Explorers 2011: UltraStar plans return to Dewline

Alaska independent wants to follow up 2009 well this winter, but drilling rigs hard to find

Eric Lidji

For Petroleum News

As the smallest active explorer on the North Slope, UltraStar Exploration LLC proves that Alaska isn’t too big for anyone, but also proves that small companies must operate at their own pace if they hope to find success among major players and giant fields.

The Alaska-based independent consists essentially of one man — Jim Weeks — and a group of investors. Subject to rig availability, UltraStar plans to drill one well this winter at its Dewline unit, four leases wedged into the coastline north of the Prudhoe Bay unit.

North Dewline No. 1 is the third North Slope exploration well for Weeks in the past decade. Weeks helped found Winstar Petroleum LLC in the late 1990s, UltraStar in 2002 and Dewline Petroleum LLC in 2008 with an overlapping group of investors. Today, UltraStar holds some 4,533 acres over the four-leases that make up the Dewline unit.

Dewline No. 1 ‘typical’

Following years of negotiations that included talk of possibly expanding the Prudhoe Bay unit to include Dewline Deep, UltraStar and BP came to terms on a framework for access to the drill site and for the future use of Lisburne facilities. UltraStar drilled the Dewline No. 1 well near Point Storkersen in early 2009 using the Akita-Doyon Arctic Wolf rig.

The 9,990-foot vertical well encountered its target in the Ivishak formation. Weeks declined to offer detailed results but called Dewline “a typical exploration well. Not a train wreck. We came pretty close to the operational amount we expected to spend.”

The Alaska Department of Natural Resources formed the Dewline unit in June 2009 and expanded the unit in March 2011 to include an offshore section. Under the existing five-year plan of exploration, UltraStar must drill a second well at Dewline by May 31, 2013.

UltraStar expects North Dewline No. 1 to be a 14,000- to 15,000-foot directional well with a 6,000-foot displacement to reach an offshore target from an onshore pad. Like its predecessor, the North Dewline No. 1 well will target the Ivishak formation, but could also explore potential targets in the Sag River and Kuparuk formations, Weeks said.

The only other well drilled to date in the area now included in the Dewline unit is the Point Storkersen No. 1 well drilled by the Hamilton Brothers in 1969 to a measured depth of 11,473 feet. That well tested an oil target in Sag River formation, flowing at 315 barrels per day and 735 bpd from two different depths in the Ivishak Sandstone.

Tiny company, big voice

Over the past year, weeks called for the Alaska Legislature to indefinitely extend the Small Producer Credit. The credit pays up to $12 million per year to companies that produce less than 50,000 barrels of oil equivalent per day (and smaller credits for companies that produce between 50,000 and 100,000 barrels of oil equivalent per day).

The credit is set to expire in 2016, although if a company brings a field online between 2006 and 2016, then the credit lasts for nine years from the start of production.

“Rather than have a specific year when the Small Producer Credit expires, I recommend that it stay in place for each reservoir or unit until payout of the exploration, delineation and development costs necessary to get the oil flowing,” Weeks wrote to lawmakers.

Weeks also continued to speak out about facility sharing on the North Slope after Rep. David Guttenberg, D-Fairbanks, proposed legislation to make oil and gas processing facilities into public utilities, like power producers and telecommunications companies.

Weeks said additional regulation would make the North Slope prohibitively complicated, but said the state could help by backing out its royalty production to make space for new producers. “It’s in the state’s interest to get new barrels in the system,” Weeks said.