leases has added to the WIOs understanding of prospective reservoir targets on the leases.
* Because of the completed work, the WIOs drilled two wells on acreage directly adjacent to the leases. The Icewine 1 well (PTD 215167) was completed on Jan. 1, 2016. The Icewine 2 well (PTD 217033) was completed on June 18, 2017, with a flow test performed during the primary term on acreage adjacent to the leases.
*This well work continues to inform new phases of development for the leases.
In its May 6 approval, the division said the WIOs exercised reasonable diligence to explore and develop the leases during the primary term, justifying reducing rent from $250 per acre to $10 per acre or fraction of an acre for years eight, nine and 10.
60 leases in 2 blocks The 60 leases in the other application consist of two separate blocks encompassing approximately 85,442 acres (see map in the pdf and print versions of this story).
The Eastern Block consists of 24 leases comprising 34,262 contiguous acres approximately 24 miles southwest of and east of the Dalton Highway. It contains the company’s Icewine 2 well.
The Western Block consists of 51,180 contiguous acres approximately 37 miles southwest of Prudhoe Bay, and approximately 18 miles west of the Dalton Highway. It contains the company’s Charlie 1 well.
All 60 leases have a June 1, 2015, effective date with an eight-year primary term.
In years one-six, the lease rental charged was $10 per acre. Accumulate asked the division to reduce the rental rate to $10 from $100 per acre in year seven and $250 in year eight.
The work performed for the two blocks is listed as follows:
* The Toolik/Kuparuk 2D seismic was acquired in 2016, reprocessed, and new interpretation performed on lands that encompass the leases and adjacent acreage during the primary term.
* The Icewine 3D seismic survey was acquired in 2018, with processing and interpretation completed in 2018 on lands that encompass the leases and adjacent acreage during the primary term.
* The work completed on the leases has added to the WIOs understanding of prospective reservoir targets on the leases.
* Because of the completed work, the WIOs drilled two wells on acreage adjacent to the leases - Icewine 2 well completed on June 18, 2017, with a flow test performed during the primary term on acreage adjacent to the Eastern Block.
* The Charlie 1 well (PTD 22001) was completed on April 15, 2020, on acreage adjacent to the Western Block during the primary term of the leases.
* Well work continues to inform new phases of development for the leases.
In its May 6 approval, the division said the WIOs exercised reasonable diligence to explore and develop the leases during the primary term, justifying reducing rent from $100 to $10 for year seven and from $250 to $10 in year eight.
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