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Evergreen finalizes plans to drill in Matanuska-Susitna unit Company has set up temporary office in Wasilla, expects to begin drilling six to eight coalbed methane wells in August Kay Cashman PNA Publisher
Evergreen Resources will file its first permit application and drilling plan in Alaska in the next two weeks, the company’s president and CEO told PNA March 26.
Evergreen Resources (Alaska) Corp., a wholly owned subsidiary of the Denver-based independent Evergreen Resources Inc. (NYSE:EVG), expects to submit drilling plans to the state Division of Oil and Gas for “four production pilot areas” in its Pioneer unit 30 miles northwest of Anchorage in the Matanuska-Susitna Borough, Mark Sexton, the top man at both companies, said.
Evergreen paid in the neighborhood of $960,000 cash in May 2001 for 100 percent working interest in the 48,000-acre coalbed methane prospect, which it acquired from Ocean Energy Resources Inc. and Union Oil Co. of California. Target one-half tcf gas “Of these four (production pilot areas), we will drill two pilots, each having three to four wells. In this process, we will drill, complete and then place the wells on an extended production test lasting at least six months,” Sexton said. The company’s budget for Alaska in 2002 is “a little more than $5 million. ”
The paperwork Evergreen is preparing for the Division of Oil and Gas will contain the locations of the four pilot areas.
Sexton said the drilling target is one-half trillion cubic feet-plus of recoverable gas from which the company expects daily production rates in the range of 50-200 million cubic feet. Drill new wells, hold off on re-completions The company, which uses its own specially designed drilling, cementing, stimulation and well servicing equipment (see photo on page 1), initially planned to re-complete wells that had been drilled by Unocal and Ocean Energy.
The re-completions, originally scheduled for November 2001, were delayed until after the first of the year because of Evergreen’s commitments in the United Kingdom.
On March 26, Sexton said Evergreen has decided not to re-complete the “two production wells nor do we plan to continue testing the BLT No. 1 well located near Big Lake. We will, however, utilize the disposal well drilled and partially completed by Ocean Energy and Unocal.”
His decision was not based solely on the unavailability of Evergreen’s completion equipment, which is still working overseas. Sexton said Evergreen knows, through experience that “slight variations in drilling, cementing, completion and production practices” spell success or failure in coalbed methane wells.
He said his company was not satisfied with the way the previous lessees drilled and completed the wells.
“If we go ahead and re-complete them and are disappointed with the results.…
“We’re just going to drill new wells and control the process all the way. … Ultimately, we might re-complete those old wells when we bring in our equipment but we’re not going to bring it in early. We’re going to wait until we have drilled our own wells,” Sexton said. Rig in Raton Basin, then Alaska Evergreen’s cementing, stimulation and well servicing equipment is expected to return to the United States in May.
The company’s drill rig recently returned from Ireland and is working on Evergreen’s properties in the Raton Basin in southern Colorado.
The drill rig will be moved to Alaska two weeks prior to drilling start-up, which is tentatively scheduled for August, Sexton said.
“Our frac equipment will arrive a few months later when we’re ready to fracture and stimulate the wells,” he said. 100 wells won’t happen quickly If the results from the first wells are good, Evergreen could drill as many as 100 wells in the Pioneer unit, Sexton said.
“But it won’t happen immediately. We’ll carefully ramp up the pace of drilling based on well results. We won’t be drilling six wells one year and 100 wells the next year. We’ll very carefully evaluate the program as we go. It would take several years to get to 100 wells.” Two year wait for leases In addition to its acreage within the Pioneer unit, Evergreen has applied for 46,080 acres of shallow gas leases from the state and won 14,908 acres at an Alaska Mental Health Land Office lease sale held in September — both sets of leases are in the Matanuska-Susitna Borough.
Evergreen would like to include the acreage close to Pioneer in that unit and form a separate unit for the other acreage.
The mental health leases were issued about 30 days after the lease sale but Evergreen is still waiting for the state to issue its shallow gas leases.
“The state leases are in limbo. It has been two years as of last week since we applied for them,” Sexton said.
In addition to understaffing problems at the Department of Natural Resources’ Division of Oil and Gas, Sexton thinks part of the reason for the delay is the shallow gas program is new and “the state wants to do it correctly. If there’s anything we can do to facilitate the process, were open to suggestions,” he said.
The director of the Division of Oil and Gas, Mark Meyers, “has been doing a terrific job. ... I’d encourage the Legislature not to cut DNR’s budget if they want to encourage development of this unconventional resource,” Sexton said. Unitization before drilling at Delta Evergreen plans to drill at the Pioneer unit first and then move its equipment to the Delta Junction area where it has an agreement with Dave Lappi to explore and, depending on results, develop 65 shallow gas leases on 333,383 acres. Lappi is the contact name on the leases, which are held by eight different leaseholders.
Although the Delta Junction leases have been issued, nothing will happen, Sexton said, until the state agrees to unitize the acreage. Talks with the state have been under way for several months and the division’s mood to unitization is receptive.
“Unitization is extremely important. It allows for orderly development, vital to these types of operations, of the field and minimizes waste of the resource,” Sexton said.
“The process is — get leases, get the unit and then start drilling. That has been our position since the beginning and still is our position,” he said. Negotiations ongoing with Cominco Last summer, Sexton told PNA his company was in negotiations with Teck-Cominco Alaska to develop four shallow gas leases north of the Red Dog Mine in the Wulik basin.
On March 26, he said the “negotiations are ongoing with Teck-Cominco. Not only with Teck-Cominco but we will also need to work with NANA Corp. We want to see everyone benefit from activity in the area.”
Evergreen is waiting for an internal senior geologist’s report on Teck-Cominco’s 23,040 acres. He said the report would determine “the extent of the shallow tight gas shale play.”
Sexton said, “The report is still in progress. But what I can add is that we do know these are all highly complex basins. … They clearly have some gas — the extent and upside potential has not been quantified.” Alaska office in Wasilla Evergreen has set up a temporary office in Wasilla where their Alaska projects manager, John Tanigawa, now lives.
“Once we begin daily operations, we plan to open up a full time office somewhere in the Matanuska-Susitna Borough, central to our operations,” Sexton said.
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