Explorers 2014: Focused on production, Savant has exploration options
The smallest producer on the North Slope is in the process of becoming a subsidiary of Miller Energy
For Petroleum News
Over the past decade, Savant Alaska LLC has turned North Slope exploration into sustained development activities, but not in the way such transitions usually occur.
Instead of drilling a prospect and bringing it into production, the one-time affiliate of Colorado-based Savant Resources LLC came to the state in 2006 to pursue the Kupcake prospect in Foggy Island Bay, some 20 miles west of the Badami unit. After an unsuccessful exploration campaign, Savant applied its Arctic experience to Badami.
Now, Savant Alaska is preparing to enter new hands. In May 2014, the Tennessee-based independent Miller Energy Resources Inc. agreed to by the company for $9 million.
Biting into KupcakeThe Kupcake prospect is near the much more famous Liberty prospect.
After BP drilled the Liberty No. 1 well in 1997, the company mapped the Kupcake prospect using 3-D seismic acquired in 1995. BP allowed the leases to expire in 2005, and several former BP executives working for Savant took an interest in the prospect.
Savant acquired the Kupcake leases in a March 2006 sale, licensed some 200 square miles of 3-D seismic nearby and intended to drill the Kupcake No.1 well by early 2007.
Savant envisioned “a conventional exploration well targeting several hundred feet of Beaufortian-age sediments located at a depth of approximately 10,600 feet,” according to filings. The name Kupcake came from the targets, as Savant consultant Erik Opstad explained to Petroleum News in 2006: “KUParuk zone-C and KEkiktuk = KUPCAKE. The Kuparuk-C age Beaufortian sands are the sweet icing atop the Kekiktuk.”
In December 2006, Savant and nearby leaseholder True North Energy Corp. pooled their leases to enlarge the surface area of the prospect by 120 acres. True North estimated the prospect contained some 200 million barrels of oil, of which half might be recoverable.
The partners were unable to secure a rig and postponed plans to drill in early 2007, but contracted the Kuukpik No. 5 rig over the summer and set their sights on winter. The goal of the program was to learn more about the size and shape of the reservoir, and to determine whether it was communicating with BP’s nearby Liberty prospect.
The agreement terminated in early 2008 when True North failed to come up with its share of the funding for the Kupcake No. 1 well, but the companies quickly signed a new deal.
During the interim, though, Savant signed a deal with the Calgary-based Bordeaux Energy Inc. to share the cost of drilling Kupcake No. 1 and acquiring seismic data.
A Bordeaux-commissioned study estimated that Kupcake contained 170 million barrels of oil in place, with 68 million barrels listed as “recoverable.” The figure was lower than previous assessments, but Savant said the estimate only covered a portion of the prospect.
With Kupcake located some three miles from shore, under 14 feet of water, Savant built an ice island and ice road to access the prospect. The magnitude of the construction effort, and harsher-than-expected Arctic weather, delayed drilling until late March 2008.
Ultimately, the target interval in the Kemik formation “was thinner than anticipated” and the porous Cretaceous sandstone was “water wet,” according to partner Bordeaux.
Approaching BadamiIn mid-2008, Savant Alaska and ASRC Exploration LLC signed a deal with BP Exploration (Alaska) Inc. to work on Badami in return for a stake in the unit.
The partnership was primarily focused on restarting sustained oil production from the Brookian formation using horizontal drilling and hydraulic fracturing, but an initial plan of development under the deal also required an exploration well by September 2009.
Savant saw Badami as an opportunity to apply technology to a known reservoir.
“We’re taking technical risk as opposed to exploration risk in the Brookian sands,” Savant Chief Operating Officer Greg Vigil told Petroleum News in August 2008.
While Savant pursued those development activities in the Brookian, though, the exploration well would target the Red Wolf prospect in the deeper Kekiktuk formation.
In early 2010, Savant drilled the B1-38 well, which found oil in the Kekiktuk and also the shallower late Cretaceous Killian sands. In early 2012, Savant drilled the Red Wolf No. 2 well about two miles northwest of the bottom-hole location for B1-38. The target zone in the Kekiktuk was wet, though, which led Savant to suspend its pursuit of Red Wolf.
In May 2013, Savant transferred a 10 percent working interest in deep zones at four Badami leases to Red Wolf Exploration LLC, a Wyoming-based independent created in April 2012 by eight small independent companies. The leases were ADL 367005, ADL 367006, ADL 367010 and ADL 367011, but in July 2013 Savant relinquished ADL 367005 and ADL 367010 as part of a new plan of development and the leases expired.
Other opportunitiesWhile Savant appears to be cold on exploration at the moment, it continues to hold some intriguing exploration acreage at the Yukon Gold prospect of the eastern North Slope.
In 1993, BP drilled the Yukon Gold No. 1 well on state land adjacent to the Arctic National Wildlife Refuge 1002 area. While the well is on the extended confidentiality list, previous estimates placed the recoverable oil reserves at some 120 million barrels.
Savant acquired three leases south of the Point Thomson unit in an October 2009 sale.
“We like the area and feel like we understand the Brookian,” Vigil told Petroleum News in mid-September 2012. “The biggest impediment is lack of infrastructure - i.e. roads.”
The Yukon Gold leases expire in 2017, 2022 and 2023.
The 10th Plan of Development for Badami - running through November 2014 - also calls for Savant to drill an exploration well at the East Mikkelsen prospect at the unit.
In March 2013, the Alaska Department of Natural Resources expanded Badami to include two Alaska Venture Capital Group LLC leases along the eastern edge of the unit.
The expansion included the East Mikkelsen No. 1 well that Humble Oil drilled in 1971, but excluded five other leases that the companies also wanted to add to the unit. The companies had argued that adding all seven leases would “connect subsurface potential and surface infrastructure” for the two companies. By combining the leases into a single unit, “drilling targets could be reached more easily and development could occur more efficiently and safely with less environmental impact on the area,” Savant told the state.
The expansion decision required Savant to drill a well at East Mikkelsen by the following winter - early 2014. The directional well would have targeted the Hue Shale, allowing Savant to test the entire Canning formation, including the Badami and Killian intervals.
Those plans were put on hold when Savant appealed the expansion decision.
Sale under wayIt is too early to say what the proposed sale will mean for those prospects.
The sale would give Miller a 67.5 percent working interest in Badami, with ASRC Exploration LLC holding the remaining stake. But Miller would get also 100 percent working interest in the exploration acreage and a 25 percent working interest in the underutilized Badami pipeline, which creates the potential for future exploration work.
So far, Miller has said that its initial plans for the Badami unit include drilling two sidetracks at an estimated cost of $15 million per well. But the company made note of “several prospective horizons” within the Badami unit and exploration acreage nearby.
The sale is “subject to due diligence and regulatory approval” and is expected to close by August 2014. If the sale were successful, Savant Alaska would become a subsidiary of Miller. Another Miller subsidiary called Cook Inlet Energy is active in the Cook Inlet.