Department of Commerce, Community, and Economic Development
Alaska Oil and Gas Conservation
Commission
HOME
EVENTS
DATA
Data List
Drilling
Production
Orders
Data Miner
Document Search
REPORTS
Reports and Charts
Pool Statistics
FORMS
LINKS
Links
Test Notification
Data Requests
Regulations
Industry Guidance Bulletins
How to Apply
ABOUT US
History
Staff
HELP
Loading...
The URL can be used to link to this page
Your browser does not support the video tag.
Home
My WebLink
About
CO 076 A
CONSERVATION ORDER 76A Granite Point Field Middle Kenai Oil Pool 1. October 26, 2018 Hilcorp's proposed Amendment to CO 76 2. February 26, 2019 Notice of Public Hearing, Affidavit of Publication, and mailings 3. April 4, 2019 Transcript and sign -in sheet 4. April 11, 2019 Transcript, exhibits and sign -in sheet 5. April 22, 2019 Hilcorp's requested submittal after hearing of 4/11/2019 STATE OF ALASKA ALASKA OIL AND GAS CONSERVATION COMMISSION 333 West 7" Avenue Anchorage Alaska 99501 Re: THE APPLICATION OF Hilcorp Alaska, LLC for amendments to Conservation Order No. 76 to expand the boundaries of the Middle Kenai Oil Pool, establish a new Hemlock Oil Pool, revise interwell spacing requirements, authorize commingling of production between the existing Middle Kenai Oil Pool and the newly formed Hemlock Oil Pool, revise the administrative approval rule to be consistent with how the Alaska Oil and Gas Conservation Commission currently implements the rule, and revise the Affected Area of the order to coincide with the current unit boundary for the Granite Point Unit. IT APPEARING THAT: Docket Number: CO -18-036 Conservation Order No. 76A Granite Point Unit Granite Point Middle Kenai Oil Pool Granite Point Hemlock Oil Pool Kenai Peninsula Borough, Alaska Nunc pro tunc May 20, 2019 Dated May 23, 2019 By application received October 26, 2018, Hilcorp Alaska, LLC (Hilcorp) as operator of the Granite Point Unit (GPU) requested that Conservation Order No. 76 (CO 76) be amended to revise the vertical limits of the Granite Point Middle Kenai Oil Pool (GPMKOP), define a new Granite Point Hemlock Oil Pool (GPHOP), eliminate the interwell spacing requirements of 20 AAC 25.055(a)(3)&(4) for wells drilled in the affected area, authorize downhole commingling of production between the GPMKOP and GPHOP, revise Rule 7 of CO 76 so that the administrative approval is consistent with how the Alaska Oil and Gas Conservation Commission (AOGCC) is currently implementing this rule, and revise the Affected Area of the order to be consistent with the current GPU boundary. 2. Pursuant to 20 AAC 25.540, the AOGCC scheduled a public hearing for April 4, 2019. On March 1, 2019, the AOGCC published notice of that hearing on the State of Alaska's Online Public Notice website and on the AOGCC's website, electronically transmitted the notice to all persons on the AOGCC's email distribution list and mailed printed copies of the Notice of Public Hearing to all persons on the AOGCC's mailing distribution list. On February 26, 2019, the notice was published in the Anchorage Daily News. 3. The hearing convened as scheduled on April 4, 2019, and immediately recessed until April 11, 2019, due to a lack of a quorum of Commissioners. The hearing reconvened on April 11, 2019, and evidence was presented by Hilcorp in support of its application. The hearing record was left open until April 22, 2019 for Hilcorp to respond to AOGCC's requests for additional information. 4. On April 22, 2019, Hilcorp submitted its written, supplemental information.' The hearing record closed. 5. Hilcorp's April 22, 2019 supplement requested its application received October 26, 2018 be modified to: Hilcorp Alaska, LLC, "RE: Proposed Amendment to Conservation Order 76 (Granite Point Field)," dated April 22, 2019. Conservation Order 76A Errata May 23, 2019 Page 2 of 8 a. retain Granite Point State 1 as the reference well for defining the GPMKOP and GPHOP; b. use geochemical fingerprinting of produced oil to allocate production between the GPMKOP and GPHOP; and c. remove the request to amend the Affected Area of CO 76. 6. Hilcorp's application, testimony, supplemental evidence, AOGCC records, and published technical literature provide sufficient information for AOGCC to make an informed decision. FINDINGS: 1. Operator and Owners: Hilcorp is the Operator and sole Working Interest Owner of the GPU. The State of Alaska, Department of Natural Resources (DNR) is the landowner of the Affected Area, which is located offshore in the Cook Inlet in the Kenai Peninsula Borough, in southcentral Alaska. 2. Development History: The Granite Point Field was discovered in 1965 by the Mobil -Union Granite Point No. 1 well. Three production platforms were installed in 1965 and 1966. They are named, from north to south, the Bruce, Anna, and Granite Point Platforms. Regular production from the GPMKOP began in 1967 and peaked at over 49,000 barrels of oil per day (BOPD) in February of 1968. Cumulative oil production is over 150 million barrels of oil (MMBO). Current production is approximately 2,600 BOPD from approximately 31 active production wells that are supported by four injection wells. Regular production from the Hemlock Formation within the field began in 1992 and peaked at approximately 1,900 BOPD in October of that year. Cumulative oil production is approximately 2.2 MMBO, and current production is approximately 15 BOPD from a single well. 3. Pool Identification: a. Granite Point Middle Kenai Oil Pool: The GPMKOP is currently defined in CO 76 as the accumulation that is common to and which correlates with the accumulation found in Mobil's Granite Point No. 1 well (Permit to Drill 165-002) between 7,725' and 10,800' measured depth (MD). Hilcorp's post -hearing supplemental information proposes retaining this definition for the GPMKOP. b. Granite Point Hemlock Oil Pool: Hilcorp's supplemental information proposes defining the GPHOP as the accumulation that is common to and which correlates with the accumulation found in Mobil's Granite Point No. 1 well between 10,885' and 11,280' MD. 4. Geology: a. Structure: Within the Affected Area, the structure at the top of the proposed GPMKOP forms a northeast -trending, asymmetrical anticline that forms a four -way -closure measuring about 7 miles long by 1-1/2 miles wide. This anticline is bound on the west by a north -northeast -trending, high -angle reverse fault, and the anticline is also cut by several northeast -trending, normal faults. The western limb of the anticline is difficult to image on seismic data and well control is sparse, but it appears to dip steeply to the a Frankforter, M.J. and Waugaman, J.C., 2013, The Granite Point Field, Cook Inlet, Alaska, in Stone, D.M. and Hite, D.M., eds., Oil and Gas Fields of the Cook Inlet Basin, Alaska; AAPG Memoir 104, p. 263 — 290. Conservation Order 76A Errata May 23, 2019 Page 3 of 8 west at more than 60 degrees. The eastern limb dips more gently toward the east at approximately 20 to 25 degrees. The depth to the top of the GPMKOP along the crest of the anticline is about -7,800' TVDSS? The depth to the top of the GPHOP is about -10,500' TVDSS. b. Stratigraphy: Sediments comprising Hilcorp's proposed GPMKOP encompass Oligocene- to Miocene -aged fluvial sediments that are assigned to the Tyonek Formation (Tyonek). Sandstone and conglomerate layers within the proposed pool were deposited in braided streams, and they are interbedded with overbank siltstones and claystones. Thin layers of coal are common. The sandstone and conglomerate layers vary in true vertical thickness from 3' to about 75'. These reservoir layers are thickest, most laterally continuous in the southern part of the field, and they become thinner and less continuous laterally toward the north. Hilcorp's proposed GPHOP encompasses Eocene- to Oligocene -aged, fluvial sediments that were deposited in braided streams or alluvial fans, and they vary in true vertical thickness from 3' to about 100'. c. Rock Properties: For the GPMKOP, porosity of the reservoir intervals ranges from about 5 to 20 percent and averages about 14 percent. Permeability ranges up to about 180 millidarcies (md), and averages approximately 10 md. Oil gravity averages about 41 degrees APL" For the GPHOP, porosity of the reservoir layers ranges from about 1 to 14% and averages about 5 percent. Hilcorp testified that, in general, the Hemlock within the GPU consists of very tight reservoir rock, but properly located wells may be able to utilize natural fracturing to enhance productivity. Oil gravity is similar to that of the GPMKOP ° d. Faults: The vertical displacement of the small, northeast -trending faults cutting the proposed pools range up to about 125 feet. Because of the relatively thin -bedded nature of many reservoirs within proposed pools, some faults act as local barriers. e. Trap Configuration and Seals: Well log and seismic information indicate that western bounding fault and structural dip control the hydrocarbon accumulation within the anticline in the western, southern and southeastern portions of the proposed pool. To the east and northeast, the accumulation is limited by the lack of reservoirs due to non - deposition. Claystone layers form top seals for individual reservoirs. Geologic structure maps provided by Hilcorp on April 22, 2019, depict the areal extent of the oil accumulations within the GPMKOP and the GPHOP based on the depth of the original lowest -known oil for each of those accumulations. 5. Well Spacing: CO 76 established GPMKOP spacing requirements of no more than two wells per governmental quarter section, at least 1,000' of separation between wells, and at least 500' set -back from any property line. Statewide spacing regulations govern all wells drilled to other pools within the GPU. Since the GPU is a very mature oil development, Hilcorp is considering drilling horizontal and multilateral wells which are highly likely to require an exception from the CO 76 or statewide spacing requirements. To avoid confusion, when depths represent true vertical depth below mean sea level (or subsea), the footage will be preceded by a minus sign and followed by the acronym TVDSS (e.g., 3,000 feet true vertical subsea will be depicted as -3,000 feet TVDSS). Frankforter, M.J. and Waugaman, J.C., 2013, p. 268 Conservation Order 76A Errata May 23, 2019 Page 4 of 8 6. Downhole Commingling: CO 693 grants downhole commingling between the GPMKOP and Hemlock Formation in well Granite Pt St 11-13RD (PTD 191-133). Hilcorp requests that downhole commingling be authorized field -wide between the proposed, expanded GPMKOP and the proposed GPHOP. GPU is a very mature development with many wells at or near their economic limit. Downhole commingling between the GPMKOP and the GPHOP will improve resource recovery by increasing the lifespan of wells that become marginal in one pool by allowing concurrent production from a second pool. Production logging and/or chemical fingerprinting of recovered oil can be used to allocate production between the two pools for conventional wells. However, Hilcorp may drill multilateral wells, and multilateral wells cannot be configured to allow use of production logging tools. For such wells, chemical analysis is the only practical means of allocating production. CONCLUSIONS: 1. Retaining the vertical extent of the GPMKOP and defining the new GPHOP is appropriate and will lead to better development of the field and maximization of ultimate recovery. 2. To avoid a narrow, vertical gap between pools, the base of the GPMKOP is best placed at 10,885' MD, which is coincident with the top of the underlying GPHOP. 3. The structure maps provided by Hilcorp that depict the areal extent of the GPMKOP and GPHOP oil accumulations do not support Hilcorp's original request to revise the Affected Area of CO 76 to coincide with the current Granite Point Unit boundary or Hilcorp's supplemental request to retain the Affected Area defined in CO 76. 4. Eliminating interwell spacing requirements while maintaining a minimum set -back distance from property lines where ownership or landownership changes will improve resource recovery while protecting correlative rights. 5. Allowing downhole commingling will extend well life and improve ultimate recovery. 6. Allocating production based on geochemical fingerprinting or production well logs— depending on how each well is completed—will ensure proper reserve tracking and reservoir management. 7. The Administrative Approval rule is being modified to reflect the current language used by the AOGCC for these rules. NOW, THEREFORE, IT IS ORDERED: In addition to statewide requirements under 20 AAC 25 (to the extent not superseded by these rules), the following rules govern development of the Granite Point Middle Kenai Oil Pool and the Granite Point Hemlock Oil Pool. CO 76 and all of its associated administrative approvals are revoked and superseded by this order. The records of CO 76 and its administrative approvals are incorporated by reference into this order. Conservation Order 76A Errata May 23, 2019 Page 5 of 8 Affected Area: Seward Meridian Township and Range Sections TION-R11W Section 5: SW/4, W/2 ofNW/4 Sections 6, 7: All Section 8: NW/4, W/2 of SW/4 Section 18: W/2, NEA, NW/4 of SEA Section 19: W/2 of NW/4, NE/4 of NWA TION-R12W Section 1: E/2, SWA, E/2 of NW/4, SW/4 ofNW/4 Section 11: E/2 of E/2, SWA of SE/4 Sections 12, 13, 23, & 24: All Section 14: E/2, E/2 of SWA, SEA of NW/4 Section 25: NW/4, NW/4 of NE/4, NW/4 of SWA Section 26: N/2, N/2 of S/2 T1IN-RI l W Section 19: SW/4 Seaward portion only, NW/4 Seaward portion only, W/2 of SE/4, SW/4 of NEA, SE/4 of SEA Section 29: W/2 of SW/4 Sections 30 & 31: All Section 32: W/2 of W/2 T11N-R12W Section 25: SEA, E/2 of NEA Section 36: E/2, E/2 of SW/4 SEA ofNW/4 Rule 1 Definition of Pools (Revised this order) a. The Granite Point Middle Kenai Oil Pool is defined as the oil accumulation that is common to, and correlative with, the accumulation found in Mobil's Granite Point No. 1 well (PTD 165-002) between 7,725' and 10,885' MD. This reference log is depicted in Figure 1, below. b. The Granite Point Hemlock Oil Pool is defined as the accumulation common to, and correlative with, that in Mobil's Granite Point No. 1 well between 10,885' and 11,280' MD. Rule 2 Well Spacing (Revised this order) There shall be no well spacing restrictions for the pools defined above, except that no oil well shall be completed within 500 feet of an exterior property line where ownership or landownership is not the same on both sides of the line. Rule 3 Casing and Cementing Rea uirements (Restated from CO 76) Surface casing must be set and cemented to a depth of at least 1600 feet. Sufficient cement must be used to circulate to the surface. Conservation Order 76A Errata May 23, 2019 Page 6 of 8 1650020 MOBIL GRANITE POINT 1 1042 FNL 1289 FWL TWP: 10 N - Range: 12 W - Sec. 13 i -7000_ _.._. - - -7000 o JF -7500 - - -7500 t -sono :i m..,..,... -9000 r- -8500 ... — ___. _=j -8500 Middle t 7 Kenai _ Oil Pool —� - -9000 _ — -9000 -9500 `,. - -9500 -10000 - -� - ---�-1 -10000 t} -105004Y -10500 TMa . -11000 Hemlock ...'� } - -11000 Oil Pool Figure 1. Granite Point No. 1: Reference Log for Granite Point Middle Kenai and Granite Point Hemlock Oil Pools Conservation Order 76A Errata May 23, 2019 Page 7 of 8 The production string must be cemented with a sufficient volume of cement to extend at least 500 feet above the shoe or a volume sufficient to cover 100 feet above the top of the uppermost producing zone encountered in the well, whichever is greater. Rule 4 Bottom Hole Pressure Survevs (Restated from CO 76) A key well bottom hole pressure survey shall be made upon AOGCC request; provided however, such surveys are not anticipated to be required more often than twice in any calendar year. The time and length of survey, number and location of wells, datum and other details will be determined by the AOGCC upon consultation with the operators. Rule 5 Gas -Oil Ratio Tests (Restated from CO 76) A gas -oil -ratio test of 24 hours duration shall be made annually on each producing well. The tests will be made during the months of June and July and the results will be reported on AOGCC Form 10-409 prior to September of each year. The requirements of this rule will be waived if monthly reported oil and gas production is based on a gas -oil -ratio test made at least every six months on each producing well. Rule 6 Pressure Maintenance Proiect (Superseded by Area Infection Orders No. 6 & 11 as amended Rule 7 Downhole commin¢ling (New this order) Downhole commingling of production in wells simultaneously open to the GPMKOP and the GPHOP is hereby approved with the following conditions: a. Within 30 days of commencement of commingled production, a production log or geochemical analysis must be obtained. b. The operator must perform periodic production logging or geochemical analysis for all wells with downhole commingled production to allocate production between the GPMKOP and the GPHOP, with no more than 24 months between tests, and adjust the allocation of production between the pools accordingly. c. Copies of all tests, logs, or analyses used for determining allocation of production shall be submitted to the AOGCC within 30 days. Rule 8 Other Conservation Orders (Revised this order Conservation Orders No. 59, 60, 76, & 693 and any associated administrative approvals to those orders are hereby revoked. Their records are incorporated by reference into this order. All other Conservation Orders affecting the GPHOP or the GPHOP shall remain in full force and effect, except as modified hereby. Rule 9 Administrative Approval (Revised and renumbered this order) Unless notice and public hearing is otherwise required, the AOGCC may administratively waive the requirements of any rule stated above or administratively amend any rule as long as the change Conservation Order 76A Errata May 23, 2019 Page 8 of 8 does not promote waste or jeopardize correlative rights, is based on sound engineering and geoscience principles, and will not result in an increased risk of fluid movement into freshw tPr ONE at Anchorage, Alaska and dated May 23, 2019, nunc pro tunc. Daniel T. Se ount, Jr. J sie L. Chmielowski Commissioner Commissioner 2� As provided in AS 31.05.080(a), within 20 days after written notice of the entry of this order or decision, or such further time as the AOGCC grants for good cause shown, a person affected by it may file with the AOGCC an application for reconsideration of the matter determined by it. If the notice was mailed, then the period of time shall be 23 days. An application for reconsideration must set out the respect in which the order or decision is believed to be erroneous. The AOGCC shall grant or refuse the application for reconsideration in whole or in part within 10 days after it is filed. Failure to act on it within 10 -days is a denial of reconsideration. If the AOGCC denies reconsideration, upon denial, this order or decision and the denial of reconsideration are FINAL and may be appealed to superior court. The appeal MUST be filed within 33 days after the date on which the AOGCC mails, OR 30 days if the AOGCC otherwise distributes, the order or decision denying reconsideration, UNLESS the denial is by inaction, in which case the appeal MUST be filed within 40 days after the date on which the application for reconsideration was filed. If the AOGCC grants an application for reconsideration, this order or decision does not become final. Rather, the order or decision on reconsideration will be the FINAL order or decision of the AOGCC, and it may be appealed to superior court. That appeal MUST be filed within 33 days atter the date on which the AOGCC mails, OR 30 days if the AOGCC otherwise distributes, the order or decision on reconsideration. In computing a period of time above, the date of the event or default after which the designated period begins to mn is not included in the period; the last day of the period is included, unless it falls on a weekend or state holiday, in which event the period runs until 5:00 p.m, on the next day STATE OF ALASKA ALASKA OIL AND GAS CONSERVATION COMMISSION 333 West 7" Avenue Anchorage Alaska 99501 Re: THE APPLICATION OF Hilcorp Alaska, LLC for amendments to Conservation Order No. 76 to expand the boundaries of the Middle Kenai Oil Pool, establish a new Hemlock Oil Pool, revise interwell spacing requirements, authorize commingling of production between the existing Middle Kenai Oil Pool and the newly formed Hemlock Oil Pool, revise the administrative approval rule to be consistent with how the Alaska Oil and Gas Conservation Commission currently implements the rule, and revise the Affected Area of the order to coincide with the current unit boundary for the Granite Point Unit. IT APPEARING THAT: Docket Number: CO -18-036 Conservation Order No. 76A Granite Point Unit Granite Point Middle Kenai Oil Pool Granite Point Hemlock Oil Pool Kenai Peninsula Borough, Alaska Nunc pro tunc May 20, 2019 Dated May 23, 2019 I. By application received October 26, 2018, Hilcorp Alaska, LLC (Hilcorp) as operator of the Granite Point Unit (GPU) requested that Conservation Order No. 76 (CO 76) be amended to revise the vertical limits of the Granite Point Middle Kenai Oil Pool (GPMKOP), define a new Granite Point Hemlock Oil Pool (GPHOP), eliminate the interwell spacing requirements of 20 AAC 25.055(a)(3)&(4) for wells drilled in the affected area, authorize downhole commingling of production between the GPMKOP and GPHOP, revise Rule 7 of CO 76 so that the administrative approval is consistent with how the Alaska Oil and Gas Conservation Commission (AOGCC) is currently implementing this rule, and revise the Affected Area of the order to be consistent with the current GPU boundary. 2. Pursuant to 20 AAC 25.540, the AOGCC scheduled a public hearing for April 4, 2019. On March 1, 2019, the AOGCC published notice of that hearing on the State of Alaska's Online Public Notice website and on the AOGCC's website, electronically transmitted the notice to all persons on the AOGCC's email distribution list and mailed printed copies of the Notice of Public Hearing to all persons on the AOGCC's mailing distribution list. On February 26, 2019, the notice was published in the Anchorage Daily News. 3. The hearing convened as scheduled on April 4, 2019, and immediately recessed until April 11, 2019, due to a lack of a quorum of Commissioners. The hearing reconvened on April 11, 2019, and evidence was presented by Hilcorp in support of its application. The hearing record was left open until April 22, 2019 for Hilcorp to respond to AOGCC's requests for additional information. 4. On April 22, 2019, Hilcorp submitted its written, supplemental information.' The hearing record closed. 5. Hilcorp's April 22, 2019 supplement requested its application received October 26, 2018 be modified to: Hilcorp Alaska, LLC, "RE: Proposed Amendment to Conservation Order 76 (Granite Point Field)," dated April 22, 2019. Conservation Order 76A Errata May 23, 2019 Page 2 of 8 a. retain Granite Point State 1 as the reference well for defining the GPMKOP and GPHOP; b. use geochemical fingerprinting of produced oil to allocate production between the GPMKOP and GPHOP; and C. remove the request to amend the Affected Area of CO 76. 6. Hilcorp's application, testimony, supplemental evidence, AOGCC records, and published technical literature2 provide sufficient information for AOGCC to make an informed decision. FINDINGS: 1. Operator and Owners: Hilcorp is the Operator and sole Working Interest Owner of the GPU. The State of Alaska, Department of Natural Resources (DNR) is the landowner of the Affected Area, which is located offshore in the Cook Inlet in the Kenai Peninsula Borough, in southcentral Alaska. 2. Development History: The Granite Point Field was discovered in 1965 by the Mobil -Union Granite Point No. I well. Three production platforms were installed in 1965 and 1966. They are named, from north to south, the Bruce, Anna, and Granite Point Platforms. Regular production from the GPMKOP began in 1967 and peaked at over 49,000 barrels of oil per day (BOPD) in February of 1968. Cumulative oil production is over 150 million barrels of oil (MMBO). Current production is approximately 2,600 BOPD from approximately 31 active production wells that are supported by four injection wells. Regular production from the Hemlock Formation within the field began in 1992 and peaked at approximately 1,900 BOPD in October of that year. Cumulative oil production is approximately 2.2 MMBO, and current production is approximately 15 BOPD from a single well. 3. Pool Identification: a. Granite Point Middle Kenai Oil Pool: The GPMKOP is currently defined in CO 76 as the accumulation that is common to and which correlates with the accumulation found in Mobil's Granite Point No. 1 well (Permit to Drill 165-002) between 7,725' and 10,800' measured depth (MD). Hilcorp's post -hearing supplemental information proposes retaining this definition for the GPMKOP. b. Granite Point Hemlock Oil Pool: Hilcorp's supplemental information proposes defining the GPHOP as the accumulation that is common to and which correlates with the accumulation found in Mobil's Granite Point No. I well between 10,885' and 11,280' MD. 4. Geology: a. Structure: Within the Affected Area, the structure at the top of the proposed GPMKOP forms a northeast -trending, asymmetrical anticline that forms a four -way -closure measuring about 7 miles long by 1-1 /2 miles wide. This anticline is bound on the west by a north -northeast -trending, high -angle reverse fault, and the anticline is also cut by several northeast -trending, normal faults. The western limb of the anticline is difficult to image on seismic data and well control is sparse, but it appears to dip steeply to the z Frankforter, M.J. and Waugaman, J.C., 2013, The Granite Point Field, Cook Inlet, Alaska, in Stone, D.M. and Hite, D.M., eds., Oil and Gas Fields of the Cook Inlet Basin, Alaska; AAPG Memoir 104, p. 263 — 290. Conservation Order 76A Errata May 23, 2019 Page 3 of 8 west at more than 60 degrees. The eastern limb dips more gently toward the east at approximately 20 to 25 degrees. The depth to the top of the GPMKOP along the crest of the anticline is about -7,800' TVDSS.' The depth to the top of the GPHOP is about -10,500' TVDSS. b. Strativauhy: Sediments comprising Hilcorp's proposed GPMKOP encompass Oligocene- to Miocene -aged fluvial sediments that are assigned to the Tyonek Formation (Tyonek). Sandstone and conglomerate layers within the proposed pool were deposited in braided streams, and they are interbedded with overbank siltstones and claystones. Thin layers of coal are common. The sandstone and conglomerate layers vary in true vertical thickness from 3' to about 75'. These reservoir layers are thickest, most laterally continuous in the southern part of the field, and they become thinner and less continuous laterally toward the north. Hilcorp's proposed GPHOP encompasses Eocene- to Oligocene -aged, fluvial sediments that were deposited in braided streams or alluvial fans, and they vary in true vertical thickness from 3' to about 100'. c. Rock Properties: For the GPMKOP, porosity of the reservoir intervals ranges from about 5 to 20 percent and averages about 14 percent. Permeability ranges up to about 180 millidarcies (md), and averages approximately 10 md. Oil gravity averages about 41 degrees API .4 For the GPHOP, porosity of the reservoir layers ranges from about 1 to 14% and averages about 5 percent. Hilcorp testified that, in general, the Hemlock within the GPU consists of very tight reservoir rock, but properly located wells may be able to utilize natural fracturing to enhance productivity. Oil gravity is similar to that of the GPMKOP? d. Faults: The vertical displacement of the small, northeast -trending faults cutting the proposed pools range up to about 125 feet. Because of the relatively thin -bedded nature of many reservoirs within proposed pools, some faults act as local barriers. e. Tran Confleuration and Seals: Well log and seismic information indicate that western bounding fault and structural dip control the hydrocarbon accumulation within the anticline in the western, southern and southeastern portions of the proposed pool. To the east and northeast, the accumulation is limited by the lack of reservoirs due to non - deposition. Claystone layers form top seals for individual reservoirs. Geologic structure maps provided by Hilcorp on April 22, 2019, depict the areal extent of the oil accumulations within the GPMKOP and the GPHOP based on the depth of the original lowest -known oil for each of those accumulations. Well Spacing: CO 76 established GPMKOP spacing requirements of no more than two wells per governmental quarter section, at least 1,000' of separation between wells, and at least 500' set -back from any property line. Statewide spacing regulations govern all wells drilled to other pools within the GPU. Since the GPU is a very mature oil development, Hilcorp is considering drilling horizontal and multilateral wells which are highly likely to require an exception from the CO 76 or statewide spacing requirements. r To avoid confusion, when depths represent true vertical depth below mean sea level (or subsea), the footage will be preceded by a minus sign and followed by the acronym TVDSS (e.g., 3,000 feet true vertical subsea will be depicted as -3,000 feet TVDSS). Frankforter, M.J. and Waugaman, J.C., 2013, p. 268 Conservation Order 76A Errata May 23, 2019 Page 4 of 8 6. Downhole Commingling: CO 693 grants downhole commingling between the GPMKOP and Hemlock Formation in well Granite Pt St 11-13RD (PTD 191-133). Hilcorp requests that downhole commingling be authorized field -wide between the proposed, expanded GPMKOP and the proposed GPHOP. GPU is a very mature development with many wells at or near their economic limit. Downhole commingling between the GPMKOP and the GPHOP will improve resource recovery by increasing the lifespan of wells that become marginal in one pool by allowing concurrent production from a second pool. Production logging and/or chemical fingerprinting of recovered oil can be used to allocate production between the two pools for conventional wells. However, Hilcorp may drill multilateral wells, and multilateral wells cannot be configured to allow use of production logging tools. For such wells, chemical analysis is the only practical means of allocating production. CONCLUSIONS: 1. Retaining the vertical extent of the GPMKOP and defining the new GPHOP is appropriate and will lead to better development of the field and maximization of ultimate recovery. 2. To avoid a narrow, vertical gap between pools, the base of the GPMKOP is best placed at 10,885' MD, which is coincident with the top of the underlying GPHOP. 3. The structure maps provided by Hilcorp that depict the areal extent of the GPMKOP and GPHOP oil accumulations do not support Hilcorp's original request to revise the Affected Area of CO 76 to coincide with the current Granite Point Unit boundary or Hilcorp's supplemental request to retain the Affected Area defined in CO 76. 4. Eliminating interwell spacing requirements from property lines where ownership or recovery while protecting correlative rights. while maintaining a minimum set -back distance landownership changes will improve resource 5. Allowing downhole commingling will extend well life and improve ultimate recovery. 6. Allocating production based on geochemical fingerprinting or production well logs— depending on how each well is completed—will ensure proper reserve tracking and reservoir management. 7. The Administrative Approval rule is being modified to reflect the current language used by the AOGCC for these rules. NOW, THEREFORE, IT IS ORDERED: In addition to statewide requirements under 20 AAC 25 (to the extent not superseded by these rules), the following rules govern development of the Granite Point Middle Kenai Oil Pool and the Granite Point Hemlock Oil Pool. CO 76 and all of its associated administrative approvals are revoked and superseded by this order. The records of CO 76 and its administrative approvals are incorporated by reference into this order. Conservation Order 76A Errata May 23, 2019 Page 5 of 8 Affected Area: Seward Meridian Township and Range Sections TION-Rl 1 W Section 5: SW/4, W/2 of NW/4 Sections 6, 7: All Section 8: NW/4, W/2 of SW/4 Section 18: W/2, NEA, NW/4 of SEA Section 19: W/2 of NW/4, NEA ofNW/4 TION-R12W Section 1: E/2, SW/4, E/2 of NW/4, SWA ofNW/4 Section 11: E/2 of E/2, SWA of SEA Sections 12, 13, 23, & 24: All Section 14: E/2, E/2 of SW/4, SEA ofNW/4 Section 25: NW/4, N W/4 of NEA, NW/4 of SW/4 Section 26: N/2 N/2 of S/2 T11N-Rl l W Section 19: SW/4 Seaward portion only, NW/4 Seaward portion only, W/2 of SE/4, SWA of NEA, SE/4 of SEA Section 29: W/2 of SWA Sections 30 & 31: All Section 32: W/2 of W/2 T11N-R12W Section 25: SEA, E/2 of NEA Section 36: E/2, E/2 of SWA, SEA of NW/4 Rule 1 DeTnition of Pools (Revised this order) a. The Granite Point Middle Kenai Oil Pool is defined as the oil accumulation that is common to, and correlative with, the accumulation found in Mobil's Granite Point No. 1 well (PTD 165-002) between 7,725' and 10,885' MD. This reference log is depicted in Figure 1, below. b. The Granite Point Hemlock Oil Pool is defined as the accumulation common to, and correlative with, that in Mobil's Granite Point No. 1 well between 10,885' and 11,280' MD. Rule 2 Well Spacing (Revised this order) There shall be no well spacing restrictions for the pools defined above, except that no oil well shall be completed within 500 feet of an exterior property line where ownership or landownership is not the same on both sides of the line. Rule 3 Casine and Cementine Requirements (Restated from CO 76) Surface casing must be set and cemented to a depth of at least 1600 feet. Sufficient cement must be used to circulate to the surface. Conservation Order 76A Errata May 23, 2019 Page 6 of 8 Figure 1. Granite Point No. 1: Reference Log for Granite Point Middle Kenai and Granite Point Hemlock Oil Pools 507331005900 1650020 MOBIL GRANITE POINT 1 1042 FNL 1289 FWL TWP: 10 N - Range: 12 W - Sec. 13 -7000 -'s - — ri -7000 J - C -7500 - - -- -- 1 -7500 -6000 -'; 4 -9000 w -9500 - -- �� - -9600 Middle ,g Kenai Oil Pool '- a:� _ __ -9000 i - .. �" _9000 S ii, _ -9600 a. -9600 r S� - S -10009 _ _ _ -- ys- y -10000 -10600. _ --• ' = -10600 Hemlock' tt000 Oil Pool 4 - 11000 i 1 - Figure 1. Granite Point No. 1: Reference Log for Granite Point Middle Kenai and Granite Point Hemlock Oil Pools Conservation Order 76A Errata May 23, 2019 Page 7 of 8 The production string must be cemented with a sufficient volume of cement to extend at least 500 feet above the shoe or a volume sufficient to cover 100 feet above the top of the uppermost producing zone encountered in the well, whichever is greater. Rule 4 Bottom Hole Pressure Surveys (Restated from CO 76) A key well bottom hole pressure survey shall be made upon AOGCC request; provided however, such surveys are not anticipated to be required more often than twice in any calendar year. The time and length of survey, number and location of wells, datum and other details will be determined by the AOGCC upon consultation with the operators. Rule 5 Gas -Oil Ratio Tests (Restated from CO 76) A gas -oil -ratio test of 24 hours duration shall be made annually on each producing well. The tests will be made during the months of June and July and the results will be reported on AOGCC Form 10-409 prior to September of each year. The requirements of this rule will be waived if monthly reported oil and gas production is based on a gas -oil -ratio test made at least every six months on each producing well. Rule 6 Pressure Maintenance Project (Superseded by Area Infection Orders No. 6 & 11 as amended Rule 7 Downhole commineline (New this order) Downhole commingling of production in wells simultaneously open to the GPMKOP and the GPHOP is hereby approved with the following conditions: a. Within 30 days of commencement of commingled production, a production log or geochemical analysis must be obtained. b. The operator must perform periodic production logging or geochemical analysis for all wells with downhole commingled production to allocate production between the GPMKOP and the GPHOP, with no more than 24 months between tests, and adjust the allocation of production between the pools accordingly. c. Copies of all tests, logs, or analyses used for determining allocation of production shall be submitted to the AOGCC within 30 days. Rule 8 Other Conservation Orders (Revised this order Conservation Orders No. 59, 60, 76, & 693 and any associated administrative approvals to those orders are hereby revoked. Their records are incorporated by reference into this order. All other Conservation Orders affecting the GPHOP or the GPHOP shall remain in full force and effect, except as modified hereby. Rule 9 Administrative Approval (Revised and renumbered this order) Unless notice and public hearing is otherwise required, the AOGCC may administratively waive the requirements of any rule stated above or administratively amend any rule as long as the change Conservation Order 76A Errata May 23, 2019 Page 8 of 8 does not promote waste or jeopardize correlative rights, is based on sound engineering and geoscience principles, and will not result in an increased risk of fluid movement into freshwater. DONE at Anchorage, Alaska and dated May 23, 2019, nunc pro tunc. //signature on file// Daniel T. Seamount, Jr. Commissioner //signature on file// Jessie L. Chmielowski Commissioner As provided in A8 31.05.080(a), within 20 days after written notice of the entry of this order or decision, or such further time as the AOGCC grants for good cause shown, a person affected by it may file with the AOGCC an application for reconsideration of the matter determined by it. If the notice was mailed, then the period of time shall be 23 days. An application for reconsideration must set out the respect in which the order or decision is believed to be erroneous. The AOGCC shall grant or refuse the application for reconsideration in whole or in part within 10 days after it is filed. Failure to act on it within I0 -days is a denial of reconsideration. If the AOGCC denies reconsideration, upon denial, this order or decision and the denial of reconsideration are FINAL and may be appealed to superior court. The appeal MUST be filed within 33 days after the date on which the AOGCC mails, OR 30 days if the AOGCC otherwise distributes, the order or decision denying reconsideration, UNLESS the denial is by inaction, in which case the appeal MUST be filed within 40 days after the date on which the application for reconsideration was filed. If the AOGCC grants an application for reconsideration, this order or decision does not become final. Rather, the order or decision on reconsideration will be the FINAL order or decision of the AOGCC, and it may be appealed to superior court. That appeal MUST be filed within 33 days after the date on which the AOGCC mails, OR 30 days if the AOGCC otherwise distributes, the order or decision on reconsideration. In computing a period of time above, the date of the event or default after which the designated period begins to run is not included in the period; the last day of the period is included, unless it falls on a weekend or state holiday, in which event the period runs until 5:00 p.m. on the next day Bernie Karl K&K Recycling Inc. Gordon Severson Penny Vadla P.O. Box 58055 3201 Westmar Cir. 399 W. Riverview Ave. Fairbanks, AK 99711 Anchorage, AK 99508-4336 Soldotna, AK 99669-7714 George Vaught, Jr. Darwin Waldsmith Richard Wagner P.O. Box 13557 P.O. Box 39309 P.O. Box 60868 Denver, CO 80201-3557 Ninilchik, AK 99639 Fairbanks, AK 99706 STATE OF ALASKA ALASKA OIL AND GAS CONSERVATION COMMISSION 333 West 7th Avenue Anchorage Alaska 99501 Re: THE APPLICATION OF Hilcorp Alaska, LLC for amendments to Conservation Order No. 76 to expand the boundaries of the Middle Kenai Oil Pool, establish a new Hemlock Oil Pool, revise interwell spacing requirements, authorize commingling of production between the existing Middle Kenai Oil Pool and the newly formed Hemlock Oil Pool, revise the administrative approval rule to be consistent with how the Alaska Oil and Gas Conservation Commission currently implements the rule, and revise the Affected Area of the order to coincide with the current unit boundary for the Granite Point Unit. IT APPEARING THAT: Docket Number: CO -18-036 Conservation Order No. 76A Granite Point Unit Granite Point Middle Kenai Oil Pool Granite Point Hemlock Oil Pool Kenai Peninsula Borough, Alaska May 20, 2019 1. By application received October 26, 2018, Hilcorp Alaska, LLC (Hilcorp) as operator of the Granite Point Unit (GPU) requested that Conservation Order No. 76 (CO 76) be amended to revise the vertical limits of the Granite Point Middle Kenai Oil Pool (GPMKOP), define a new Granite Point Hemlock Oil Pool (GPHOP), eliminate the interwell spacing requirements of 20 AAC 25.055(a)(3)&(4) for wells drilled in the affected area, authorize downhole commingling of production between the GPMKOP and GPHOP, revise Rule 7 of CO 76 so that the administrative approval is consistent with how the Alaska Oil and Gas Conservation Commission (AOGCC) is currently implementing this rule, and revise the Affected Area of the order to be consistent with the current GPU boundary. 2. Pursuant to 20 AAC 25.540, the AOGCC scheduled a public hearing for April 4, 2019. On March 1, 2019, the AOGCC published notice of that hearing on the State of Alaska's Online Public Notice website and on the AOGCC's website, electronically transmitted the notice to all persons on the AOGCC's email distribution list and mailed printed copies of the Notice of Public Hearing to all persons on the AOGCC's mailing distribution list. On February 26, 2019, the notice was published in the Anchorage Daily News. 3. The hearing convened as scheduled on April 4, 2019, and immediately recessed until April 11, 2019, due to a lack of a quorum of Commissioners. The hearing reconvened on April 11, 2019, and evidence was presented by Hilcorp in support of its application. The hearing record was left open until April 22, 2019 for Hilcorp to respond to AOGCC's requests for additional information. 4. On April 22, 2019, Hilcorp submitted its written, supplemental information.' The hearing record closed. 5. Hilcorp's April 22, 2019 supplement requested its application received October 26, 2018 be modified to: ' Hilcorp Alaska, LLC, "RE: Proposed Amendment to Conservation Order 76 (Granite Point Field)," dated April 22, 2019. Conservation Order 76A May 20, 2019 Page 2 of 8 a. retain Granite Point State 1 as the reference well for defining the GPMKOP and GPHOP; b. use geochemical fingerprinting of produced oil to allocate production between the GPMKOP and GPHOP; and c. remove the request to amend the Affected Area of CO 76. 6. Hilcorp's application, testimony, supplemental evidence, AOGCC records, and published technical literature2 provide sufficient information for AOGCC to make an informed decision. FINDINGS: 1. Operator and Owners: Hilcorp is the Operator and sole Working Interest Owner of the GPU. The State of Alaska, Department of Natural Resources (DNR) is the landowner of the Affected Area, which is located offshore in the Cook Inlet in the Kenai Peninsula Borough, in southcentral Alaska. 2. Development History: The Granite Point Field was discovered in 1965 by the Mobil -Union Granite Point No. 1 well. Three production platforms were installed in 1965 and 1966. They are named, from north to south, the Bruce, Anna, and Granite Point Platforms. Regular production from the GPMKOP began in 1967 and peaked at over 49,000 barrels of oil per day (BOPD) in February of 1968. Cumulative oil production is over 150 million barrels of oil (MMBO). Current production is approximately 2,600 BOPD from approximately 31 active production wells that are supported by four injection wells. Regular production from the Hemlock Formation within the field began in 1992 and peaked at approximately 1,900 BOPD in October of that year. Cumulative oil production is approximately 2.2 MMBO, and current production is approximately 15 BOPD from a single well. 3. Pool Identification: a. Granite Point Middle Kenai Oil Pool: The GPMKOP is currently defined in CO 76 as the accumulation that is common to and which correlates with the accumulation found in Mobil's Granite Point No. 1 well (Permit to Drill 165-002) between 7,725' and 10,800' measured depth (MD). Hilcorp's post -hearing supplemental information proposes retaining this definition for the GPMKOP. b. Granite Point Hemlock Oil Pool: Hilcorp's supplemental information proposes defining the GPHOP as the accumulation that is common to and which correlates with the accumulation found in Mobil's Granite Point No. I well between 10,885' and 11,280' MD. 4. Geology: a. Structure: Within the Affected Area, the structure at the top of the proposed GPMKOP forms a northeast -trending, asymmetrical anticline that forms a four -way -closure measuring about 7 miles long by 1-1/2 miles wide. This anticline is bound on the west by a north -northeast -trending, high -angle reverse fault, and the anticline is also cut by several northeast -trending, normal faults. The western limb of the anticline is difficult to image on seismic data and well control is sparse, but it appears to dip steeply to the 2 Frankforter, M.J. and Waugaman, J.C., 2013, The Granite Point Field, Cook Inlet, Alaska, in Stone, D.M. and Hite, D.M., eds., Oil and Gas Fields of the Cook Inlet Basin, Alaska; AAPG Memoir 104, p. 263 — 290. Conservation Order 76A May 20, 2019 Page 3 of 8 west at more than 60 degrees. The eastern limb dips more gently toward the east at approximately 20 to 25 degrees. The depth to the top of the GPMKOP along the crest of the anticline is about -7,800' TVDSS.' The depth to the top of the GPHOP is about -10,500' TVDSS. b. StratigrVhy: Sediments comprising Hilcorp's proposed GPMKOP encompass Oligocene- to Miocene -aged fluvial sediments that are assigned to the Tyonek Formation (Tyonek). Sandstone and conglomerate layers within the proposed pool were deposited in braided streams, and they are interbedded with overbank siltstones and claystones. Thin layers of coal are common. The sandstone and conglomerate layers vary in true vertical thickness from 3' to about 75'. These reservoir layers are thickest, most laterally continuous in the southern part of the field, and they become thinner and less continuous laterally toward the north. Hilcorp's proposed GPHOP encompasses Eocene- to Oligocene -aged, fluvial sediments that were deposited in braided streams or alluvial fans, and they vary in true vertical thickness from 3' to about 100'. c. Rock Properties: For the GPMKOP, porosity of the reservoir intervals ranges from about 5 to 20 percent and averages about 14 percent. Permeability ranges up to about 180 millidarcies (md), and averages approximately 10 md. Oil gravity averages about 41 degrees API.4 For the GPHOP, porosity of the reservoir layers ranges from about 1 to 14% and averages about 5 percent. Hilcorp testified that, in general, the Hemlock within the GPU consists of very tight reservoir rock, but properly located wells may be able to utilize natural fracturing to enhance productivity. Oil gravity is similar to that of the GPMKOP.4 d. Faults: The vertical displacement of the small, northeast -trending faults cutting the proposed pools range up to about 125 feet. Because of the relatively thin -bedded nature of many reservoirs within proposed pools, some faults act as local barriers. e. Trap Configuration and Seals: Well log and seismic information indicate that western bounding fault and structural dip control the hydrocarbon accumulation within the anticline in the western, southern and southeastern portions of the proposed pool. To the east and northeast, the accumulation is limited by the lack of reservoirs due to non - deposition. Claystone layers form top seals for individual reservoirs. Geologic structure maps provided by Hilcorp on April 22, 2019, depict the areal extent of the oil accumulations within the GPMKOP and the GPHOP based on the depth of the original lowest -known oil for each of those accumulations. 5. Well Spacing: CO 76 established GPMKOP spacing requirements of no more than two wells per governmental quarter section, at least 1,000' of separation between wells, and at least 500' set -back from any property line. Statewide spacing regulations govern all wells drilled to other pools within the GPU. Since the GPU is a very mature oil development, Hilcorp is considering drilling horizontal and multilateral wells which are highly likely to require an exception from the CO 76 or statewide spacing requirements. s To avoid confusion, when depths represent true vertical depth below mean sea level (or subsea), the footage will be preceded by a minus sign and followed by the acronym TVDSS (e.g., 3,000 feet true vertical subsea will be depicted as -3,000 feet TVDSS). 4 Frankforter, M.J. and Waugaman, J.C., 2013, p. 268 Conservation Order 76A May 20, 2019 Page 4 of 8 6. Downhole Commingling: CO 693 grants downhole commingling between the GPMKOP and Hemlock Formation in well Granite Pt St 11-13RD (PTD 191-133). Hilcorp requests that downhole commingling be authorized field -wide between the proposed, expanded GPMKOP and the proposed GPHOP. GPU is a very mature development with many wells at or near their economic limit. Downhole commingling between the GPMKOP and the GPHOP will improve resource recovery by increasing the lifespan of wells that become marginal in one pool by allowing concurrent production from a second pool. Production logging and/or chemical fingerprinting of recovered oil can be used to allocate production between the two pools for conventional wells. However, Hilcorp may drill multilateral wells, and multilateral wells cannot be configured to allow use of production logging tools. For such wells, chemical analysis is the only practical means of allocating production. CONCLUSIONS: 1. Retaining the vertical extent of the GPMKOP and defining the new GPHOP is appropriate and will lead to better development of the field and maximization of ultimate recovery. 2. To avoid a narrow, vertical gap between pools, the base of the GPMKOP is best placed at 10,885' MD, which is coincident with the top of the underlying GPHOP. 3. The structure maps provided by Hilcorp that depict the areal extent of the GPMKOP and GPHOP oil accumulations do not support Hilcorp's original request to revise the Affected Area of CO 76 to coincide with the current Granite Point Unit boundary or Hilcorp's supplemental request to retain the Affected Area defined in CO 76. 4. Eliminating interwell spacing requirements while maintaining a minimum set -back distance from property lines where ownership or landownership changes will improve resource recovery while protecting correlative rights. 5. Allowing downhole commingling will extend well life and improve ultimate recovery. 6. Allocating production based on geochemical fingerprinting or production well logs— depending on how each well is completed—will ensure proper reserve tracking and reservoir management. 7. The Administrative Approval rule is being modified to reflect the current language used by the AOGCC for these rules. NOW, THEREFORE, IT IS ORDERED: In addition to statewide requirements under 20 AAC 25 (to the extent not superseded by these rules), the following rules govern development of the Granite Point Middle Kenai Oil Pool and the Granite Point Hemlock Oil Pool. CO 76 and all of its associated administrative approvals are revoked and superseded by this order. The records of CO 76 and its administrative approvals are incorporated by reference into this order. Conservation Order 76A May 20, 2019 Page 5 of 8 Affected Area: Seward Meridian Township and Range Sections T10N-R11W Section 5: SWA, W/2 ofNW/4 Sections 6, 7: All Section 8: NW/4, W/2 of SWA Section 18: W/2, NEA, NW/4 of SE/4 Section 19: W/2 of NW/4, NE/4 of NW/4 TION-R12W Section 1: E/2, SWA, E/2 of NWA, SW/4 of NWA Section 11: E/2 of E/2, SW/4 of SEA Sections 12, 13, 23, & 24: All Section 14: E/2, E/2 of SW/4, SE/4 of NW/4 Section 25: NW/4, NW/4 of NEA, NW/4 of SWA Section 26: N/2, N/2 of S/2 T] 1N-Rl l W Section 19: SWA Seaward portion only, NW/4 Seaward portion only, W/2 of SE/2, SW/4 of NEA, SEA of SEA Section 29: W/2 of SWA Sections 30 & 31: All Section 32: W/2 of W/2 T11N-R12W Section 25: SE/4, E/2 of NEA Section 36: E/2, E/2 of SWA, SEA of NW/4 Rule 1 Definition of Pools (Revised this order) a. The Granite Point Middle Kenai Oil Pool is defined as the oil accumulation that is common to, and correlative with, the accumulation found in Mobil's Granite Point No. 1 well (PTD 165-002) between 7,725' and 10,885' MD. This reference log is depicted in Figure 1, below. b. The Granite Point Hemlock Oil Pool is defined as the accumulation common to, and correlative with, that in Mobil's Granite Point No. 1 well between 10,885' and 11,280' MD. Rule 2 Well Spacing (Revised this order) There shall be no well spacing restrictions for the pools defined above, except that no oil well shall be completed within 500 feet of an exterior property line where ownership or landownership is not the same on both sides of the line. Rule 3 Casing and Cementing Requirements (Restated from CO 76) Surface casing must be set and cemented to a depth of at least 1600 feet. Sufficient cement must be used to circulate to the surface. Conservation Order 76A May 20, 2019 Page 6 of 8 Figure 1. Granite Point No. 1: Reference Log for Granite Point Middle Kenai and Granite Point Hemlock Oil Pools 507331005900 1650020 MOBIL GRANITE POINT 1 1042 FNL 1289 FWL TWP: 10 N - Range: 12 W - Sec. 13 l -7000 -7000 '� -7500 ---- -7500 ob -9000 . -5000 __ - -9500- -�- -9500 Middle _ �_ - Kenai Oil Pool - -9000 =O�< _. ww . -9000 -9500 -9500 - g- Eg - T — 10000 _ 10000 ate. -10500 ,I - -10500 - 11000 Hemlock i_ :� 11000 Oil Pool S t a 7 Figure 1. Granite Point No. 1: Reference Log for Granite Point Middle Kenai and Granite Point Hemlock Oil Pools Conservation Order 76A May 20, 2019 Page 7 of 8 The production string must be cemented with a sufficient volume of cement to extend at least 500 feet above the shoe or a volume sufficient to cover 100 feet above the top of the uppermost producing zone encountered in the well, whichever is greater. Rule 4 Bottom Hole Pressure Surveys (Restated from CO 76) A key well bottom hole pressure survey shall be made upon AOGCC request; provided however, such surveys are not anticipated to be required more often than twice in any calendar year. The time and length of survey, number and location of wells, datum and other details will be determined by the AOGCC upon consultation with the operators. Rule 5 Gas -Oil Ratio Tests (Restated from CO 76) A gas -oil -ratio test of 24 hours duration shall be made annually on each producing well. The tests will be made during the months of June and July and the results will be reported on AOGCC Form 10-409 prior to September of each year. The requirements of this rule will be waived if monthly reported oil and gas production is based on a gas -oil -ratio test made at least every six months on each producing well. Rule 6 Pressure Maintenance Proiect (Superseded by Area Iniection Orders No. 6 & 11 as amended Rule 7 Downhole comminElinP (New this order) Downhole commingling of production in wells simultaneously open to the GPMKOP and the GPHOP is hereby approved with the following conditions: a. Within 30 days of commencement of commingled production, a production log or geochemical analysis must be obtained. b. The operator must perform periodic production logging or geochemical analysis for all wells with downhole commingled production to allocate production between the GPMKOP and the GPHOP, with no more than 24 months between tests, and adjust the allocation of production between the pools accordingly. c. Copies of all tests, logs, or analyses used for determining allocation of production shall be submitted to the AOGCC within 30 days. Rule 8 Other Conservation Orders (Revised this order) Conservation Orders No. 59, 60, 76, & 693 and any associated administrative approvals to those orders are hereby revoked. Their records are incorporated by reference into this order. All other Conservation Orders affecting the GPHOP or the GPHOP shall remain in full force and effect, except as modified hereby. Rule 9 Administrative Approval (Revised and renumbered this order) Unless notice and public hearing is otherwise required, the AOGCC may administratively waive the requirements of any rule stated above or administratively amend any rule as long as the change Conservation Order 76A May 20, 2019 Page 8 of 8 does not promote waste or jeopardize correlative rights, is based on sound engineering and geoscience principles, and will not result in an increased risk of fluid movement into fr�_el}r{ttS DONE at Anchorage, Alaska and dated May 20, 2019. v Daniel T. Seamount, Jr. J ie L. Chmielowski Commissioner C missioner RECONSIDERATION AND APPEAL NOTICE As provided in AS 31.05.080(a), within 20 days after written notice of the entry of this order or decision, or such further time as the AOGCC grants for good cause shown, a person affected by it may file with the AOGCC an application for reconsideration of the matter determined by it. If the notice was mailed, then the period of time shall be 23 days. An application for reconsideration must set out the respect in which the order or decision is believed to be erroneous. The AOGCC shall grant or refuse the application for reconsideration in whole or in part within 10 days after it is filed. Failure to act on it within I0days is a denial of reconsideration. If the AOGCC denies reconsideration, upon denial, this order or decision and the denial of reconsideration are FINAL and may be appealed to superior court. The appeal MUST be filed within 33 days after the date on which the AOGCC mails, OR 30 days if the AOGCC otherwise distributes, the order or decision denying reconsideration, UNLESS the denial is by inaction, in which case the appeal MUST be filed within 40 days after the date on which the application for reconsideration was filed. If the AOGCC giants an application for reconsideration, this order or decision does not become final. Rather, the order or decision on reconsideration will be the FINAL order or decision of the AOGCC, and it may be appealed to superior court. That appeal MUST be filed within 33 days after the date on which the AOGCC mails, OR 30 days if the AOGCC otherwise distributes, the order or decision on reconsideration. In computing a period of time above, the date of the event or default aftff which the designated period begins to ran is not included in the period; the last day of the period is included, unless it falls on a weekend or state holiday, in which event the period runs until 5:00 p.m. on the next day STATE OF ALASKA ALASKA OIL AND GAS CONSERVATION COMMISSION 333 West 7'" Avenue Anchorage Alaska 99501 Re: THE APPLICATION OF Hilcorp Alaska, LLC for amendments to Conservation Order No. 76 to expand the boundaries of the Middle Kenai Oil Pool, establish a new Hemlock Oil Pool, revise interwell spacing requirements, authorize commingling of production between the existing Middle Kenai Oil Pool and the newly formed Hemlock Oil Pool, revise the administrative approval rule to be consistent with how the Alaska Oil and Gas Conservation Commission currently implements the rule, and revise the Affected Area of the order to coincide with the current unit boundary for the Granite Point Unit. IT APPEARING THAT: Docket Number: CO -18-036 Conservation Order No. 76A Granite Point Unit Granite Point Middle Kenai Oil Pool Granite Point Hemlock Oil Pool Kenai Peninsula Borough, Alaska May 20, 2019 1. By application received October 26, 2018, Hilcorp Alaska, LLC (Hilcorp) as operator of the Granite Point Unit (GPU) requested that Conservation Order No. 76 (CO 76) be amended to revise the vertical limits of the Granite Point Middle Kenai Oil Pool (GPMKOP), define a new Granite Point Hemlock Oil Pool (GPHOP), eliminate the interwell spacing requirements of 20 AAC 25.055(a)(3)&(4) for wells drilled in the affected area, authorize downhole commingling of production between the GPMKOP and GPHOP, revise Rule 7 of CO 76 so that the administrative approval is consistent with how the Alaska Oil and Gas Conservation Commission (AOGCC) is currently implementing this rule, and revise the Affected Area of the order to be consistent with the current GPU boundary. 2. Pursuant to 20 AAC 25.540, the AOGCC scheduled a public hearing for April 4, 2019. On March 1, 2019, the AOGCC published notice of that hearing on the State of Alaska's Online Public Notice website and on the AOGCC's website, electronically transmitted the notice to all persons on the AOGCC's email distribution list and mailed printed copies of the Notice of Public Hearing to all persons on the AOGCC's mailing distribution list. On February 26, 2019, the notice was published in the Anchorage Daily News. 3. The hearing convened as scheduled on April 4, 2019, and immediately recessed until April 11, 2019, due to a lack of a quorum of Commissioners. The hearing reconvened on April 11, 2019, and evidence was presented by Hilcorp in support of its application. The hearing record was left open until April 22, 2019 for Hilcorp to respond to AOGCC's requests for additional information. 4. On April 22, 2019, Hilcorp submitted its written, supplemental information.' The hearing record closed. 5. Hilcorp's April 22, 2019 supplement requested its application received October 26, 2018 be modified to: ' Hilcorp Alaska, LLC, `RE: Proposed Amendment to Conservation Order 76 (Granite Point Field)," dated April 22, 2019. Conservation Order 76A May 20, 2019 Page 2 of 8 a. retain Granite Point State 1 as the reference well for defining the GPMKOP and GPHOP; b. use geochemical fingerprinting of produced oil to allocate production between the GPMKOP and GPHOP; and c. remove the request to amend the Affected Area of CO 76. 6. Hilcorp's application, testimony, supplemental evidence, AOGCC records, and published technical literature2 provide sufficient information for AOGCC to make an informed decision. FINDINGS: 1. Operator and Owners: Hilcorp is the Operator and sole Working Interest Owner of the GPU. The State of Alaska, Department of Natural Resources (DNR) is the landowner of the Affected Area, which is located offshore in the Cook Inlet in the Kenai Peninsula Borough, in southcentral Alaska. 2. Development History: The Granite Point Field was discovered in 1965 by the Mobil -Union Granite Point No. 1 well. Three production platforms were installed in 1965 and 1966. They are named, from north to south, the Bruce, Anna, and Granite Point Platforms. Regular production from the GPMKOP began in 1967 and peaked at over 49,000 barrels of oil per day (BOPD) in February of 1968. Cumulative oil production is over 150 million barrels of oil (MMBO). Current production is approximately 2,600 BOPD from approximately 31 active production wells that are supported by four injection wells. Regular production from the Hemlock Formation within the field began in 1992 and peaked at approximately 1,900 BOPD in October of that year. Cumulative oil production is approximately 2.2 MMBO, and current production is approximately 15 BOPD from a single well. 3. Pool Identification: a. Granite Point Middle Kenai Oil Pool: The GPMKOP is currently defined in CO 76 as the accumulation that is common to and which correlates with the accumulation found in Mobil's Granite Point No. 1 well (Permit to Drill 165-002) between 7,725' and 10,800' measured depth (MD). Hilcorp's post -hearing supplemental information proposes retaining this definition for the GPMKOP. b. Granite Point Hemlock Oil Pool: Hilcorp's supplemental information proposes defining the GPHOP as the accumulation that is common to and which correlates with the accumulation found in Mobil's Granite Point No. 1 well between 10,885' and 11,280' MD. 4. Geology: a. Structure: Within the Affected Area, the structure at the top of the proposed GPMKOP forms a northeast -trending, asymmetrical anticline that forms a four -way -closure measuring about 7 miles long by 1-1/2 miles wide. This anticline is bound on the west by a north -northeast -trending, high -angle reverse fault, and the anticline is also cut by several northeast -trending, normal faults. The western limb of the anticline is difficult to image on seismic data and well control is sparse, but it appears to dip steeply to the z Frankforter, M.J. and Waugaman, J.C., 2013, The Granite Point Field, Cook Inlet, Alaska, in Stone, D.M. and Hite, D.M., eds., Oil and Gas Fields of the Cook Inlet Basin, Alaska; AAPG Memoir 104, p. 263 — 290. Conservation Order 76A May 20, 2019 Page 3 of 8 west at more than 60 degrees. The eastern limb dips more gently toward the east at approximately 20 to 25 degrees. The depth to the top of the GPMKOP along the crest of the anticline is about -7,800' TVDSS.3 The depth to the top of the GPHOP is about -10,500' TVDSS. b. Stratigranhv: Sediments comprising Hilcorp's proposed GPMKOP encompass Oligocene- to Miocene -aged fluvial sediments that are assigned to the Tyonek Formation (Tyonek). Sandstone and conglomerate layers within the proposed pool were deposited in braided streams, and they are interbedded with overbank siltstones and claystones. Thin layers of coal are common. The sandstone and conglomerate layers vary in true vertical thickness from 3' to about 75'. These reservoir layers are thickest, most laterally continuous in the southern part of the field, and they become thinner and less continuous laterally toward the north. Hilcorp's proposed GPHOP encompasses Eocene- to Oligocene -aged, fluvial sediments that were deposited in braided streams or alluvial fans, and they vary in true vertical thickness from 3' to about 100'. c. Rock Properties: For the GPMKOP, porosity of the reservoir intervals ranges from about 5 to 20 percent and averages about 14 percent. Permeability ranges up to about 180 millidarcies (md), and averages approximately 10 md. Oil gravity averages about 41 degrees API.4 For the GPHOP, porosity of the reservoir layers ranges from about 1 to 14% and averages about 5 percent. Hilcorp testified that, in general, the Hemlock within the GPU consists of very tight reservoir rock, but properly located wells may be able to utilize natural fracturing to enhance productivity. Oil gravity is similar to that of the GPMKOP.4 d. Faults: The vertical displacement of the small, northeast -trending faults cutting the proposed pools range up to about 125 feet. Because of the relatively thin -bedded nature of many reservoirs within proposed pools, some faults act as local barriers. e. Trap Configuration and Seals: Well log and seismic information indicate that western bounding fault and structural dip control the hydrocarbon accumulation within the anticline in the western, southern and southeastern portions of the proposed pool. To the east and northeast, the accumulation is limited by the lack of reservoirs due to non - deposition. Claystone layers form top seals for individual reservoirs. Geologic structure maps provided by Hilcorp on April 22, 2019, depict the areal extent of the oil accumulations within the GPMKOP and the GPHOP based on the depth of the original lowest -known oil for each of those accumulations. 5. Well Spacing: CO 76 established GPMKOP spacing requirements of no more than two wells per governmental quarter section, at least 1,000' of separation between wells, and at least 500' set -back from any property line. Statewide spacing regulations govern all wells drilled to other pools within the GPU. Since the GPU is a very mature oil development, Hilcorp is considering drilling horizontal and multilateral wells which are highly likely to require an exception from the CO 76 or statewide spacing requirements. 3 To avoid confusion, when depths represent true vertical depth below mean sea level (or subsea), the footage will be preceded by a minus sign and followed by the acronym TVDSS (e.g., 3,000 feet true vertical subsea will be depicted as -3,000 feet TVDSS). 4 Frankforter, M.J. and Waugaman, J.C., 2013, p. 268 Conservation Order 76A May 20, 2019 Page 4 of 8 6. Downhole Commingling: CO 693 grants downhole commingling between the GPMKOP and Hemlock Formation in well Granite Pt St 11-13RD (PTD 191-133). Hilcorp requests that downhole commingling be authorized field -wide between the proposed, expanded GPMKOP and the proposed GPHOP. GPU is a very mature development with many wells at or near their economic limit. Downhole commingling between the GPMKOP and the GPHOP will improve resource recovery by increasing the lifespan of wells that become marginal in one pool by allowing concurrent production from a second pool. Production logging and/or chemical fingerprinting of recovered oil can be used to allocate production between the two pools for conventional wells. However, Hilcorp may drill multilateral wells, and multilateral wells cannot be configured to allow use of production logging tools. For such wells, chemical analysis is the only practical means of allocating production. CONCLUSIONS: 1. Retaining the vertical extent of the GPMKOP and defining the new GPHOP is appropriate and will lead to better development of the field and maximization of ultimate recovery. 2. To avoid a narrow, vertical gap between pools, the base of the GPMKOP is best placed at 10,885' MD, which is coincident with the top of the underlying GPHOP. 3. The structure maps provided by Hilcorp that depict the areal extent of the GPMKOP and GPHOP oil accumulations do not support Hilcorp's original request to revise the Affected Area of CO 76 to coincide with the current Granite Point Unit boundary or Hilcorp's supplemental request to retain the Affected Area defined in CO 76. 4. Eliminating interwell spacing requirements while maintaining a minimum set -back distance from property lines where ownership or landownership changes will improve resource recovery while protecting correlative rights. 5. Allowing downhole commingling will extend well life and improve ultimate recovery. 6. Allocating production based on geochemical fingerprinting or production well logs— depending on how each well is completed—will ensure proper reserve tracking and reservoir management. 7. The Administrative Approval rule is being modified to reflect the current language used by the AOGCC for these rules. NOW, THEREFORE, IT IS ORDERED: In addition to statewide requirements under 20 AAC 25 (to the extent not superseded by these rules), the following rules govern development of the Granite Point Middle Kenai Oil Pool and the Granite Point Hemlock Oil Pool. CO 76 and all of its associated administrative approvals are revoked and superseded by this order. The records of CO 76 and its administrative approvals are incorporated by reference into this order. Conservation Order 76A May 20, 2019 Page 5 of 8 Affected Area: Seward Meridian Township and Range Sections T10N-1111W Section 5: SWA, W/2 ofNW/4 Sections 6, 7: All Section 8: NW/4, W/2 of SWA Section 18: W/2, NE/4, NW/4 of SEA Section 19: W/2 of NW/4, NE/4 of NW/4 TION-R12W Section 1: E/2, SW/4, E/2 of NW/4, SW/4 ofNW/4 Section 11: E/2 of E/2, SWA of SEA Sections 12, 13, 23, & 24: All Section 14: E/2, E/2 of SWA, SE/4 ofNW/4 Section 25: NW/4, NW/4 of NE/4, NW/4 of SWA Section 26: N/2, N/2 of S/2 T11N-RI 1 W Section 19: SWA Seaward portion only, NW/4 Seaward portion only, W/2 of SE/2, SWA of NE/4, SEA of SE/4 Section 29: W/2 of SW/4 Sections 30 & 31: All Section 32: W/2 of W/2 T11N-R12W Section 25: SEA, E/2 of NEA Section 36: E/2, E/2 of SW/4, SEA ofNW/4 Rule 1 Definition of Pools (Revised this order) a. The Granite Point Middle Kenai Oil Pool is defined as the oil accumulation that is common to, and correlative with, the accumulation found in Mobil's Granite Point No. 1 well (PTD 165-002) between 7,725' and 10,885' MD. This reference log is depicted in Figure 1, below. b. The Granite Point Hemlock Oil Pool is defined as the accumulation common to, and correlative with, that in Mobil's Granite Point No. 1 well between 10,885' and 11,280' MD. Rule 2 Well Spacing (Revised this order) There shall be no well spacing restrictions for the pools defined above, except that no oil well shall be completed within 500 feet of an exterior property line where ownership or landownership is not the same on both sides of the line. Rule 3 Casine and Cementing Requirements (Restated from CO 76) Surface casing must be set and cemented to a depth of at least 1600 feet. Sufficient cement must be used to circulate to the surface. Conservation Order 76A May 20, 2019 Page 6 of 8 Figure 1. Granite Point No. 1: Reference Log for Granite Point Middle Kenai and Granite Point Hemlock Oil Pools 507331005900 1650020 MOBIL GRANITE POINT 1 1042 FNL 1289 FWL TWP: 10 N - Range: 12 W - Sec. 13 - - - - - -- -7000 -i000 -7500 "-' -7500 .� ... `; -8000 -8000 -8600 -8500 Middle ; g Menai -9000 _ - -q -- -9000 S; -9500 ,f ; .� k+� - -f -9500 -10000 z -' z - - -10000 _ -10600 j - "'^ - -_ � -. -10500 -11000 Hemlock^- _11000 Oil Pool - I Figure 1. Granite Point No. 1: Reference Log for Granite Point Middle Kenai and Granite Point Hemlock Oil Pools Conservation Order 76A May 20, 2019 Page 7 of 8 The production string must be cemented with a sufficient volume of cement to extend at least 500 feet above the shoe or a volume sufficient to cover 100 feet above the top of the uppermost producing zone encountered in the well, whichever is greater. Rule 4 Bottom Hole Pressure Surveys (Restated from CO 76) A key well bottom hole pressure survey shall be made upon AOGCC request; provided however, such surveys are not anticipated to be required more often than twice in any calendar year. The time and length of survey, number and location of wells, datum and other details will be determined by the AOGCC upon consultation with the operators. Rule 5 Gas -Oil Ratio Tests (Restated from CO 76) A gas -oil -ratio test of 24 hours duration shall be made annually on each producing well. The tests will be made during the months of June and July and the results will be reported on AOGCC Form 10-409 prior to September of each year. The requirements of this rule will be waived if monthly reported oil and gas production is based on a gas -oil -ratio test made at least every six months on each producing well. Rule 6 Pressure Maintenance Proiect (Superseded by Area Infection Orders No. 6 & 11 as amended Rule 7 Downhole commin¢line (New this order) Downhole commingling of production in wells simultaneously open to the GPMKOP and the GPHOP is hereby approved with the following conditions: a. Within 30 days of commencement of commingled production, a production log or geochemical analysis must be obtained. b. The operator must perform periodic production logging or geochemical analysis for all wells with downhole commingled production to allocate production between the GPMKOP and the GPHOP, with no more than 24 months between tests, and adjust the allocation of production between the pools accordingly. c. Copies of all tests, logs, or analyses used for determining allocation of production shall be submitted to the AOGCC within 30 days. Rule 8 Other Conservation Orders (Revised this order Conservation Orders No. 59, 60, 76, & 693 and any associated administrative approvals to those orders are hereby revoked. Their records are incorporated by reference into this order. All other Conservation Orders affecting the GPHOP or the GPHOP shall remain in full force and effect, except as modified hereby. Rule 9 Administrative Approval (Revised and renumbered this order) Unless notice and public hearing is otherwise required, the AOGCC may administratively waive the requirements of any rule stated above or administratively amend any rule as long as the change Conservation Order 76A May 20, 2019 Page 8 of 8 does not promote waste or jeopardize correlative rights, is based on sound engineering and geoscience principles, and will not result in an increased risk of fluid movement into freshwater. DONE at Anchorage, Alaska and dated May 20, 2019. //signature on file// Daniel T. Seamount, Jr. Commissioner //signature on file// Jessie L. Chmielowski Commissioner NOTICE As provided in AS 31.05.080(a), within 20 days after written notice of the entry of this order or decision, or such further time as the AOGCC grants for good cause shown, a person affected by it may file with the AOGCC an application for reconsideration of the matter determined by it. If the notice was mailed, then the period of time shall be 23 days. An application for reconsideration must set out the respect in which the order or decision is believed to be erroneous. The AOGCC shall grant or refuse the application for reconsideration in whole or in part within 10 days after it is filed. Failure to act on it within 10-0ays is a denial of reconsideration. If the AOGCC denies reconsideration, upon denial, this order or decision and the denial of reconsideration are FINAL and may be appealed to superior court. The appeal MUST be filed within 33 days after the date on which the AOGCC mails, OR 30 days if the AOGCC otherwise distributes, the order or decision denying reconsideration, UNLESS the denial is by inaction, in which case the appeal MUST be filed within 40 days after the date on which the application for reconsideration was filed. If the AOGCC grants an application for reconsideration, this order or decision does not become final. Rather, the order or decision on reconsideration will be the FINAL order or decision of the AOGCC, and it may be appealed to superior court. That appeal MUST be filed within 33 days after the date on which the AOGCC mails, OR 30 days if the AOGCC otherwise distributes, the order or decision on reconsideration. In computing a period of time above, the date of the event or default after which the designated period begins to ran is not included in the period; the last day of the period is included, unless it falls on a weekend or state holiday, in which event the period runs until 5:00 p.m. on the next day Bernie Karl K&K Recycling Inc. Gordon Severson Penny Vadla P.O. Box 58055 3201 Westmar Cir. 399 W. Riverview Ave. Fairbanks, AK 99711 Anchorage, AK 99508-4336 Soldotna, AK 99669-7714 George Vaught, Jr. Darwin Waldsmith Richard Wagner P.O. Box 13557 P.O. Box 39309 P.O. Box 60868 Denver, CO 80201-3557 Ninilchik, AK 99639 Fairbanks, AK 99706 5 Hilcorp Alaska, LLC April 22nd, 2018 Commissioners Post Office Box 244027 Anchorage, AK 99524-4027 3800 Centerpoint Drive Suite 100 Anchorage, AK 99503 Phone: 907/777-8300 /Fax: 907//7777-8301 RECEIVE® Alaska Oil and Gas Conservation Commission APR 2 2 2019 333 West 7 Avenue, Suite 100 Anchorage, Alaska 99501 AOGCC RE: Proposed Amendment to Conservation Order 76 (Granite Point Field) Dear Commissioners, During the April 11' 2018 hearing (Docket Number CO -18-036), the Commissioners and Executive Staff of the Alaska Oil & Gas Conservation Commission ("AOGCC") requested the following further information: 1. Clarification of the measured depths of the Hemlock Oil Pool in the MUCI- 01 well. 2. A proposed allocation methodology that would allow for allocating production in producing wells in which the Granite Point Middle Kenai and Hemlock Oil Pools are commingled. 3. Map of the original lowest known oil of the Granite Point Middle Kenai Oil Pool in relation to the Granite Point Unit Boundary and affected area. 4. Map of the original lowest known oil of the Granite Point Hemlock Oil Pool in relation to the Granite Point Unit Boundary and affected area. In response to these requests, Hilcorp provides the following information: Upon further evaluation, the Granite Point State 1 Well sufficiently characterizes the Middle Kenai and Hemlock Oil Pools. Therefore, Hilcorp proposes that Rule 1 read as defined below. This below path forward minimizes changes to the existing Pool Rules by keeping the same reference well for Oil Pool definitions in the Granite Point Field. Rule 1. Pool Rules a. The Granite Point Middle Kenai Oil Pool is defined as the accumulation of oil common to and which correlates with the accumulation found in the Granite Point 1 Well between the drilled depths of 7,725 feet and 10,800 feet. b. The Granite Point Hemlock Oil Pool is defined as the accumulation of oil common to and which correlates with the accumulation found in the Granite Point 1 Well between the drilled depths of 10,885 feet and 11,280 feet. Post Office Box 244027 Anchorage, AK 99524-4027 Hilcorp Alaska, LLC300 Suite 100terpoint Drive Anchorage, AK 99503 Phone: 907/777-8300 April 22nd, 2018 Fax: 907/777-8301 RECEIVED Commissioners Alaska Oil and Gas Conservation Commission APR 2 333 West 7h Avenue, Suite 100 201 Anchorage, Alaska 99501 AOGCC RE: Proposed Amendment to Conservation Order 76 (Granite Point Field) Dear Commissioners, During the April 11" 2018 hearing (Docket Number CO -18-036), the Commissioners and Executive Staff of the Alaska Oil & Gas Conservation Commission ("AOGCC") requested the following further information: 1. Clarification of the measured depths of the Hemlock Oil Pool in the MUCI- 01 well. 2. A proposed allocation methodology that would allow for allocating production in producing wells in which the Granite Point Middle Kenai and Hemlock Oil Pools are commingled. 3. Map of the original lowest known oil of the Granite Point Middle Kenai Oil Pool in relation to the Granite Point Unit Boundary and affected area. 4. Map of the original lowest known oil of the Granite Point Hemlock Oil Pool in relation to the Granite Point Unit Boundary and affected area. In response to these requests, Hilcorp provides the following information: Upon further evaluation, the Granite Point State 1 Well sufficiently characterizes the Middle Kenai and Hemlock Oil Pools. Therefore, Hilcorp proposes that Rule 1 read as defined below. This below path forward minimizes changes to the existing Pool Rules by keeping the same reference well for Oil Pool definitions in the Granite Point Field. Rule 1. Pool Rules a. The Granite Point Middle Kenai Oil Pool is defined as the accumulation of oil common to and which correlates with the accumulation found in the Granite Point 1 Well between the drilled depths of 7,725 feet and 10,800 feet. b. The Granite Point Hemlock Oil Pool is defined as the accumulation of oil common to and which correlates with the accumulation found in the Granite Point 1 Well between the drilled depths of 10,885 feet and 11,280 feet. Hilcorp Alaska, LLC Proposed Rules re Granite Point Field October 11. 2018 Page 2 of 5 2. To improve the ultimate recovery of the Granite Point Middle Kenai and Hemlock Oil Pools multiple horizontal laterals from existing wells will need to be drilled. This will result in commingled production of the two Oil Pools in a single parent bore. The completions associated with drilling multiple laterals from a single parent bore can prevent the ability to allocate production to individual Oil Pools with mechanical methods such as production logging. However, production can be allocated between the Granite Point Middle Kenai and Hemlock Oil Pools by Geochemical fingerprinting. Therefore, Hilcorp requests that the proposed new Commingling Rule be revised as follows to incorporate conditions to ensure proper allocation of production between the Granite Point Middle Kenai and Hemlock Oil Pools. Rule 8. Commingling A. In any oil well, commingling of the Granite Point Middle Kenai Oil Pool and Hemlock Oil Pool is authorized with the following conditions: a. The operator must perform geochemical allocation of oil between the Granite Point Middle Kenai and Hemlock Oil Pools within the first 30 days, of when the well has stabilized, for the commencement of commingled production. b. The operator must perform periodic geochemical allocation of oil production in any well in which there is commingled production of the Granite Point Middle Kenai and Hemlock Oil Pools, with no more than 24 months between geochemical allocations. 3. Attachment 1 is a map of the original lowest known oil of the Granite Point Middle Kenai Oil Pool in relation to the Granite Point Unit Boundary and current affected area. Upon further consideration, Hilcorp would like to remove the request to amend the affeted area of Conservation Order 76. 4. Attachment 2 is a map of the original lowest known oil of the Granite Point Hemlock Oil Pool in relation to the Granite Point Unit Boundary and current affected area. Upon further consideration, Hilcorp would like to remove the request to amend the affeted area of Conservation Order 76. Hilcorp Alaska, LLC Proposed Rules re Granite Point Field October 11. 2018 Page 3 of 5 Hilcorp would be pleased to schedule a technical meeting with AOGCC staff to provide additional information in support of this proposal. Should you have any other questions regarding this proposal, please do not hesitate to contact the undersigned at 907-777-8424. Sincerely, Thomas Nenahlo Hilcorp Alaska, LLC Senior Reservoir Engineer Enclosure: Attachment 1: Granite Point Middle Kenai Oil Pool in relation to the Granite Point Unit Boundary Attachment 1: Granite Point Hemlock Oil Pool in relation to the Granite Point Unit Boundary Hilcorp Alaska, LLC Proposed Rules re Granite Point Field October 11. 2018 Page 4 of 5 Attachment 1: Granite Point Middle Kenai Oil Pool C5 Sand lowest known oil (green polygon) in relation to the Granite Point Unit Boundary (purple outline) and the current CO 76 affected area (gray hash). T11N-R11W 21 22 ]! 27 n ;4 a e 10 is 4 T10N-R11W , — HILCORP ALASKA, LLC GRANITE POINT C5STRUCTUREkW wEU S:nBOts • w»w � wsiw }Y h<w xa r lwrwrw � tixr.e ronae.e e w..e xN n aanr.wr`r f Ca uw waaw�xu FEET , — . . � CD , © �•\� $ § ! ` 2 «E§ { = i � �- , © �•\� $ § ! \§ CD =E G} )o /\ \[ 2 \\ (§ o 2. )/ �- $ § ! \§ { & . 2 CD =E G} )o /\ \[ 2 \\ (§ o 2. )/ $ § \§ AOGCC 4/I i/2019 ITMO: APPLICATION OF HILCORP AK TO AMEND CONSERVATION ORDER 76 Docks No. CO IM36 ALASKA OIL AND GAS CONSERVATION COMMISSION In the Matter of the Application of ) Hilcorp Alaska to Amend Conservation ) Order 76 to Revise the Description of the ) Middle Kenai Oil Pool, Define a Hemlock ) Oil Pool, Revise the Rule on Well Spacing ) and Authorize Downhole Commingling of ) Production, ) Docket No. CO 18-036 ALASKA OIL and GAS CONSERVATION COMMISSION Anchorage, Alaska April 11, 2019 9:00 o'clock a.m. PUBLIC HEARING BEFORE: Jessie Chmielowski, Commissioner Daniel T. Seamount, Commissioner Computer Metrix, LLC Phone: %7-243-0668 135 Chrixt. Ex., Ste. 2., Anch. AK 99501 Fu: 907-243-1473 Email: sehik@Rci. at AOGCC 4/112019 ITMO: APPLICATION OF HILCORP AK TO AMEND CONSERVATION ORDER 76 Docks No. CO IM36 Computer Matrix, LLC Phom: 907-243 W8 135 Chdue Dr., Ste. 2.. Asch. AK 99501 Fax: 907-243-1473 Emaiheah0eg,ti nci Page 2 1 TABLE OF CONTENTS 2 Opening remarks by Commissioner Chmielowski 03 3 Testimony by Thomas Nenahlo 08 4 Testimony by Michael Schoetz 37 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Computer Matrix, LLC Phom: 907-243 W8 135 Chdue Dr., Ste. 2.. Asch. AK 99501 Fax: 907-243-1473 Emaiheah0eg,ti nci ACOCC 4 11 2019 ITMO: APPLICATION OF HILCORP AK TO AMEND CONSERVA PION ORDER 76 Docket N., CO I8-036 Page 3 1 P R O C E E D I N G S 2 (On record) 3 COMMISSIONER CHMIELOWSKI: Okay. We'll go on 4 the record. I'd like to call this hearing to order. 5 The date is April lith 2019, the time is 9:00 a.m. We 6 are located at 333 West Seventh Avenue, Anchorage, 7 Alaska, in the office of the Alaska Oil and Gas 8 Conservation Commission. I will introduce the bench. 9 Commissioner Dan Seamount is to my left and I am 10 Commissioner Jessie Chmielowski. 11 We are here regarding docket number CO 18-036. 12 It's the Granite Point Field, Middle Kenai Oil Pool and 13 Hemlock Oil Pool. Hilcorp, by letter dated October 26, 14 2018 requests the AOGCC amend conservation order 76 to 15 revise the description of the Middle Kenai Oil Pool, 16 define a Hemlock Oil Pool, revise the rule on well 17 spacing and authorize downhole commingling of 18 production. 19 This is a continuation of a hearing that was 20 opened and closed on April 4th, 2019. 21 Computer Matrix will be recording the 22 proceedings. You can get a copy of the transcript from 23 Computer Matrix Reporting. 24 According to the sign -in sheet we have two 25 folks from Hilcorp who plan to testify. The Computer Metrix, LLC Phone_ 909943-0668 135 Christrnsen Dr., S,, 2.. Anch. AK 99501 Fax: 907-^_43-1473 Frait. sahilu(agci net AOOCC 4,11 2019 ITMO. APPLICATION OF HILCORP AN 10 AMEND CONSERVATION ORDER 76 Docket No CO I8-036 Page 4 1 Commissioners will ask questions during testimony. We 2 may also take a recess to consult with staff to 3 determine whether additional information or clarifying 4 questions are necessary. If a member of the audience 5 has a question that he or she feels should be asked 6 please submit that question in writing to Samantha 7 Carlisle in the back corner. She will provide the 8 question to the Commissioners and if we feel that a 9 question will assist us in making our determinations we 10 will ask it. 11 For those testifying please keep in mind that 12 you must speak into the microphone so that those in the 13 audience and the court reporter can hear your 14 testimony. Also please remember to reference your 15 slides so that someone reading the public record can 16 follow along. For example refer to slides by their 17 numbers if numbered or by their titles if not 18 numbered. 19 We have a few ground rules on what is allowed 20 relative to testimony. First all testimony must be 21 relevant to the purposes of the hearing that I outlined 22 a few minutes ago and to the statutory authority of the 23 AOGCC. Anyone desiring to testify may do so, but if 24 the testimony drifts off subject we will limit the 25 testimony. Additionally testimony may not take the Compmer Matvv. LLC Phone 907-243-0668 135 Christensen Dr- Ste 2., Anch, AN 99501 F.x 909-243-1473 6mfil .ahilua ¢ci.nw AODCC 4/11/2019 ITMO:APPLICATIONOFHILCORPAKTOA NDCONSERVATIONORDER76 Docks No. CO I8-036 Page 5 1 form of cross examination. As I said before the 2 Commissioners will be asking the questions. And 3 finally testimony that is disrespectful or 4 inappropriate will not be allowed. 5 Commissioner Seamount, do you have anything to 6 add? 7 COMMISSIONER SEAMOUNT: The only thing I have 8 to add is I believe this is Commissioner Chmielowski's 9 first real hearing that she's chairing and you guys are 10 -- it's pretty honorable to be at her first hearing 11 other than the one that you -- the fake one that you 12 just did last week. 13 So let's have fun. 14 COMMISSIONER CHMIELOWSKI: All right. So I 15 will now swear in the witnesses. We have -- is it 16 Michael Schoetz? 17 MR. SCHOETZ: Mike Schoetz. 18 COMMISSIONER CHMIELOWSKI: Mike Schoetz and 19 Thomas Nenahlo. So you're both giving sworn testimony. 20 If you would please raise your right hand. 21 (Oath administered) 22 MR. SCHOETZ: Yes. 23 MR. NENAHLO: Yes. 24 COMMISSIONER CHMIELOWSKI: Would either of you 25 like to be recognized as experts? ComPata M fi., LLC Phone: 9W-243-0668 135 C ia.. Dr., St. 2., A h. AK 99501 F. 90]-243-14]3 Email: s ileHjgci.nel 4/112019 ITMO: APPLICATION OF HILCORP AK TO Ah1END CONSERVATION ORDER 76 Docket No. CO 1"36 Page 6 1 1 MR. SCHOETZ: Yes. 2 COMMISSIONER CHMIELOWSKI: You would. Okay. 3 So please state your name, who you represent, what is 4 the subject of your expertise and your qualifications, 5 please. 6 MR. SCHOETZ: Michael Schoetz representing 7 Hilcorp Alaska as a landsman. I graduated from or went 8 to the University of Oklahoma, Michael F. Price College 9 of Business, graduated in December of 2007 with a BBA 10 in energy management. Began my career at HighMount 11 Exploration and Production in Houston working as a 12 Utica shale -- our Utica shale assets in Michigan, 13 Black Water Basin assets in Alabama. In 2011 I began 14 my employment at British Gas Group working Utica and 15 Marcellus shales in Pennsylvania and West Virginia 16 assets. In 2013 I moved and began working for Hilcorp 17 Energy Company. I worked Gulf Coast and East Texas 18 assets until 2017 as a -- all as landsman. And then 19 began in August of 2017 my employment up here with 20 Hilcorp Alaska working our Cook Inlet assets to 21 current. And, you know, through that time I've been 22 involved in the daily activities of a landsman, lease 23 sales, drafting spacing exceptions, drafting PODS is a 24 daily activity. 25 COMMISSIONER CHMIELOWSKI: So? Computa Matrix, LLC An.: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax 909-243-1473 Email: while@Bci no Ct�f 4/M019 ITMO: APPLICATION OF HILCORP AN TO AMEND CONSERVATION ORDER 76 Doeka No. CO 18-036 Page 7 1 COMMISSIONER SEAMOUNT: Is this a question on 2 expert witness? 3 COMMISSIONER CHMIELOWSKI: Right. 4 COMMISSIONER SEAMOUNT: I have no questions, no 5 objections. 6 COMMISSIONER CHMIELOWSKI: Yeah. I agree, no 7 questions, no objections. 8 Thank you. So..... 9 MR. SCHOETZ: Commissioner, he would like to 10 also be a..... 11 COMMISSIONER CHMIELOWSKI: Oh, also. 12 MR. NENAHLO: Yeah. 13 MR. SCHOETZ: .....expert witness. 14 COMMISSIONER CHMIELOWSKI: Okay. 15 MR. NENAHLO: Thomas Nenahlo, I work for 16 Hilcorp Alaska. I have 11 years industry experience 17 with an undergraduate degree from Colorado School of 18 Mines in chemical engineering and economics and a 19 master's degree in chemical engineering from University 20 of Alaska Fairbanks. I spent numerous years working 21 with ConocoPhillips on their North Slope assets and 22 working with facility engineering, production 23 engineering and reservoir engineering rules. Currently 24 with Hilcorp working the Cook Inlet Basin assets, 25 specifically Granite Point field, Trading Bay field, Computer Marx, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 F. 907-243-1473 Em": sshile@Vi.net AOGCC 4111/2019 ITMO: APPLICATION OF HILCORP AK TO AMEND CONSERVATION ORDER 76 Docket No. CO I "36 1 North Cook Inlet and exploration work. 2 COMMISSIONER SEAMOUNT: I have no questions, no 3 objections. 4 Is it Mr. Nenahlo? 5 MR. NENAHLO: Nenahlo. 6 COMMISSIONER SEAMOUNT: Nenahlo. I don't have 7 my reading glasses with me so I'm having a hard time. 8 COMMISSIONER CHMIELOWSKI: Great. No 9 questions, no objections. 10 So I believe you can proceed with your 11 presentation. 12 MR. NENAHLO: All right. Thank you. 13 THOMAS NENAHLO 14 previously sworn, called as a witness on behalf of 15 Hilcorp Alaska, testified as follows on: 16 DIRECT EXAMINATION 17 MR. NENAHLO: So on the first slide is the pool 18 rules amendment, the objectives. So ultimately what 19 we're trying to do is improve the ultimate recovery of 20 the Granite Point field through two methodologies. One 21 is to increase the well density and two is to commingle 22 production in the Middle Kenai and Hemlock oil pools. 23 The proposed rule changes would be rule 1 and 2 would 24 be changed, rule 1 being the definition of the pool, 25 rule 2 being the well spacing. We propose a new rule Computor Matrix, LLC Phone: 907-243-0668 135 Chnsmmn Dr.- Ste. 2., Arch. AK 99501 Fax: 90]-243-14]3 Email: sahilergBci toot AOOCC 4 11 2019 11 MO. APPLICATION OF HIICORP AK TO AMEND CONSFRVATION ORDER 76 Docker No. CO 18-036 Page 9 1 authorizing commingling with the Middle Kenai and 2 Hemlock pools and Michael will be speaking to rules 7 3 and 9 which are administrative approvals in the 4 affected area. 5 The picture on the right side of the slide is a 6 picture of the northern half of the Cook Inlet and 7 highlighted in the red box there is the Granite Point 8 field, the anticline structure that runs north south as 9 typical of most of the producing assets in the Cook 10 Inlet offshore basin. 11 It's an oil field. It was discovered -- if you 12 go to the next slide which is Granite Point field 13 overview, was discovered in 1965. First oil was 14 brought online in 1967. It is currently produced from 15 three platforms, the Granite Point platform which is 16 furthest to the south, the Anna which is in the middle 17 and then the Bruce to the north. All three production 18 platforms are active and producing. It reached peak 19 production of 53,000 barrels of oil per day early on in 20 its life. Its current cumulative recovery is 150 21 million stock tank barrels. It was acquired by Hilcorp 22 Energy Company in 2011. 23 We'd like to bring attention to the chart on 24 the lower left there. The scale there is unfortunately 25 fuzzy on the presentation slide, but 2011 is roughly in Cotnpa erMatrix. LLC Phone 907-243-0668 135 Christensen Dr_ Ste 2_ Arch. AK 99501 1ax: 902243.1473 F nail. salineai For nor AOGCC 4/112019 ITMO: APPLICATION OF HILCORP AK TO AMEND CONSERVATION ORDER 76 Docket No. CO 18-036 Page 10 1 this time frame. Since Hilcorp acquired the field 2 production has continued to increase and this most 3 recent uptick was a well drilled in -- this is a log 4 scale with oil on your Y1 access along with water and 5 then gas is in red, water blue, injection in the dashed 6 blue and green is for oil production rate. 7 So this uptick in green is incremental, about a 8 thousand barrels a day. The well that was drilled by 9 Hilcorp in 2017, I was part of that effort after 10 joining Hilcorp, it was drilled from the Granite Point 11 platform and is one of the reasons for us being here to 12 improve the ultimate recovery and amend the pool rules 13 to give us more latitude in increasing the well density 14 to improve the ultimate recovery. And I'll speak a 15 little bit more to that well in a minute. 16 The first rule, definition of pool. 17 COMMISSIONER SEAMOUNT: Excuse me, Mr. Nenahlo. 18 Normally the slides are numbered and they're numbered 19 for the court recorder. Since these aren't numbered 20 could you just describe what the slide is before you 21 get into. 22 MR. NENAHLO: Sure. 23 COMMISSIONER SEAMOUNT: This one's easy I can 24 tell. 25 MR. NENAHLO: This is slide 4. Coinputa Mavis, LLC Phone: 907-243-0668 135 Clotmeesen @., Ste. 2., Anch. AK 99501 Fax: 907-2434473 Email: sahilegygeine AOOC 4 11 '_019 Il MO. APPLICATION OF IIILCORP AK l0 AMEND CONSERVATION ORDER 76 Docks No.CO I8-036 Page 11 1 COMMISSIONER SEAMOUNT: Oh, our's aren't 2 numbered. 3 COMMISSIONER CHMIELOWSKI: He's giving the 4 title. 5 COMMISSIONER SEAMOUNT: Okay. 6 MR. NENAHLO: Rule 1 is proposed amendments. 7 And this is really a clerical amendment for ourselves 8 and the reason we'd like to propose this amendment is 9 that the -- we'd like to have one well, one type log, 10 defining both the Middle Kenai and Hemlock oil pools. 11 And an excellent well for that is the Mcguay (ph) 1 12 injector. It was drilled deep and encompasses both the 13 Middle Kenai and the Hemlock oil pools. So in one type 14 log we can have both pools combined. Many wells are 15 not drilled into the Hemlock, it's a secondary target 16 in terms of recovery objectives. It was not produced 17 until the 1980s. The Middle Kenai contains the vast 18 majority of the reserves. 19 So the existing rule 1, the definition of the 20 pool is that the Granite Point Middle Kenai oil pool is 21 defined by the accumulation of oil common to and which 22 correlates with the accumulation found in the Mobile 23 Union Granite Point number 1 well. That was a 24 discovery wells between the drilled depths of 7,725 and 25 10,800 feet. Computer Marnx. LLC Phone: 907-243-0668 135 armemen Dr- Ste 2- Anch. AK 94501 Fax: 907-243-1473 Email. while(µ,... AOOCC 4111/2019 ITMO: APPLICATION OF NILCORP AK TO AMEND CONSERVATION ORDER 76 Dm,kd No. CO 18-036 Page 12 1 What we're proposing is that we use the Muckeye 2 1 well which again encompasses the Middle Kenai oil 3 pool along with the Hemlock oil pool. What I've shown 4 on the right here is the type log Muckeye 1, the Middle 5 Kenai is on the left and just to get better clarity I 6 broke the log into two sections because it covers a 7 significant section. You can see the Middle Kenai 8 starting on the left and then the top of the Hemlock at 9 the bottom of the first log. And then on the right you 10 can see where the top of the Hemlock is and it 11 continues down. 12 The Hemlock is pretty pervasive across the Cook 13 Inlet Basin, you see it in most fields. It's 14 characterized by a relatively flat gamma and the 15 interbedded coals that you see in the Middle Kenai 16 disappear. It's a pretty homogenous package if you 17 look through it. 18 COMMISSIONER CHMIELOWSKI: I have a question. 19 We were looking at some logs for this or at the log for 20 this well earlier and it looks like the Middle Kenai 21 oil pool matches up pretty closely with the original 22 type log, right, it's just shifted down to a lower 23 depth. It looks like though the Hemlock is typically 24 defined as about a 500 foot interval with a shale I 25 think called the Westmoreland shale below it and then CoWma Mmrix, LLC Phone: 907-243-0668 135 Claisteaaen @., Ste. 2., Amh. AK 99501 Fax: 907-243-1473 Email: sahile@8ci.mt AOGCC 4/I 12019 ITMO: APPLICATION OF HILCORP AK TO AMEND CONSERVATION ORDER 76 Docket No. CO 18-036 Page 13 1 something called the Jurassic below that. And it looks 2 like you're suggesting incorporating the Jurassic in 3 the (indiscernible) section of Hemlock into one 4 Hemlock oil pool; is that correct? 5 MR. NENAHLO: If the Hemlock has the -- I can 6 maybe get back to you on that..... 7 COMMISSIONER CHMIELOWSKI: Okay. 8 MR. NENAHLO: .....but the package that we have 9 defined should be just the Hemlock and not inclusive of 10 the Jurassic and Westmoreland, but I can get back to 11 you later about it. 12 COMMISSIONER CHMIELOWSKI: Okay. Yeah. Go 13 ahead. 14 COMMISSIONER SEAMOUNT: Well, we -- looks like 15 your measured depth thickness of the Hemlock what 16 you're proposing is 2,200 feet; is that correct or is 17 that a typo and if it's correct what's the true 18 vertical thickness of that zone? I mean, I've never 19 heard of a 2,200 foot thick Hemlock. 20 MR. NENAHLO: Yeah, if you look at the 21 structural thickness it's -- the way that this well is 22 drilled, it's drilled from -- it was drilled from the 23 platform and so it sailed to the north and landed at a 24 fairly high deviation relative to the Granite Point 1 25 well which is drilled vertical exploration well. Computer Menu, LLC Ph..: 907-243-0668 135 Cl nt.ro. Dr., Ste. 2., M& AK 99501 Fax: 907-243-1473 Email: s il.@gci.m AOGCC 4 112019 ITMO: APPLICATION OF HILCORP AK TO AMEND CONSERVATION ORDER 76 Doakel No. CO I8-036 Page 14 1 COMMISSIONER SEAMOUNT: Okay. 2 MR. NENAHLO: So true vertical thickness, it 3 varies, but it's certainly not 2,200 feet. 4 COMMISSIONER SEAMOUNT: Do you use Landmark 5 still? 6 MR. NENAHLO: Landmark..... 7 COMMISSIONER SEAMOUNT: Or, I mean..... 8 MR. NENAHLO: .....the software? 9 COMMISSIONER SEAMOUNT: Yeah. Well, Unical 10 used to use Landmark, but they had a way that you could 11 get a true vertical thickness taking into account the 12 well deviation and the dip. 13 MR. NENAHLO: Yeah. 14 COMMISSIONER SEAMOUNT: And it would be good to 15 see something like that so we can see what kind of real 16 thicknesses we're looking at. 17 MR. NENAHLO: Okay. I can get those -- I can 18 get those numbers for you. We have -- we used Petra 19 software now..... 20 COMMISSIONER SEAMOUNT: Okay. 21 MR. NENAHLO: .....and we have those types of 22 numbers. I apologize I don't have them with me at this 23 moment. 24 COMMISSIONER SEAMOUNT: Do you know what the 25 lithology is of that 2,200 foot drilled section, is it Ccenpmo Mavix. LLC Phone. 907-'_43 0668 135 Cltrwe en Dr_ Ste, 2., Anch, AK 99501 Fnx 907-343-1473 E.11- ,ehilll,. nm AOGCC 4/11/2019 IWO: APPLICATION OF NILCORP AK TO AWND CONSERVATION ORDER 76 D kd No. CO IS -036 Page 15 1 -- does it all look like Hemlock..... 2 MR. NENAHLO: It pretty much..... 3 COMMISSIONER SEAMOUNT: .....or does it change 4 into Metamorphics or something? 5 MR. NENAHLO: It looks primarily all Hemlock. 6 COMMISSIONER SEAMOUNT: Okay. 7 MR. NENAHLO: Yeah. Yeah, just a very tight 8 sandstone. 9 COMMISSIONER SEAMOUNT: It's got the green 10 stuff in it and all? 11 MR. NENAHLO: I don't know about the green 12 stuff, but..... 13 COMMISSIONER SEAMOUNT: I think it's called -- 14 I think it's Glauconite. 15 MR. NENAHLO: Okay. Yeah, I'm not familiar 16 with them finding much Glauconite here, but, yeah, just 17 a very tight sandstone. Being an anticline structure 18 it was -- these oil pools -- if you go to the next 19 slide -- actually I can get to the anticline structure 20 and the uplifting that happened, help be a further 21 definition around these pools. But is there -- does 22 that help with your questions and I can get back to you 23 on the true vertical depth and the inclusion of the 24 Jurassic in Westmoreland? 25 COMMISSIONER CHMIELOWSKI: Yes. Compvtd M m, LLC Phom: 907-243-0668 135 Clvist. Dr., Ste. 2., Amh, AK 99501 Fax907-243-1473 Email: sahile@gdm AOOCC 4/11/2019 ITMO: APPLICATION OF HILCORP AK TO AASEND CONSERVATION ORDER 76 Docks No, CO I8-036 Page 16 1 MR. NENAHLO: Okay. All right. On the next 2 slide which is just a header slide, rule 2, well 3 spacing. I use these slides as breaks so we can talk 4 about each individual well one at a time. 5 So continuing on to the next slide, rule 2, 6 proposed amendments. 7 So spacing. The existing rule states that no 8 more than two completed wells shall be allowed in any 9 governmental quarter section and rule 2, part B, no pay 10 open to the wellbore shall be nearer than 500 feet to 11 any property line nor nearer than 1,000 feet to any 12 well drilling or capable of producing from the same 13 pool. 14 What we propose is that there shall be no oil 15 or gas well spacing restrictions within the Granite 16 point field except that (a), no oil well shall be 17 completed less than 500 feet from an exterior property 18 line of the Granite Point unit where the owners and 19 landowners are not the same on both sides of the line 20 and (b), no gas well shall be completed less than 1,500 21 feet from the exterior property line of the Granite 22 Point unit where the owners and landowners are not the 23 same on both sides of the line. 24 COMMISSIONER SEAMOUNT: Do you have gas? 25 MR. NENAHLO: We have a little bit of gas to Computer Mavis, LLC Phone: 907-243-0668 135 Christmen IN., Ste. 2., Arch, AK 99501 Fax 907-243-1473 Email: sahikftdw AOGCC 1 the north at Bruce, yes. 411112019 ITMO: APPLICATION OF HILCORP AK TO AMEND CONSERVATION ORDER 76 Docks No. CO 1"36 Page 17 2 COMMISSIONER SEAMOUNT: And it's within the -- 3 what was it, the Kenai section or Tyonek section that 4 you're proposing? 5 MR. NENAHLO: The middle -- we call it -- it's 6 been referred to historically as the Middle Kenai and 7 so we're keeping that nomenclature. 8 COMMISSIONER SEAMOUNT: Okay. The Middle 9 Kenai. Is that gas contained within that pool? 10 MR. NENAHLO: It is actually not in that pool? 11 COMMISSIONER SEAMOUNT: It's higher? 12 MR. NENAHLO: Yeah, I'd have to -- it's in the 13 Bruce 387 pool. 14 COMMISSIONER SEAMOUNT: Okay. So that would 15 still be an undefined pool? 16 MR. NENAHLO: Exactly. 17 COMMISSIONER SEAMOUNT: Okay. 18 MR. NENAHLO: Yes. Going to the next slide. 19 So these next two slides are two discuss the 20 fundamental properties of the reservoir and the geology 21 to explain why we're requesting an increase in the well 22 spacing or the well density, removal of the well 23 spacing rule. 24 The Granite Point field is an anticline 25 structure. So the slide I'm referring to is structure Computer Matrix. LLC P .907-243-0665 135 Ckistemen Dr., Ste. 2., Anch. AK 99501 Fax: 907843-1473 Email: snhile@gdw AOGCC 4/11/2019 ITMO: APPLICATION OF HILCORP AK TO AMEND CONSERVATION ORDER ]6 Docks No. CO 18-036 Page 18 1 and development. It was developed from three platforms 2 and they commingled production originally in the Middle 3 Kenai Oil Pool exclusively. There's significant 4 compartmentalization in the north end of the field. 5 The picture that you're seeing on the lower left is a 6 seismic representation of the top of the CSA sand is 7 the thickest and most laterally extensive sand within 8 the Middle Kenai oil pool. And you go to the north you 9 got a wrenching affect and that's causing volting that 10 runs northeast/southwest along the structure. It has a 11 very steeply dipping west flank so the north arrow is 12 in the bottom right of the picture on the lower left. 13 And a very steeply deeping west -- dipping west flank 14 that can be -- really can't be seismically imaged well. 15 You can see the platforms and number of the wellbore 16 trajectories, the development of the filed. In the 17 first horizontal wells which is a big part of my 18 requesting a spacing exception is the first horizontal 19 wells were drilled in the 1990s with a lot of success 20 and we want to continue on with that type of 21 development. 22 On the right there we have the Middle Kenai 23 pool, the column here in the green indicates oil 24 bearing sands. And the nomenclature has been to label 25 them the Middle Kenai C sands. And so there's a C1, Compute Maw, LLC Phone: 907JA3-0 68 135 Cb wt. Dr.. Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email: sahik�a,8ci.� AOOCC 4 11 2019 ITMO- APPLICATION OF HILCORP AK TO AMEND CONSERVA IION ORDER 76 Docket No CO 18-036 Page 19 1 C2, C5, C6 sands. What it is if you have a sequence of 2 coals and silts and sands and it tends to repeat itself 3 over time. And it's a fluvial system you have 4 meandering channels. Sometimes they amalgamate, 5 sometimes you get a thin sand -- a thin channel. And 6 when they developed this field they were vertical to 7 slant completions and they shot everything and brought 8 it all online. Certainly the most economic approach at 9 the time. 10 Hilcorp has development plans to target 11 individual sands with horizontal wells. We 12 successfully did that as I mentioned in 2017, the first 13 well we drilled encountered oil and encountered it in 14 the range of about 1,200 barrels a day with no water. 15 And we expect significant recoveries with that well. 16 COMMISSIONER SEAMOUNT: When you say the 1990 17 wells were highly successful, what's the definition of 18 successful? 19 MR. NENAHLO: Encountering reserves that could 20 not have been recovered without the use of horizontal 21 wells. 22 COMMISSIONER SEAMOUNT: In the 190s? 23 MR. NENAHLO: In the '90s..... 24 COMMISSIONER SEAMOUNT: Okay. 25 MR. NENAHLO: .....yeah. Compmer Matrix. LLC Phone. 907-243-0668 135 Chdwem ,eo Do. So, 2.. Aneh. AK 99501 Fac 907-243-1413 FLAIL sehllenEat vd AOGCC 4/11/2019 ITMO: APPLICATION OF HILCORP AK TO AMEND CONSERVATION ORDER 76 Dodd No. CO 1"36 Page 20 1 COMMISSIONER SEAMOUNT: What kind of rates were 2 they? 3 MR. NENAHLO: Anywhere from 300 to 1,500 4 barrels a day initial production rates. 5 COMMISSIONER SEAMOUNT: Okay. That's getting 6 close to uneconomic at 1990s prices, but as far as 7 production that sounds pretty good. 8 MR. NENAHLO: Yeah. It's -- 1990 prices were 9 certainly a challenge. If you look at the long term, 10 you know, having the hindsight of 20/20, looking back 11 at time and you look at the economics of those wells, 12 it certainly paid out in the long run. 13 COMMISSIONER SEAMOUNT: So are these 1990 wells 14 still producing well? 15 MR. NENAHLO: The ones that encountered oil are 16 still producing. 17 COMMISSIONER SEAMOUNT: What kind of rates? 18 MR. NENAHLO: Anywhere from 300 barrels a day 19 to 50 barrels a day. 20 COMMISSIONER SEAMOUNT: Hmmm. Not bad. 21 MR. NENAHLO: Yeah. Almost 30 years later. 22 Granite Point has -- if you look at the structure here, 23 the actual sands, when you look at their voracity and 24 their permeability, they are typically around 11 -- 25 they should be about 11,000 to 12,000 feet, but they ComPuter Metrix, LLC Phone: 907-M3-0668 135 pvindueo Dr.. Ste. 2., And. AK 99501 Fax 907-243-1473 Email: a eCOR,i.nd AOOCC 4 112019 ITMO'. APPLICATION OF HILCORP AK TO AMEND CONSERVATION ORDER 76 DeA0 No. CO IS016 Page 21 1 are uplifted. So at this equivalent depth that we're 2 working with where they currently are in time, they're 3 much tighter than equivalent depth without this 4 uplifting. So what you have is a rather tight rock of 5 low porosity. 6 So going to the next slide, this is 7 stratigraphy. You got tight rock and then you've got 8 the complexities of the fluvial systems. And as I 9 mentioned these -- the stratigraphy here is sequences 10 of sandstone, conglomerate, claystone and coals. We 11 have 10C sand, we call them C zones, the C1 to the C10. 12 We have subzones that have been classified, for 13 instance the C5A and the C5B. And the picture you're 14 seeing in the lower left is a cross section from B to B 15 prime and the picture in the middle here is the outline 16 of the Granite Point field in blue with the well 17 trajectories in black and then the B to B prime. 18 So we're moving from the south of the field to 19 the north. And what happens here is you have the 20 thickest, most laterally continuous sands in the south 21 of the field. As you move to the north they become 22 thinner and less laterally continuous. 23 COMMISSIONER SEAMOUNT: Can I have -- can we 24 assume that the blue is the outline of the pool? 25 MR. NENAHLO: It is very close to it. It's -- Cbmpu n Manx, LLC Phone -907-243L668 135 Cneismn,eo Dr.. Sn, 2. Ands_ AN 99501 Fax: 907-243-1473 Email: while", gci. net nnotC 4/11/2019 ITMO: APPLICATION OF KILCORP AN TO AMEND CONSERVATION ORDER 76 Docks Na. CO IMM Page 22 1 this is actually the C5 oil/water contact. And it's a 2 little -- the pool is larger, a little bit larger than 3 that, but it roughly mirrors it. 4 COMMISSIONER SEAMOUNT: Okay. And then when 5 you talk about horizontal wells are you -- are you 6 going to go horizontal within one sand or try to get a 7 number of sands? 8 MR. NENAHLO: Our initial plans are to go into 9 one individual sand, but target multiple sands with 10 multiple laterals. So each lateral would target an 11 individual sand..... 12 COMMISSIONER SEAMOUNT: Okay. 13 MR. NENAHLO: .....and you drill multiple 14 laterals from a single mother bore. 15 And the reason being is that as these sands are 16 tight relatively to -- especially the North Slope 17 assets, they have low permeability. And so improving 18 the amount of footage that you have in that sand helps 19 drive the rate and the recovery. 20 21 22 23 24 25 COMMISSIONER SEAMOUNT: Are you going to frack them? MR. NENAHLO: Fracking. So this rock is actually very interesting in the fact that it's extremely water wet, very sensitive to water. I'm going to refer to this column on the right. So these Computa Matrix, LLC Phots: 907-243-0668 135 Chriatmaen Dr., Ste. 2., Am h. AK 99501 Fix: 907-243-1473 Email: mMla@gci.nm AOGCC 4 11 2U I9 ITMO. APPLICATION OF Ili LCORP AK TO AMEND CONST RVATION ORDER 76 DOekn No. CO 18036 Page 23 1 are the Cl to the C8 sands where you have yellow 2 indicating sand in the different packages. So when 3 these sands come into contact with water they tend to 4 lock up. And the permeability, if you're looking at 5 residual oil saturation, the effective permeability to 6 water at that residual saturation is about 1 to 5 7 percent of what the original oil perm is, that initial 8 water saturation. It's very -- very low, much less 9 than a millidarcy. When they tried to flood this field 10 and they did successfully in some of the thicker sands, 11 they had -- they required up to 10,000 psi at surface 12 to inject just to get water away. And that's extremely 13 high and it caused a lot of complications from a 14 facilities engineering perspective in terms of the type 15 of part, type of pumps, type of infrastructure you have 16 on the platform. 17 So back to your question about fracking, you 18 have to frack then with dead crude which has been done 19 successfully. Unfortunately the size of the platforms 20 limit the size of the frack. 21 COMMISSIONER SEAMOUNT: Uh-huh. 22 MR. NENAHLO: So when you're trying to put in 23 -- large volumes away it's very challenging to do so 24 and you need an effective frack especially in crude. 25 COMMISSIONER CHMIELOWSKI: There's already Compmer Mainz. LIR Phone. 907-243-0668 135 Chrks en Dr_ Sm2.. A�mh. AK 99501 Far: 907-243-1473 Ema11'. sehile(o gciuu AOGCC 4/11/2019 ITMO: APPLICATION OF HILCORP AK TO AMEND CONSERVATION ORDER 76 Dockd No. CO 18-036 Page 24 1 injection on the platforms currently? 2 MR. NENAHLO: There is some minimal -- there is 3 minimal injection. It's a very small amount, we're 4 talking a few hundred barrels a day. 5 COMMISSIONER CHMIELOWSKI: Are there any 6 indications of oil shallower than 10,007 feet in the 7 Muckeye 1 well? 8 MR. NENAHLO: No, not that I'm aware of..... 9 COMMISSIONER CHMIELOWSKI: Okay. 10 MR. NENAHLO: .....nothing I saw. 11 COMMISSIONER CHMIELOWSKI: The AOGCC files for 12 this well do not contain a mud log or descriptions of 13 geology. Do you -- are you able to provide us the -- a 14 copy of the mud log..... 15 MR. NENAHLO: I can. 16 COMMISSIONER CHMIELOWSKI: .....for the Muckeye 17 1 well? 18 MR. NENAHLO: We -- yes, we can. We can 19 provide everything on that. 20 COMMISSIONER CHMIELOWSKI: Okay. And I think 21 we already discussed it, but you'll provide some TVD 22 information for that reference well, for the Hemlock 23 specifically too? 24 MR. NENAHLO: Yes. 25 COMMISSIONER SEAMOUNT: True vertical Compmcr Matrix. LLC Ph000: 907-243-0668 135 Chdrt. Dc., Sta 2.,A .AK 99501 Fax: 907-243-1473 Email:s ile�aguw 4/11/2019 ITMO: APPLICATION OF HILCORP AK TO AMEND CONSERVATION ORDER 76 Docks No. CO I8-036 Page 25 1 thickness, TVT I believe. 2 COMMISSIONER CHMIELOWSKI: Yeah, right. And 3 the proposed, you know, revisions to this conversation 4 order would have two oil pools, yet you have a spacing 5 requirement for gas wells. Are you planning to define 6 a gas pool, why wondering why there should be gas well 7 spacing rules in this conservation order for two oil 8 pools? 9 MR. NENAHLO: Yeah, we're not -- not planning 10 on defining a gas pool. 11 COMMISSIONER CHMIELOWSKI: Okay. 12 COMMISSIONER SEAMOUNT: And before we take a 13 look -- before you provide us with the mud log and 14 other descriptions do you recall if there's any oil 15 indications occurring -- well, shallower than 10,000 16 feet or deeper than what was originally called 17 Jurassic. Did you guys call it the Jurassic or did we 18 call it the Jurassic? I can't remember. 19 MR. NENAHLO: We do refer to it as the 20 Jurassic. 21 COMMISSIONER SEAMOUNT: Okay. 22 MR. NENAHLO: The Westmoreland and Jurassic 23 nomenclature is -- remains the same to my knowledge. 24 COMMISSIONER SEAMOUNT: Okay. So what used to 25 be correlated as Jurassic is now -- some of that's Computer Matrix, LLC Phots: 907-243-0668 135 Chrimt n Dr., Sm 2., Arch. AK 99501 Fax: 907-243-1473 Email: whilc@g6 nci 4 11 2019 ITMO'. APPLICATION OF HH -CORP AK TO AMEND CONSERVATION ORDER 76 Fade Na CO I8-036 Page 26 1 going to be included as Hemlock is what you're 2 proposing? 3 MR. NENAHLO: I need -- I need to go back and 4 verify that. 5 COMMISSIONER SEAMOUNT: Okay. And then -- 6 yeah. I think the mud logs would tell us is there's 7 oil shows. 8 MR. NENAHLO: Yeah, I'm not -- there's no oil 9 shows shallower than the Middle Kenai, deeper than the 10 Hemlock, but nothing economic that we've seen. But I 11 need to look at it, it's extremely tight in the 12 Hemlock. Hemlock is really a natural fracture play for 13 us and I'll explain a little bit more on that. 14 COMMISSIONER SEAMOUNT: Is there a depth at 15 which below you get over pressuring? 16 MR. NENAHLO: Not that I'm aware of. 17 COMMISSIONER SEAMOUNT: Okay. 18 COMMISSIONER CHMIELOWSKI: Are you going to 19 talk about the aerial structure, the aerial extent of 20 these pools at all? It looks like you're asking that 21 the entire revised unit boundary be part of the pools, 22 but it appears that your map of those -- of these pools 23 doesn't really line up with the unit boundary 24 especially to the northwest. 25 MR. NENAHLO: Oh, what we -- we have a map and Computer Maim. LLC Pho 907343-0668 115 Christensen Dr., Ste. 2.. Anch. AK 99501 Fax 907243-1473Lmad rahi k'o co ni AOGCC 4 112019 ITMO. APPLICATION OF H11 CORP AN TO AMEND CONSERVATION ORDER 76 D.d1 N. CO I8-036 Page 27 1 an additional slide that I'm going to be talking 2 about..... 3 COMMISSIONER CHMIELOWSKI: Okay. 4 MR. NENAHLO: ..... that shows unit boundary 5 and the current pool..... 6 COMMISSIONER CHMIELOWSKI: Okay. 7 MR. NENAHLO: .....boundary. So we'll be..... 8 COMMISSIONER CHMIELOWSKI: Great. We'll wait 9 for that. Thanks. 10 MR. NENAHLO: I have just a couple more slides 11 to further discuss the well spacing and talk a little 12 bit about the development plans and how they intertwine 13 with our proposed rule amendments. 14 So one more point about the strat column here 15 on the right and showing a cross section on the left. 16 As these wells were drilled historically with one sand 17 had water breakthrough. Water breakthrough happened in 18 really a true piston like displacement because of the 19 water wetness of the rock and the fractional flow curve 20 associated with this bore. And once you had one sand 21 breakthrough, because they're being injected into at 22 such pressure, now you have a very high pressure that 23 would drown out these deeper sands, maybe lower quality 24 sands. So imagine you have, you know, the CS where 25 water breaks through, now you have a high pressure zone Cmnpamr MavLc LLC Phone'. 907-243-0668 135 Chti,l ,a a Dr., SR,, 2, Anch_ AK 99501 Fax 907-249-1473 Email axhJo,,,. act AOOCC 4 1 .'.019 ITMO_ APPLICATION OIHILCORP AK TO AMEND CONSERVATION ORDER 76 Dodet Na CO 18-036 Page 28 1 that these thinner sands can't compete with. And so 2 what you see often in the history of this field is once 3 a sand has broken through you get a precipitous drop in 4 the oil rate, the overall oil rate for the well. 5 Doesn't mean all the sands are swept, it simply means 6 that you can't -- you can't effectively produce those 7 thinner sands. So going in and targeting each of these 8 sands individually is how we see future development to 9 improve the ultimate recovery. 10 Just speaking of core real quick, evaluating 11 the core to determine your effective perm for oil and 12 water you have a chart here on the left since this is 13 the core analysis slide. And what I'm showing here is 14 your perm on your Y axis on a log scale and your 15 porosity on the X axis. And the different colors are 16 different sands. So for instance yellow is a C2, blue 17 is the C4, green is the C5, red is the MA and the 18 purple is C7C. And the C5A and the C7C are the two 19 thickest sands. And then when you're looking at the 20 actual relationship between porosity for oil and water 21 specifically, so going form air perm to oil and water 22 perm, what you're seeing is an exponential relationship 23 between porosity and perm. A lot of sands are in this 24 -- the thinner sands especially are in that 11 to 13 25 percent porosity range. So, you know, they may be, you Computer Matrix. LIR Phone: 902243-0668 135 Ch isteDen Dr.Ste, 2, Anch. AK 99501 Fns 907-143-1473 EmaiP. sehilege ScLnu AOGCC 4/112019 ITMO: APPLICATION OF HILCORP AK TO AMEND CONSERVATION ORDER 76 Docks No. CO 18-036 Page 29 1 know, a couple millidarcies effective perm whereas, you 2 know, those big C5 and C7 sands are up in the 20 to 40 3 millidarcies. And so we believe there's potentially a 4 lot of reserves left to be recovered in these types of 5 sands, but to recover them we need longer horizontal 6 wells. 7 And then water is -- the scale here on the KW 8 at SOR graph is zero to 4 millidarcies on your Y axis 9 and then your porosity. So if you're looking at a 11 10 percent porosity rock you're about .1 millidarcy 11 effective perm to water. Doesn't like the..... 12 So future development. So we've got wells 13 going from left to right is south to north and I've 14 just highlighted in yellow different sands that we've 15 found and you see that they come and go. And what I 16 see from the next slide, future development drilling, 17 is coil tubing drilling is a -- certainly a viable 18 potential. We're pursuing rotary and coil options. 19 And what coil allows us to do is to put multiple 20 laterals out of a single mother bore and spend most of 21 our time in zone without having to drill through the 22 overburden multiple times. 23 And, you know, the key here is multiple 24 laterals from a single parent bore, minimizing your 25 complete costs, your faster trip times, really allowing Compma Metrix, LLC Phow: 907-243-0668 135 Christ. Dr., Sta 2., Anch. AK 99501 Fax 907-243-1473 Emeil: s &_-Xgd AOGCC 4/112019 ITMO: APPLICATION OF HILCORP AK TO AMEND CONSERVATION ORDER 76 Docket No. CO 18-036 Page 30 1 us to increase our net to gross ratios, these laterals 2 and then recover what's remaining in these thinner 3 sands. 4 This being a new rule that we have proposed for 5 commingling, and this is again to improve the ultimate 6 recovery. Yeah, the Tyonek and the Hemlock Tyonek 7 interchangeable with the Middle Kenai depending on 8 which company owned it through the history. They 9 sometimes refer to them as Tyonek, sometimes Middle 10 Kenai. Just want to make that clear. 11 What we have proposed is that in any oil well 12 commingling of the Granite Point/Middle Kenai oil pool 13 and the Hemlock oil pool is authorized. Total well 14 production may not be allocated to each pool or 15 productive sand interval. 16 This slide is the proposed new rule 17 commingling. The log there at blue being the Middle 18 Kenai or Tyonek and red being the Hemlock and on the 19 right, the map view, you've got the red outline being 20 the Hemlock and the blue is the Middle Kenai. And so 21 in this case there were -- the history of the Hemlock 22 development so in speaking entirely about the Middle 23 Kenai or Tyonek, the Hemlock was first developed in the 24 198Os. They found it, they knew it was there, but it 25 had not been developed. And approximately a dozen Compmer Mmdx, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email: sehilocgei.net AOGCC' 4 11 2019 ITMO'. APPI ICATION OF HILCORP AK lV AMEND CON.MRVATION ORDFR 76 Docke N. CO I8-036 Page 31 1 wells had been drilled into the Hemlock attempting to 2 produce it. It's been met with a mixed bag of results, 3 some of have been good, some have been very good, some 4 of -- most have been poor. 5 Getting back to the structure and the 6 uplifting, the Hemlock is very tight, it's truly a 7 tombstone when you look at it on the logs. However 8 with the folks what we -- what we see is that there is 9 likely natural fracturing. And when you get lucky and 10 you land the well into the right natural fracture 11 system you can get quite a good well rate and recovery - 12 wise. And so increasing your chances of encountering 13 natural fracture systems if we can drill horizontal 14 wells. Again with the spacing limitations we currently 15 have, we have to apply for a spacing exception every 16 time we drill a horizontal well. So we'd like to 17 remove that burden and increase the well density. 18 With our completions we have not landed on a 19 final completion for these development wells yet, 20 however that we target both Middle Kenai and Hemlock 21 this is more thinking about the future and leaving our 22 options open. But it can be challenging to allocate 23 production based on a KH methodology. We are -- are 24 weighing the perm and the thickness of these different 25 sands against each other to allocate production and Computo Malde, LLC Phone 907-2434,668 135 Christman Dr.. Ste 2, Anch AK 99501 Fax'. 907-243-1473 Finailsenile( get net AO(;(( 0/11/2019 ITMO: APPLICATION OF MLCORP AN TO AMEND CONSERVATION ORDER 76 Docket No, CO I8-036 Page 32 1 simply because of the Hemlock being a natural fracture 2 type play it can be challenging to allocate production 3 in that methodology. 4 Another way to allocate it would be through 5 intermittent production logs. You're putting in, you 6 know, spinner data, pressure temperature profiles and 7 you're looking at where contribution is coming from, 8 the challenges we see with that in terms of the 9 production being allocated to each pool, it may not be 10 possible to target both the Kenai and Middle Kenai out 11 of a single mother bore and still be able to 12 effectively drift and log each of these sands based on 13 the fact that we envision multiple laterals coming off 14 these wells. It could be extremely challenging from a 15 completions perspective. Now there's -- API gravity 16 methodology may be what we'd be falling back to. We 17 have a pretty humongous API gravity in the middle Kenai 18 and a pretty humongous in the Hemlock and you can 19 weight them that way with a production rate, but it's 20 not complete -- completely full proof allocation. 21 COMMISSIONER CHMIELOWSKI: As I was reading 22 through the application downhole commingling 23 allocations are discussed in the text, yet you're 24 recommending or you're, you know, asking for no 25 production allocation in your proposed rule for Compota Matrix, LLC Plot.; 907-243-0660 135 Christensen Dr., Ste, 2, Anck. AK 99501 Fu: 907-243-1473 Email: snkile ftdnet AOOCC 1 commingling? 4/1U2019 ITMO: APPLICATION OF HILCORP AK TO AMEND CONSERVATION ORDER 76 Docks No. CO 18-036 Page 33 2 MR. NENAHLO: Yes. 3 COMMISSIONER CHMIELOWSKI: Okay. Are you 4 familiar with conservation order 693 which authorizes 5 commingling, but has some production allocation 6 requirements? 7 MR. NENAHLO: I'm not familiar with that. And 8 what pools did that apply to? 9 COMMISSIONER CHMIELOWSKI: This is the same 10 Middle Kenai oil pool and Hemlock. I think there..... 11 MR. NENAHLO: Okay. 693. 12 COMMISSIONER CHMIELOWSKI: .....was one well 13 that had a conservation order 693 that allowed 14 commingling, but had some requirements on production 15 allocation methods. 16 MR. NENAHLO: Okay. 17 COMMISSIONER CHMIELOWSKI: So just thinking 18 through why we shouldn't have the same requirements, 19 you know, for this conservation order rather than no 20 production allocation. 21 MR. NENAHLO: And having -- yeah, and the 22 existing completions or the historic completions did 23 allow that type of production logging and if I just go 24 back to this schematic here, setting the whip stocks, 25 you know, we're looking at tandem assemblies is likely Computes M&rLx, LLC Phoon: 90-243.0668 135 Christens® A., Ste. 2., Anch. AK 99501 Fuc: 907-243-1473 Email: snhileftci.mt AOOCC 4 112019 ITMO_ APPLICATION OP HILCORP AK TO AMEND CONSE,RV ATION ORDER 76 Docke Ao CO IS,03n Page 34 1 the direction we'll need to take with this. And the 2 ability to drift down and log each lateral could not -- 3 it may not be possible. And if commingling is not 4 permitted then our stock of mother bores will have to 5 focus either on the Middle Kenai or the Hemlock with 6 each well. which can be done, it just -- we just see 7 that there could be risk to the ultimate recovery. 8 COMMISSIONER SEAMOUNT: Disregarding the 9 discontinuous nature of the sands how many producing 10 sands are there in the Middle Kenai, I mean, I know 11 these sands come and go, but don't they seem to come 12 and go in..... 13 MR. NENAHLO: Absolutely. 14 COMMISSIONER SEAMOUNT: Yeah, that's -- okay. 15 MR. NENAHLO: Yes, absolutely. It's..... 16 COMMISSIONER SEAMOUNT: One, two, three, four, 17 five, six, seven, eight, maybe nine different sand..... 18 MR. NENAHLO: Yeah. 19 COMMISSIONER SEAMOUNT: .....sandy 20 intervals..... 21 MR. NENAHLO: There's..... 22 COMMISSIONER SEAMOUNT: .....I wouldn't call 23 them packages? 24 MR. NENAHLO: .....there's 10 -- we refer to 25 them as zones and then within each zone there's COrputu Ahhrm LLC Phone 907-243-0668 135 Chnsteuscn Dr_ Ste 2., Anch_AK 99501 F., 901 243-1473 Errad Wrni to gr.r,I AOGCC 4 11:'_019 ITMO- APPLICATION OF IIILCORP AK TO AMEND CONSERVATION ORDER 76 Dacket N. CO 18-036 Page 35 1 subzones. So there's roughly 20 productive sands 2 across the field..... 3 COMMISSIONER SEAMOUNT: Okay. 4 MR. NENAHLO: .....we've encountered. 5 COMMISSIONER SEAMOUNT: Is it possible to 6 provide a number of maps to outline the maximum extent 7 of the oil accumulations for a lot of these sands? 8 MR. NENAHLO: Absolutely. 9 COMMISSIONER SEAMOUNT: And that -- I mean, 10 that would be -- that would be a way to define the pool 11 boundaries. 12 MR. NENAHLO: Yes, that can -- that can 13 absolutely be provided. 14 COMMISSIONER SEAMOUNT: And would they be 15 confidential? 16 MR. NENAHLO: We would -- we would be 17 requesting that it be confidential, yes. 18 COMMISSIONER SEAMOUNT: Okay. I'm not asking 19 for a structure map, I'm just asking for the 20 outlines..... 21 MR. NENAHLO: That..... 22 COMMISSIONER SEAMOUNT: .....would that still 23 be confidential? 24 MR. NENAHLO: I would -- I would need to talk 25 with our counsel about that, but we can -- yeah, we -- ComPNer Ma1nx, LLC Phonc 909-2434668 135 Christensen Dr., Ste. 2 . Anch. AK 99501 Fex_ 907-241-1471 F.tt.1 s.Mek, get tto AOGCC 4 11 ]019 ITMO'. APPLICATION OI' HILCORP AK TO AMEND CONSERVATION ORDER 76 Dacke Na. CO 18-036 Page 36 1 we'll -- we can come up with something..... 2 COMMISSIONER SEAMOUNT: Okay. 3 MR. NENAHLO: .....to help with that. Yeah, we 4 can see if we can make that no confidential to help 5 with that definition. 6 COMMISSIONER SEAMOUNT: Yeah, I'm not sure we 7 would require that they not be confidential. The most 8 important one would probably be the most -- the biggest 9 area. That one we might need to keep nonconfidential. 10 MR. NENAHLO: Okay. Moving on to the next 11 slide, proposed new rule, commingling. So new rule 12 would be stating that Hemlock or -- sorry, yeah, the 13 Hemlock and the Middle Kenai are Tyonek sands can be 14 commingled. Just this is a cross section looking west 15 to east of the structure. Again a steeply dipping left 16 flank and you can see in relation with the Hemlock 17 lines up in the relation to the Middle Kenai and Tyonek 18 sand. 19 COMMISSIONER SEAMOUNT: Is the type well on 20 that cross section? 21 MR. NENAHLO: It is not. 22 COMMISSIONER SEAMOUNT: I can see on that 23 middle well where the Hemlock would be really stretched 24 out in that wellbore. 25 MR. NENAHLO: Yeah, the -- you're referring to Compmer Mm-, LLC Phone: 907343-1668 135 Chriarensen Dr_ Ste, 2._ Anch. AK 99501 Fax'. 907-243-1473 Email. sahileat on no AOGCC 1 the Anna 3 here? Jq 12019 ITMO: APPLICATION OF HILCORP AK TO AMEND CONSERVATION ORDER 76 Docks No. CO 18-036 Page 37 2 COMMISSIONER SEAMOUNT: Yeah. 3 MR. NENAHLO: Yeah. And that's -- again I need 4 to verify to be 100 percent certain, but I believe 5 that's what we're seeing in that Muckeye 1 based on 6 azimuth and in relation to where it cut the structure. 7 If there are any further questions in regard to 8 rules 1 or 2 or the proposed new rule amendments I'm 9 happy to take them, other wise I'll hand it off to 10 Michael to discuss rule 7 and 9. And then..... 11 COMMISSIONER CHMIELOWSKI: I had a question 12 about rule 6 which isn't proposed to be modified, but 13 has to do with injection. There are also two area 14 injection orders, 6 and 11, associated with this field. 15 So your injection is authorized in the Middle Kenai oil 16 pool, but not in the Hemlock. Are you -- is there a 17 plan to initiate injection in the Hemlock? 18 MR. NENAHLO: There's not. That's primarily 19 driven by the porosity and permeability of that rock. 20 COMMISSIONER CHMIELOWSKI: Go ahead. 21 MR. NENAHLO: Okay. 22 MICHAEL SCHOETZ 23 previously sworn, called as a witness on behalf of 24 Hilcorp Alaska, testified as follows on: 25 DIRECT EXAMINATION Computer Matrix, LLC Fhorre: 907-243-0668 135 Qviat. Or.. Ste. 2.. An& AK 99501 Fax: 907-243-1473 Email:s ilKwgcinn AOOCC 4, 111019 ITMO_ APPLICATION OF HILCORP AK R) AMEND CONSERVAIION ORDER 76 Doek. No_ CO 18-036 Page 38 1 MR. S. Okay. So discussing administrative 2 approvals and effected area. This would be slide 16. 3 Administrative approval. What I've listed here is the 4 current language and this is just from 1969 and updated 5 proposed language. And this is the language that is 6 currently used. 7 COMMISSIONER CHMIELOWSKI: Uh-huh. 8 MR. S. Not much to discuss there, it's just 9 while we're in here updating opportunity to update the 10 administrative pool language. 11 COMMISSIONER CHMIELOWSKI: Right. 12 MR. SCHOETZ: Moving on to affected area, 13 discussing the affected area, slide 17. What you can 14 see here is a map displaying the Granite Point unit 15 boundary, Hilcorp's leasehold in yellow, hashed is the 16 current CO 76 affected boundary. So, you know, it 17 contains a lot of the center -- center portion of the 18 acreage, but what we want to do by this is conform to 19 the unit boundary to include the acreage -- the 20 entirety of the acreage up to the north and the south. 21 And so essentially your unit boundary, what you see 22 there, is in fact what they requested the new affected 23 area would be. 24 Hilcorp is 100 percent working interest owner 25 in all these leases. The State is the leaser in all Computer Matrix, LLC Phone. 907-243-0668 135 Chriatevaeo Dr_ Ste.2, Aoch_ AK 99501 1ax_ 909-243-1493 Email sahlle(a yci.nel AOGCC 4 11 1019 ITMO'. APPLICATION OF HILCORP AK TO AMEND CONSERVATION ORDER 76 Docket No CO IS 03b Page 39 1 these leases. All leases have 12 and a half percent 2 royalty, 87.5 NRI across the board So there would be 3 no changes as long as we stay within the unit boundary 4 as to the operator or landowner. 5 COMMISSIONER CHMIELOWSKI: And just to be clear 6 it looks like the pool extends into some leases that 7 are not part of the unit boundary and includes some 8 leases that don't appear to be part of the pool; is 9 that right, based on..... 10 MR. SCHOETZ: Can you repeat that? 11 COMMISSIONER CHMIELOWSKI: So are there leases 12 that are part of the pool, but not part of the unit, 13 hashed; is that right. 14 MR. SCHOETZ: Every lease -- no, there's not. 15 The affected order extended outside of the unit. So 16 from sections 24 and 23 in Township 10 North, Range 12 17 West, those sections aren't there. Everything hashed 18 above to the north of that was the original CS 76 19 affected area. 20 COMMISSIONER CHMIELOWSKI: Uh-huh. 21 MR. SCHOETZ: And then when you get into 22 sections 27, 26 -- 25, 26, those were -- and those are 23 just essentially the lowest three sections with the 24 hash mark on it. Those were -- the affected area was 25 expanded by conservation orders administratively Compute Matnx. LLC Plmnec 907-'_43A668 115 Christensen Dr.. Ste 2., AncL_ AK 99501 Fnx:907-743-1473 Email: sahka,e .o,t ADOCC 4/1112019 ITMO: APPLICATION OF HD,CORP AK TO AMEND CONSERVATION ORDER 76 Docks No. CO 18-036 Page 40 1 approved in the 190s, 76 1 through 2. So that's how we 2 got to those points. And that's where the boundaries 3 came from. 4 So there's no leasing -- anything in blue there 5 is no lease, there's no Hilcorp leases, no lease there. 6 The sections 2 and 11 that are excluded in Township 10 7 North, 12 West -- Range 12 West, those -- that is part 8 of lease ADL 18761. It kind of looks like just a box 9 with a chimney on top. So those are leased, they're 10 currently under lease. That lease is held by the unit, 11 those two sections are not at this time included in -- 12 within the current unit boundary. 13 COMMISSIONER CHMIELOWSKI: Okay. So just so 14 I'm 100 percent clear, the leases with the diagonal 15 lines across them were the current CO 76 boundary of 16 the pool? 17 MR. SCHOETZ: Correct. 18 COMMISSIONER CHMIELOWSKI: What you're 19 proposing is that the revised unit boundary be the new 20 pool boundary? 21 MR. SCHOETZ: Correct. 22 COMMISSIONER CHMIELOWSKI: Okay. And is there 23 a map that shows the outline of the pool as opposed to 24 the unit, you know, some overlying that we were talking 25 about before? CoruNtar Matrix, LLC Pita. 907-243-0668 135 Christrnaev Dr., Sm. 2., Arch. AK 99501 Pax: 907-243-1473 Email: sahil.@,Lr t AOGCC 4/11/2019 ITMO: APPLICATION OF HILCORP AK TO AMEND CONSERVATION ORDER 76 DDcka No. CO 18-036 Page 41 1 MR. SCHOETZ: That -- yes, that is the..... 2 COMMISSIONER CHMIELOWSKI: Okay. 3 MR. SCHOETZ: .....the hash area is the 4 entirety of the affected area of the Middle Kenai oil 5 pool. 6 COMMISSIONER CHMIELOWSKI: Okay. I thought you 7 were asking to revise the boundary of the pool? 8 MR. SCHOETZ: We are to the unit boundary. 9 COMMISSIONER CHMIELOWSKI: Right. 10 MR. SCHOETZ: So that -- I didn't -- I did not 11 put a map where we kind of take off the hash mark..... 12 COMMISSIONER CHMIELOWSKI: Right. Right. 13 MR. SCHOETZ: .....just because the unit 14 boundary's so prevalent in there. So that would -- 15 that would be it. And did I misunderstand? 16 COMMISSIONER CHMIELOWSKI: Maybe I'm not saying 17 it right. I was just thinking of a -- like a geologic 18 aerial map of the pool overlaid with the leases so we 19 could see where actually you're going to drill wells 20 and produce oil, right? 21 MR. SCHOETZ: Okay. I was just..... 22 COMMISSIONER CHMIELOWSKI: Right. 23 MR. SCHOETZ: .....I misunderstood you then. 24 COMMISSIONER CHMIELOWSKI: Yeah. 25 MR. SCHOETZ: I was just using it as the Compma Matm, LLC Phone: %7-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Emil: aahile(a/gdoet AO(;(( 4111/2019 ITMO: APPLICATION OF HILCORP AK TO AMEND CONSERVATION ORDER 26 D.&d No. CO M036 Page 42 1 affected..... 2 COMMISSIONER CHMIELOWSKI: Right. 3 MR. SCHOETZ: .....the affected area is 4 what..... 5 MR. NENAHLO: We don't have that with us today, 6 but we can provide that map. 7 COMMISSIONER CHMIELOWSKI: Okay. 8 MR. SCHOETZ: Let me look at something real 9 quick here. That's all that I had. 10 COMMISSIONER SEAMOUNT: I really -- I was 11 looking through your reference material and some of 12 those -- some of those slides are just beautiful. But 13 I'm not asking you to go through it, but they're really 14 interesting some of them. 15 MR. NENAHLO: Yeah. 16 COMMISSIONER SEAMOUNT: I like the comparison 17 with modern day. 18 MR. NENAHLO: It is -- yeah, isn't it 19 fascinating. It's potentially -- you're talking about 20 the depositional environment? 21 COMMISSIONER SEAMOUNT: Yeah. 22 MR. NENAHLO: Yeah, it truly is doing exactly 23 what it -- what it's doing now in terms of the 24 deposition environment of Susitna and associated river 25 systems is exactly what was happening when these Compute Matrix, ULC Phone: 902-243-0668 135 Christens. Dr., Ste. 2., Arch. AK 99501 Fax: 902-243-1473 Email: sahilaggci.nn AOGCC 4/112019 ITMO: APPLICATION OF HILCORP AK TO AMEND CONSERVATION ORDER 76 Docks No. CO 19-036 Page 43 1 formations were laid down. 2 COMMISSIONER SEAMOUNT: Yeah. Hemlock's still 3 being deposited it looks like. 4 COMMISSIONER CHMIELOWSKI: Do you have any 5 other questions? I think we might want to take a brief 6 recess? 7 COMMISSIONER SEAMOUNT: It's up to you, Chair 8 Chmielowski. 9 COMMISSIONER CHMIELOWSKI: Okay. Looks like we 10 may not need a recess for questions. 11 COMMISSIONER SEAMOUNT: Do you need one, does 12 the staff need..... 13 COMMISSIONER CHMIELOWSKI: Okay. We'll take a 14 15 minute recess just to make sure we don't have any 15 further questions. The time is 9:55. We'll regroup at 16 10:10. 17 (Off record) 18 (On record) 19 COMMISSIONER CHMIELOWSKI: Okay. We're back on 20 the record. So I have a question about production 21 allocation. Now AOGCC regulations require allocation 22 between pools. And we would need, you know, better 23 justification for your reasons why you can't do some 24 sort of production allocation between the Middle Kenai 25 oil pool and the Hemlock oil pool. Consider what might Computer Manu, LLC Plema. 907-243-0668 135 Cmiatemea U., Ste. 2., Asch. AK 99501 Fax: 907-243-1473 Email: aehilaa�gdnet AOGCC 4111/2019 ITMO: APPLICATION OF HILCORP AK TO AMEND CONSERVATION ORDER 76 Docke Na CO I"36 Page 44 1 work for you, like is there a geochemical allocation or 2 gravity based method. That's something that you could 3 think about and get back to us with the other 4 information. 5 MR. NENAHLO: Okay. Thank you. 6 COMMISSIONER CHMIELOWSKI: Just to be clear 7 though, there's no way to run like a spinner down the 8 mother bore and just get a gross split between the two 9 pools, would the whip stocks be in the way? 10 MR. NENAHLO: With our current projected 11 completion the whip stocks would be in the way, but we 12 can work with the staff and -- the AOGCC staff and come 13 up with a potential path forward on allocation. 14 COMMISSIONER CHMIELOWSKI: Okay. Thank you. 15 Go ahead. Is there another question? 16 COMMISSIONER SEAMOUNT: Would it be possible to 17 -- if we go back to slide proposed new rule commingling 18 and it has the structural cross section on it, 19 east/west. Would it be possible to get a similar cross 20 section which shows the Muck 1 or the type well..... 21 MR. NENAHLO: Yes. 22 COMMISSIONER SEAMOUNT: .....on it? 23 MR. NENAHLO: Yes, we can do that. 24 COMMISSIONER SEAMOUNT: And I'm wondering, I'm 25 not -- I'm just wondering if it turns out that what you ComWtc Matrix, LLC Pb.: 907-243-0668 135 Claristereen M.., Ste. 2., Anch. AK 99501 F. 907-243.1473 Email: sahile(48ci.rter AOGCC 4/112019 ITMO: APPLICATION OF HILCORP AK TO AMEND CONSERVATION ORDER 76 Dake No. CO 18-036 Page 45 1 got on the Muck 1 is just a really stretched out 2 Hemlock if you might consider a different type log. 3 I'm not saying you need to do that, I'm just wondering 5 MR. NENAHLO: Yeah. 6 COMMISSIONER SEAMOUNT: .....you know, if it -- 7 if it really is stretched out, you know, reach the 8 Westmoreland then there might be a better type log to 9 use. 10 MR. NENAHLO: Yeah. And, you know, it does 11 bring up a good point. The reason we wanted to swap 12 from the Granite Point State 1 to the Muckeye 1, the 13 only reason really was to get a full cut of the 14 Hemlock. The Granite Point State one has much..... 15 COMMISSIONER SEAMOUNT: Okay. 16 MR. NENAHLO: .....interception. You know, 17 maybe we can talk with your staff on whether we keep it 18 the Granite Point State 1, it truly doesn't matter to 19 us, we're just trying to get the most complete cut. 20 COMMISSIONER SEAMOUNT: Understood. 21 MR. NENAHLO: Okay. We'll work on that. 22 COMMISSIONER CHMIELOWSKI: How much time would 23 you need to get the information back to the Commission? 24 MR. NENAHLO: Is seven -- 10 days. 25 COMMISSIONER CHMIELOWSKI: Sure. Ten days Compute Matrix, LLC Poo.: 907-243-0668 135 Christc m Dr., Sta 2., A.h. AK 99501 1.: 90]-243-14]3 Email: h&&d.. AOGCC 4/11/2019 ITMO: APPLICATION OF MLCORP AK TO AMEND CONSERVATION ORDER 76 Docks No. CO 18-036 Page 46 1 should we say? 2 MR. NENAHLO: Ten days should work, yeah. 3 COMMISSIONER CHMIELOWSKI: Okay. So I believe 4 there's no further questions from the Commissioners. 5 MS. CARLISLE: Eleven days. 6 COMMISSIONER CHMIELOWSKI: Okay. Eleven days. 7 And we'll keep the record open for 11 days. 8 And if there's nothing further this hearing is 9 adjourned. 10 (Hearing adjourned) 11 (END OF PROCEEDINGS) 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Computer Matrix, LLC Phone: 907-243-0660 135 Christ=en IX., Ste, 2., Anch. AK 99501 Fax: 907-243-1473 EmaOaande�ajBci.nd AOGCC 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 4/11/2019 ITMO: APPLICATION OF HILCORP AK TO AMEND CONSERVATION ORDER 76 Docks No. CO 184)36 Page 47 TRANSCRIBER'S CERTIFICATE I, Salena A. Hile, hereby certify that the foregoing pages numbered 02 through 47 are a true, accurate, and complete transcript of proceedings in Docket Number CO 18-036, transcribed under my direction from a copy of an electronic sound recording to the best of our knowledge and ability. Computer Mara, LLC Phone: 907-243-0668 135 Chrig.. Dr., Ste. 2., Anch. AK 99501 Fac 907-243-1473 Email: sehile@golna STATE OF ALASKA OIL AND GAS CONSERVATION COMMISSION Docket Number: CO -18-036 April 11, 2019 NAME AFFILIATION TESTIFYING YES OR NO RECEIVE® APR 11 2019 AOGCC Granite Point Field Proposed Amendments to CO 76 Objectives: • Improve the Ultimate Recovery of the Granite Point Field by: • Increasing the well density • Commingling production in the Middle Kenai and Hemlock Proposed Rule Changes: • Rule 1: Definition of Pool • Rule 2: Well Spacing • New Rule: Commingling • Rules 7 & 9: Administrative Approvals & Affected Area In Anchorage Overview: • Discovered in 1965 • First oil in 1967 • Produced from three platforms • Granite Point, Anna, and Bruce • 53,000 BOPD peak oil production • Current cumulative recovery= 151 MMSTBO • Acquired by HEC 2011 r 'a a 1T Rlve� Oa a � a a ,o iao.uva J �. Definition of Pool Rule 1MUC-I-01 MUC-I-01 Proposed ` - • - ca aeso roa�rtr sa a¢w aoaovry xo ,m x c xuua s o Existing MipOLE NE HEMLOC Rule 1: Definition of Pool The Granite Point Middle Kenai Oil Pool is defined as the accumulation of oil common to and which correlates with the accumulation found in the Mobil-Union Granite Point No. 1 well between the drilled depths of 7,725 feet and 10,800 feet. Proposed Rule 1: Pool Rules - - a.) The Granite Point Middle Kenai Oil Pool is defined as the accumulation of oil common to and which correlates with the accumulation found in the MUCI-01 Well (API: 50-733-20173) between the drilled depths of 10,007 feet and 12,800 feet. b.) The Granite Point Hemlock Oil Pool is defined as the accumulation of oil '--' - - common to and which correlates with the accumulation found in the MUCI-01 Well (API: 50-733-20173) between the drilled depths of 12,800 feet and 15,000 feet. — ---:— -- HEMLOC Rule 2 Well Spacing Existing Rule 2: Spacing a.) Not more than two completed wells shall be allowed in any governmental quarter section. b.) No pay opened to the well bore shall be nearer than 500 feet to any property line nor nearer than 1,000 feet to any well drilling to or capable of producing from the same pool. Proposed Rule 2: Granite Point Field Well Spacing There shall be no oil or gas well spacing restrictions with the Granite Point Field, except that: a.) No oil well shall be completed less than 500 feet from an exterior property line of the Granite Point Unit where the owners and landowners are not the same on both sides of the line; and b.) No gas well shall be completed less than 1500 feet from the exterior property line of the Granite Point Unit where the owners and landowners are not the same on both sides of the line. Developed from three platforms Commingled production Significant compartmentalization in the north end Not able to image west flank with seismic First horizontal wells drilled in 1990's Stratigraphy: ^ Sequences ofsandstone, conglomerate, daystone,and coal ^ Ten zones, [1through C10 ^ Sub -zones also classified ^ Sands are amalgamated fluvial deposits ofsand, conglomerate, and sibstonc ^C5and [Jzones are most prolific ^ Sands become thinner and more laterally discontinuous from SVVtuNE OHM MR MM MM EM Core Analysis: • Evaluated core to determine ko,eff and kn,eff • Key insights: • Exponential relationship between � and k • Conglomerates have higher perm for given porosity • Deeper sands have less porosity • General �-k relationship is consistent • Two order of magnitude range in perm for given • Extremely low relative permeability to water at low porosities Granite Point Field Core Data - Core Porosity vs Air Perm - 1000 o O • O 0 0 0 8 100 8 Abn 0 0. o 00 O o ' n O 0 10 0a• o O • d• 1 OR, • • 00% O 0 • C 0 0 • 0 5 10 is 20 Core Porosity (%) OC2 •C4 OCSA •C7A •C7C 25 60 50 Z 40 E a 30 x 20 00 6 Ko at Swi - Excludes Sample 21147 - y=0.0014c0.w9a Q ft° = 0.986 9 10 11 12 13 14 15 16 12 Porosity (%) O Ko of SryiiMeawred) — Exaon.(W at SM(Measumd)) Kw at Sor Excludes Sample 21147- y = 3E-05ea— R'= 0.9648 0 19 9 30 11 12 13 14 is 16 17 18 Porosity (%) 0 0,MSor(Measu.ed)—Expoo.(Kwat Sor(Measured)) Future Development ➢Future Development: CTD o Additional footage required to improve ultimate recovery o Multiple laterals from a single parentbore o Minimize de -complete costs (thru tubing) o Faster trip times o Minimize rig time require for new windows/sidetracks o Maximize time drilling in sand o Higher dogleg capability o Minimal materials costs o Reduction in contract costs (required personnel) o Increase Net:Gross ratio c5 v C5 C6t2 — Coiled Tubing Drilling Concept m Map Map View Proposed Loq View New Rule: Commingling a.) In any oil well, commingling of Granite Point Middle Kenai Oil Pool and Hemlock Oil Pool is authorized. Total well production need not be allocated to each pool or productive sand interval. Tyonek Hemlock Bruce ran e Poi F1 New Rule: Commingling • Hemlock productivity is believed to be highly dependent upon natural fracturing • Allocating by k-h methodology can be erroneous • Periodic production log data will be utilized for production allocation Q_ Hemlock S �Y. Current Lanquage Upon request of the applicants and a showing that the affected parties have been notified of such request, the Committee may authorize the conversion or drilling of any well at any location, the termination or suspension of the project, or any operation reasonably designed to further the purposes of the project. Proposed Language Upon proper application, or its own motion, and unless notice and public hearing are otherwise required, the Commission may administratively waive the requirements of any rule stated herein or administratively amend this order as long as the change does not promote waste or jeopardize correlative rights, is based on sound engineering and geoscience principles, and will not result in an increased risk of fluid movement into freshwater aquifers. Apnl 10. 2019 rADL017587 I 9 A �L017588 4 Bruce son: 0121% snn�mn� Sato. n1EN 51111]01 IIP c 54m\nu 51 Snnl\011M ❑Anna ADLO18742 L r i y 99 zco-- 9nauan OOln7160A ryl. ❑j7jG LPca ADI374 cPGnliumacmffinoeq mtIoT nanvqtl nS0cnree 5� 1 Miles 011119 4.\\ 0n1l Man cle 190,000 Imn \\ sn4qON% Apnl 10. 2019 1 T_1 Cook Inlet Reservoir Characterization Tyonek Depositional Environment Y _ �t r .. .F. Yentna R., Cook Inlet, AK Br -14-42 An -32 Cook Inlet Reservoir Characterization Hemlock Depositional Environment a-- _ w . ,,Susitna R., 600kjnlet, AK 11 34 6'>,Ifi 21 A„ q 12098-9 P 87c Fractional Flow & Relative Permeability: • Fractional flow curve shows minimal incremental recovery after water breakthrough SCAL data shows extremely low effective permeability to water Minimal clay content of reservoir rock, potential fines migration • Sensitivity to water evident from field production data 100 090 080 0.70 e 0.60 0.50 0.40 0.30 0.70 0.10 OAO 0.00 Fractional Flow Curve - GP -1 & GP -31 SCAL - 0.10 020 0.30 OAO 050 0.60 0.70 0.80 090 1.00 Sw (Fraction) 1.0 0.9 0.8 0.7 — 0.6 - 0.5 0.4 e u 0.3 0.2 0.1 0.0 0.3 0.35 OA GPF Tyonek Water Oil Relative Perm 0.5 0.55 0.6 Water Saturrtlm (Sw) 3 VY'd( 4/4/2019 ITMO: APPLICATION OF HILCORP AN TO AMEND CONSERVATION ORDER 96 ALASKA OIL AND GAS CONSERVATION COMMISSION In the Matter of the Application of ) Hilcorp Alaska to Amend Conservation ) Order 76 to Revise the Description of the ) Middle Kenai Oil Pool, Define a Hemlock ) Oil Pool, Revise the Rule on Well Spacing ) and Authorize Downhole Commingling of ) Production, ) Docket No. CO 18-036 ALASKA OIL and GAS CONSERVATION COMMISSION Anchorage, Alaska April 4, 2019 9:00 o'clock a.m. PUBLIC HEARING BEFORE: Jessie Chmielowski, Commissioner Compute Matrix, LLC Phone: 907-243-060 135 C"tmmo Dr., Sm. 2., An& AN 99501 Fax: 909-243-1473 Email: sdh kCm,Bd. AOOCC 442019 HMO .APPLICAITON OF HILCORP AK TO AMEN D CONSFRNA[ ION ORDER 7h Page 2 1 TABLE OF CONTENTS 2 Opening remarks by Commissioner Chmielowski 03 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Computer Man, LLC Phone. 902243-0668 115 Christensen Dr., Ste, 2., Anch. AK 99501 Fax_ 907-243.1473 Email aahilUn gcinet AOGCC 1 4-02019 DMO'. APPLICATION OF IIILCORP AK TO AMEND CONSFRVATION ORDER 76 P R O C E E D I N G S Page 3 2 (On record) 3 COMMISSIONER CHMIELOWSKI: All right. I'd like 4 to call this hearing to order. The date is April 4th, 5 2019, the time is 9:00 a.m. We are located at 333 West 6 Seventh Avenue, Anchorage, Alaska in the offices of the 7 Alaska Oil and Gas Conservation Commission. I will 8 introduce the bench. I'm Jessie Chmielowski, 9 Commissioner of the AOGCC. 10 We are here regarding docket number CO 18-036. 11 It's the Granite Point Field, Middle Kenai Oil Pool and 12 Hemlock oil Pool. Hilcorp Alaska has requested to 13 amend conservation order number 76 to revise the 14 description of the Middle Kenai Oil Pool, define a 15 Hemlock Oil Pool, revise the ruling on well spacing and 16 authorize downhole commingling of production. 17 As the parties are aware we are here to simply 18 open and close this proceeding as the AOGCC does not 19 have a quorum. This hearing is continued until April 20 11th at 9:00 a.m. 21 Are there any comments from the audience? 22 (No comments) 23 COMMISSIONER CHMIELOWSKI: Okay. This hearing 24 is adjourned. 25 (Hearing adjourned) Computer Matrix. LLC Phone'. 907243-0668 135 Chrnstmen Dr.. Ste 2., Anch, AK 99501 Fax 909-243-1471 Email sahile,,a.nA AOOCC 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 4/4/2019 ITMO: APPLICATION OF MLCORP AK TO AMEND CONSERVATION ORDER 76 Page 4 1 TRANSCRIBER'S CERTIFICATE I, Salena A. Hile, hereby certify that the foregoing pages numbered 02 through 04 are a true, accurate, and complete transcript of proceedings in Docket Number CO 18-036, transcribed under my direction from a copy of an electronic sound recording to the best of our knowledge and ability. - - - Compute Metrix, LLC Phone: 90]-243-0666 135 Christ. Dr., Ste. 2., Awh. AK 99501 Fax: 907-243-1473 Emeil: sehile�y&ci.vn STATE OF ALASKA OIL AND GAS CONSERVATION COMMISSION Docket Number: CO -18-036 April 4, 2019 AFFILIATION I"\Jc"RL >GHOrT rl�wour Fll.lGKPr �--w o �! lo [-�/ e oG cc, 71 )otj A6, 61t�liS l /�oGcC 2 Notice of Public Hearing STATE OF ALASKA ALASKA OIL AND GAS CONSERVATION COMMISSION Re: Docket Number: CO -18-036 Granite Point Field, Middle Kenai Oil and Hemlock Oil Pools The application of Hilcorp Alaska, LLC (Hilcorp) to amend Conservation Order No, 76 (CO 76) to revise the description of the Middle Kenai Oil Pool, define a Hemlock Oil Pool, revise the rule on well spacing, and authorize downhole commingling of production. Hilcorp, by letter dated October 26, 2018, requests the Alaska Oil and Gas Conservation Commission (AOGCC) amend CO 76 to revise the description of the Middle Kenai Oil Pool, define a Hemlock Oil Pool, revise the rule on well spacing, and authorize downhole commingling of production. The AOGCC has tentatively scheduled a public hearing on this application for April 4, 2019, at 9:00 a.m. at 333 West 71h Avenue, Anchorage, Alaska 99501. To request that the tentatively scheduled hearing be held, a written request must be filed with the AOGCC no later than 4:30 p.m. on March 14, 2019. If a request for a hearing is not timely filed, the AOGCC may consider the issuance of an order without a hearing. To learn if the AOGCC will hold the hearing, call (907) 793-1221 after March 19, 2019. In addition, written comments regarding this application may be submitted to the AOGCC, at 333 West 7`h Avenue, Anchorage, Alaska 99501. Comments must be received no later than 4:30 p.m. on March 29, 2019, except that, if a hearing is held, comments must be received no later than the conclusion of the April 4, 2019, hearing. If, because of a disability, special accommodations may be needed to comment or attend the hearing, contact the AOGCC's Special Assistant, Jody Colombie, at (907) 793-1221, no later than April 1, 2019. Cathy P. Foerster Commissioner Notice of Public Hearing STATE OF ALASKA ALASKA OIL AND GAS CONSERVATION COMMISSION Re: Docket Number: CO -18-036 Granite Point Field, Middle Kenai Oil and Hemlock Oil Pools The application of Hilcorp Alaska, LLC (Hilcorp) to amend Conservation Order No, 76 (CO 76) to revise the description of the Middle Kenai Oil Pool, define a Hemlock Oil Pool, revise the rule on well spacing, and authorize downhole commingling of production. Hilcorp, by letter dated October 26, 2018, requests the Alaska Oil and Gas Conservation Commission (AOGCC) amend CO 76 to revise the description of the Middle Kenai Oil Pool, define a Hemlock Oil Pool, revise the rule on well spacing, and authorize downhole commingling of production. The AOGCC has tentatively scheduled a public hearing on this application for April 4, 2019, at 9:00 a.m. at 333 West 71' Avenue, Anchorage, Alaska 99501. To request that the tentatively scheduled hearing be held, a written request must be filed with the AOGCC no later than 4:30 p.m. on March 14, 2019. If a request for a hearing is not timely filed, the AOGCC may consider the issuance of an order without a hearing. To learn if the AOGCC will hold the hearing, call (907) 793-1221 after March 19, 2019. In addition, written comments regarding this application may be submitted to the AOGCC, at 333 West 7'' Avenue, Anchorage, Alaska 99501. Comments must be received no later than 4:30 p.m. on March 29, 2019, except that, if a hearing is held, comments must be received no later than the conclusion of the April 4, 2019, hearing. If, because of a disability, special accommodations may be needed to comment or attend the hearing, contact the AOGCC's Special Assistant, Jody Colombie, at (907) 793-1221, no later than April 1, 2019. //signature on file// Cathy P. Foerster Commissioner STATE OF ALASKA ADVERTISING ORDER NOTICE TO PUBLISHER SUBMIT INVOICE SHOWING ADVERTISING ORDER NO., CERTIFIED AFFIDAVIT OF PUBLICATION WITH ATTACHED COPY OF ADVERTISMENT. ADVERTISING ORDER NUMBER 11 AO-19-020 FROM: AGENCY CONTACT: Jody Colombie/Samantha Carlisle Alaska Oil and Gas Conservation Commission DATE OF A.O.AGENCY PHONE: 333 West 7th Avenue 2/25/2019 (907)279-1433 Anchorage, Alaska 99501 DATES ADVERTISEMENT REQUIRED: COMPANY CONTACT NAME: PHONE NUMBER: ASAP FAX NUMBER: (907) 276-7542 TO PUBLISHER: Anchorage Daily News, LLC SPECIAL INSTRUCTIONS: PO Box 140147 Anchorage Alaska 99514-0174 TYPE OF ADVERTISEMENT: r LEGAL f— DISPLAY 17 CLASSIFIED r OTHER (Specify below) DESCRIPTION PRICE CO 18-036 Initials of who prepared AO: Alaska Non -Taxable 92-600185 :$REMIT INYOIGE $a9WTNGripY¢RTISING: :' ORD$RNO', CEIYFIFIRDA�F.IDAVTT01+.'' :PuaLICa'ntiry:wITHATrnCNEucneYOM:: AtiYERTtsMENTTxs: AOGCC 333 West 7th Avenue Anchorage,Alaska 99501 Pae 1 of I Total of All Pa es $ REF I Typel Number Amount Date Comments I PvN IVCO21795 2 Ao AO-19-020 3 4 FIN AMOUNT NY Act Template I PGM LGR Object FY I DIST LIQ I 19 A14I00 3046 19 2 3 4 /5 PurO,.Ang!Am I N e ,; Ti_tle:, Purchasing Authority's Signature Telephone Number 1. A.O. C and 9'agiency name must appear on all invoices and documents relating to this purchase. 2. Thee state is registered for tax free transactions under Chapter 32, IRS code. Registration number 92-73-0006 K. Items are for the exclusive use of the state and not for rg3We. DISTRIBUTION . DIVI$glon i$caVOngmal>CO ;Copies .... . her (faxRdj; DlvtsltNt Fiscal Ret:ervriig Form: 02-901 Revised: 2/25/2019 Bernie Karl K&K Recycling Inc. P.O. Box 58055 Fairbanks, AK 99711 George Vaught, Jr. P.O. Box 13557 Denver, CO 80201-3557 Gordon Severson 3201 Westmar Cir. Anchorage, AK 99508-4336 Darwin Waldsmith P.O. Box 39309 Ninilchik, AK 99639 Penny Vadla 399 W. Riverview Ave. Soldotna, AK 99669-7714 Richard Wagner P.O. Box 60868 Fairbanks, AK 99706 ANCHORAGE Max NEN WR�MVED AFFIDAVIT OF PUBLICATION MAR 0? 19'9 AOIGC�11 Account#: 270227 OMer9 0001435038 ST OF AK/AK OILAND GAS cost $229.10 CONSERVATION COMMISSION 333 WEST 7TH AVE STE 100 nnicunwarr aroosn»czo STATE OF ALASKA THIRD JUDICIAL DISTRICT Sarah Jennett being first duly sworn on oath deposes and says that he/she is a representative of the Anchorage Daily News, a daily newspaper. That said newspaper has been approved by the Third Judicial Court, Anchorage, Alaska, and it now and has been published in the English language continually as a daily newspaper in Anchorage, Alaska, and it is now and during all said time was printed in an office maintained at the aforesaid place of publication of said newspaper. That the annexed is a copy of an advertisement as it was published in regular issues (and not in supplemental form) of said newspaper on February 26, 2019 and that such newspaper was regularly distributed to its subscribers during all of said period. That the full amount of the fee charged for the fo pagping publication is not in excess of the racha ed private individuals. Jennett ad and sworn to before me day of February, 2019 Npta Public in and for I State of Alaska. Third Division Anchorage, Alaska MY COMM SION XPIRES OF At', NOTARY Product ADN -Anchorage Daily News Placement 0300 Position 0301 -- - Notice of Public Nearing STATE OF ALASKA ALASKA OIL AND GAS CONSERVATION COMMISSION Re: Docket Number: CO -18-036 Granite Point Field, Middle Kenai Oil and Hemlock Oil Pools The application of Hilcorp Alaska, LLC (Hilcorp) to amend Conservation Order No, 76 (CO 76) to revise the description of the Middle Kenai Oil Pool, define a Hemlock Oil Pool, revise the rule on well spacing, and authorize downhole commingling of production. Hilcorp, by letter dated October 26, 2018, requests the Alaska Oil and Gas Conservation Commission (AOGCC) amend CO 76 to revise the description of the Middle Kenai Oil Pool, define a Hemlock Oil Pool, revise the rule on well spacing, and authorize downhole commingling of production. The AOGCC has tentatively scheduled a public hearing on this application for April 4, 2019, at 9:00 a.m. at 333 West 7th Avenue, InchoraSe, Alaska 99501. To request that the - tentatively scheduled hearing be held, a written request must be filed with the AOGCC no later than 4:30 p.m. on March 14, 2019. If a request for a hearing is not timely filed, the AOGCC may consider the issuance of an order without a hearing. To learn if the AOGCC will hold the hearing, call (907) 793-1221 after March 19, 2019. In addition, written comments regarding this application maybe submitted to the AOGCC, at 333 West 7thAvenue, Anchorage, Alaska 99501. Comments must be received no later than 4:30 p.m. on March 29, 2019, except that, if a hearing is held, comments must be received no later than the conclusion of the April 4, 2019, hearing. If, because of a disability, 'special accommodations may be needed to comment or attend the hearing, contact the AOGCCs Special Assistant, Jody Colombia, at (907) 793-1221, no later than April 1, 2019. Published: February 26, 2019 PUBLIC vaoa C. N&I01" are on file// R Foerster. 11 IilIeorp Alaska, LLC October 26, 2018 Hollis French, Chair Alaska Oil and Gas Conservation Commission 333 West 7°i Avenue, Suite 100 Anchorage, Alaska 99501 Post Office Box 244027 Anchorage, AK 99524-4027 3800 Centerpoint Drive Suite 100 Anchorage, AK 99503 Phone: 907/777-8300 Fax: 907/777-8301 RE: Proposed Amendment to Conservation Order 76 (Granite Point Field) Dear Commissioner French, Hilcorp Alaska, LLC, as Operator of the Granite Point Field, respectfully requests the Alaska Oil and Gas Conservation Commission ("AOGCC") to amend Conservation Order No. 76 (September 12, 1969) by repealing Rules I and 2 in their entirety and replacing them with the following language: Rule 1. Pool Rules a) The Granite Point Middle Kenai Oil Pool is defined as the accumulation of oil common to and which correlates with the accumulation found in the MUCI-01 Well (API: 50-733-20173) between the drilled depths of 10,007 feet and 12,800 feet. b) The Granite Point Hemlock Oil Pool is defined as the accumulation of oil common to and which correlates with the accumulation found in the MUCI- 01 Well (API: 50-733-20173) between the drilled depths of 12,800 feet and 15,000 feet. [new this order] Rule 2. Granite Point Field Well Spacing: There shall be no oil or gas well spacing restrictions within the Granite Point Field, except that: a) No oil well shall be completed less than 500 feet from an exterior property line of the Granite Point Unit where the owners and landowners are not the same on both sides of the line; and b) No gas well shall be completed less than 1500 feet from exterior property line of the Granite Point Unit where the owners and landowners are not the same on both sides of the line. In addition, Hilcorp requests the addition of a new pool rule to allow for field -wide commingling: Hilcorp Alaska, LLC Proposed Rules re Granite Point Field October 26, 2018 Page 2 of 8 Rule 8. Comminglin¢ A. In any oil well, commingling of Granite Point Middle Kenai Oil Pool and Hemlock Oil Pool is authorized. Total well production need not be allocated to each pool or productive sand interval. Finally, Hilcorp requests that Rules 7 and 9 be amended as follows: Rule 7. Administrative Approval. Upon proper application, or its own motion, and unless notice and public hearing are otherwise required, the Commission may administratively waive the requirements of any rule stated herein or administratively amend this order as long as the change does not promote waste or jeopardize correlative rights, is based on sound engineering and geoscience principles, and will not result in an increased risk of flui movement into freshwater aquifers. Rule 9: Affected Area The affected area of the Granite Point Field, shall be recognized as coexistant with the geographic boundary of the Granite Point Unit, as depicted in Attachment 1, attached hereto. BACKGROUND. A. Operator. Hilcorp Alaska, LLC is the Operator of the Granite Point Unit. B. Owner and Landowners. Hilcorp owns a 100% working interest in the Granite Point Unit. The State of Alaska is the sole landowner. C. Affected Area. Pursuant to Conservation Order 76, and as subsequently amended by AA 76.32 (October 23, 1997), the current boundary of the Granite Point Field is defined as follows: Township 10 North, Range 11 West, S.M. Sections 5, 6, 7, 8, 18 and 19: All Township 10 North, Range 12 West, S.M. Sections 1, 12, 13, 14, 23, and 24: All Section 3: N %2 Section 25: NW '/4 NW '/4 Section 26: N'/2, SW'/4, W'/z SE'/4 Section 27: E1/2E '/2 Section 34: NE'/4 NE'/4 Hilcorp Alaska, LLC Proposed Rules re Granite Point Field October 26, 2018 Page 3 of 8 Section 35: N''/z NW '/4 Township 11 North Range 11 West S.M. Sections 20, 29, 30, 31 and 32: All Section 17: Fractional All, 125 acres Section 19: Fractional All, 555 acres Township 11 North Range 12 West S.M. Sections 34, 35, 36:All Section 24: Fractional All, 50 acres Section 25: E Y: NE'/4, SE 1/4 Section 26: Fractional All, 125 acres Section 27: Fractional All, 185 acres D. Proposed Affected Area. Hilcorp proposes to align the affected area of the Granite Point Field with the geographic boundary of the recently expanded Granite Point Unit. t The Granite Point Unit, as recently expanded, consists of six (6) state oil and gas leases within the Cook Inlet. Operations within the 15,411 acre unit include the Anna, Baker and Granite Point Platforms. Hilcorp is the 100% working interest owner. The Granite Point Tank Farm ("GPTF") is located within Section 28, Township I 1 North, Range 12 West, Seward Meridian. Originally known as the Granite Point "Shoreline Facility," the GPTF is used to process, meter and ship crude oil and natural gas produced from the Anna, Bruce and Granite Point Platforms. Hilcorp owns 100% of the surface estate and infrastructure at the GPTP. This 73 acre facility is the primary service and operation center for each of the three off -shore platforms. Oil and gas produced from the Anna Platform runs via subsea pipelines to a riser on the Bruce Platform, where it is transported to shore at the GPTF. Another subsea pipeline system carries oil and gas produced from the Granite Point Platform to the GPTF. From the GPTF, oil is then shipped via newly modified subsea pipeline system for delivery direct to Kenai Pipeline (KPL) E. Field Development History In 1962, three oil and gas leases within the Granite Point Field were acquired by Pan American Petroleum Corporation (ADL 17586, 17587 and 18742) and one oil and gas ' See Findings and Decision of the Director of the Division of Oil and Gas (February 24, 2015) (available at hU7//dog.dnr.alaska.gov/Units/Documents/2015/20150224 SGPU App to Exp Unit apprvl pdf). A copy of the current unit exhibits and map are attached hereto as Exhibit A and Exhibit B. Hilcorp Alaska, LLC Proposed Rules re Granite Point Field October 26, 2018 Page 4 of 8 lease (ADL 18761) by Union Oil Company of California (Union) and Socony Mobil Oil Company. Oil from the Granite Point field was discovered in 1965. The Anna, Bruce and Granite Point Platforms were built in 1966. That same year, DNR certified the Granite Point No. 1 well as being capable of producing in paying quantities. Since the mid 1960's, the Granite Point Field has produced oil and gas from the Tyonek and Hemlock Formations. On March 10, 1967, the AOGCC granted the field's first well spacing exception. See Conservation Order 36. Subsequently, no less than 17 separate spacing exception orders have been issued for the drilling, testing completion and recompletion of the field's oil and gas wells? On January 19, 1968, the AOGCC adopted Conservation Order 59 to guide the initial development of the Middle Kenai Pool. Rule 2 allowed up to two oil wells per quarter section. Also on January 19, 1968, the AOGCC issued Conservation Order 60, and thereby authorized fluid injection tests in the Middle Kenai Pool to "acquire data for a possible future secondary recovery program." On September 12, 1969, the AOGCC issued Conservation Order No. 76, which, inter alfa, renamed the Middle Kenai Oil Pool to the "Granite Point Middle Kenai Oil Pool," redefined the pool's affected area, and modified the applicable spacing rules as follows:3 Rule 2. Spacing a) Not more than two completed wells shall be allowed in any governmental quarter section. b) No pay opened to the well bore shall be nearer than 500 feet to any property line nor nearer than 1,000 feet to any well drilling to or capable of producing from the same pool. In addition, Conservation Order 76 provided: z See., e.g., Conservation Order 37 (March 13, 1967); Conservation Order 39 (May 18, 1969); Conservation Order 49 (August 18,1967); Conservation Order 50 (September 7,1967); Conservation Order 52 (September 7, 1967); Conservation Order 55 (October 12, 1967); Conservation Order 58 (November 24, 1967); Conservation Order 70 (February 15, 1969); Conservation Order 75 (August 6, 1969); Conservation Order 240 (March 8, 1989); Conservation Order 243 (June 2, 1989); Conservation Order 244 (June 20, 1989); Conservation Order 340 (October 14, 1994); Conservation Order No. 355 (February 1, 1995); Conservation Order 370 (February 16, 1996); Conservation Order 371 (February 21, 1996); and Conservation Order 397 (July 29, 1997). 3 Conservation Order 76 revoked Conservation Orders 59 and 60. Hilcorp Alaska, LLC Proposed Rules re Granite Point Field October 26, 2018 Page 5 of 8 Rule 7. Administrative Approval Upon request of the applicants and a showing that the affected parties have been notified of such request, the Committee may authorize the conversion or drilling of any well at any location, the termination or suspension of the project, or any operation reasonably designed to further the purpose of the project. Since 1970, AOGCC has frequently exercised its administrative authority under Rule 7 to allow for the drilling and completion of wells that otherwise would require a formal spacing exception. See, e.g., Administrative Approval No. 76.29 (January 13, 1995, regarding drilling and completion of Granite Point State 18742 No. 50 as a Middle Kenai Oil Pool production well). In addition, the AOGCC has also exercised its administrative authority to amend the Pool's affected area. See, e.g., Administrative Approval No. 76.32 (October 23, 1997) (expanding the affected area). On September 4, 1986, the AOGCC issued Area Injection Order 6, which authorized the injection of fluids for the purpose of enhanced oil recovery from the northern two-thirds (2/3) of the Granite Point Field (i.e., Bruce and Anna Platforms). On September 29, 1986, the AOGCC issued Area Injection Order 11, which authorized the injection of fluids for the purpose of enhanced oil recovery from the southern one-third (1/3) of the Granite Point Field (i.e., Granite Point Platform). By 1991 Union had 100% working interest in the three Pan American leases and became the lease operator of the four granite point field leases and the three platforms. Two additional oil and gas leases (ADLs 374044 and 374045) were acquired by Union in 1991. In 1995 75% working interest was transferred to Mobil Rocky Mountain Inc. which later became-ExxonMobil Alaska Production Inc. (Exxon). The three leases owned by Union (25%) and Exxon (75%) were unitized March 1998, becoming the South Granite Point Unit, operated by Union. At formation, the SGPU was comprised of 5,889 acres from three state oil and gas leases. DNR also approved the formation of the South Granite Point Sands Participating Area ("PA") and the Hemlock PA. In 2008, the SGPU contracted to the existing Participating Area boundaries. In January 2009, production from the Granite Point Platform was disrupted due to the sinking of a supply boat. In April 2009, following the volcanic eruption of Mt. Redoubt, DNR approved a suspension of all Cook Inlet west side oil production from March Hilcorp Alaska, LLC Proposed Rules re Granite Point Field October 26, 2018 Page 6 of 8 September 2009. This volcanic event also resulted in the closure of the Drift River Terminal facility.° From April through June 2010, production and operation of the Anna Platform was again suspended to allow for riser repair on the Bruce Platform. During this time, oil production from Anna was cycled to prevent reservoir damage. In February 2011, Union attempted to re -perforate 80 feet of the Hemlock interval in well GP 11-13RD, but the new completions were not successful. In May 2011, Union installed a new gas compression. The new compressor reduced the volume of over lifted gas and made recycling excess gas unnecessary. As a result, Union shut -down GP 31-13 and GP - 50. On January 1, 2012, Hilcorp acquired the assets of Chevron (successor in interest to Union) and thereafter Hilcorp became the operator of the Granite Point Field and South Granite Point Unit. Effective June 1, 2012, Hilcorp became 100% working interest owner of leases within the SGPU. In October 2012, Hilcorp successfully re -opened the Drift River Terminal facility, which set the stage to increase Cook Inlet oil production capacity, including the Granite Point Field and South Granite Point Unit. In August 2014, AOGCC granted Hilcorp's request to commingle production between the Hemlock and Middle Kenai pools in the GP 11-13RD well. See CO 693. This approval extended the economic life and of the well and reduced waste. In relevant part, the AOGCC concluded: The Hemlock in the GP 11-13RD is very near its economic limit and if commingling is not authorized [the Hemlock] will be abandoned so that the Middle Kenai can be produced. Allowing commingling production will allow some of the remaining 164 MBO of reserves in the Hemlock to be recovered. CO 693 (page 3, Conclusion No. 2). In November 2014, as the sole working interest owner and operator of both the Granite Point Field and the South Granite Point Unit, Hilcorp submitted a proposal to the DNR to expand the South Granite Point Unit to include three non -unitized operations associated with the Anna and Bruce Platforms. DNR approved the proposed unit expansion on February 24, 2015 and changed the name to the "Granite Point Unit.s5 A 4 After production resumed, oil was stored at the GPTF and Trading Bay Tank Farm, then delivered directly to tankers moored at the Christy Lee in what is known as a "tightline" operation. Due to storage capacity limits at Drift River Terminal Facility, oil transportation cost and tanker traffic in Cook Inlet more than doubled. 5 http://dog.dnr.alaska.gov/tJnits/Documents/2015/20150224 SGPU App to Exp Unit qpprvl.pd Hilcorp Alaska, LLC Proposed Rules re Granite Point Field October 26, 2018 Page 7 of 8 copy of the current unit exhibits are attached hereto. In July 2018, Cook Inlet Pipe Line, LLC (CIPL) submitted an Application (P-18-009) to the Regulatory Commission of Alaska (RCA) for approval to permanently discontinue use of and abandon Drift River Terminal and Tank Farm. CIPL has modified its existing oil transportation system to provide undersea path from the west side of Cook Inlet to the east side of Cook Inlet. 17T.161MIY.y com Hilcorp's proposed rules are designed to prevent waste, protect correlative rights and improve the ultimate recovery of remaining hydrocarbons throughout the Granite Point Field. They are also designed to reduce the administrative burdens on both Hilcorp and AOGCC staff. By eliminating the spacing restrictions at the Granite Point Field horizontal wells can be drilled in the stacked sands of the Middle Kenai Oil Pool. These stack sands have a low effective permeability to oil and are provided pressure support by a weak aquifer. Historical drilling of horizontal wells at the Granite Point Field have proven to improve the ultimate recovery of the field. Therefore, removing the spacing restrictions allows for the decreasing of well spacing through the drilling of horizontal wells that will improve the ultimate recovery. Commingling of the Middle Kenai and Hemlock Oil Pools will allow single zone Hemlock and/or Middle Kenai Oil Pool wells that are at or near their economic limit to continue to be produced, therefore improving ultimate recovery of the Granite Point Field. Production logging in addition to using permeability, net sand thickness, and reservoir drawdown to allocate production will provide a relatively accurate assessment of the contribution from each oil pool. Hilcorp's proposed rules are also timely: there have been no significant changes to the Granite Point Field's pool rules for nearly 45 years. Since that time, production from the field, and in particular the Middle Kenai Oil Pool, has been continuous, but in steady decline. While existing rules may have adequately protected correlative rights of this legacy field's original owners, and prevented waste during the field's initial development, they are not appropriate to the enhanced recovery effort necessary to produce remaining hydrocarbon reserves. Hilcorp purchased these legacy assets with the intent to maximize the recovery of remaining hydrocarbons. This requires implementation of a comprehensive capital workover program designed to: 6 Repair broken injection wells Hilcorp Alaska, LLC Proposed Rules re Granite Point Field October 26, 2018 Page 8 of 8 • Return shut in production wells to service • Optimize existing well completions • Increase water injection and reservoir throughput, • Pursue pursuing stimulation opportunities, and • Identify, then execute new drilling projects By incorporating the proposed amendments into Conservation Order 76, Hilcorp will have more development options to improve the ultimate recovery of the field. Hilcorp would be pleased to schedule a technical meeting with AOGCC staff to provide additional information in support of this proposal. Should you have any other questions regarding this proposal, please do not hesitate to contact the undersigned at 777-8414. Sincerely, Michael W. Schoetz, CPL Hilcorp Alaska, LLC Landman Enclosure: Attachment 1: Granite Point Unit Map Exhibit A: Granite Point Unit Agreement Exhibit A Exhibit B: Granite Point Unit Agreement Exhibit B cc: State of Alaska, Department of Natural Resources, Division of Oil and Gas Attachment I Proposed Amendment to Conservation Order 76 Granite Point Unit 96 15 14 ;7 21 22 1 23 2.1 22 S S 016012W i SOIINOIIIW 2P 27 26 25 f s 27 —A .14 U Bruce' Map Scale 1:70,000 Hileorp Alaska, LLC 0 0.5 1 Miles It 17 16 15 S01ON011W 2' vj -4 1 2,' 0 Platforms E3Unit Boundary F/I Granite Point Hemlock PA FIGranite Point Sands PA Map Scale 1:70,000 Hileorp Alaska, LLC 0 0.5 1 Miles Exhibit A Granite Point Unit Effective March 1, 2015 Working Working Tract Mineral Mineral Royalty ORRI ORRI Interest Interest Tract Tract Legal Description Acreage Lease k Owner Interest Percent Owner Percent Ownership Owner % 01 TION,RIIWSM,AK Section 18: All; Section 19: All; T10N,Rl2W,SM,AK Section 13; All; Section 14; All; Section 23: All; Sedion24: All. 02 TION,R12W,SM,AK Sedion27: EMEI2; Section34: NEI/4NE1/4. 03 T10N, Rl2W, SM, AK Socion25: NWl/4NW1/4; Sedion 26: N1/2, SW 1/4, W 12SE1/4; Sedion35: N12NW1/4, 3,809.00 HAK#600953 StateofAlaska, 100.00°/a 12.500% ADL 918761 Department of Natural Rcaourecs 200.00 HAK#605872 StateofAlaska, 100.00% 12.500% ADL 4374044 DepatMentofNaturN Resources 680.00 HAK#605873 State of Alaska, 100.00% 12.500% ADL#374045 DepatterentofNamml Resources Hilemp Alaska LLC 100.00% HilcoM Alaska, LLC 100.00% Hilcory Alaska, LLC 100.00% 04 Tl0N,R12W,SM,AK 3,070.00 14AK9605933 StateofAlasks, 100.00% 12.500% Hilcorp Alaska LLC 100.00% Section 03: N2, 320 acres; ADL #17586 Deparument ofNaturel Resources TI 1N, R12W, SM, AK Section 24: Fractional; All; Section 25: Fractional; All; Secdo,26: Fractional; All; Section 27: Fractional; All; Section 34: All; Section 35: Alk Section 36: All. Granite Point Unit Exhibit A Page 1 oft Lost Upeazc: 2/262015 Tract Tract Legal Description Tract Acreage Lease# Miami Owner Mineral Interest Royalty ORRI Percent Owner Working ORRI Interest Percent Ownership Working Interest Owner % 05 TUN, R11W, SM, AK 2,592.00 I'IAK#605834 StatcofAlasks, 100.00% 12.500% HilcoM Alaska, LLC 100.00% Section 17: FmctionaG ADL 417587 Oepanment of Natural Section 18: Fractional; R..' Section 19: Fractional; Section 20: AIL Section 29: All; Senior 30: All. 06 TI ON, RI IW, SM, AK 5,060.00 HAK#605835 StatcofAlaska, 100.00% 12.500% Hilmtp Alaska, LLC 100.00% Section05: All; ADL#18742 IRpament of Natural Section 06: All; Remumw Section 07: All; Section 08: AII; TION,RI2W,SM,AK Scdon Ob All; Section 12: All; TI IN, R1 W, SM, AK. Section 31: All; 5.6.32: All. Total Unit Working Interest Net Acres Unit% Acreage Owner 15,411.00 Uncomnited 0.00 0.00% HilcoM Almka. LLC 15,411.00 100.00% Granite Point Unit Exhibit A last Update: 2,262015 Page 2 aft Exhibit B Granite Point Unit Cook Inlet, Alaska December 1, 2014 14 Hilcorp Alaska, LLC scale: 1:90,000 —o 6 AD' 0 AN 10742 j Anna A� Granite P1 GraFib nip u AN 115Hf, ADL. 18761 4 December 1, 2014 14 Hilcorp Alaska, LLC scale: 1:90,000 6 AD' 0 AN 10742 Anna Granite P1 ADL. 18761 Ct '0 3 AN 374044 2 A A L :174 045 OUnit Tracts I t, -- — - 49 Platforms F state Leases — — .a 7 1.39111@9 .01.391 to? Ail!., -13.3 AtXnMif 3 AN -I 6 ML391 A0099. -T December 1, 2014 14 Hilcorp Alaska, LLC scale: 1:90,000
