ALASKA NORTH SLOPE OPERATIONAL ENVIRONMENT JANUARY 2011

In the past decade, the operational setting on the North Slope of Alaska has experienced a gradual transition from total major company dominance to include a much broader spectrum of industry players. As recently as the 90’s the North Slope was considered a majors only club, and the activity base had a limited number of participants. ARCO and BP historically had been the only entities with ongoing operations, and other majors would make periodic appearances for isolated projects.

After the ARCO/BP merger with the emergence of Phillips Petroleum and eventually ConocoPhillips as the new owner/operator of the Kuparuk Field and the Alpine Field, the State made a big push for other exploration companies like ARCO in its early independent days to invest in Alaska. The Alaska Governor at that time, Governor Tony Knowles, made “marketing visits” to major oil cities, meeting with CEOS from a variety of other companies to highlight that “Alaska was open for business” while announcing special exploration tax credits and broader, area-wide leasing on the North Slope.

The ARCO/BP merger was also a milestone in the release of vintage 2D seismic data from BP and Phillips (prior ARCO Alaska, Inc.) being made a part of the merger approval terms by the State of Alaska. The State also encouraged facility sharing by the majors to allow independents to bring new production into existing processing facilities when capacity exists (yet the State did not specify sharing terms, and negotiation for facility sharing is often protracted). These factors, particularly release of 2D seismic data, area-wide leasing, and exploration tax credits, attracted new entrants that have begun to take an active role in the pursuit of projects that would allow them to gain a foothold position on the Slope and asset control.

As late as the 1990s, a list of lease owners on the North Slope was primarily dominated by the names of ARCO, BP, Exxon, Unocal, Chevron, etc. Today, numerous additional company names are seen on lease records for the North Slope: Pioneer Natural Resources, Anadarko Petroleum, ENI Petroleum, Petro-Canada, BG Alaska E&P, FEX L.P., Total E&P, Alaska Venture Capital Group (AVCG, LLC), Brooks Range Development Corporation, Ramshorn Investments, TG World Energy, UltraStar Exploration LLC, Armstrong Oil and Gas, Escopeta Oil Company, Arctic Slope Regional Corporation, 70 & 148 LLC (subsidiary of Armstrong), Great Bear Petroleum, BTA Oil Producers, Bordeaux Alaska Holdings, Samuel Cade, Daniel Donkel, GMT Exploration Company, etc.

While this list of slope participants has continued to grow over the last ten years to include large, mid-sized and even smaller independents that have made financial commitments in leasehold positions, some companies have also undertaken operational programs from exploration drilling through production. Most notably, the presence of Pioneer and ENI, at the large independent class with field development and production in the Oooguruk Field and soon to start up Nakiachuk Field demonstrate the full transition that has taken place regarding North Slope operations.

Respectively, the Pioneer and ENI projects have chosen distinctly separate courses in efforts to monetize their investments. Pioneer has elected to enter into a Facility Sharing Agreement (FSA) with ConocoPhillips to process their produced oil in the existing Kuparuk Field facilities and transport the oil to market. ENI has chosen to design and install its own facilities capable of processing the field’s production and tie-in to established common carrier pipeline infrastructure.

Smaller and privately held Savant Alaska has taken over operations and start-up of the previously developed Badami Unit (BP) and has begun production through this existing facility and pipeline. Overall, operational execution has evolved from large major companies as the only consistent players to a very diverse spread of companies performing field operations on the slope.

Brooks Range Petroleum Corporation, the operating subsidiary for AVCG, feels that over the years of doing business on the North Slope, we have gained the operational confidence to execute within all aspects of the Slope process and perform to levels that support continued activities and further planning for ultimate field development and production. BRPC has successfully acquired acreage, permitted various activities, contracted with service providers, planned and executed exploration well drilling and testing in the field and have maintained or exceeded State and Federal standards with respect to health, safety and environmental issues and performance.

BRPC has established a sound reputation and has gained the respect of state regulatory agencies and is viewed by these agencies, the contracting community and industry peers as a competent and fundamentally responsible operator committed to sound execution of North Slope operations. BRPC has positioned itself to exploit its past performance and continues to progress plans moving toward field development, installation of infrastructure, facility operations and ultimately generate a profitable revenue stream capable of attractive returns on investment. This new production will supply funding support for future sustained growth from AVCG’s Alaskan portfolio of projects.

Prepared by Brooks Range Petroleum Corporation Bart Armfield, Vice-President of Operations