At the end of the road and the end of a shift, workers in Alaska’s Prudhoe Bay, the largest oil field in North America, come to Deadhorse.

Alaska has a plentitude of colorful place names, such as Cold Bay, Abyss Lake and Red Devil. But Deadhorse comes closest to embodying Alaska’s slumbering oil and gas industry.

In 1988, the state produced 738 MMbbl of crude, equal to about 25% of all U.S. production. In 2013, Alaska’s yield had fallen to 188 MMbbl, about 7% of U.S. output.

Yet Alaska is poised to break out of its slump. Newcomers are believers, set on unlocking the state’s resources in what former Gov. Sean Parnell called “The Alaska Comeback.” Companies are working diligently to find oil and gas, and some, such as Miller Energy Resources and NordAq Energy Inc., are set on becoming Alaska pure-plays.

Partly, Alaska’s optimism is traceable to the reform of its paradoxical tax system on North Slope production. Enacted in 2007, the old law linked higher taxes to higher oil prices. Levies could hit up to 75% of net profit.

Bob Swenson, deputy commissioner for Alaska’s Department of Natural Resources, said the state’s previous tax regime was onerous before changes were made last year. Since then, the More Alaska Production Act (MAPA) has capped the nominal tax rate at 35%. It rewards production instead of the former system’s emphasis on lease capital investments.

The law can help defray a large slice of costs. From June to October 2014, Miller Energy received tax credits, in cash, of about $56 million.

Though Alaska is home to the largest oil companies in the world smaller companies are having a big impact. Independent oil companies are boosting oil production in Cook Inlet, and a new independent-led project on the North Slope is beginning to take shape.

Cook Inlet offshore oil production also is increasing. Production rose to 15,486 bbl/d in third-quarter 2014 from 13,677 bbl/d in the previous quarter. The increase reflects the trend in oil production over the past two years.

Swenson said companies including Repsol S.A. and ConocoPhillips have drilling programs underway. In late October the latter announced a new drillsite at Kuparuk that is expected to produce 8,000 bbl/d of oil at peak production.

The drillsite is one of the key projects announced since the passage of MAPA, said Trond-Erik Johansen, president of ConocoPhillips Alaska.

“This is in addition to the two rigs we have added to our North Slope drilling fleet as well as the newbuild drilling rig currently under construction,” he said. “The positive investment climate we now have in Alaska has been an important factor in the increased investment levels.”

Operators have plenty to shoot for. Alaska has produced 16.2 Bbbl of oil in its history, largely from the North Slope. What remains is 5.6 Bbbl of discovered conventional resources, another 19.2 Bbbl of undiscovered crude and 5.5 Bbbl of unconventional resources.

Party favors

Ambition is easily transmitted among independents on the North Slope. And Alaska likes independents—a lot.

Stephen Hosmer, CEO of Royale Energy Inc., said Parnell has been aggressive in trying to recruit independent producers to the state.

“I was recently invited into the governor’s office with a group of independent producers,” Hosmer said. “I’ve never been invited to the governor’s office in any other state. That shows a certain level of commitment to the industry.”

Parnell’s support of smaller independents is what will help create new productive fields. “I think he’s being rather visionary in that regard,” Hosmer said.

Royale announced in June that it was targeting two potential drilling sites reviewed by Netherland Sewell & Associates. Geological and geophysical data, including a 3-D seismic survey, “concluded the targets contain 17.8 to 325.3 million barrels of oil in place,” the company said. Recovery ranges from 14% to 42% of oil in place.

Hosmer said Royale was ready to drill until a former partner was unable to fulfill its responsibility to fund drilling of the first two wells. Plans to drill are on hold until winter of 2016.

“We’re very excited about getting the project underway but rather disappointed that we didn’t get it done for this winter,” Hosmer said. “We are fully committed to Alaska and to testing this property’s concept.”

Hosmer said he finds that most people in Alaska are excited to work in a “more stringent environment.” That includes a great deal of regulatory oversight.

“I’ve never worked in place that has the regulator working constructively with industry as much as they do in Alaska,” he said.

Unlocking Alaska

Carl Giesler Jr.’s years in business have taught him that the best way to create value is to “buy right.”

“You realize value when you buy something, not necessarily when you sell it,” said Giesler, CEO of Miller Energy Resources Inc. “So we’re very careful on how much we pay for acquisitions.”

Alaska’s frequently low sale prices were just part of the appeal to Miller in making the 5,270-km (3,275-mile) journey from Houston.

The company’s leaders are so convinced of Alaska’s potential that they are selling the last of their Lower 48 assets in the southern Appalachian Basin in Tennessee. The company’s Tennessee assets are worthwhile but represent only a small part of Miller’s production and value.

“From an investor perspective and overall value creation perspective, we felt it was better to segment them out, sell them and become a pure-play Alaska company,” Giesler said.

In September Miller reported average net production increased by 144% from fiscal year to fiscal year, to 3,313 boe/d from 1,360 boe/d.

Giesler said Miller’s aim is to create an oil and gas company where shareholders can focus their investments in Alaska. Alaskan operators such as Exxon Mobil, Apache Corp., ConocoPhillips, Caelus, Hilcorp and others are either far-flung giants or private companies.

“We are the only pure-play Alaska E&P company,” he said. “If you’re an investor and you want exposure to Alaska, we’re it.”

Miller wants to make the case that Alaska is one of the best places to be, not just in the U.S. but also worldwide, to explore for and develop oil and gas.

The company has access to a solid resource base and the operational and financial skills needed for development.

“Over time we’ve been trying to simplify and lower the cost of capital so that it’s just an easier way to invest,” Giesler said.

There is much on the company’s plate, he said. Miller is studying a master limited partnership for monetization of its midstream assets. In September it entered into a nonbinding letter of intent to buy substantially all of Buccaneer Energy’s operating assets for about $40 million to $50 million. Buccaneer Energy has proved reserves of about 1.9 MMboe and produces about 1.7 Mboe/d.

The company also made a $9 million offer in May to acquire Savant Alaska LLC’s Badami Unit on the North Slope.

Earlier in the year, Miller won a bid to acquire an exploration license on 168,000 acres in Cook Inlet on the Iniskin Peninsula.

Giesler said Alaska has been a good partner, and Miller will look for opportunities that make economic sense. “If we can continue to unlock the value of our resource, I think it will show in our stock price.”