Hilcorp Energy continues to dominate the oil exploration scene in Cook Inlet--it's the only company to put in a bid on the State of Alaska's annual Cook Inlet basin oil and gas lease sale for the third consecutive year.
The Houston-based company that specializes in mature fields spent $190,350 on three lease tracts totaling 10,286 acres earlier this year, according to the Alaska Department of Natural Resources (DNR), Division of Oil and Gas.
"We are pleased to see bid activity in the Cook Inlet lease sale," DNR Deputy Commissioner Sara Longan said in a prepared statement earlier this year. "We recognize the focus of investment has been on the North Slope in recent years. Nevertheless, significant investment is made to sustain current Cook Inlet production, while exploration activities continue to inform and support future development."
Within the last ten years, previous major players, such as ConocoPhillips, Chevron, and Marathon Oil. pulled out of Cook Inlet, explains Larry Persily, former head of the federal office for Alaska North Slope natural gas pipeline projects.
"They walked away because it was a very mature field with a limited market and it's just not what they put millions of dollars into investment," Persily says. "The implication was that the big, easy stuff was found decades ago and it was going to take a lot of capital and work for smaller returns, and they said, 'Hey that's just not our business model,' so they bailed."
However, for others the business model works.
'I like to say we recycle old oil fields." Hilcorp Senior Vice President Dave Wilkins said in a presentation at the Kenai Peninsula Economic Development District's Industry Outlook Forum earlier this year. "When other companies are done with assets, we come in and we put new capital into it and reinvent it-extend the life of those oil and gas assets."
Hilcorp jumped on the assets in Cook Inlet following the state issuing "a lot" of tax credits, Persily explains. However, plans to rein in the tax credit program for exploration and development work was reportedly the primary reason that the state received no lease bids for its oil basin for the first time in 2016. The next three years, Hilcorp was the only company to bid on Cook Inlet leases.
"They [Hilcorp] figured they could make good returns and that's where it kind of stands," Persily says.
With the $90 million Cook Inlet oil pipeline project wrapped up last year, Hilcorp is now reportedly looking at investing in more drilling in the region.
"We run things year to year fairly steady," Wilkins said in his presentation. "We...