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Vol. 25, No.42 Week of October 18, 2020
Providing coverage of Alaska and northern Canada's oil and gas industry

Hilcorp looks to drill 17 wells in the Milne Point unit in 2021

Kay Cashman

Petroleum News

On Oct. 14 Hilcorp Alaska filed the 39th plan of development for the North Slope Milne Point unit with Alaska’s Division of Oil and Gas, for the period of Jan. 13, 2021, through Jan. 12, 2022.

The company told the division that it anticipates drilling up to 17 new wells, completing as many as 20 well workovers with the ASRI rig, and undertaking six major facility projects during the 39th POD period, including polymer facility installation and startups at Moose Pad, I Pad and E Pad, as well as a fuel gas compressor installation and start-up and a G Pad replacement test separator installation.

Other 39th POD projects might include, but are not limited to:

* B Pad gas injection compressor installation and start-up.

* V-5304 grid replacement.

* S Pad test separator replacement.

* S Pad polymer engineering and procurement.

* Solar Titan 130 power generator engineering and procurement.

* Diesel tank to slop oil tank conversion.

During the remainder of the 38th POD period, Hilcorp expects to complete up to eight additional workovers, as well as drill five new wells, including two L Pad Kuparuk injectors, one F Pad Kuparuk injector sidetrack, one F Pad Kuparuk producer sidetrack, and one I Pad Schrader Bluff producer.

In addition, Hilcorp anticipates finishing the following projects before the end of the 38th POD period:

* F Pad Kuparuk polymer pilot installation and startup.

* I Pad electrical infrastructure upgrade.

* I Pad test separator upgrade.

* Installation of chemical storage tanks at B Pad.

* Pad expansion at E, S and Moose pads.

Field production

From Jan. 1 through Aug. 31 of this year the average daily production rate from the Milne Point unit was 32,407 barrels of oil per day.

The unit consists of the Kuparuk reservoir in the Kuparuk participating area, the Schrader Bluff reservoir in the Schrader Bluff PA and the Sag River reservoir in the Sag River PA.

Additionally, the Milne Point unit includes the following tract operations: C-15A, S-90, C-23, K-33, MPS-37, MPS-39, MPS-41, MPS-43, B-30, C-46 and S-203.

38th POD drilling to date

Hilcorp anticipated drilling up to 28 new wells under the 38th POD from Jan. 13, 2020, through Jan. 12, 2021. To date the company has drilled 19 new wells, including:

* Moose Pad Schrader Bluff, four producers and three injectors.

* L Pad Schrader Bluff, two producers and two injectors.

* S Pad Schrader Bluff, one producer and one injector,

* I Pad Schrader Bluff, two producers and three injectors.

* K Pad Kuparuk, one producer (a sidetrack).

Hilcorp also expected to complete as many as 20 workovers under the 38th POD. To date, it has completed 13 of those workovers.

38th POD major projects

To date Hilcorp has completed the following major facility projects that were outlined in the 38th POD:

* F Pad polymer facility installation and start-up.

* J and L pad polymer silo upgrade.

* LM2500 turbine overhaul completion.

* Portable heater for test separation.

* Solar Titan 130 power generator and associated infrastructure startup.

* Moose Pad production segregation from F&L Separation.

* L Pad PLC upgrade.

Drilling candidates, and beyond

Under the 39th POD period the 17 new wells that Hilcorp anticipates include 14 I Pad Schrader Bluff wells (six injectors, eight producers) and three J Pad Schrader Bluff wells (two injectors, one producer).

The company is also evaluating the following possible long-term activities:

* Future drilling opportunities both on undeveloped acreage in the northwest of the unit, particularly in the net profit share leases, and previously developed acreage from I, H and S pads in the Schrader Bluff PA.

* Continued expansion of polymer injection into the Schrader Bluff reservoir in horizontal well patterns beyond current polymer injection pilots at J and L pads.

* Evaluation of continued performance from Ugnu horizontal producing well S-203 to help determine future Ugnu development strategy.

* Continue to evaluate infill drilling opportunities in the Kuparuk sands via conventional and coiled tubing drilling.

Hilcorp history in Alaska

A privately held independent, Hilcorp entered Alaska by acquiring a significant percentage of the producing Cook Inlet basin through two acquisitions in 2011 and 2012 - one from Union Oil Co. of California and the other from Marathon Oil Corp.

Hilcorp was known for rejuvenating aging oil fields, and it quickly pursued that strategy in Cook Inlet. Its investments yielded flat or growing production at oil and/or natural gas fields that had long been in decline.

The 2014 deal between Hilcorp and BP seemed like a perfect marriage. It allowed an eager newcomer to grow, and it allowed an established company to focus.

Among other purchases, Hilcorp became the operator and 50% working interest owner of the Milne Point unit.

The company devoted considerable resources to Milne, just as it had done with its legacy Cook Inlet fields.

Drilling more wells in more places, Hilcorp renewed the focus on Milne’s viscous oil. And it commissioned a new drilling pad - Moose Pad. In the six years since the sale in 2014, BP and Hilcorp as partners invested approximately $700 million with Hilcorp drilling more than 60 new wells.

The results have been dramatic. Milne Point was producing 18,400 barrels per day when Hilcorp took over the field in November 2014. By early 2020, production had reached 34,000 barrels per day with forecasts suggesting 40,000 barrels per day by year-end.

Investing in technology

Speaking to Petroleum News toward the end of 2019, a retired unnamed BP Exploration (Alaska) executive pointed to the different management structures of the two companies as a source of change.

Hilcorp is thought to have roughly half the levels of management between low-level employees and top executives compared to BP, which could lead to greater investment in technology and equipment at the Prudhoe Bay oil field, which Hilcorp took over as operator on July 1. (The same deal made Hilcorp the 100% owner of the Milne Point unit.)

“That’s what Hilcorp did at the Milne Point field when they took over from BP five years ago - they’ll go after the big prize at Prudhoe, which is viscous oil. … Lower operating costs … will mean more oil for Hilcorp and the other Prudhoe partners (ExxonMobil and ConocoPhillips), but it will also mean more oil down TAPS and more revenues for the State of Alaska,” the former executive explained.

As that comment suggests, the Prudhoe Bay field has always been seen as a keystone of the North Slope oil industry - and by obvious extension, the broader economy of Alaska.

Without the Prudhoe Bay unit, and by extension the trans-Alaska oil pipeline, the Kuparuk River unit and the Colville River unit (Alpine), it is hard to imagine how any of the smaller North Slope oil fields could have been developed. While many of those fields would be considered elite properties if they were in the Lower 48, their position in the wilderness of Arctic Alaska increased the cost of development, making many uneconomic on their own.

In fact, even today, more than 60 years after the discovery of the Prudhoe Bay oil field and the expansion of infrastructure in several directions, many significant North Slope oil fields remain stubbornly beyond the reach of economic development - at least as-of-yet.

Major technological advances and investments have allowed Prudhoe operators to keep the field alive - it is still the largest producing oil field in Alaska at some 260,000 barrels per day. That’s 10,000-20,000 more barrels daily than it was two years ago, David Wilkins, the top Alaska executive at Hilcorp Alaska, said Sept. 24.

The production increases at the Milne Point unit are “an important milestone for the State of Alaska and Hilcorp,” Hilcorp Energy Co. President Jason Rebrook said in the first quarter of this year. “By empowering our employees closest to the wellhead, driving efficiencies, and innovating, we’re increasing production at Milne Point and putting more oil in TAPS. Our goal is to apply these successes at Prudhoe Bay and beyond.”

Two rigs working at Milne

In the years since it first acquired assets from BP, Hilcorp has directed most of its North Slope resources toward Milne Point, increasing activity, infrastructure and production - and keeping two rigs working at the field, even through the COVID pandemic.

The company’s work not only included increased attention to aging wells, Hilcorp also increased grassroots drilling activities and quickly announced new pad permitting efforts. With the new Moose Pad brought into production in just two years, under budget and without incident, Hilcorp is advancing preliminary work for a proposed Raven Pad and an expansion of its existing S Pad.


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