On March 3, Vision Operating LLC was given an 18-month delay in the mandatory contraction of its North Fork unit on the southern Kenai Peninsula by Alaska's Division of Oil and Gas.
The division had received a request in February from Vision Resources LLC and Vision Operating, both wholly owned subsidiaries of Gardes Holdings Inc., requesting the delay. The 18-month period goes through Oct. 6, 2024.
According to the approval letter, which was sent to Gardes and Vision executive Mark Landt by Division Director Derek Nottingham, the 18-month respite provides Vision time to drill and evaluate potential resources outside the current participating area, or PA, which is the 800-acre NFU Gas Pool No. 1 in the 2,601.84-acre unit.
But drilling costs money.
In a Aug. 22 interview with Landt, Petroleum News asked whether Vision has any new wells planned outside the PA during 18-month period, and he said: "We have proposed locations that extend beyond our current PA, but the bottom line is drilling capital is hard to find. We are continually meeting with potential investors extolling the virtues of low risk development drilling in the Cook Inlet basin, a commodity short market, that supports $7.50/mcf-plus pricing. Fundamentally, there is a lack of drilling capital for the smaller players in the Cook Inlet basin. Unfortunately, we're not seeing the level of private equity funding in oil and gas as many investors are focused on consolidating positions and ignoring new niche plays, especially in the Permian basin."
Immediate return on investment
So what can Vision Operating and its North Fork unit in Alaska's Cook Inlet basin offer investors?
"We can put new wells online almost immediately," Landt, who is vice president of land and business development for Gardes Holdings, replied.
"Also, the potential Southcentral Alaska natural gas market is very attractive in terms of current pricing and potential future pricing. According to recent utility reports addressing the long-term -- 2027 and beyond -- one alternative is importing LNG at $12 to $32 per mcf. That puts natural gas pricing in the long-term in the $10-20 per mcf range," Landt told PN.
Another advantage, he said, is that that the onshore North Fork unit has all its infrastructure in place and is accessible by road on the southern Kenai Peninsula and located on state, not federal land.
Brought online by Armstrong
A Bill Armstrong joint venture brought the North Fork unit online in 2011, even though the field was first unitized by Standard Oil Co. of California in 1965. North Fork produced from six Tyonek sandstones.
In March 2009, Armstrong Vice President of Land and Business Development Ed Kerr told the Alaska House Resources Committee that North Fork held between 7.5 billion and 12.5 billion cubic feet of natural gas reserves and said it was "realistic" the prospect could hold between 20 billion and 60 billion cubic feet.
"There is some potential that it could be substantially larger than that," Kerr said.
That same year Armstrong hired PGS Onshore to shoot a 3-D seismic campaign over some 20 square miles around North Fork to help guide future drilling decisions.
The seismic acquisition "greatly improved the regional structural definition of the four-way anticlinal North Fork closure," Armstrong Cook Inlet said in state filings.
The trick at North Fork was to find productive patches within the sandstones.
"Depositionally, these are lenticular sands, so they come and go," Kerr told Petroleum News, referring to layers of sands and mud. "We're drilling through a package of sands."
The North Fork unit was initially formed as a federal unit in1965. In 2006, BLM waived its administration rights and transferred its North Fork unit leases to the state of Alaska.
Currently, the unit is made up of five state oil and gas leases totaling 2,601.84 acres.
Gardes takes over
In late 2014, Armstrong sold the North Fork unit to Cook Inlet Energy LLC for nearly $65 million in order to concentrate its efforts on the oil-rich North Slope.
Bob Gardes of Lafayette, Louisiana, entered Alaska in September 2020 with the purpose of becoming a natural gas producer by acquiring bypassed and/or underdeveloped gas deposits in the Cook Inlet basin.
Gardes was first and foremost looking for natural gas, not oil. He told PN at the time that he views the Cook Inlet basin as one of four top gas regions in the world.
"We think the future in the U.S. is gas. It burns 98% cleaner than oil and coal. It is a transformational resource," Gardes said. "There is a lot of bypassed gas here because the deposits weren't big enough" for companies to bother with them.
Gardes' first, and so far, only acquisition in the Cook Inlet basin was the North Fork unit from Cook Inlet Energy, or CIE, by that time a Glacier Oil and Gas company.
Effective May 1, 2021, Vision became unit operator.
Focused on North Fork
Vision is "focused on North Fork," Landt told PN on March 10, 2021. "We see some definite opportunities to pursue there," he said, noting the company has a "full G&G staff" working on the unit.
"Now that we have our plan of development for the unit approved with the Division of Oil and Gas and have purchased 3D seismic - we are going to be working the 3D data and generating our own ideas going forward."
Landt said Vision sees "additional gas to be recovered" at North Fork, mentioning the possibility of "additional sands" in the field and more workovers.
The plan of development approved by the division was the 56th POD for North Fork.
Also in March 2021, then-operator CIE requested and received on behalf of Gardes a one-year delay in contraction of the North Fork unit to allow the new owner time to assess opportunities for additional drilling targets outside the PA.
Contraction of a unit is required after a unit has been in production for 10 years, at which point it is contracted to areas that are producing.
Gardes' contract to distribute gas from North Fork went into effect May 11, 2021, at a starting price of $7.30 per thousand cubic feet, eventually increasing to $7.60 per mcf.
North Fork averaged 2,311 mcf per day in June of this, down 67 mcf per day, 2.8%, from a May 2022 average of 2,378 mcf per day.
