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Controversy continues for young energy company exploring Cook Inlet

Australia-based Buccaneer Energy, a leader in the recent surge of interest in offshore oil and gas exploration in Cook Inlet, could get new leadership due after shareholder revolt plays out Tuesday overseas. Courtesy Peter Law

Shareholder unrest playing out in an open confrontation thousands of miles from Anchorage could impact a company that's playing an aggressive role in Cook Inlet's oil and gas renaissance.

A pair of Chinese stockholders with Buccaneer Alaska hold enough shares to possibly bring change to the controversy-beset company whose stock prices have cratered. They hope their peers will vote to replace the leadership at a meeting set for Tuesday in Sydney, Australia, according to records filed with the Australian Stock Exchange where parent company Buccaneer Energy is traded.

What a change in leadership would mean for Alaska is anyone's guess. Some fear it could undermine Buccaneer's efforts to produce oil and gas in Cook Inlet, and put at risk investments that have helped electrify local economies. A critical question is what it might mean for Buccaneer's involvement in a multi-million-dollar financial deal involving the state.

Buccaneer's chief executive, Curtis Burton, has said the proposed new management -- based in Singapore and as of late last week apparently unreached by U.S. reporters following the battle -- wants to reduce the company's offshore exposure.

Some think that means they'd slow efforts in the waters west of the Kenai Peninsula.

Less offshore work would be welcome news for some critics of Buccaneer, who say the young firm's track record raises troubling questions about its ability to operate safely in important halibut and salmon habitat. They say the company has played fast and loose with Alaskans and companies it owes, and that generous tax credits from the state have barely kept it alive.

Buccaneer officials, for their part, are fighting to keep their posts, including with video and written pleas to shareholders. They say they're moving steadily ahead with development in Alaska -- the most important play for seven-year-old Buccaneer. Earlier this year, Buccaneer began producing gas at an onshore well in the region, and has spent more than $100 million and worked with more than 300 different vendors in the last two and a half years.

"We have in all cases of which I am aware, attempted to be a good corporate citizen and have complied with all known rules and regulations and we will continue to do so," said Curtis Burton, in an email.

The company has striven to be up front and fair with those it's worked with, he said.

"When our primary lender decided to leave the energy space in early 2012; we were open with the community regarding our cash flow issues and our plan to remedy that situation. ... As a result of our efforts EVERY vendor involved with us during that time was paid. When you are investing the sums we have invested, disagreements are bound to arise and will continue to do so."

Having leased 50,000 acres across multiple prospects, Buccaneer Alaska is a key player in Cook Inlet. With more than $20 million in help from the state, a partnership involving Buccaneer helped the company purchase the $100 million jack-up drilling rig the Endeavour, a unit the likes of which Cook Inlet hasn't seen for decades, with its ability to drill almost four miles deep.

State: Alaska's interest protected

No matter what happens, the state will be protected by contractual obligations, said Karsten Rodvik, a spokesperson with Alaska Industrial Development and Export Authority, the state agency involved in the rig partnership.

"Regardless of who owns the company, all of Buccaneer’s obligations to AIDEA, including their commitment to drill four wells in Cook Inlet, are clearly and contractually defined, and must be fulfilled. In short, even if Buccaneer ownership changes, AIDEA’s interests are protected," said Rodvik in an email.  

Much of Buccaneer's controversy in Alaska have been related to the drilling rig, which required far more refurbishing than the company announced after it was pulled out of long-term storage in Singapore, leading to an 8-month stay in Homer instead of the eight days Buccaneer originally promised, said Bob Shavelson, president of conservation group Cook Inletkeeper.

"They said they had these unforeseen issues. No you didn't. They'd pulled this rig from Singapore after it'd lied up for years," said Shavelson. "I've been dealing with oil and gas issues for 18 years, and I never saw someone come in so dishonest and not being forthright with the community. So what I'm seeing now is the manifestation of that among the shareholders."

"If I were an investor I would not be comfortable with their offshore efforts," Shavelson said. "Everything we saw was it’s a pyramid scheme. They came here looking for tax credits and other incentives to pay off debts and they weren't paying people they owed."

Well-timed discovery announcements?

The shareholder troubles come alongside news reports that the company has found an oil pool, large for the region, and unexpected oil shows in the Cosmopolitan exploration well where the jack-up rig is drilling.

Was Buccaneer's leadership trumpeting that news to quiet dissenting shareholders?

No, Burton said. Instead it issued press releases as required by the Australian stock exchange, for items "considered material to the stock under fairly narrow parameters."

"Were we putting out good news? Yes, it is mandated by law on the ASX," Burton's email said. "Were we hyping the news or inflating it? No, we simply produced a release adhering to the rules for this type of disclosure as required to keep our shareholders appraised."

"Right now Buccaneer is drilling offshore at the Cosmopolitan project, we are about to begin work at our Kenai Loop project, and we are in the middle of a capital raise. I would suspect that many more announcements will be forthcoming."

He added that the company remains committed to its Alaska program.

"We have six permitted offshore projects, we have the first commercial discovery of gas onshore in the last 10 years. We worked with the state to bring the Endeavour to the Inlet and we expect to be integral in providing resources to the state on a go-forward basis."

Contact Alex DeMarban at alex@alaskadispatch.com