The Finnex LLC deal to purchase the assets of the Mustang oil field, which lies between the Kuparuk River and Colville River units on the North Slope, appears to have fallen through, putting the Southern Miluveach unit in the hands of AIDEA-owned Mustang Holding LLC, per a Dec. 4 decision by Alaska’s Division of Oil and Gas.
AIDEA, the Alaska Industrial Development and Export Authority, is the primary lender for the Mustang oil field.
Anchorage-based Finnex was formed on June 23. According to an Alaska Division of Corporations filing, Thyssen Petroleum Alaska LLC holds 85% of Finnex and Galactico LLC the remaining 15%. An affiliate of Thyssen was part of a joint venture the original operator of the Southern Miluveach unit, or SMU, put together - Brooks Range Petroleum Corp, or BRPC.
The SMU was formed on March 31, 2011, and currently contains five state leases covering approximately 8,960 acres.
BRPC drilled the North Tarn No. 1A discovery well in 2012. The resulting Mustang field is estimated to hold some 21.2 million proven barrels of oil in place.
BRPC spent the next seven years responding to a series of technical, economic, political and logistical complications. While some of those complications were inherent to the Mustang field and to the company, others were external, such as the 2017 veto by then-Gov. Bill Walker of previously approved oil and gas tax credits designed to offset exploration expenses.
With the start of commercial production on Oct. 30, 2019, BRPC became the first small independent oil company in Alaska to bring a North Slope field from discovery to production. The company conducted an extended production test from its North Tarn 1A well using temporary processing facilities, exporting oil to the Alpine Pipeline System. By the time a flaring permit for the unit expired on Nov. 27, the company had produced 10,999 barrels of oil.
“In late October 2020, Mustang Holding informed the Division that it had not reached an agreement to transfer the working interest or operatorship to Finnex and that Mustang Holding, through experienced oilfield services companies, would be maintaining the SMU in a cold shutdown mode while AIDEA continued to pursue an operator for the SMU and related assets,” division Director Tom Stokes wrote in his recent decision to Geoffrey A. Johns of Mustang Holding.
Mustang Holding asked the division for recognition of the transfer of working interest to its name and requested it be named operator of the SMU, which the agency approved on Dec. 3 and 4, respectively.
On Oct. 1, then-operator BRPC and Finnex filed the eighth annual plan of development for the SMU with the division, promising sustained oil production from the Mustang field by third quarter 2021.
The division now considers the eighth plan of development “as if it were initially submitted by Mustang Holding and considers the stated intentions and capabilities of Mustang Holding in its finding and decision,” which was to disapprove the plan with modifications.
“Mustang Holding does not possess the technical capabilities … to carry out the work commitments found in the 8th POD, but does possess, through competent contractors, the ability to maintain the SMU in cold shutdown,” Stokes wrote. “By maintaining the SMU in cold shutdown status, Mustang Holding will be preserving the SMU Infrastructure … in a manner to allow for their marketing and an expedient acquisition by an operator who can return the SMU to production,” thus also protecting the interest of the state of Alaska, the unit’s landowner.
Quarterly reports
Mustang Holding or its successor operator must provide quarterly reports on the status of the SMU infrastructure. They are due no later than the 15th day of the first month of the immediately following quarter - e.g., the first quarterly report for 2021 covering the period of Jan. 1 through March 31 is due no later than April 15, and so on.
By Jan. 4 Mustang Holding also has to give the division a 2020 year-end report about any progress made regarding continued viability and operations of the SMU.
- KAY CASHMAN
