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Vol. 19, No. 29 Week of July 20, 2014
Providing coverage of Alaska and northern Canada's oil and gas industry

Explorers 2014: Brooks Range Petroleum moving toward development

The active independent could be sold soon as part of a larger financing plan for the Mustang development

Eric Lidji

For Petroleum News

Brooks Range Petroleum Corp. spent a decade as one of the most active exploration companies on the North Slope, but its future exploration plans in Alaska are unknown.

The uncertainty comes from two sources.

First, the operating arm of Kansas-based Alaska Venture Capital Group LLC is currently working to bring its first North Slope development online by early 2016. The development program at the Mustang field of the Southern Miluveach unit includes a $225 million processing facility partially funding by public investment and a $350 million drilling campaign taking place in five phases over a three-to-four year timeline.

Second, as of press time Alaska Venture Capital Group and its partner, the Nabors-subsidiary Ramshorn Investments Inc., were in the process of selling Brooks Range Petroleum to the privately owned independent company Thyssen Petroleum USA Corp.

Who is Thyssen?

Thyssen Petroleum USA is the American subsidiary of Thyssen Limited, a privately owned company based in the British Virgin Islands, with offices in Monaco and Houston.

The chairman of the company, a Swiss national named Baron Lorne Thyssen-Bornemisza, “heads a family business with investments in the entertainment industry in California, agriculture in Pakistan and is a major shareholder in IHS, the critical information provider to the oil and gas industry,” according to a company website.

Thyssen Petroleum USA formed a subsidiary called TPNorthSlope LLC on March 14, 2014, according to the Division of Corporations, Banking and Professional Licensing.

In addition to buying Brooks Range Petroleum, which held no state leases as of April 7, 2014, according to the state, Thyssen would also buy a 90 percent working interest in the Southern Miluveach unit from the Alaska Venture Capital Group and Ramshorn. The remaining 10 percent interest would be split between Brooks Range Development Corp., which holds nearly 9 percent, and Mustang Road LLC, which holds 1 percent.

Brooks Range Development Corp. is a wholly owned Alaska Venture Capital Group subsidiary formed in 2010 to acquire the interests of a previous investor in the program.

Mustang Road LLC is a joint venture between the Alaska Industrial Development and Export Authority and the Alaska Venture Capital Group. The partners formed the company in 2013 to construct a road and pad to support operations at the Mustang field.

AIDEA and the private company CES Oil Services Pte. Ltd are forming a new company, Mustang Operations Center 1 LLC, to finance a $200 million to $225 million processing facility for Mustang. AIDEA will spend up to $50 million on the project. The joint venture will get a 20 percent annually adjusted working interest in the Mustang field.

The sale is a pre-condition for the financing, according to AIDEA.

As of May 2014, Alaska Venture Capital Group, Ramshorn and Brooks Range Development Corp. held nearly 105,000 acres of state leases across the North Slope.

The acreage included four units and one pending unit: the Southern Miluveach, Kachemach and Tofkat units near the Colville River, the Beechey Point unit north of Prudhoe Bay and the proposed Telemark unit on the eastern North Slope.

The Beechey Point unit

Alaska Venture Capital Group came to Last Frontier at a dynamic time.

A wave of mergers and acquisitions in the late 1990s changed the face of the oil industry, and long-time oilmen John Jay “Bo” Darrah Jr. and Barton Armfield formed their company in 1999 to pursue relatively large but overlooked prospects on the North Slope.

The company quickly acquired properties and drew up exploration plans, but kept delaying those efforts because of difficulties, including funding and facilities access.

From 2004 to 2006, Alaska Venture Capital Group regrouped. It acquired additional leases, created Brooks Range Petroleum Corp. and formed a multi-partner joint venture.

Exploration efforts began in the Gwydyr Bay area in 2007.

The Alaska Venture Capital Group had initially picked up a minority working interest in several leases in the Gwydyr Bay area in a 2001 land swap with Phillips Petroleum. The company formed the Sakonowyak River unit that summer with majority interest owner BP Exploration (Alaska). The partners planned to drill two exploration wells by May 2004, but Alaska Venture Capital Group faced numerous challenges over the following 18 months - including difficulty finding partners, difficulty negotiating access to existing infrastructure and difficulty finalizing farm-in agreements and seismic licensing.

Alaska Venture Capital Group cancelled the program and disbanded the unit, but the company remained interested in Gwydyr Bay and acquired the acreage again in 2005.

Testing Gwydyr Bay

“Initially we were just going to drill in one prospect,” former President Ken Thompson told Petroleum News at the time. “We then acquired seismic and reviewed well records and identified a second prospect.” First, the company drilled the North Shore No. 1 to gather more information about an oil accumulation in the Ivishak first tested by Mobil in the Gwydyr Bay South No. 1 well in 1974. Next, the company drilled the Sak River No. 1 to follow up on a prospect previously included in the BP-operated Sak River unit.

The 11,348-foot Sak River No. 1 was a dry hole, but the results were intriguing enough for the joint venture to consider returning to drill a sidetrack. The 10,319-foot North Shore No. 1 found “approximately 70 feet of oil-charged Ivishak sandstone formation.”

That winter, Brooks Range Petroleum also collected 130 square miles of 3-D seismic and the results “identified two small satellite prospects to North Shore No. 1 that can be reached from the North Shore No. 1 drilling pad,” according to a partner, TG World.

Brooks Range Petroleum re-entered North Shore No. 1 in early 2008 to test the Ivishak and the shallower Sag River formations. The Ivishak flowed at 2,092 barrels of oil per day, but a mechanical problem down hole compromised the Sag River test. One partner estimated that the Sag River, unencumbered, could have flowed at 1,000 barrels per day.

That summer, the joint venture acquired the nearby Pete’s Wicked prospect, a discovery BP made in 1997 and Pioneer Natural Resources Inc. acquired in a 2003 lease sale.

Around that time, TG World Energy said the joint venture was “establishing a threshold” for development, or searching for a way to improve the economics of the region by connecting several smaller satellites within relatively close proximity of one another. The potential solutions at the time included two production pads or extended reach drilling.

In 2009, the state formed the Beechey Point unit over 25 leases covering some 52,876 onshore and offshore acres. The unit included five exploration blocks and a commitment drill in one block by December 2010 and drill in another block by December 2012.

A dispute between partners kept the joint venture from drilling in early 2009, but Brooks Range Petroleum drilled the Sak River No. 1A sidetrack and the North Shore No. 3 delineation well in early 2010. Sak River No. 1A prompted TG Energy World to pull back from the joint venture. The results of North Shore No. 3 remain proprietary.

North Shore No. 3 satisfied the first work commitment and the state subsequently gave Brooks Range Petroleum until 2014 to drill a well in another exploration block.

In September 2012, Brooks Range Petroleum relinquished some 42,119 acres on the western side of the Beechey Point unit, leaving seven leases covering some 10,757 acres.

The move allowed Brooks Range Petroleum to focus its resources on bringing the Mustang field into production. Chief Operating Officer Bart Armfield said at the time that the company remained interested in its exploration properties, including the Gwydyr Bay region, but would need to conduct appraisal drilling before moving forward.

The Tofkat and Putu units

Exploration efforts continued at the Tofkat prospect.

After re-entering North Shore No. 1 in early 2008, Brooks Range Petroleum drilled the 13,174-foot Tofkat No. 1 exploration well and two sidetracks in the area near Nuiqsut.

Early testing showed a 10-foot interval of gross pay with between four and six feet of net pay. Using a modular formation dynamics tester, Brooks Range Petroleum took 10 oil samples from four sandstone reservoirs. The sampling found 22.9-24.0 degree API oil in the Brookian Topset 1 at 6,128 feet, followed by 13.4-14.7 degree API oil in the Brookian Topset 2 at 6,294 feet, then 36.6-38.2 degree API oil in the Brookian Turbidites at 11,000 feet and finally 41.8-42.0 degree API oil in the Kuparuk zone at 11,943 feet.

The two sidetracks targeted bottom-hole locations 3,500 feet to the southeast and 4,500 feet to the northwest of the main well in an attempt to delineate the reservoir. The well and both sidetracks all also “encountered oil in secondary targets above the Kuparuk.”

Brooks Range Petroleum also shot a 210-square-mile 3-D seismic survey over the region.

By August 2009, Brooks Range Petroleum was showing an interest in revisiting Tofkat, but Vice President of Land Jim Winegarner told Petroleum News that, “whether we do it this year or next is subject to the 3-D seismic we shot. … We’re prospecting that data now. … We’re not sure if we will be ready to drill there in time for this winter or not.”

By early 2010, Brooks Range Petroleum was exploring other prospects.

The joint venture lost three leases at the prospect to expirations. To avoid losing more acreage, Brooks Range Petroleum applied to form the Putu unit in mid-2011. The proposal included 39 leases covering some 39,993 acres of state and Native land.

The unit application split the proposed unit into three exploration blocks and proposed drilling al least one well in each block by March 2013, 2014 and 2015, respectively, with the option to localize those wells if focused exploration seemed more productive. The application envisioned a second unit plan down the road with more drilling commitments.

The companies said they had spent $25 million exploring the unit up to that point.

The state split the proposed unit into two. The Tofkat unit included 21 leases owned jointly by the state and ASRC covering some 9,131 acres. The Putu unit includes nine state leases covering some 21,946 acres. The remaining leases stayed un-unitized.

The Tofkat unit agreement required Brooks Range Petroleum to complete the Tofkat No. 2 well and the Tofkat No. 2-A sidetrack into the Kuparuk formation by May 2013, and sanction a Tofkat development by October 2013. The Putu unit agreement required the company to post a $10 million bond to backstop a four-well drilling commitment.

By mid-2012, Brooks Range Petroleum floated the possibility of drilling a delineation well and a sidetrack at Tofkat the following winter to confirm the size of the previous discovery in the Kuparuk formation and test a deeper target in the Jurassic formation. The company had previously estimated that Tofkat held about 40 million barrels of recoverable oil in the Kuparuk C sands and another 20 million in the Jurassic sands.

In September 2012, Brooks Range Petroleum dropped the Putu unit. The company said it wanted to focus its resources on the Mustang development and three exploration targets.

The plans firmed up toward the end of the year, but by March 2013 the company had delayed the program until the following winter while it worked “with area stakeholders to obtain the required permitting for drilling.” The company did not drill at Tofkat this year.

The Kachemach unit

The Kachemach unit remains underexplored.

Just as the state segmented the proposed Putu unit to create the Tofkat unit, it segmented the proposed Southern Miluveach unit to create the Kachemach unit. The smaller Kachemach unit included 11 leases covering some 16,487 acres of state and Native land.

The unit agreement split the Kachemach area into two exploration blocks and required Brooks Range Petroleum to complete two wells in Block A by May 31, 2013. The first well would target the Caribou trend and the second well would target the Moonlight trend. If the company met those commitments, it would then be required to complete one well in Block B, targeting a different prospect in the Moonlight trend, by May 31, 2014.

The two Kachemach wells were competing for financing against other prospects in the Brooks Range Petroleum portfolio. “Decisions on proceeding - or not proceeding - with some or all of these wells will be made in the next few months and will be based on working interest owners’ technical and capital budgeting priorities,” Alaska Venture Capital Group lead member Ken Thompson told Petroleum News in August 2012.

Brooks Range Petroleum seemed optimistic about Kachemach by early October, but in December 2012 the company told Petroleum News that the program “remains under consideration within the (Department of Natural Resources), and we are not at liberty to speculate as to the response that may come from the decision issued by the DNR.”

By March 2013, the company said it was continuing to “re-process and merge acquired seismic data to identify optimal drilling location and target” and plans to drill an exploration well next winter, after discussing the project with working interest owners.

The eastern North Slope

Concurrent to those efforts, Brooks Range Petroleum has eyed the eastern North Slope.

By early 2006, the company was touting the Slugger prospect south of the Point Thomson unit as one of the many prospects it hoped to pursue in the years to come. The company picked up additional leases in the area the following year and planned to acquire 130 square miles of 3-D seismic over the region in early 2008, but low snow cover that winter led the companies to postpone the program until the following year.

The legal challenges between partners forced the joint venture to postpone the program again in early 2009 and other exploration opportunities have since taken precedent.

In early 2011, Brooks Range Petroleum proposed the Greater Bullen unit including 68 leases covering some 200,179 acres between the Point Thomson and Badami units. The proposed unit included the Friezen, Red Dog and Telemark prospects. The proposal included plans for two 3-D seismic surveys in advance of exploration and development.

Brooks Range Petroleum ultimately withdrew the application in September 2011 and surrendered approximately 100,000 acres in the area in order to focus on a smaller area.

Among the acreage Brooks Range Petroleum retained were the leases comprising one of the six exploration blocks proposed for the original unit. In early 2012, the company proposed to form the Telemark unit over those nine leases covering some 16,235 acres.

The company proposed to shoot a 3-D seismic survey over the region by the end of 2012 and to drill a well by the end of March 2014. The company justified the unit by saying a development would lower the cost for future projects across the eastern North Slope.

Later in the year, with a decision about the unit still pending, Brooks Range Petroleum decided to defer any Telemark exploration until early 2014 “pending negotiations for a joint drilling agreement with Savant Alaska in the adjoining Badami unit.” By late 2012, Savant and Brooks Range Petroleum proposed expanding the Badami unit to include the East Mikkelsen prospect, with plans for Savant to drill an exploration well in early 2014.

The state approved a partial expansion, but the exploration well has been on hold while Savant has been appealing the decision to exclude segments of the prospect from the unit.

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