Sunday, July 29, 2012

Linc refines portfolio; The Australian independent allows most of its Cook Inlet acreage to expire

Eric Lidji
For Petroleum News

Linc Energy (Alaska) Inc. has allowed almost all of its Cook Inlet acreage to expire.

The local subsidiary of an Australian independent allowed 26 State of Alaska leases to expire in early June, keeping one state lease currently proposed for unitization, its Alaska Mental Health Trust leases and exploration licenses and its Cook Inlet Region Inc. leases.

The leases are split into two blocks on either side of the Cook Inlet — a 10-lease block in the Trading Bay area and a 16-lease block along the Knik Arm north of Pt. MacKenzie.

“The majority of Linc Energy’s Cook Inlet oil and gas leases expired June 1, 2012 at the end of their primary term,” Linc spokeswoman Maria VanderKolk told Petroleum News.

Pioneer Oil originally acquired the leases in 2005 on a seven-year term, but eventually sold the leases to San Francisco-based independent GeoPetro Resources. Linc picked up the leases as part of a 123,000-acre Cook Inlet acquisition from GeoPetro in March 2010.

Originally, Linc planned to drill a well on each block.

While Linc drilled the LEA No. 1 well on the Pt. MacKenzie leases in late 2010, and plans to continue exploring the area, it never drilled a well on the Trading Bay leases.

Shell discovered gas near the Trading Bay leases while looking for oil in the 1960s, but didn’t pursue development because of the low value of Cook Inlet gas at that time.

Linc plans to continue exploring in the area north of Pt. MacKenzie. The company kept one Cook Inlet lease, ADL 390581. In May 2012, Linc applied to form the 1,950-acre Angel unit combining the state lease and a contiguous Alaska Mental Health Trust lease.

The proposed three-year unit agreement includes plans for 2-D and 3-D seismic, drilling and potential development of conventional natural gas resources in the area in the future.

Linc said it expects a decision about the unit by mid-August.

LEA No. 1 encountered natural gas, but Linc originally decided the field could not be developed economically. But after analyzing the region further, the company recently announced its interest in returning to investigate a feature of the Pittman Anticline.

In addition to its conventional gas program, Linc is currently exploring the potential for underground coal gasificiation development over an Alaska Mental Health Trust exploration license spread across three large sections of the Interior and the Cook Inlet.

Linc also plans to explore the North Slope Umiat oil field this coming winter.

Other Cook Inlet expirations

Because the Alaska Department of Natural Resources typically holds its Cook Inlet areawide lease sale in May, the month is also a time when many former leases expire.
The current batch of expired leases includes acreage at active and dormant prospects across the basin, including the southern Kenai Peninsula, prospects dotting the northern Kenai Peninsula, the North Alexander prospect and some scattered offshore leases.

Marathon Alaska Production LLC allowed five leases to expire on the east side of Cook Inlet. They include four leases scattered outside the boundaries of the Marathon-operated Sterling Unit near Soldotna. The leases are mostly non-contiguous plots interspersed among state and Alaska Mental Health Trust leases held by Apache Alaska Corp.

The fifth lease is further south, several miles inland from Clam Gulch.

Apache Alaska Corp. allowed three Cook Inlet leases to expire.

ADL 390567 is an offshore lease northeast of Tyonek, abutting the ConocoPhillips-operated Beluga River unit and the Buccaneer-operated Northwest Cook Inlet unit.

ADL 390572 is an onshore lease north of the Beluga River unit. The lease includes the Pretty Creek No. 1 well. Apache still holds other yet-to-expire leases in the region.

Southern Kenai expirations

The southern Kenai Peninsula saw much activity in late May.
Apache also allowed ADL 390604 to expire.

The onshore lease is just inland from Anchor Point in the southern Kenai Peninsula, between the onshore North Fork unit and the offshore Cosmopolitan prospect.

Apache is holding onto another lease in the region not set to expire until 2013.

After remaining in a holding pattern for decades, the southern Kenai Peninsula is undergoing a renaissance of interest. Armstrong recently brought North Fork online and plans to drill additional wells in the area. Buccaneer is working to close on its previous acquisition of the Pioneer Natural Resources-owned Cosmopolitan unit and has outlined plans to explore the onshore West Eagle prospect located further inland, to the east.

However, Armstrong Cook Inlet also allowed two leases in the southern Kenai Peninsula to expire at the end of May. ADL 390597 and ADL 390603 sit to the east and to the south, respectively, of the Armstrong-operated North Fork unit. Armstrong still holds additional state acreage outside the boundaries of the unit not set to expire until 2013.

Hilcorp Alaska LLC allowed four leases in the southern Kenai Peninsula to expire. The onshore leases — ADL 390598, ADL 390600, ADL 390601 and ADL 390602 — are all north of the North Fork unit and west of the Hilcorp-operated Nikolaevsk unit.

Hilcorp acquired the leases — as well as the leases and operatorship of Nikolaevsk — through its recent acquisition of Union Oil Co. of California’s leases in the Cook Inlet.

Hilcorp also allowed a fifth lease to expire. ADL 390568 is a small onshore lease north of Tyonek on the west side of Cook Inlet, near an existing Marathon 16-inch pipeline.

Because many of these expirations come from the portfolios of companies retaining a presence in the region, the southern Kenai Peninsula could be active in future lease sales.

North Alexander and others

Aurora Gas allowed three leases to expire in May.
ADL 390560 is in the area north of the Aurora-operated Nikolai Creek unit on the west side of the Cook Inlet. The other Aurora leases in the area don’t expire until 2013.

The remaining two expired leases are on the east side of the Cook Inlet. Aurora originally asked the Alaska Department of Natural Resources to unitized those leases — ADL 390364 and ADL 390365 — into the Cohoe unit. The DNR denied the request and is currently facing an appeal on that decision from Dan Donkel and Donkel Oil & Gas Inc.

Cornucopia Oil and Gas Co. LLC allowed three leases to expire.

ADL 390586 and ADL 391216 were originally part of the onshore North Alexander prospect, located on the west side of Cook Inlet near the mouth of the Susitna River.

ADL 391213 is offshore and adjacent to the Furie-operated Kitchen Lights unit.

All three leases originally all belonged to Escopeta Oil Co., but transferred to Cornucopia after Escopeta divided its leases among several independents over the second half 2011.

Escopeta first planned to explore the North Alexander prospect as early as 2002, believing the field could contain as much as 600 billion cubic feet of gas. Despite attracting numerous partners to the project over the years, beginning the permitting process and contemplating unitization, Escopeta never drilled at North Alexander.

Cook Inlet Energy LLC allowed three leases to expire in late May.

ADL 390585 and ADL 390578 were adjacent to the Cornucopia leases at the North Alexander prospect. The two Cook Inlet Energy leases include the Cities Services East Lewis River No. 1 well. Cook Inlet Energy holds other, yet-to-expire leases in the area.

Cook Inlet Energy also allowed a lease to the south — ADL 390571 — to expire. The onshore-offshore lease is on the coastline south of the Hilcorp-operated Ivan River unit.

DNR extended ADL 390579 — a fourth lease, also set to expire — because Cook Inlet Energy is drilling on the property. The lease is west of the Lewis Creek and Pretty Creek unit and includes the Texas International Petroleum Co. Pretty Creek State No. 1 well.

Miscellaneous transactions

Great Bear Petroleum Ventures I transferred a 25 percent working interest and 20.83 percent royalty interest in one North Slope lease — ADL 391706 — to Halliburton Energy Services Inc. The companies are exploring the potential of shale in the region.
Aquilonia Energy E&P Inc. transferred a 30 percent working interest and 22.92 percent royalty interest in one Cook Inlet lease — ADL 391104 — to Nordaq Energy Inc., giving Nordaq complete working interest ownership. The lease is in the Trading Bay area.

Finally, ExxonMobil Alaska Production Inc. transferred a 75 percent working interest and 65.625 percent royalty interest in three leases in the Granite Point unit to operator Hilcorp Alaska LLC. The leases are ADL 18761, ADL 374044 and ADL 374045.