A North Slope explorer relying on a generous tax credit offered under Alaska's previous production tax is moving forward to evaluate what it believes is a promising exploration play, with the drilling of two wells planned to start this winter.
Torey Marshall, chief executive of Rampart Energy, said he wouldn't wade into the debate over which is better, the state's old tax system or the new one that critics say favors existing producers over explorers. Supporters of the new law, Senate Bill 21, say it retains many similar benefits for small companies.
"It's a good way of getting yourself in trouble," said Marshall of the ongoing debate over which tax system most benefits Alaska and Alaskans, speaking by phone on Thursday from Adelaide, Australia.
But Marshall said the tax credit established under the old tax system, dubbed Alaska's Clear and Equitable Share or ACES, has provided the financial push the company needs to prospect for oil in Alaska, where the potential for a sizable find is big, at least for a small outfit like Rampart.
"Without ACES we couldn't participate," he said. "We're not the big guys, we take risks."
The new Senate Bill 21, implemented in January, has many benefits to encourage smaller companies like Rampart to invest in Alaska, said Mike Pawlowski, deputy commissioner for the Alaska Department of Revenue.
The tax credits offered under ACES allowed companies to recoup up to 45 percent of certain expenses, and Senate Bill 21 made sure to keep that level of reimbursement in place for two years, Pawlowski said. After the two years is up, the benefit falls to up to 35 percent, but small companies can cash in their credit more quickly and benefit from the new law's lower production taxes.
Rampart, a publicly traded company on the Australian stock exchange, came to Alaska in May of 2013.
Partnering with San Diego-based Royale Energy, Rampart recently completed a three-dimensional seismic survey on about 60,000 acres some 15 miles southwest of the village of Nuiqsut. The acreage is about 10 miles from a trio of other fields, such as ConocoPhillips' Greater Mooses Tooth Unit at the eastern edge of the National Petroleum Reserve Alaska.
At the moment, Rampart is zeroing in on a 20,000-acre section that showed intriguing "hydrocarbon indicators," perhaps oil or gas, said Marshall, an exploration geologist. The company is using consulting firm Netherland, Sewall and Associates to provide a third-party review of the acreage.
The company has contracted a rig through 2016 to drill the wells, an effort set to start in January, said spokesman Jay Morakis. The company announced this week it's teaming up with California-based Roth Capital Partners and is working to raise money for the drilling, Morakis said.
Marshall said the company hopes to discover an oil field containing 25 million to 50 million barrels, something in the range of what Brooks Range Petroleum plans to unlock later this year at its Mustang field, a 40-million-barrel pool with peak production expected to reach 15,000 barrels a day.
Those are small finds compared to the Slope's giant Prudhoe Bay and Kuparuk fields that have produced billions of barrels of oil over the decades. But such small fields may be the wave of the future in the Arctic oil patch.
The North Slope has long been explored, but it's generally been done with old two-dimensional seismic tests and drilling that has been widely spaced, said Paul Decker, resource evaluation manager for the Alaska Division of Oil and Gas.
Three-dimensional seismic testing like that conducted by Rampart can offer a more refined look that could lead to the discovery of small pools.
"The basin is what we'd still call relatively under-explored or not completely explored," said Decker. Compared to Texas, for example, Alaska has far fewer wells and they are widely peppered across the landscape, while seismic assessments of underground features are also relatively limited, he said.
The U.S. Geological Survey estimated in 2005 that the North Slope contained a mean of 4 billion barrels of undiscovered, technically recoverable oil. There could be dozens of midsize to small pools of oil with fewer than 64 million barrels, and perhaps one or two big fields with up to half a billion barrels of oil, according to the USGS' broad estimate.
Of course, whether such small fields are economic is another matter, Decker said. Some may be far from a pipeline, road or other infrastructure, and installing that infrastructure may be costly.
Marshall sounded optimistic, but cautioned that there's no certainty until wells are drilled.
"We feel it's something that's reasonably sizable," he said of the hydrocarbon potential. "It's quite big, it's quite broad, and we need to explore that properly."
By ALEX DEMARBAN