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Cook Inlet’s Otter well looks promising Company president says he’s ‘very excited’ about natural gas prospect; drilling plans elsewhere along inlet’s west side outlined By Wesley Loy For Petroleum News
Cook Inlet Energy LLC is reporting good results from exploratory drilling operations on its Otter natural gas prospect on the inlet’s west side.
David Hall, the company’s chief executive, said he has high hopes Otter will become “a very prolific gas field.”
His remarks came July 25 during a Miller Energy Resources Inc. investor conference call. Tennessee-based Miller Energy is the parent company of Anchorage-based Cook Inlet Energy.
The Otter prospect is about 10 miles north of the Beluga gas field, which has a long legacy as a major energy source for Anchorage, the state’s largest city.
Cook Inlet Energy recently drilled the Otter No. 1 well to a depth of 5,680 feet into the nine-acre prospect, which is in the Beluga gas formation, Hall said.
“The mud loggers reported two significant hydrocarbon gas shows in the zone of interest,” he said. “We’re very excited about the Otter No. 1.”
Additional work is now needed to fully evaluate the Beluga formation, Hall said.
The company plans to conduct a chemical treatment, a hydraulic fracture or both to stimulate the well, he said.
“These are two processes that are commonly performed in wells in the Beluga formation,” Hall said.
Company-owned rig About $7 million was spent on the Otter well, Miller Energy President David Voyticky said on the conference call.
The company used its own rig 34 to drill the well. The truck-mounted Atlas Copco RD20 model rig was brought up from Tennessee and extensively modified for work in Alaska.
“As we evaluate the Otter’s structure, additional wells may be planned in the prospect to target the same Beluga sands and the underlying Tyonek formation,” Hall said.
A third-party engineering reserve report showed Otter could hold 45 billion cubic feet of gas, he said.
The company plans to put rig 34 to work on another west side gas prospect known as Olsen Creek.
Prior to drilling the Otter No. 1 well, rig 34 did a workover on the KF-1 gas well near the company’s Kustatan production facility. The workover incorporated the option of converting the well for use as an injector to dispose of drilling muds and cuttings, a service Hall sees as a good moneymaker in the west Cook Inlet oil patch.
The workover went fine, and the KF-1 well was tested. Unfortunately, the hydrocarbon show appeared wet, Hall said.
Before swapping over KF-1 to disposal duty, the company will attempt to dewater the zone of interest in hopes the gas will follow, he said.
Either way, KF-1 will have a useful life as either a gas producer or a disposal well, Hall said.
Osprey workovers starting soon During the conference call, Hall covered plenty of other drilling work the company has in its sights.
He said the company is now only a few weeks away from having final regulatory clearance to begin using its new rig 35, recently installed atop the Osprey offshore platform in the Redoubt unit.
The first job will be to workover and restart RU-1, one of several damaged and shut-in oil wells on the platform, which Cook Inlet Energy picked up in a bankruptcy sale in late 2009.
“Rig 35 has a new string of workover drill pipe onboard already,” Hall said.
The RU-1 workover has a capital expense of about $2.5 million, Voyticky said.
Four more Osprey wells are scheduled for recompletion, including possible sidetracks, by the end of March 2013, he said.
Total cost for the five wells is expected to be about $43 million gross, Voyticky said. The company expects to recoup 40 percent of the cost as tax credits from the state of Alaska, he said.
New life for old oil field? Cook Inlet’s most productive asset for now is the mature West McArthur River oil field.
The field currently has three wells producing a total of about 750 barrels of crude oil per day, Hall said.
“West Mac production continues to be constant and reliable,” he said. “We have identified three infield development wells — two oil and one gas — and hope to drill them over the next two years. We believe West Mac has a lot of life left in it, especially if you consider the fault-separated opportunities to the north that could hold new discoveries.”
Hall also spoke with excitement about the revenue potential of the company’s midstream assets, including the relatively new and oversized Kustatan production facility, which supports the Osprey platform.
“We’re in discussion with folks in the Cook Inlet regarding not only oil and gas processing, but exporting power as well,” he said. “Our facilities have a state-of the-art power generation network that could easily export power to the region.”
Miller Energy is a small company, but its shares are listed on the New York Stock Exchange. Executives say 90 percent of its production comes from Alaska, and 10 percent from Tennessee. Miller reported revenue of $35.4 million for the fiscal year ended April 30.
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