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THE EXPLORERS 2005: Independent hopes to drill Whiskey Gulch AVCG picks up Anadarko oil prospect; acquires 30% interest in ConocoPhillips’s Cronus unit Kay Cashman Petroleum News
Alaska Venture Capital Group LLC (AVCG) continues to expand its activity in Alaska.
In 2004 the company opened an Anchorage office and formed a new operating subsidiary, Brooks Range Petroleum Corp.
Wichita, Kan.-based AVCG brought in former ARCO Alaska President Ken Thompson as a funding and managing member, and also appointed him chairman of Brooks Range.
When it was formed Brooks Range was tasked with working with other oil and gas companies to monetize, explore and develop AVCG’s 147,000 acres-plus of oil and gas leases on Alaska’s North Slope. The company also picked up some of its own North Slope leases.
But following a September 2005 meeting of AVCG and Brooks Range owners, AVCG now holds all acreage and oil ownership interests and controls all exploration approval decisions, while Brooks Range serves AVCG as a technical and operations services subsidiary and does not hold any oil lease or production interests.
As part of the September reorganization, AVCG head Bo Darrah and Thompson essentially exchanged roles, with Darrah taking over as Brooks Range chairman, president and CEO and Thompson being promoted to AVCG managing director, meaning he will oversee both companies.
Gets piece of Cronus In 2005, AVCG cross-assigned acreage with ConocoPhillips in the Cronus prospect area and AVCG has a 30 percent ownership in ConocoPhillips’ North Slope Cronus unit. AVCG owns 100 percent of the leases to the north and south of the prospect making the cross assignment possible, Thompson said.
According to state paperwork, Cronus operator ConocoPhillips is required to drill a well in the unit in the winter of 2005-06.
“Although we have not been contacted by ConocoPhillips regarding their final decision to drill, we have been in contact with a third party who is interested in participating with AVCG, should a well be drilled this winter,” Thompson said in October 2005.
In 2005, Brooks Range also picked up the Whiskey Gulch oil prospect from Anadarko Petroleum. That acreage was transferred to AVCG. Through operator Brooks Range, AVCG applied with the State of Alaska to unitize the prospect. The companies are moving forward with plans to drill a well in the winter of 2006-07.
Looking for Whiskey Gulch partner Finding a partner to help fund a Whiskey Gulch well is part of those plans.
Thompson said that AVCG does not yet have a partner for Whiskey Gulch but is “awaiting the results of the nearby Antigua exploration well this winter to be drilled by Pioneer (Natural Resources Alaska). Dependent on a future deal structure, we may or may not operate.”
When asked if AVCG was expecting Pioneer to come in as a partner in Whiskey Gulch, Thompson would not comment except to say that AVCG was still in the market for a partner and that Pioneer was not a signed partner as of mid-October.
South of Kuparuk operations center Of the 31 leases it purchased from Anadarko, AVCG through Brooks Range applied with the state to include 12 of them in its proposed 30,651-acre Whiskey Gulch unit 20 miles south of the ConocoPhillips-operated Kuparuk River unit operations center, the second largest producing oil field on Alaska’s North Slope. The independent has told the state it is looking for a Kuparuk sand reservoir at the prospect.
AVCG holds 100 percent of the working interest in the 12 leases; Anadarko retains a 2 percent overriding royalty interest in all 31 leases.
Eight of the leases were originally acquired in a 1998 lease sale and four in a 2000 lease sale. Without formation of a unit one of the leases would expire at the end of October 2005, seven at the end of November 2005 and the four newest leases at the end of November 2008. Bids for the acreage in state lease sales ranged from $7.85 per acre to $251.68 per acre.
Well drilled by June 1, 2007 Brooks Range told the state in its October 2005 unit application that it would define a prospect area and redefine the unit by Nov. 1, 2006, and pay the state a deferral fee for any leases not in that redefined unit which the state could have included in its February 2006 lease sale.
According to Thompson, AVCG (through Brooks Range) proposed in its unit application to select a well location by Nov. 1, 2006. The well would have to be drilled by June 1, 2007. If the company does not commit to drill a well by next November, “the unit automatically terminates and the leases will expire according to their terms, and no payment will be due.”
If, however, the companies commit to drill in November but do not actually drill a well by June 1, 2007, the company would lose the acreage and have to pay the state $234,119.
If the well were drilled, a revised unit plan would be due before Sept. 15, 2007.
Two wells permitted by Anadarko According to Anadarko paperwork filed in 2001 with permit applications to drill two exploration wells, Whiskey Gulch is an old prospect which ARCO had “drilled in and around.” Anadarko shot seismic at the prospect in 2000.
Anadarko got its permits to drill Whiskey Gulch A in section 30-8N-9E, UM and Whiskey Gulch B in section 22-9N-9E, UM, but did not drill them. The wells were permitted as a back-up to drilling the company was doing in the National Petroleum Reserve-Alaska in the winter of 2001-2002. In the event Anadarko had unexpected permitting problems for its NPR-A well or difficulty getting across the Colville River because of weather delays, it wanted a contingency drilling program in place.
After the winter of 2001-2002, Anadarko held off operating any more of its own conventional wells on the North Slope for a number of reasons; none of which, company officials said, had anything to do with the prospectivity of Whiskey Gulch.
Kuparuk play the target Brooks Range told the state that the Whiskey Gulch prospect is “a Kuparuk play based on amplitude anomalies” in a seismic survey shot by Anadarko and ConocoPhillips Alaska. The prospect “is expected to find Kuparuk Sand below the known oil-water contact of the Kuparuk River field,” which is at 6,530 to 6,570 feet at the southeast corner of the Kuparuk field.
The company told the state that 40-foot to 60-foot Kuparuk sands were encountered in nearby wells, the Hemi Springs State No. 1, Rock Flour and Silvertip.
There is a 90 percent probability the reservoir contains 15 million barrels; a 50 percent probability it contains 67 million barrels; and a 10 percent probability that it contains 91 million barrels.
“The major risk is reservoir presence,” Brooks Range told the state. The prospect would be “the southernmost Kuparuk sand in the system” and is “surrounded by wells with no significant Kuparuk sand development.”
“For Whiskey Gulch to be hydrocarbon-charged, it must be stratigraphically separate from the Kuparuk River field,” the company said, otherwise “any reservoir encountered would only be a pathway for hydrocarbon charging to the up-dip Kuparuk River field.”
Kuparuk field oil ranges from 22-27 degrees API, but “highly viscous” 12 degree API oil “has been encountered at places along the southern margin” of the field.
Brooks Range said the Hemi Springs test wells found 24 degree to 33 degree API oil “well down dip to the Kuparuk River unit as well as testing gas which argues for good quality oil south of the field.” 1 in 5 chance of success The company said that based on exploration wells drilled in similar circumstances the prospect has a 1 in 5 chance of commercial success.
If the Whiskey Gulch wells had been drilled by Anadarko in the winter of 2001-2002, Anadarko’s plan was to reach them by ice roads off the Kuparuk River 2K pad, using rolligons to transport water trucks to the well site to build ice pads as soon as tundra travel was allowed.
Ice road construction would have started in early December. There would have been 10.3 miles of ice road from pad 2K to a split, and a further three miles to Whiskey Gulch B from the split and six miles to Whiskey Gulch A from the split. The Whiskey Gulch B well was going to be drilled first, starting in January, with the Whiskey Gulch A well to follow in March. Demobilization was to begin April 15 with the operation complete and inspected by May 15.
Editor’s note: AVCG currently has 147,097 acres under lease. The acreage is spread over seven prospects. In addition to Whiskey Gulch (30,651 acres) they are: Ocean Pt. with 31,696 acres; Itkillik River with 22,734 acres; Cronus with 20,869 acres; Titania with 12,680 acres; Gwydyr Bay with 17,151 acres; and Slugger with 11,316 acres.
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