New oil company hopes to restore production quickly

Posted: Friday, December 18, 2009

Managers of a newly formed oil company operating on the west side of Cook Inlet say they're looking forward to restoring operations at formerly abandoned assets acquired earlier this week.

Photo Courtesy Of Cook Inlet Energy Llc
Photo Courtesy Of Cook Inlet Energy Llc
The Osprey Platform, seen here in 2005, was one of several assets recently acquired by Cook Inlet Energy from former owner Pacific Energy. While the Osprey will take up to 18 months to get back online, company officials expect other assest to be back online within a week.

On Tuesday, Anchorage-based Cook Inlet Energy LLC acquired the facilities abandoned in September by Long Beach, Calif.-based Pacific Energy.

CIE paid Pacific $2.25 million after a Delaware banktrupy judge vacated the abandonment order for all of Pacific's operated facilities including the West McArthur River Unit, the West Foreland gas field, the Kustatan Production Facility, the Osprey Platform, the Redoubt Unit, a 30 percent interest in Aurora Gas's Three-Mile Creek field and over 600,000 acres of exploration acreage in Southcentral.

According to CIE, the assets were valued at $327 million by independent auditors in March of 2008.

CIE formed in January under the leadership of J.R. Wilcox and David Hall, the president and CEO of the company, respectively.

Both said they were involved with Pacific's Alaska operations.

Hall said the company plans to get the West McArthur facilities operational first.

"We're hoping to resume base levels of production at West McArthur within a week," Hall said on Thursday.

Bringing the Osprey back online will require more time and resources, according to Wilcox.

Hall said he didn't expect to see the facility operational again for a year to 18 months.

The Osprey, located off of the West Forelands, was shut-in this past April along with other west side crude producers as a result of volcanic activity on Mount Redoubt.

In the meantime Hall said the platform will continue to be "lighthoused."

The company said the production there had fallen to 20 barrels of oil per day before it was shut in.

At its peak, the platform pumped out 4,850 barrels per day.

Production from the West McArthur unit peaked at 4,950 barrels per day, according to CIE, but had declined to less than 250 barrels per day at the time it was abandoned in September.

Wilcox said there were a number of factors that lead to the decline of both Pacific Energy and as a result the output of their Cook Inlet assets. The biggest, he said, was the economic meltdown.

"To paint it with a broad brush, Pacific was a casualty of the meltdown," Wilcox said. "They were highly indebted, needed cash and were backed by investment banks."

Hall called the eruption of Redoubt and subsequent west side shut down, "the final nail in the coffin," for Pacific.

The two said that the demise of Pacific's Alaska assets wasn't for lack of reserves but a lack of capital investment, explaining that the company was spending its resources elsewhere.

"These are great facilities on great reservoir rock and we can increase production rapidly," Hall said.

To avoid some of the same pitfalls Pacific faced, the two said they plan to run a "lean operation."

The company didn't pick up all of Pacific's assets in the deal either, leaving behind a 46.8 percent share of the Chevron-operated McArthur River Field also known as the Trading Bay Unit, the Trading Bay Field and the Trading Bay Production Facility, and a 50 percent share in the Cook Inlet Pipeline Company.

Hall said the company would focus on repairing "a couple of our champion wells," first.

He said the company has plans to do more drilling in the future.

"We're still in the early days," Wilcox said. "It will take a while to get base operations up before we have long term detailed development plan. It's hard to commit to anything."

The two estimated the company would employ 12 or 13 field workers and said they were hoping to get some of Pacific's former workers back.

Dante Petri can be reached at dante.petri@peninsulaclarion.com.



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