Providing coverage of Alaska and northern Canada's oil and gas industry
June 2019

Vol. 24, No.26 Week of June 30, 2019

Oil patch insider: Alliance looking for partner for North Slope well next to Prudhoe

Kay Cashman

for Petroleum News

In what is possibly the least expensive and least risky play on the North Slope today, Alliance Exploration LLC is looking for a partner in its Guitar unit to help shoulder the cost of drilling a well next winter.

On the southwestern side of the Prudhoe Bay oil field, Guitar is “an easy play and close to infrastructure,” Barry Foote told Petroleum News June 25. Foote is one of Alliance’s owners, along with Sam Nappi and Derek Foote.

“I really like this play … the best-case scenario is we could have 200-300 million barrels of oil. And more that extends over to other leases outside our unit,” he said.

Although the company does not plan to set up a data room, Foote has a lot of information available, including 3D seismic over the entire area.

“I hate to see all the work we’ve done … (including) processing 3D seismic go to waste, but we’ve sunk $1.5 million in this already. We need a partner to move forward … and we need them yesterday,” he said.

In a mid-June plan of exploration filing with the Alaska Department of Natural Resources’ Division of Oil and Gas, Alliance said its work on Guitar to date has materially increased the prospectivity of the unit for the initial well and subsequent wells “for both currently defined targets, Kuparuk C and Ivishak.”

Cut deal with ConocoPhillips

The Guitar unit consists of three state leases, which had previously been part of the Hemi Springs unit, formed in 1983 by ARCO Alaska, predecessor to ConocoPhillips, and terminated in 1992.

Alliance has a 100 percent working interest in the three leases and has finalized a lease transfer document and production sharing agreement with ConocoPhillips on the fourth lease, ADL 28249, which sits at the northwest quadrant of what, with the three Guitar unit leases, forms a square.

The Hemi Springs State No. 1 well, drilled by ARCO in tract 28249 in 1984, was certified as capable of producing hydrocarbons in payable quantities from the Kuparuk C sands.

“The well head is on the Conoco lease but the bottom hole is on one of our leases,” Foote said.

Alliance has said it hopes to drill a well in tract 392104 that would penetrate the Ivishak formation, the formation that hosts the Prudhoe Bay field reservoir, with a lateral well targeting a seismic anomaly in the Kuparuk C sands.

Accomplished to date

In the paperwork Alliance filed in mid-June with the division, it listed what it had accomplished for the Guitar unit since April 2018 - .and planned to do between now and Sept. 1.

From April 25 to Dec. 31, 2018, Alliance accomplished the following, plus finalized the deal with ConocoPhillips on the fourth lease:

* Held discussions with DNR to reduce level of bonding related to adding ADL 28249 to the Guitar unit.

* Held discussions with a geotechnical consultant to identify the optimum location of the initial well, retaining Waters Petroleum for this work; Larry Casarta, who works with Ryan Moynagh, also vetted the location.

* Continued discussions with service companies to reduce cost estimates and schedule equipment availability to drill the initial well.

* Oil to market study performed by David Clark of PRA.

* Continued to work permitting issues.

* Oil discharge prevention and contingency plan – AECOM

From Jan. 1 to May 31, Alliance did the following:

* Retained MAP Consulting and its subcontractor GEC LLC to optimize risk-weighted original oil in place and estimated ultimate recovery potential of the initial well and increase probability of commercial success including potential subsequent wells MAP and GEC were also tasked with design plans for 2019-22 for the development of a commercially successful initial well.

* Identify additional adjoining prospective acreage to increase the probability of commercial success of the initial well (especially reservoir structural position, permeability and volume interpretations).

* Continued discussions with state to minimize bonding requirements for the additional prospective acreage, ADL 28249.

* Contacted surety agents to identify availability and cost for bonds.

Between June 1 and Sept. 1 Alliance plans to perform the following:

* Continue discussions with adjoining lease owners for potential farm-out and working interest investors for initial well.

* Continue all geotechnical and operational work to drill the initial well.

* Finalize permitting.

* Secure bonding requirements.

* Secure additional working interest partner

* Submit a letter to the commissioner of DNR and ask for an extension of unit default period from March 31, 2020, to 2021.

And finally, the company was considering posting the $500,000 statewide bond by June 25 but have held off doing so.

“As I said, it’s probably the cheapest play on the North Slope that could be a significant play. We’re ready to make something happen,” Foote said.


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