BlueCrest to drill at least one well in 2018

Oil producer BlueCrest Alaska Operating intends to drill at least one new well in 2018 from its onshore pad between Anchor Point and Ninilchik, according to a plan of development it submitted Sept. 27 to the Alaska Department of Natural Resources’ Division of Oil and Gas.

The Forth Worth, Texas-based BlueCrest previously halted drilling in August 2017 — after drilling two of the five wells it had planned that year — citing the state government’s nonpayment of about $75 million in refundable tax-credits owed under Alaska’s oil and gas tax credit program.

BlueCrest CEO Benjamin Johnson declined an interview request about the company’s current plans.

BlueCrest ultimately hopes to drill and hydraulically fracture 20 directional wells from its onshore pad — 10 producing and 10 for pressure injection — into the Cosmopolitan sandstone formation located about 3 miles from the Cook Inlet shore and 7,000 feet beneath the inlet bottom. BlueCrest started producing oil in April 2016 from a converted exploration well originally drilled by ConocoPhillips in 2001, but didn’t start the first of its own wells until November of that year. In 2017 BlueCrest completed and fracked that well, which is now producing about 330 barrels a day. In March 2017 BlueCrest began drilling a second well and completed it in May.

Drilling 7,000 foot-deep directional wells three miles out required what BlueCrest described in its recent plan as “the largest most powerful operating rig in Alaska.” The 210 foot-tall rig was shipped from Houston, Texas and constructed near Anchor Point at a cost of about $40 million, aided by a $30 million loan from the state-owned Alaska Industrial Development and Export Authority. The company also received roughly roughly $27 million in state aid through the cashable tax credit program meant to attract smaller producers to Cook Inlet.

With the state running multi-billion deficit budgets in fiscal 2015 and 2016, Alaska Governor Bill Walker vetoed a total $603 million in payments for these tax credits from those years’ budgets, leaving BlueCrest short an expected $75 million in credits and triggering its August hiatus while the company sought other funding sources. The Alaska legislature ended the state’s oil and gas tax credit program in July.

BlueCrest outlined its goals for 2018 in the plan submitted to the Division. Though it states the company will be evaluating the results from the two previous wells “to determine our path forward,” the plan includes drilling at least one new well and says “our best candidate for drilling” is a well into the Starichkoff zone — a strata in the Cosmopolitan formation about 6,740 and 7,005 feet deep, in which driller Penzoil discovered hydrocarbons in 1967. Various explorers of the Cosmopolitan formation have since found oil and gas in the strata, including ConocoPhillips, Pioneer, and Buccaneer, an Australian exploration company that previously leased the Cosmopolitan unit before going bankrupt in May 2014. Buccaneer had sold its share of the Cosmopolitan field to BlueCrest in January of that year.

The Division of Oil and Gas approved BlueCrest’s application to designate a participating area — a section of rock known to contain recoverable hydrocarbons — including the Starichkof zone on August 29.

Reach Ben Boettger at ben.boettger@peninsulaclarion.com

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