Cook Inlet Energy Buys Pacific Energy’s Alaska Assets
ANCHORAGE, ALASKA - Alaska has given birth to a new oil & gas company named Cook Inlet Energy, which began operations last night. The bankruptcy filing of independent oil and gas producer Pacific Energy Resources, Ltd. and subsequent abandonment of its Cook Inlet interests in September appeared to close the curtains on the operation at several facilities on the West side of Cook Inlet. After Pacific abandoned the assets they effectively became wards of the State of Alaska. However, a company formed by two former Pacific Employees, Cook Inlet Energy, LLC, now stands ready to restart production. On December 10 Cook Inlet Energy closed on the deal to remove the assets from bankruptcy and return them to production. Cook Inlet Energy was approved as operator in record time and assumed operational control of the facilities as of 6 pm Tuesday night.
“We’re immediately hiring back many of the employees who lost their jobs due to the shutdown,” said David Hall, CEO of Cook Inlet Energy. Hall was previously Vice President in charge of Pacific’s Alaska operations. “Our initial strategy will be to restore base production at the West McArthur River Field by repairing a couple of our champion wells,” says Hall, “but our long term strategy is to significantly raise oil and gas production at the properties through new drilling. This will allow us to bring proven reserves to market and prove up new additional reserves through sound geological principles and advanced drilling.”
Cook Inlet Energy picked up all of Pacific Energy’s operated facilities: the West McArthur River Unit, the West Foreland Gas Field, the Kustatan Production Facility, the Osprey Platform, the Redoubt Unit, a 30% interest in Aurora Gas’s Three-Mile Creek field, and over 600,000 acres of exploration acreage in Southcentral Alaska. The reserves purchased by Cook Inlet Energy were valued at $327 million by independent auditors in March of 2008, and their acreage position puts them in the best oil and gas exploration position in Southcentral Alaska.
JR Wilcox, the company’s President commented “2009 was probably the hardest year imaginable to pull something like this together, given the state of the financial markets. But we’ve received tremendous support and encouragement from a lot of people. We’ve been working closely with the Department of Natural Resources since June in an effort to ensure as smooth a transition as possible, and really appreciate their efforts to help us get people back to work.”
Hall and Wilcox have both been involved with these facilities under Pacific Energy and its predecessor, Forest Oil. Hall has worked with them since 1991 for Stewart Petroleum and ForceEnergy. Wilcox formerly worked for BP. The company’s CFO Troy Stafford. Stafford has managed financing for some of the State’s largest projects, including the bond financing for the expansion of the Ted Stevens International Airport, and served as a project manager for VECO Construction’s Oil & Gas Division.
Cook Inlet Energy’s assets are located the Cook Inlet Basin, a large under explored and undercapitalized basin in Southcentral Alaska. Pacific Energy originally acquired the assets from Forest Oil Corp. in 2007 for $464 million in a deal which included the above assets as well as a 46.8% share of the Chevron-operated McArthur River Field (a.k.a. the Trading Bay Unit), the Trading Bay Field, and the Trading Bay Production Facility, and a 50% share in the Cook Inlet Pipeline Company.
Stewart Petroleum developed the West McArthur River Unit in 1991. Production from WMRU peaked at 4,950 barrels of oil per day (bopd), but had declined to less than 250 bopd at the time it was abandoned in September, largely due to a lack of available capital. ForceEnergy and Forest Oil built the Osprey and KPF to produce the Redoubt Unit in 2001-2002. Redoubt production peaked at 4,850 bopd, but had fallen to 20 bopd when the platform was shut down, also due to capital limitations.
As part of the deal, CIE’s managers swapped their membership interest in CIE for 3.5 million stock warrants in Miller Energy Resources, and became a wholly-owned subsidiary of Miller. Miller (MILL.OB) is a publicly traded oil & gas company based in the Appalachian Basin (http://www.millerenergyresources.com).