Furie assets on the auction block
Furie Operating Alaska’s assets go on the auction block Oct. 7 with bids due Oct. 4 on the company’s Cook Inlet gas reserves and production facilities, mainly four producing wells, a Cook Inlet production platform and pipelines to shore. Seaport Global Securities, of New Orleans, has been retained as financial adviser to Furie and issued a solicitation to potential buyers on Aug. 12. Furie filed for Chapter 11 bankruptcy protection in a Delaware bankruptcy court on Aug. 8.

Furie’s gas reserves in the Kitchen Lights Unit are listed at 59.6 billion cubic feet proven and with 217 billion feet in probable resource additions based on the local geology and seismic profiling. Furie currently produces about 19.5 million cubic feet (mmcf) of total daily gas production with 15.29 mmcf/day of this net to Furie after royalty obligations. Gas is now sold for prices of $6.30 per thousand cubic feet, or mcf, to $7.04 mcf, according to the solicitation from Seaport Global. The company’s two customers are Homer Electric Assoc. and Enstar Natural Gas, and its contracts extend to 2022.

Furie’s financial problems began with project costs (wells, platform, pipelines) that were higher than expected and the state’s decision in 2016 to withhold payments on exploration and development tax credits to mainly small independents, including Furie. Furie didn’t have sufficient cash to weather that, and brought in new investors. What may have pushed the company over the edge were problems with hydrates forming in pipeline to shore which impeded gas production, and revenues last winter. What may have compounded this, industry experts say, is that Furie may have been obligated under its supply contracts to purchase gas from other producers to meet the contract volumes. Often this can be at penalty pricing, which may have worsened the problems. We expect someone will buy Furie, possibly Hilcorp Energy. Hilcorp controls most other Inlet gas production and all oil production.

BlueCrest, Caelus also struggled
Furie isn’t the only small independent that has struggled because of the state’s cutoff of the tax credit payments. BlueCrest Energy, which is producing and further developing its Cosmopolitan oil project in the Inlet, has struggled but is still active in development work, and BlueCrest has a substantial gas reservoir overlying the oil formation. On the North Slope, the cutoff of payments were a major factor in Caelus Energy selling off its producing Oooguruk field to Eni and the nearby Nuna deposit, which has proved reserves but is not yet producing, to ConocoPhillips. Brooks Range Petroleum has managed to hang in there with its small Mustang field, however. Mustang is expected to begin limited production this fall.

Nuna a bargain for ConocoPhillips?
ConocoPhillips said the Nuna purchase from Caelus was a real bargain with $100 million paid for 100 million barrels of reserves, or about $1 per barrel. Mike Hatfield, a top Conoco official, made the statement during ConocoPhillips’ July 30 call to financial analysts.

Oil tax voter initiative now underway
Anchorage attorney Robin Brena and Merrick Pierce, a former official of the Alaska Gasline Port Authority, launched a voter initiative campaign to raise taxes on the oil and gas industry. Signatures are being gathered for submission to the Lieutenant Governor who would then approve the start of a broader signature drive to get the question on the 2020 election ballot.