Aurora Gas Sees Mixed Results from 2006 Drilling Program

Aurora Gas

Aurora Gas announced mixed results from its 2006 Drilling and Workover program in Cook Inlet, Alaska. The company also announced that it had suspended drilling operations and is in the process of mobilizing the AWS Rig No. 1 back to Kenai, Alaska.

"This has been a tough year for Aurora Gas," said company president G. Scott Pfoff. "Geologic complexity, the high-cost environment in which Aurora operates, and recent commercial uncertainty have all combined in a perfect storm effect to paralyze the company's efforts to prove up additional reserves and deliverability in Cook Inlet. We understand and accept the geologic risks, and we are constantly striving to reduce costs, but when commercial uncertainty was thrown into the mix, we had no choice but to defer further activities in our core area of operations on the west side of Cook Inlet."

"Our efforts to exercise our contractual right to suspend deliveries of gas to the local gas utility (ENSTAR Natural Gas Company) at prices that are far below what is economic has been met with resistance and litigation. We see no incentive to continue the search for gas until this issue can be resolved; and if the issue is not resolved in Aurora's favor, the result will be no further exploration and development by Aurora Gas in our core area of operations." said Pfoff.

Aurora Gas announced last spring that its oil exploration well at Anchor Point, the Endeavour No. 1, was noncommercial. Aurora Gas subsequently mobilized the AWS Rig No. 1 to the west side of Cook Inlet to drill Long Lake No. 2, a natural gas exploration well and commence its 2006 well workover program. Long Lake No. 2 was drilled to a total depth of 3842' MD and was subsequently plugged and abandoned as a dry hole.

Aurora Gas spent much of the season focused on recompletions and workovers in an effort to develop deliverability in anticipation of tight supplies this coming winter. The company reported moderate success on its recompletions of Nicolai Creek No. 1B, Lone Creek No. 1, Mobil Moquawkie No. 1 and Nicolai Creek No. 9. Additionally, the company performed an acid stimulation of its Three Mile Creek Well No. 2 and is evaluating results.

The company had hoped to drill at least two additional development wells in 2006; however, due to geologic risk and commercial uncertainties, the company decided to release the rig for the season.

"There is a certain amount of irony involved; everyone fears the shortage of gas this coming winter, yet Aurora Gas had no choice but to release the rig and suspend further drilling." said Pfoff. "But the good news is that Aurora Gas is committed to Cook Inlet, Alaska. We have other opportunities and prospects that we can pursue. We hope to conduct some additional 3D seismic work this winter and we are optimistically planning a work program for 2007 including another wildcat exploration well for oil. My guess is that most of the work will either be oil-focused or focused on natural gas opportunities in new areas of Cook Inlet."