Saturday, December 10, 2011

$25 million day; State, Bureau of Land Management, hold North Slope, Beaufort, NPR-A sales

Kristen Nelson
Petroleum News

The State of Alaska and the U.S. Department of the Interior’s Bureau of Land Management both held Alaska oil and gas lease sales Dec. 7 in Anchorage, with apparent high bids of $24,606,947 from a combination of new entrants and established players.

BLM’s National Petroleum Reserve-Alaska sale, the smallest of the sales, had 20 bids on 17 tracts by three bidders, for a total of apparent high bids of $3,637,477 on some 119,987 acres.

The Alaska Department of Natural Resources’ Division of Oil and Gas held three areawide oil and gas lease sales — Beaufort Sea, North Slope and North Slope Foothills. The state received no bids for the Foothills sale. It received 89 bids on 78 tracts from 11 bidders or bidding groups in the Beaufort Sea sale, a total of $6,874,656.80 in apparent high bids, with 281,095 acres sold. In the North Slope areawide sale, the state received 220 bids on 179 tracts from 13 bidders or bidding groups, for $14,094,812.47 in apparent high bids on 335,289 acres.

Presidential direction

The BLM sale was held in response to a May 14 direction from President Obama to Interior to conduct annual oil and gas lease sales in NPR-A.

In a release on sale results Interior noted that the sale followed the announcement that two federal agencies have reached agreement with ConocoPhillips on the proposed Alpine satellite development plan in NPR-A (see page 1 story in this issue). Interior said the bridge over the Nigliq Channel of the Colville River and the road between the proposed CD-5 drill site and the Alpine facilities would be the first pipeline and all-weather road into NPR-A, and said the existence of that infrastructure is expected to spur further exploration and development in the reserve.

“As industry begins to build infrastructure and explore and develop oil and gas in this area of the North Slope of Alaska, we expect to harness the energy and economic benefits of the NPR-A for our nation,” Interior Secretary Ken Salazar said in a statement.

Interior said the State of Alaska would receive 50 percent of the NPR-A bid receipts, some $1.8 million, as well as 50 percent of the annual rental revenue generated from the sale. An economic evaluation of the NPR-A bids is the next step; BLM expects to issue leases by mid-April.

BLM Alaska Deputy Director Ted Murphy said after reading bids that next year’s NPR-A sale would also be in the fourth quarter.

This was the sixth largest North Slope lease sale the state has held and the second largest since the areawide leasing program was begun in 1998. In recent years, only the 2006 sale ($15.7 million) was larger.

Gov. Sean Parnell said the combined North Slope and Beaufort sales, more than $21 million, was one of the most successful in recent Alaska history, and called it “an important, positive step that attracted additional investment to the North Slope.”

“Reversing the declining flow of oil through TAPS and getting to 1 million barrels per day is critical to our economy and the nation’s energy security,” the governor said in a statement following the sale.

“It was quite a respectable showing,” Commissioner of Natural Resources Dan Sullivan told Petroleum News after the sales.

He said the bids showed “there is more interest in the shale than just Great Bear,” and said he was pleased to see “very big world-class companies who know Alaska well were taking some pretty sizeable positions — Repsol, Shell, ConocoPhillips, Pioneer, Armstrong.”

“We participated in scores of meeting with oil and gas companies, investors, policy makers (leading up to the sale). … Certainly learned a lot. I would say there were some companies that I thought would show up who didn’t. It’s always hard to know why. … Perhaps high costs, but I am just speculating … tax reform, some companies might be waiting it out.”

There were no bids in the North Slope Foothills sale, and Sullivan said that was probably due to the lack of a gas pipeline.

“We’ve been relentlessly working the governor’s five-point plan, and we’ll keep on working it,” Sullivan said. “This is just the first inning of a long term strategy. … Here is the issue: We recognize the status quo is not working. A critical part of our five-point plan is tax reform. We’re going to work hard on that during the upcoming legislative session. Very hard.”

70 & 148, ConocoPhillips

Armstrong subsidiary 70 & 148 LLC bid the most across all the sales: high bids of $2,149,580.80 in the state North Slope sale (11 tracts, 37,120 acres) and $2,701,636 in the NPR-A sale (11 tracts, 62,044 acres), for a total of more than $4.8 million.

In the NPR-A sale, 70 & 148 took tracts between the ConocoPhillips Alaska-operated Greater Mooses Tooth unit and the border of state lands, matching up with the 11 tracts the company took in the North Slope sale, giving the company a substantial block across the state-NPR-A boundary.

ConocoPhillips Alaska, bidding in all three sales, took 35 tracts in the North Slope sale, 99,840 acres for $2,717,424 in apparent high bids, with the bulk of the tracts in a large block south of Point Thomson and Badami on the east side.

In NPR-A, the company took three tracts, 23,650 acres, with apparent high bids of $524,325, bringing the company’s total to more than $3.2 million for the day. The NPR-A tracts are: a tract south of company-held acreage adjacent to its Greater Mooses Tooth unit; one tract adjacent to three state tracts it holds across the NPR-A border south of Nuiqsut; and a tract which was a “hole” in a large block of acreage the company holds southwest of Mooses Tooth.

ConocoPhillips bid unsuccessfully in partnership with Exxon on one tract in the Beaufort Sea sale.

Repsol, Great Bear
Repsol E&P bid in both the North Slope and Beaufort sales

In the Beaufort sale, Repsol was apparent high bidder on five tracts adjacent to a large block of Repsol leases north of the Colville River unit, some 19,200 acres, for which it bid $376,256.

In the North Slope sale Repsol took 26 tracts, 45,920 acres, for $2,642,193.60, bringing its total to just over $3 million.

The North Slope tracts Repsol took are in two blocks, one in the central North Slope, adjacent to existing Repsol leases south of Kuparuk, and the second block adjacent to existing Repsol leases south of Kuparuk and Prudhoe Bay.

Great Bear Petroleum, which bid only in the North Slope sale, had $2,910,633.60 in apparent high bids on 32 tracts, filling in a “hole” in tracts the company took south of Kuparuk in last year’s North Slope sale.

Royale Energy

Royale Energy, a new bidder in the state, took 60 tracts in the North Slope sale with apparent high bids of $2,717,424 on 99,840 acres.

Royale took tracts in three areas: east of Great Bear Petroleum’s existing acreage; south of Great Bear acreage; and a large block of leases near the border with NPR-A.

Royale was bidding against Great Bear on some acreage and against 70 & 148 in other areas.

Shell Offshore, bidding in the Beaufort Sea sale, took 18 leases in Harrison bay, 86,400 acres, for $2,615,200.

A bidding group of Daniel K. Donkel 25 percent and Samuel H. Cade 75 percent, took 35 leases in the Beaufort Sea sale from north of the Arctic National Wildlife Refuge (near existing Donkel-Cade leases) on the east to Simpson Lagoon north of Milne Point on the central North Slope, 94,080 acres, for $1,525,760 in apparent high bids. Cade also took a single lease, adjacent to BP’s Northstar unit, 1,920 acres, $21,120.

Donkel and Cade also took three tracts in the North Slope sale, 7,680 acres, for $171,520, bringing their total for the sale to more than $1.7 million.

NordAq Energy, Cook Inlet leaseholder and explorer, took 11 tracts in Smith Bay off NPR-A in the Beaufort Sea sale, 58,880 acres for $1,356,902.40.

Woodstone Resources

Woodstone Resources of Houston, a new bidder, took nine tracts in the North Slope sale, 12,960 acres for $488,160. The tracts are all well south of existing production and include sites of three old exploration wells: Itkillik Unit 1, Nora Fed 1 and Susie Unit 1.

Woodstone was also a bidder in the NPR-A sale, and was apparent high bidder on three tracts, 34,293 acres, for $411,516, bringing its total for the day to almost $900,000 for the two sales. The tracts are in the southern area of NPR-A, adjacent to acreage held by Petro-Canada and Anadarko.

AVCG took one tract in the Beaufort Sea sale, paying $206.75 an acre, a total of $529,280 for 2,560 acres. AVCG fended off two competing bids, including one from a 50-50 bidding partnership of ConocoPhillips and Exxon, to take the tract adjacent to its Beechey Point unit. Its bid for tract 286 was the highest bid in the Beaufort Sea sale.

Savant Alaska also fended off competing bids for two tracts, these in the North Slope sale, paying $212,096 for 5,120 acres, one tract adjacent to three existing Savant tracts on the edge of ANWR and the second tract to the north on the ANWR border.

Pioneer Natural Resources Alaska had the highest per-acre bid in both the North Slope and Beaufort Sea sales, $876 per acre for small tracts at its Oooguruk unit. The company paid $118,260 for 135 acres, two tracts, in the Beaufort Sea sale, and $43,800 for 50 acres, one tract, in the North Slope sale.

A bidding group of J. Andrew Bachner 90 percent and Keith C. Forsgren 10 percent, took five tracts on east side in the Beaufort Sea sale, north of ANWR, bidding against Donkel and Cade. Bachner-Forsgren had apparent high bids on 17,920 acres for $331,878.40.

A bidding group of Alaska LLC/Gavora one lease in the North Slope sale, 1,440 acres, for $36,158.40.