THE EXPLORERS 2006 - GeoPetro may seek partner for Alaska

Rose Ragsdale

For Petroleum News

A year after acquiring Pioneer Oil Co.’s gas leases on the west side of Cook Inlet near Point Mackenzie, GeoPetro Resources Co. is still considering its options for exploring the acreage.

In April 2005, the San Francisco-based independent purchased 100 percent working interest in the leases, which cover about 116,000 acres with promising geology for coalbed methane and natural gas deposits in significant quantities. Pioneer Oil originally purchased the leases at the State of Alaska’s May 2004 Cook Inlet areawide lease sale.

The leases encompass 27 tracts primarily in two onshore blocks — one west of Knik Arm across from Anchorage, from north of Point Mackenzie to southwest of Wasilla, and the other on the west side of Cook Inlet, inland from Trading Bay and west of Aurora’s Nikolai Creek gas field. At the time of the lease sale, Pioneer Oil said it hoped to explore for coalbed methane.

Prospective for coalbed methane, conventional gas

“Preliminary log analysis indicates the lease blocks may contain significant coalbed methane reserves as well as conventional accumulations of natural gas in Tertiary sandstones,” GeoPetro said in a 2005 prospectus.

“The coals occur in seams which are commonly 20 feet thick and can be as thick as 70 feet. Accessible onshore areas have 200 to 300 feet of coal shallower than 5,000 feet. Gas content for these coals ranges from 80 to 250 standard cubic feet per ton,” the company elaborated.

GeoPetro also told investors that it “may reduce exploration risk (in the Cook Inlet leases) by finding participants to pay most or all of the money expended towards acquisition and initial exploration.”

GeoPetro reported a 37 percent jump in 2005 earnings, but posted modest 8.4 percent increase in profits for first half of 2006. The company has spent recent months drilling wells in its gas-producing Madisonville Project in Texas and selling 70 percent interest in the Bengara Block in Indonesia to a subsidiary of Hong Kong-based CNBC. That company agreed to pay up to $18.7 million for exploration drilling and to carry all of GeoPetro’s share of exploitation costs up to an additional $41.3 million on any development of oil and gas discoveries within the prospect.

GeoPetro also owns oil and gas prospective properties in California, Alberta and Australia.