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Vol. 22, No. 39 Week of September 24, 2017
Providing coverage of Alaska and northern Canada's oil and gas industry

Excited over Badami

Glacier thinks Starfish well has great potential at a key NS location

Alan Bailey

Petroleum News

Glacier Oil and Gas is excited about the potential of its Badami field on Alaska’s North Slope, both in terms of the location of the field and its facilities, and in terms of the Starfish well that the company plans to drill during the coming winter, Carl Giesler, company CEO, told the Alaska Support Industry Alliance on Sept. 14.

“We really do believe that’s a game changer for the company,” Giesler said of the planned exploration well at Badami.

He characterized the Badami field as occupying a key position in the more eastern part of the North Slope. With processing facilities scaled for production of up to 38,500 barrels of oil but current production of only about 1,000 barrels per day, the facilities have ample capacity to act as a fulcrum for future development.

“We think that could be a central facility for any development, for oil production acreage around us,” Giesler said.

And the Badami pipeline can also act as a conduit for transporting oil to the trans-Alaska oil pipeline, he commented.

Moving ahead

Glacier has received bids for ice road construction for the Starfish drilling: Road construction should start in November and continue into January. Everything should be in place for the start of drilling by the end of January. The Nabors 27E drilling rig that the company plans to use is expected to take about 60 days to complete the well. Following the use of fracking to test the prospect, drilling results should be in hand by the end of April.

“If this well works close to what we think it will, it should open five to seven more prospects similar to it,” Giesler said.

Giesler told Petroleum News that the Starfish well is targeting a potential reservoir interval immediately above the oil source rock and below the Badami sands that form the reservoir for the Badami field.

Three buckets

In his talk to the Alliance Giesler grouped his company’s overall operations into three buckets: oil on the west side of Cook Inlet; gas onshore the east side of the inlet; and Badami. He said that his company is also engaged in three key plays: oil development in the Redoubt field in western Cook Inlet, the planned Sabre exploration well on the west side of the inlet and the drilling at Badami.

Likening the three plays to the dealing of three flop cards in Texas hold ’em poker, he said that one of these cards, the Redoubt development, is already face up on the table. A combination of drilling, fracking and the use of waterflood has successfully boosted oil production from the field - the drilling of the Redoubt Unit No. 3 well in the first half of this year added a little more than 1,100 barrels per day to field production, he said.

The second card, the drilling of the Sabre well, northwest of Glacier’s West McArthur River field, is under evaluation for potential drilling in the summer of 2018. And the card representing the Badami drilling remains face down until the drilling results are known.

In Cook Inlet, Glacier has the potential to more than triple its oil production, Giesler said.

Giesler characterized his company’s Cook Inlet gas interests as the production of a nice fuel but not a game changing operation. The company operates the North Fork gas field on the Kenai Peninsula.

“If people want more gas, we can make more gas,” he said.

Emerged from bankruptcy

Glacier Oil and Gas is the company that emerged from the bankruptcy of its predecessor, Miller Energy Resources Ltd. and its subsidiaries Cook Inlet Energy LLC and Savant Alaska LLC, operator of the Badami field. Although Glacier still has those two subsidiaries, the company views itself very much as a single entity, Giesler said.

And the company has now established a strong financial position, having dramatically cut its costs while also increasing production levels, Giesler said. In particular through the elimination of unnecessary cost elements, overall costs including operating costs and capital expenditure have dropped 60 percent relative to costs in 2014, he said. Previous to the bankruptcy the company had “spent a ton of money and got a whole bunch of nothing,” he commented.

With a completely new executive team at the helm, the company is now focused on disciplined growth, Giesler said. And the company culture emphasizes safety as the top priority, while being technically driven and financially disciplined.

“If it’s not safe, we’re not doing it. If the technicals don’t merit it, we’re not doing it. We don’t drill or workover hope. And if it doesn’t make money or we don’t think it will make money, we’re not doing it,” Giesler said.

The company has a clean balance sheet, no third-party debt and no litigation to deal with. The company’s equity owners, Apollo and HPS Investment Partners, have provided $40 million in revolving liquidity. And a recent audit raised no issues, Giesler said.

He also commented on factors that particularly enable Glacier to efficiently manage its costs and investments: The company enjoys 100 operatorship across all of its facilities, and with each field being close to existing infrastructure, the company can grow production on a fixed cost base.

Emphasis on safety

Emphasizing the priority that Glacier gives to safety, Giesler said the company’s first capital investment upon emerging from bankruptcy had been the multiple millions of dollars spent moving West McArthur oil processing from the field’s aging and problematic facilities to the more modern and reliable Kustatan facility that processes oil from Redoubt. As well as reducing environmental risk, the changeover will ultimately reduce production costs for the fields, Giesler said.

In addition, the company spent nearly $1 million stabilizing its subsea pipelines in Cook Inlet; plugging and abandoning six onshore wells; and switching to the use of twin-engined helicopters for personnel support. The company has a strong health, safety and environmental record, with no spills to the environment since 2013 and no lost time incidents for employees in 2017, Giesler said.

“We really do try to operate safely and to strictly adhere to all regulatory rules,” he said.

Capital a challenge

Giesler commented that the biggest challenge for a company like his operating in Alaska is the ability to obtain capital. For 80 percent of the small banks that typically lend to exploration and production companies, upon mentioning of operating in Alaska the investment conversation stops, he said. There are relatively few operators in the state and banks have to consider a number of issues including the political environment, the geological environment and gaining an understanding of remote operations. Moreover, some banks were burned by the deferral of the payments on state tax credits, Giesler said, adding that he understands that the Alaska governor and state legislators have difficult problems to deal with.

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