Cook Inlet Energy wins 3-year Alaska exploration license extension

Miller Energy Resources subsidiary Cook Inlet Energy has obtained approval for a three year extension of the Susitna Basin Exploration License 2, ADL 390078 which encompasses 471,474 acres.

The license makes up the majority of Miller's and Cook Inlet Energy's net undeveloped acres, and covers primarily natural gas prospects. The licensed acreage is located approximately 55 miles northeast of Anchorage. Scott M. Boruff, Miller's CEO, said today, "We appreciate the decision of the commissioner in granting this extension of the Susitna License. Extending the license was one of the key initiatives for our team in Alaska this quarter."

Under the terms of the license, the original term was seven years with an expiration date of 31 October, extendable for an additional three years at the sole discretion of the commissioner of the State of Alaska Department of Natural Resources. The license grants Cook Inlet Energy an exclusive license to explore for oil and gas on the specified lands, and upon fulfillment of the work commitment, the license for all or any part of the land could be converted into oil and gas leases.

The original work commitment of approximately US$3.5 million was fulfilled, and, prior to the granting of the extension of the license, Cook Inlet Energy had the right to convert the license for all or any portion of the acreage into oil and gas leases. Once the original term of the license expired, Cook Inlet Energy would have been required to pay a per acre fee in order to convert the acreage to leases to the state and commence drilling operations within specified timeframes. Cook Inlet Energy applied for an extension under the license terms and was granted a three-year extension on 29 October, extending the expiration date of the license to 31 October 2013.

To comply with extension terms, Cook Inlet Energy committed to a total additional work commitment of $750,000 over the term of the extension, with a minimum of $250,000 being required by the end of the first year and an additional $250,000 by the end of the second year. If it fails to meet its work commitment in either of the first two years of the extension, it would be required to relinquish a portion of the licensed acreage at the end of that year. Upon completion of the work commitment, it will have the option to convert any or all of the license acreage to oil and gas leases with a five year term and a royalty rate of 12.5%, with annual rentals of $3.00 per acre.