Hillcorp: investment, rigs and storage changes aim to sustain Cook Inlet supply; company bought jackup rig to keep capacity in Alaska

Hillcorp senior vice president for Alaska Luke Sorge told the Alaska Senate Resources Committee on Jan. 22 that the company is investing heavily in Cook Inlet development, has purchased and kept a jackup drilling rig in Alaska to preserve seasonal drilling capacity, and is moving to make a large depleted reservoir available for regulated third‑party storage.

Sorge said Hillcorp arrived in Alaska in 2012 and has since drilled 174 wells, spent over $1 billion in the state and produced roughly 750 BCF for local markets. He told the committee Hillcorp budgeted and drilled 21 wells in 2024, of which “a little over half” — roughly 13 — were brought into production; the company plans another aggressive program in 2025 (about 15–20 wells).

Sorge explained that Cook Inlet production declines quickly (Hillcorp estimates about a 30 percent annual decline on its late‑life assets), so maintaining supply requires sustained drilling. He said Hillcorp’s leases cannot, by themselves, meet 100 percent of South Central Alaska demand and that production from other operators has declined in recent years. Sorge said Hillcorp’s contracted sales volume is about 323 BCF (out to about 2033), which he offered as a proxy for Hillcorp’s near‑term available supply.

On drilling capacity, Sorge described how the jackup rig that had been available and used in Cook Inlet was scheduled for redeployment overseas in early 2024. After surveying options to lease alternate rigs (including moving a rig from abroad), Hillcorp concluded the transport and modification costs (it cited roughly $30 million for moving and cold‑weather modifications) plus multi‑year contract expectations made leasing prohibitively expensive. Hillcorp purchased the jackup rig (through Hillcorp Jackup Rig LLC) to keep it in Alaska. Sorge said the company offered use of that rig to other operators at the same internal rate Hillcorp charges itself; Hex Cook Inlet (Fury) is negotiating for time on the rig for its 2025 program.

Sorge said bringing a rig to Cook Inlet is not simply a one‑time cost: companies generally expect multi‑year commitments and often require payments for non‑drilling months because rigs can operate year‑round elsewhere. That commercial reality, Sorge said, explains why there are few rigs suitable for Cook Inlet operations and why Hillcorp bought one rather than rely on an uncertain market.

On storage, Sorge said Hillcorp is moving to offer Pool 6 — a large depleted reservoir — as a regulated storage facility under the Regulatory Commission of Alaska. He told the committee Pool 6 could hold “over 100 BCF” of gas and that Hillcorp filed an RCA application in late December and plans to refile with additional information. Sorge said making Pool 6 available would add a large, low‑pressure storage option that could be leased by utilities; House Bill 50 earlier in the session facilitated legislative changes to allow that pathway.

Sorge also addressed the consent decree that limited prices; he said the decree expired at the end of 2024 but that Hillcorp had complied and never charged the maximum allowed under the cap. He described company staffing (roughly 1,500 Alaska employees) and said Hillcorp will continue exploration and seismic acquisition where it sees prospects, but that most of Hillcorp’s current activity is development on extensively drilled, late‑life fields.

Committee members asked about the company’s reserves relative to public USGS estimates and why Hillcorp and other companies sometimes differ about the Cook Inlet resource base. Sorge said USGS totals reflect basin‑wide potential and include many areas not under Hillcorp leases; he declined to disclose proprietary reserve volumes in a public hearing but said DNR and state agencies have access to the company’s confidential filings. He also told senators that alternate producers’ discoveries (for example, those tied to the Kitchen Lights area) may contain large gas volumes, but that such resources are not uniformly located under Hillcorp leases.

Sorge said that if Hex Cook Inlet leases the Hillcorp jackup rig, Hillcorp would still meet its 2025 drilling plan; Hillcorp planned the rig schedule to accommodate Hex Cook Inlet’s potential use. On contingency questions, Sorge said if the rig were to be lost or damaged, finding a replacement in season would be expensive and difficult but not impossible; moving a replacement rig into Cook Inlet would likely take a drilling season.

Sorge closed by saying Hillcorp remains committed to the basin, will pursue seismic and exploration where appropriate, and is working to make additional storage and scheduled drilling capacity available to stabilize local supply.