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Alliance posts bond on North Slope Guitar unit to cure default
Kay Cashman Petroleum News
As of Aug. 8, the Alaska Department of Natural Resources’ Division of Oil and Gas is reviewing a $500,000 bond posted by Alliance Exploration to cure a default terminating the company’s Guitar unit, which is adjacent to the Prudhoe Bay oil field on the North Slope.
The bond was secured through Alliance’s surety bonding agent, Bowen, Miclette, & Britt Insurance Agency of Houston, Texas.
Alliance President Samuel Nappi received a certified letter June 27 from DNR Commissioner Corri Feige that gave the Alaska independent 20 days to comment on the company’s failure to post the bond by June 25, as promised.
On July 22, the bonding company sent a letter to the commissioner saying they had approved the bond.
Alliance had asked for a two-year delay in drilling its first well in the unit, which it formed with state approval in 2017.
In February, Feige gave the company a one-year extension for drilling but also placed the unit in default: If the company did not drill the well by the March 2020 deadline and post the $500,000 bond by June 25, the unit would terminate and its leases revert to the state.
The other major owner of Alliance, Barry Foote, told Petroleum News June 25 that although the unit could have an upside in the neighborhood of 200-300 million barrels of oil, the company’s owners had reached the limit of what they were willing to invest in the acreage - $1.5 million - without a farm-in partner.
Looking for a partner On the southwestern edge of the Prudhoe Bay unit and close to infrastructure, Foote said Guitar was the least expensive and least risky play on the North Slope.
“I hate to see all the work we’ve done … (including) processing 3D seismic go to waste, but … we need a partner to move forward,” he said.
Foote said Feige, part of the administration of Gov. Mike Dunleavy, “seems to be willing” to work with Alliance on curing the default and getting a well drilled, but the only real solution, he said, would be a partner who is able to help shoulder the cost of drilling.
Apparently, Nappi and Foote reconsidered how much they were willing to invest.
“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,” Foote said in July.
Originally an ARCO Alaska unit 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 as crude pieces were dropping.
Alliance has a 100% 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 ADL 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 ADL 392104 that would penetrate the Ivishak, the formation that hosts the Prudhoe field reservoir, with a lateral targeting a seismic anomaly in the Kuparuk C sands.
In conjunction with the 2017 unit approval the division also approved a plan of exploration for Guitar submitted by Alliance. That plan said the company would drill a well in lease ADL 392104 into a seismic anomaly in the Kuparuk C, preferably during the winter of 2018, but no later than the winter of 2019, depending on how soon the company could secure the necessary permits.
The well was to penetrate to the base of the Ivishak, with a lateral into the Kuparuk C. Depending on the results from that first well, Alliance was to drill a second well in the same tract the following year. The second well was to target a structural high in the Ivishak, bounded by a fault.
For more information contact Derek Foote, Alliance’s manager of land operations for Alaska via email at [email protected] or by phone at 907-953-5525.
- KAY CASHMAN
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