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Osprey platform rig nears full assembly Anchorage-based Cook Inlet Energy has slate of well sidetracks planned; Tennessee parent company reports third quarter financials Wesley Loy For Petroleum News
Some tough winter weather delayed the work. But now Cook Inlet Energy is rolling toward the finish line on a big project — installing a new drilling rig atop the Osprey platform.
“I expect the derrick to start going up in about a week, and full assembly of the rig should be complete in 30 to 60 days,” David Hall, the company’s chief executive, said March 12.
His comments came during a conference call with investors in Cook Inlet Energy’s parent company, Tennessee-based Miller Energy Resources.
Once the rig is operational, Cook Inlet Energy aims to jump into a series of well workovers that could greatly boost the company’s Alaska oil production.
The company intends to repair or sidetrack five shut-in wells on Osprey, with the expectation of restoring the roughly 2,250 barrels of oil per day the wells once produced.
Reviving idle assets Cook Inlet Energy, based in Anchorage, is a young company off to a fast start.
It launched as an oil and gas producer in December 2009 after acquiring, with Miller’s backing, a collection of assets out of bankruptcy. The previous operator was Pacific Energy Resources.
The main assets included the West McArthur River unit, the Redoubt unit and Osprey platform, and the Kustatan onshore production facility.
Since the purchase, Hall and Cook Inlet Energy have been busy restoring production from the shut-in properties.
Osprey is the newest and southernmost of the 16 platforms in Cook Inlet. Forcenergy completed installation in 2000, but production from the platform proved a serious disappointment.
Cook Inlet Energy is hoping to turn that around with rig 35, a National 1320 model built at a cost of $19.5 million in Houston and then shipped to Alaska.
Installation of the rig on the platform might have been done by now, but work was suspended due to extreme January cold and heavy ice conditions in Cook Inlet, which raised worker safety concerns and challenged workboat operations.
Oil pricing change Miller Energy is listed on the New York Stock Exchange under the ticker symbol MILL.
In a March 12 filing with the U.S. Securities and Exchange Commission, the company reported total revenue of $8.4 million against total costs and expenses of $14.5 million for an operating loss of $6.1 million for the third quarter ended Jan. 31.
Miller reported total net production of 89,234 barrels of oil equivalent for the quarter, with Alaska contributing 90 percent and Tennessee 10 percent.
In the conference call, Hall put current daily Alaska oil production at about 1,040 barrels per day, with most of it coming from wells in the West McArthur River unit and the rest from the RU-7 well on the Osprey platform.
With the planned Cook Inlet well workovers and sidetracks, Miller expects to have total company production of 4,500 to 5,000 barrels per day by the end of calendar year 2012, said David Voyticky, company president.
A big change took hold at the outset of February, when the company began selling its oil based on Alaska North Slope crude pricing rather than a West Texas Intermediate index.
ANS crude has been selling at a big premium over WTI, and during February the company saw an increase in its average realized price of about $15 per barrel, Voyticky said.
Miller has a good relationship with a syndicate of lenders, he said.
“We have a very aggressive development plan that’s going to require a couple hundred million dollars of capital,” Voyticky said.
Land rig overhauled Besides the new rig taking shape atop Osprey, Miller and Cook Inlet Energy also recently upgraded rig 34, brought up from Tennessee to target shallow gas prospects on Cook Inlet’s west side.
Upgrades to the truck-mounted Atlas Copco RD20 model rig included outfitting it for winter operations. Accommodations also were made for a larger blowout preventer stack and a mud handling system, the SEC filing said.
Rig 34 is now doing a workover of the KF-1 well in the Kustatan gas field. Later, the plan is to deploy the rig on exploratory prospects on the Otter and Olsen Creek leases, company executives said.
Hall also spoke about efforts to generate additional revenue through the rental of its west Cook Inlet facilities. He said Cook Inlet Energy is studying how to process “other people’s crude” at the oversized Kustatan facility acquired from Pacific Energy.
In 2011, Hall said, the company signed a contract with another operator to receive cuttings from a new well. Cook Inlet Energy is setting up a grind and inject facility next to its West McArthur River property for cuttings disposal, he said.
“We see that to be a fairly significant revenue generation stream,” Hall said.
Cook Inlet Energy also has been renting out its work camp to other parties, he said.
Miller’s SEC filing noted “$299,320 in miscellaneous income generated from the rental of our facilities in Alaska” during the third quarter.
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