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Vol. 21, No. 46 Week of November 13, 2016
Providing coverage of Alaska and northern Canada's oil and gas industry

Producers 2016: Aurora bankruptcy delays development

Independent had proposed a major development campaign before reorganization process began

ERIC LIDJI

For Petroleum News

Aurora Gas LLC entered bankruptcy protection earlier this year after more than 15 years of operation. The small Alaska independent blamed its financial problems on a combination of declining natural gas production at its Cook Inlet properties and a recent workover project that cost more than $1 million but failed to improve production rates.

Those problems followed a recent change in ownership. The utility Aurora Power Resources Inc. created Aurora Gas as an exploration and production arm in 1999, when major consolidations throughout the oil industry were creating opportunities for smaller companies to pursue overlooked fields in Alaska. Later, Kaiser-Francis Oil Co.-affiliate Aurora-KF LLC owned a 95 percent interest in Aurora Gas, with Aurora Power Resources owning 4 percent and Orion Resources Inc. owning 1 percent, according to state records. In August 2015, independent Rieck Oil Inc. acquired Aurora Gas outright.

Aurora filed for bankruptcy protection after three creditors - Aurora Well Service LLC, Shirleyville Enterprises LLC and Tanks-A-Lot Inc. - filed an involuntary petition with the United States Bankruptcy Court for the District of Alaska in May 2016. According to court records, as of June 1, Aurora owed its 20 largest creditors nearly $1.5 million.

The bankruptcy proceedings were still underway as The Producers went to print. When Rieck Oil acquired the company, Aurora Gas was operating five fields on the west side of Cook Inlet: Nicolai Creek, Lone Creek, Moquawkie, Kaloa and Three Mile Creek.

All five of those fields have seen minimal development work over the past three years and in some cases much longer. In a public presentation released in February 2016, Rieck Oil outlined a major exploration and development program through the end of 2017. The bankruptcy process has postponed any development, but the presentation provides a sense of the investment opportunities available within the existing Aurora Gas portfolio.

At the Nicolai Creek unit, Aurora would drill the NCU No. 12 extension well and the NCU No. 15 step-out well from the existing NCU No. 9 well. At the Moquawkie unit, the company would drill two extension wells into the West Moquawkie prospect.

The proposed program also called for acquiring a package of existing Apache Alaska Corp. 3-D seismic over the region to learn more about exploration leads around the Nicolai Creek unit, the Kaloa field and other areas throughout the leasehold. The company also wanted to follow exploration leads in other sections of its leasehold and was looking for a partner to share the expense of pursuing those opportunities.

In addition to this exploration and development drilling, Rieck Oil was proposing a considerable maintenance campaign at its existing wells. The company wanted to work over as many as eight existing wells spread across all five of its producing fields.

Five fields

With the bankruptcy proceedings, the future of those plans remains uncertain.

Aurora drilled no new wells at the Nicolai Creek unit in 2014, 2015 or the first nine months of 2016, although the company regularly proposed drilling in its plans of development. By the start of 2014, the Nicolai Creek unit had produced 8.14 billion cubic feet, according to figures from the Alaska Oil and Gas Conservation Commission. The unit produced 453.2 million cubic feet that year and 424.4 million cubic feet in 2015 for a total of 9.02 bcf by the start of this year. The unit produced 180 million cubic feet in the first six months of 2016, which suggests a decline from 2015 rates.

Aurora drilled no wells at Lone Creek in 2014, 2015 or the first nine months of 2016. By the start of 2014, the Lone Creek unit had produced 10 billion cubic feet. The unit produced 477.2 million cubic feet that year and 369.3 million cubic feet in 2015 for a total of 10.9 bcf by the start of this year. The unit produced 109.2 million cubic feet in the first six months of 2016, which suggests a decline from 2015 rates.

Aurora drilled no wells at Moquawkie in 2014, 2015 or the first nine months of 2016. By the start of 2014, the Moquawkie unit had produced 4.92 billion cubic feet. The unit produced 76.7 million cubic feet that year and 36.6 million cubic feet in 2015 for a total of 5.03 bcf by the start of this year. The unit produced 19.5 million cubic feet in the first six months of 2016, which suggests an increase from 2015 rates.

Aurora drilled no wells at Albert Kaloa in 2014, 2015 or the first nine months of 2016. By the start of 2014, the Kaloa field had produced 3.59 billion cubic feet. The field produced 6.9 million cubic feet that year and 3.5 million cubic feet in 2015 for a total of 3.6 bcf by the start of this year. The field produced just 946,000 cubic feet in the first six months of 2016, which suggests a decline from 2015 production rates.

Aurora drilled no wells at Three Mile Creek in 2014, 2015 or the first nine months of 2016. By the start of 2014, the field had produced 2.39 billion cubic feet. The unit produced 65.1 million cubic feet that year and 77.1 million cubic feet in 2015 for a total of 2.53 bcf by the start of this year. The unit produced 34.3 million cubic feet in the first six months of 2016, which suggests a decline from 2015 production rates.



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