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THE EXPLORERS 2004: Independents’ Day Alaska lease sales bring in $14.7 million; Armstrong dominates, Devon enters Kristen Nelson Petroleum News
One observer called it “Independents’ Day,” and he was right on the mark: Only one major oil company bid in the Oct. 27 state lease sales, and that in partnership with an independent. The state of Alaska took in $14,728,140.80 in bonus bids at the areawide oil and gas lease sales — $5,280,384 in the Beaufort Sea sale and $9,447,756.80 in the North Slope sale.
The sales were dominated by Armstrong Alaska, subsidiary of Denver-based Armstrong Oil and Gas, which had $8,309,112.32 in apparent high bids, $509,777.92 in the Beaufort Sea sale and $7,799.334.4 in the North Slope sale. Partnership bidding in the Beaufort Sea sale with Kerr-McGee accounted for $465,669.12 of Armstrong’s bids.
Calgary-based Talisman Energy’s U.S. subsidiary Fortuna Exploration was the second largest bidder at $3,453,312.
Other independents with winning bids in the two lease sales included Anadarko Petroleum, AVCG, Mark Anderson (affiliated with Summitt Oil & Gas of Beverly Hills, Calif.), and UltraStar Exploration (an affiliate of Winstar Petroleum).
Independent Pioneer Natural Resources bid in a 50-50 partnership with ConocoPhillips, the only major oil company bidding at the sales.
And Devon Energy Production, a subsidiary of Houston-based Devon Energy, bid in its first Alaska lease sale, picking up a block of Beaufort Sea leases.
Armstrong has highest bids in North Slope sale Armstrong had the highest bids in the North Slope sale for three adjacent leases on the eastern edge of the Kuparuk River unit, with bids ranging from $373.87 an acre to $383.57 an acre.
Armstrong, in partnership with Kerr-McGee, also had the highest bids in the Beaufort Sea sale, $303.17 an acre, for two tracts on the southern edge of the Kerr-McGee operated Nikaitchuq unit in which Armstrong is a partner. On its own, Armstrong took a tract to the east of Nikaitchuq.
The largest block Armstrong took was in the North Slope sale: 14 leases astride the Kuparuk River south of the Kuparuk River and Prudhoe Bay units. Armstrong took five leases on the southern edge of Kuparuk, one tract northwest of ConocoPhillips’ Placer prospect on the western side of Kuparuk and six tracts northwest of Tarn. Fortuna dominates Beaufort Sea sale Fortuna’s $3,453,312 in bids were all for Beaufort Sea tracts. The company took a block of 19 leases in Harrison Bay off the National Petroleum Reserve-Alaska, bidding $60.10, $50.10 and $40.10 for some acreage closer to NPR-A, ranging down to $15.10 an acre farther offshore.
Fortuna farmed into NPR-A acreage held by Total and was a partner in Total’s NPR-A exploration well in 2003. Fortuna was the largest bidder in the Bureau of Land Management’s June 2004 northwest NPR-A lease sale, with $26,480,300 in high bids and also making the highest bid, $13,745,000, for a tract near the Ikpikpuk River at the junction between the northwest and northeast NPR-A planning areas.
Kerr-McGee, bidding in partnership with Armstrong, spent $1,086,561.28 for its 70 percent share of the two leases it bid on with Armstrong in the Beaufort Sea sale.
Anadarko, bidding only in the North Slope sale, was apparent high bidder on $746,361.60 for 16 leases on the east side, three on the southern edge of BP’s currently dormant Badami unit, and the remainder farther south in the area where Anadarko has been working what it calls its Jacob’s Ladder prospect.
AVCG took a block of leases in the vicinity of Nuiqsut adjacent to NPR-A for $478,080.
Mark Anderson bid $256,000 for four onshore leases. Pioneer bid $185,196.80 for one lease adjacent to its existing acreage position south of Prudhoe Bay, and was a 50-50 bidder with ConocoPhillips on two other leases in that general area.
Devon took a Beaufort Sea block of leases west of Northstar for $182,400. UltraStar took a Beaufort Sea lease for $48,332.80 in the vicinity of Gwydyr Bay, and ConocoPhillips’ share of its partnership bid with Pioneer was $33,984.
Geologic opportunity It’s not rocket science: companies bid at Alaska’s Oct. 27 lease sales because they see geologic opportunity in the state. But the largest bidder at the sale, Armstrong Oil and Gas, also said a spirit of cooperation from big companies already working on the North Slope and from regulators are big factors.
H.S. “Hank” Radomski, Devon Canada senior landman, told Petroleum News after the sale that this is the first time Devon has bid in an Alaska lease sale. Devon’s acreage in the Cosmopolitan unit in Cook Inlet and on the North Slope at Point Thomson is the result of mergers, he said.
“Geologically Alaska is not much different” and the Canadian group “saw some exploration opportunities in Alaska.” The leases just acquired are “near Sandpiper” and the prospect “is still in its infancy stage. It’s just a lead at this point. We’re still evaluating data,” and plan to acquire seismic that has already been shot over the leases.
Geoscience team credited Ed Kerr, vice president for land and business development for Denver-based Armstrong Oil and Gas, credited the company’s geoscience team in Denver for identifying acreage the company bid on Oct. 27. The company’s acreage selection “was a product of the science that we’ve been able to do, coupled with some of the confidential data from our earlier drilling and the application of it on a regional basis,” he said.
Kerr said Armstrong has found both big companies and the state willing to work with it cooperatively. “It’s a difficult place to come in and do business, but we have seen that spirit of cooperation (from the big companies) and it’s caused us to come up here and get more active, not less active.”
On the regulatory side, he said, things have to be done safely and appropriately, “but you still have to have that spirit of cooperation in order to be successful and get things done.”
Kerr said he thinks the North Slope is “a great place for independents … and this is one of the greatest petroleum systems there is in the world, so I think that you will see more companies coming.”
There are “moderate sized companies that are looking to get up on the North Slope and they’re just a little nervous because they haven’t stuck their toe in the water yet, and I think in large part companies like Armstrong are a catalyst for them — Pioneer, Kerr-McGee as well — they want to see that first development get going, they want to see that first bit of production coming on,” Kerr said.
Production from an independent on the North Slope, he said, combined with the current high oil prices and the global need for oil, “will open the floodgates.”
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