After emerging from bankruptcy protection earlier this year, the publicly traded Miller Energy Resources Ltd. became the privately owned Glacier Oil & Gas Corp.
The changes appear to go far beyond name and ownership status. If the first year of activities is any indication, Glacier will be pursuing a different strategy than its predecessor, favoring caution and focus where Miller was ambitious and sprawling.
Following the reorganization, Glacier retained the North Slope and Cook Inlet holdings of Miller Energy, including wholly owned subsidiaries Cook Inlet Energy LLC and Savant Alaska LLC. Through those two companies, Glacier now operates the West McArthur River unit and the nearby Redoubt unit on the west side of Cook Inlet, the North Fork unit in the southern Kenai Peninsula and the Badami unit on the eastern North Slope.
The operating subsidiaries submitted plans of developments for those units as the bankruptcy proceedings were underway, meaning that actual work this year is likely to diverge from proposed plans to a certain extent. While Glacier did not drill any new wells in the first nine months of 2016, the company trimmed some longer-term exploration prospects from its portfolio and began resuming previous efforts to work over existing wells. The plans of developments due over the coming months should provide a much clearer sense of the strategy of the company than its current workload.
According to state records from September 2016, Glacier has nine working interest owners: Apollo Investment Corp. (50 percent), seven affiliates of HPS Investment Partners LLC (48.52 percent collectively) and Lincoln Investment Solutions Inc. (1.48 percent). Among the new directors of the company is former Gov. Sean Parnell.
Redoubt and West McArthur RiverCook Inlet Energy acquired the Redoubt unit and the West McArthur River unit through the 2009 bankruptcy auction of former operator Pacific Energy Resources Ltd.
For both units, the company typically submits its plans of development in January, which came this year as Miller was reorganizing and Glacier was coming into existence.
Under the 16th plan of development for Redoubt, which runs through March 2017, Cook Inlet Energy proposed a fairly robust program. Assuming that the company emerged from bankruptcy intact - which it did - Cook Inlet Energy said it would sidetrack the existing RU-4A and RU-4B sidetracks by 2018. The company also suggested that it might convert the RU-3 well as a water injector or sidetrack the existing RU-7B sidetrack, depending on economics. The company also proposed a workover program at RU- 1A and RU-9.
According to AOGCC records, Cook Inlet Energy drilled no wells or sidetracks through the development cycle ending March 2016 or through the first nine months of 2016.
Through a workover campaign, Cook Inlet Energy returned the dormant Redoubt unit to production from the Osprey platform in mid-2011 and started drilling sidetracks and wells in 2014. The slowdown in activity since then appears to be impacting production.
By the start of 2014, the Redoubt unit had produced 2.88 million barrels of oil, according to the Alaska Oil and Gas Conservation Commission, and produced some 400,000 barrels over the course of the year to a cumulative total of 3.28 million by the start of 2015. By this beginning of this year, cumulative production had increased by 350,000 barrels to 3.63 million. Through the first six months of this year, the unit produced 100,000 barrels.
Similarly, Cook Inlet Energy initially focused on working over existing West McArthur River unit wells before expanding to new wells in 2014. In early 2015, the company told state officials it believed sidetracking existing wells was the best strategy for improving production at the field, but those plans have been on hold. This year, Cook Inlet Energy proposed no additional drilling, instead suggesting it would focus on ways to improve recovery from existing wells. The company stuck to its plans, drilling no wells or sidetracks at the unit this year, through September 2016, according to AOGCC records.
As with the Redoubt unit, the lack of activity at West McArthur River appears to be slowing production rates. By the start of 2014, the unit had produced 13.30 million barrels of oil. The unit produced some 500,000 barrels over the course of the year to a cumulative total of 13.8 million by the start of 2015. By this beginning of this year, cumulative production had increased by approximately 470,000 barrels to a total of 14.27 million. Through the first six months of this year, the unit produced 190,000 barrels.
North ForkCook Inlet Energy acquired the North Fork unit in late 2013. When global crude oil prices began declining in late 2014, the existing natural gas production (and also the existing sales contract) made the onshore unit particularly valuable to the company.
Cook Inlet Energy submitted its most recent plan of development for the unit in late December 2015, as Miller was in the early stages of its bankruptcy proceedings. The state approved the plan in early March 2016, after those proceedings had been completed.
Cook Inlet Energy completed the North Fork Unit No. 24-26 well in late 2014 and the North Fork Unit No. 42-35 well in early 2015, both of which fell within the timeframe of the existing 49th plan of development running from March 2014 to March 2015. The results of NFU No. 42-35 were “disappointing,” according to the company. “These poor results, coupled with an increasingly constrained financial situation, necessitated a pause in drilling activity at the North Fork Unit throughout the 50th Plan Year,” Cook Inlet Energy told state officials in its 50th plan of development, filed in December 2015.
In that plan of development, which outlined activities from March 2015 to March 2016, Cook Inlet Energy proposed a three-well development program for North Fork. The company drilled no wells or sidetracks for the remainder of 2015 or the first nine months of 2016, according to AOGCC. The company finished permitting the North Fork Unit No. 14-26 well in August 2015 but had yet to complete the well by September 2016.
In its 51st plan of development, for the year ending March 2017, Cook Inlet Energy again proposed to drill or sidewalk as many as three wells. The company said it would begin by sidetracking the existing North Fork Unit No. 42-35 well or North Fork Unit No. 42-35A sidetrack, followed by drilling the grassroots North Fork Unit No. 14-26 well. If the results of those two wells and sidetracks were favorable, and if economic conditions warranted, the company said it might also consider drilling a second delineation well.
In early 2016, AOGCC approved pool rules for the Tyonek gas pool at North Fork, which Cook Inlet Energy set as a prerequisite for sidetracking the existing North Fork Unit No. 42-35 well. The company intended to complete the project either late in the 50th planning cycle - early 2016 - or early in the next current cycle. Those plans never materialized. Given that the company never sidetracked the NFU No. 42-35, and therefore never got results, the continued halt in drilling is likely economic in nature.
Without any drilling scheduled for 2016, Cook Inlet Energy proposed a year of planning instead. The company proposed improving infrastructure such as compression and separation facilities, monitoring existing wells, planning for future development drilling, evaluating the need for a new pad in the northeast of the participating area and analyzing previous results to determine the value of drilling outside the existing participating area.
By the start of 2014, the North Fork unit had produced 6.18 billion cubic feet of natural gas. The unit produced 3.27 million cubic feet over the course of the year to a cumulative total of 9.45 bcf by the start of 2015. By the beginning of this year, cumulative production had increased by approximately 3.22 million cubic feet to a total of 12.67 bcf. Without continued activity, production is beginning to suffer. Through the first six months of this year, the unit produced 1.26 million cubic feet. If that rate continues for the second half of the year, it would represent a notable slowdown in production.
BadamiMiller acquired Savant Alaska and its 67.5 percent working interest in the Badami unit over the last half of 2014, a period of time when global oil prices fell by more than half.
With the combination of low oil prices and the ongoing bankruptcy proceedings, Savant was “unable to justify the expense” of conducting hydraulic fracture stimulations on two existing wells and drilling two new wells at the unit over this past year, the company told state officials in its most recent plan of development, which was filed in April 2016.
Those projects had been scheduled for late 2014 or early 2015 but were postponed to this past year because the company was unable to secure and barge equipment to Badami in time to complete the activities before the end of the open water season in the Arctic.
Savant now plans to pursue those projects “as economic conditions warrant.” The company is currently undergoing internal evaluations to determine what opportunities exist and intended to review those plans with state officials by the end of September.
As part of the reorganization, Savant began a geologic and geophysical review of the “Badami and Killian sands and associated producing wells,” as well as “historical wells and field structure.” The company is also reviewing potential targets outside the Badami Sands participating area, including the Killian Sands on the eastern end of the unit.
Even with those economic and administrative obstacles preventing development and exploration, Savant managed to improve operations at Badami over the past year.
A “minor workover” of the B1-11A and B1-36 wells identified 321 feet of additional zones in need of perforation, which the company performed in November 2015. The work increased production by 369 barrels per day, according to the company. Although small by North Slope standards, such an increase is noteworthy for the unit, which has struggled to reach its full production potential since BP brought it online in 1998.
By the start of 2014, the Badami unit had produced 6.65 million barrels of oil. The unit produced 390,000 barrels over the course of the year to reach a cumulative total of 7.04 million by the start of 2015. By the start of this year, cumulative production was 7.38 million barrels, up 340,000 barrels over the year before. Through the first six months of this year, the unit produced 190,000. If production holds steady for the remainder of the year, it would represent an increase over 2015, reflecting the benefits of the workovers.