Hex LLC and subsidiary Furie dominate Cook Inlet lease sale

Small independents did the bidding in Wednesday’s Cook Inlet oil and gas lease sale that netted the Department of Natural Resources $451,594 from eight bids, according to the department’s tally.

Furie Operating Alaska collected four leases adjacent to its large offshore Kitchen Lights Unit in the middle of the Inlet gas fields as well as one onshore tract containing at least part of the North Fork Unit just east of Anchor Point on the southern Kenai Peninsula. Overall, Furie spent $325,605 for the rights to its acreage.

Hex LLC, the primary owner of Furie, also won two onshore tracts north of Nikiski along the edge of the Kenai National Wildlife Refuge for $101,489. John Hendrix, a former Apache Alaska general manager and oil and gas adviser to former Gov. Bill Walker owns Hex LLC and purchased Furie — and the Kitchen Lights natural gas facilities — out of bankruptcy last summer. Production problems and unpaid state tax credits among other issues pushed the previous owners to seek debt relief.

Furie currently produces a small amount of natural gas from Kitchen Lights for local utility customers.

As for the 5,760-acre North Fork Unit tract, which Furie bid $325,843, or $56.75 per acre, to acquire, the opportunity to purchase the lease already with a handful of wells and pipeline infrastructure was too good to pass up, according to Hendrix, who also noted an apparent discrepancy regarding the total acreage leased in figures provided by the state Division of Oil and Gas.

“Until they can prove otherwise the leases that they put up for sale were up for lease. That’s why we bid on it,” Hendrix said. “I can’t afford not to bid on it.”

A spreadsheet detailing the winning bids indicates Furie won 19,200 acres across five tracts, while a summary of the sale shows the company won an estimated 14,053 acres in five tracts.

Somewhere between 21,267 acres and 26,414 acres were sold Wednesday, according to the division’s numbers.

Division of Oil and Gas spokesman Sean Clifton wrote via email that Oil and Gas Director Tom Stokes delayed a mandatory contraction of the North Fork Unit in a March decision after Cook Inlet Energy resigned its rights to North Fork and transferred them to Gardes Holdings Inc., a Louisiana-based firm.

The actual acreage available for lease was about 720 acres, according to Clifton, who wrote that the time and labor required to adjudicate tracts for lease means the work is usually done after a sale is held.

Furie will be refunded for the amount the company bid on acreage that wasn’t available to lease, according to Clifton.

Hendrix insisted state officials had not notified him of any issues with the lease and need to be open in their explanation of the situation.

“We should get what we bid for. We bid on it because it was available,” he said, adding the company could have used the money it committed to the North Fork lease elsewhere.

“They hurt us with our strategy,” Hendrix said.

Hendrix said the goal with the acreage near Kitchen Lights is to “shore up” the company’s position around the unit and eventually work to diversify its resource base.

“We bid on some acreage that I wanted to drill back in the Apache days,” he said in an interview.

Hilcorp Energy, the large, dominant producer in the Cook Inlet basin, was the only bidder in last year’s sale.

This year’s winning bids averaged $21.23 per acre, according to the Division of Oil and Gas.

Houston-based Strong Energy Resources LLC also picked up a small offshore lease on the edge of state waters near Anchor Point. BlueCrest Energy produces oil from the nearby offshore Cosmopolitan Unit.