Oil Patch Insider

Canadian Superior closes book on Nova Scotia well; Eni files for Rock Flour unit

Toss another few million dollars into the US$30 million spent drilling one of offshore Nova Scotia’s most celebrated wells.

Only this time Canadian Superior Energy has agreed to pay C$2.15 million and settle a Canadian class-action lawsuit.

That followed a similar deal in the United States in June when the Calgary-based company agreed on a US$3.2 million payment to settle a legal action with U.S. investors.

Court approvals are still needed in both cases.

The settlements related to the drilling last year of the Mariner I-85 exploration well that was touted to contain 1.2 trillion cubic feet of natural gas with a potential production rate of 200 million cubic feet per day.

Under a farm-out arrangement with El Paso Oil & Gas Canada, Canadian Superior retained a 50 percent working interest in the exploration license by contributing up to one-third of the drilling costs.

Before the well reached its targeted depth of 18,370 feet speculation was rife that the well had hit pay dirt.

Canadian Superior issued a news release trumpeting promising results, sending its own shares surging by more than 50 percent.

But, within days, another release said the well was being abandoned when El Paso turned down requests for more funding to test Mariner I-85, much to the chagrin of Canadian Superior Chief Executive Officer Greg Noval, a noted industry maverick and risk-taker.

He conceded that his company had reluctantly agreed with El Paso not to proceed with testing or completion operations on the test well “to maintain the well within the original budget.”

That left everyone to ponder whether Mariner I-85 was a discovery or a dud.

But investors were not prepared to go quietly.

They accused Canadian Superior of issuing “materially misleading statements” about the well and alleged that Noval improperly traded shares in advance of announcing the well was being abandoned.

None of the allegations has been proven in court, and the settlement was covered by Canadian Superior’s insurance policy.

The company said the settlement contained no admission of liability by any party and was “entered into to avoid costly and time-consuming litigation by all parties.”

—Gary Park

Ooops. Kerr-McGee not involved at Eni’s Rock Flour prospect; Eni files unit application

And, according to officials from Eni Petroleum Exploration Co., in addition to filing for permits to drill up to three wells at the central North Slope prospect, the company has also applied with the state Division of Oil and Gas to form a Rock Flour unit.

Five of the eight leases in the proposed unit are 100 percent Eni-owned, purchased from Armstrong Alaska; three other leases are owned 50-50 by ConocoPhillips Alaska and Pioneer Natural Resources Alaska.

The three well locations are all on Eni leases.

The proposed Rock Flour unit is along the southeast corner of the Kuparuk River unit just a few miles west of the Prudhoe Bay unit.

Eni’s well application, which was submitted by Armstrong on behalf of Eni, calls for the wells to be drilled from three ice pads with access via a nine and a half mile ice road from Kuparuk River MP1.

Houston-based Eni Petroleum is an affiliate of Italy’s Eni SpA, one of the largest oil companies in the world. On Aug. 26 Eni Petroleum said two weeks earlier it had purchased the Alaska assets of Armstrong Alaska (an affiliate of Denver’s Armstrong Oil and Gas), which included 104 North Slope oil and gas leases where Eni said “reserves are expected to exceed 170 million barrels.” (See story in the Aug. 28 edition of Petroleum News.)

The leases encompass 341,500 gross (273,000 net) acres onshore and offshore in state and federal waters. As part of that deal Eni inherited Armstrong’s minority working interests with Pioneer and Kerr-McGee in northern Alaska, including the proposed Oooguruk and Nikaitchuq developments.

—Kay Cashman