HOUSTON--(BUSINESS WIRE)--Houston-based and Australian Securities Exchange listed Buccaneer Energy (BCC) is bringing a drilling rig to the Cook Inlet of Alaska. CEO, Curtis Burton, is known for making the impossible happen. In the 90’s he led a team to create DeepStar for the industry and unlocked the secrets of deepwater drilling. Today Curtis leads another team with Dean Gallegos, Clint Wainwright, Andy Rike, Jim Watt and Mark Landt – all long-term industry veterans who know the business. Together they are poised to make history yet again.
The Cook Inlet of Alaska is in danger of running short on natural gas. According to the South Central Alaska Natural Gas Study, 95% of the gas in the Cook Inlet was found before 1970. Currently proven developed reserves are forecasted to only meet demand until 2012. Until now the only solution appeared to be curtailing industrial use and importing LNG. However the Inlet is home to an estimated 13-15 TCF of gas and 230 million barrels of oil bypassed by the majors as they moved on to the North Slope of Alaska (Based on published studies by the State of Alaska).
Buccaneer Energy entered the Inlet through the purchase of Stellar Oil & Gas in April 2010. Stellar held in excess of 50,000 acres of leased inventory in both land and offshore tracks. Buccaneer has added an additional 25,000 acres over the past year. To tap the potential of the Inlet Buccaneer needed a Jack up drilling rig. However, after evaluating the attendant issues they concluded that lease of a rig was impractical, but the purchase of one would make excellent business sense and would unlock the Inlet’s opportunities for a multitude of operators if the rig were to be chosen for a broad drilling footprint and placed in a custom built “drilling in Alaska only” company. Burton and others of his team went to work to make this long shot (there hasn’t been a jack-up in Alaska in over 16 years) a reality.
With the creation of Kenai Offshore Ventures (KOV), a partnership with Alaska Industrial Development and Export Authority (AIDEA) and Ezion Holdings Ltd of Singapore, Buccaneer was able to pull together a collation of industry, capital and government partners to identify, purchase and bring a Letourneau 116c rig to the Inlet. On Friday the board of AIDEA cleared the way for the organization to invest $30 million in KOV.
“Today’s Board action is the culmination of many months of hard work by a dedicated team of people devoted to the successful completion of thorough due diligence and complex negotiations for the benefit of Alaskans,” said AIDEA Board Chairman Mike Felix. “We are very pleased to take this important step with Buccaneer, and to move forward with much-needed drilling in the Cook Inlet.”
It is estimated that KOV will create some 500 jobs and possibly avert the shortage of gas coming in 2012. After others had tried for over 16 years, it took Curtis Burton and Buccaneer Energy only a few months to make this a reality.
With the drilling season well underway in the Cook Inlet, KOV will need to move quickly to refurbish and transport the rig to the Inlet in order to be able to drill this year.
The deal requires Buccaneer and Ezion to:
- Contribute at least $5 million to the project;
- Secure a term loan for the remaining $50 million needed to fund the $85 million drilling venture; and
- Contract to buy a jack-up rig from Transocean Limited and contract to upgrade the rig for use in Alaska.
KOV will also have to put a management structure in place to operate the rig, and the deal is also conditioned on Buccaneer committing to drill four wells in the Cook Inlet with the rig. Buccaneer will have to obtain the permits for its drilling program before the end of August. Of course KOV will also contract the rig to other operators in the region insuring that the rig has enough work to support it for the duration of the 6 year agreement with AIDEA.
“There are many 'to do list items' and challenges, but we are confident that we can meet or exceed expectations set for KOV and our partners,” said Burton.
All in, Ezion estimates the value of the deal to be $109 million to be realized over the five year period.