Buccaneer Energy Ltd. is selling its interest in the Cosmopolitan field and the Endeavour jack-up drilling rig in an effort to strengthen its balance sheet, the company announced Jan. 1.
The Australian independent is selling its 25 percent stake in the offshore Cosmopolitan field to BlueCrest Energy Inc. for $41.25 million. The privately held Fort Worth independent currently holds the majority interest in the oil and gas field off Anchor Point.
Buccaneer is also selling its equity stake in Kenai Offshore Ventures LLC to Teras Investments Pte. Ltd. for $23.95 million. The joint venture Kenai Offshore Ventures owns the jack-up rig through a deal partially funded by the Alaska Industrial Development and Export Authority. Under the terms of the financing arrangement, AIDEA must approve the sale before it can be finalized, according to Buccaneer.
By keeping its wholly owned subsidiary Kenai Drilling LLC, Buccaneer said it would still be the rig operator once those sales are finalized, thus keeping a revenue source.
The sales are designed to help Buccaneer pay down previous debt, but the company is also pursuing a series of loans, credit facilities and rights issues totaling $116.3 million, according to the company. If those financing agreements and both sales are ultimately executed, Buccaneer said, it "will have working capital and will be essentially debt free."
The two sales are designed to free Buccaneer from the responsibility of owning assets in the Cook Inlet basin, while allowing the company to make money from those assets.
The Cosmopolitan deal keeps Buccaneer in place as rig operator.
An associated deal requires BlueCrest to use the Endeavour rig at the field for at least 50 working days each over the three upcoming winters, which run through April 15, 2016.
BlueCrest will pay Buccaneer a minimum rate of $175,000 per day for the rig and will file a $5 million letter of credit to underwrite its use, according to Buccaneer. At a rate of $175,000 per day, BlueCrest would pay some $26.25 million total to use the rig for 150 days. The letter of credit will remain in place until BlueCrest uses the rig for 150 days.
Buccaneer described the $41.25 million price tag as being "within acceptable market parameters for undeveloped projects of this type in Alaska" and said the sale provided the opportunity to profit off its minority stake "at a significant premium to its sunk costs."
The company said it had spent some $9 million at Cosmopolitan since acquiring the field in August 2012. The figure includes acquisition costs and the cost of drilling the Cosmopolitan No. 1 well in early 2013, but is offset by state exploration tax credits.
Buccaneer expects the deal to close by mid-January.
The Kenai Offshore Ventures deal also keeps Buccaneer involved in rig management.
The joint venture between Buccaneer and Ezion Holdings Ltd owns the jack-up rig through an agreement with the Buccaneer operating subsidiary Kenai Drilling LLC.
Buccaneer is selling its 50 percent working interest in Kenai Offshore Ventures to Teras Investments Pte. Ltd., which is a wholly owned subsidiary of Ezion Holdings.
The agreement expires Oct. 29, 2017.
The sale keeps Kenai Drilling as rig operator, allowing Buccaneer to "sell its ownership in the rig while maintaining control of the asset for its drilling operations in Alaska."
Buccaneer still owns three offshore Cook Inlet prospects that require a jack-up rig, although the status of two of those prospects is currently in limbo, pending a state ruling.
The $23.95 million sale price represents the total equity and debt Buccaneer had invested in Kenai Offshore Ventures since it acquired and began refurbishing the rig in late 2011.
AIDEA could potentially address the matter at its Jan. 14 meeting.
The deals could give Buccaneer some financial breathing room.
The company said it planned to use the proceeds from the sales to pay down an $11.2 million loan due toward the end of January, and to provide some money for operations.
Along with the sales, Buccaneer also announced several financial arrangements.
Those include a $6 million loan from Meridian Capital International Fund, an 18.9 percent shareholder represented on the board of directors. The loan is due at the end of March and Buccaneer plans to repay the loan from the money its gets from the Cosmopolitan sale.
Buccaneer also said it had signed a non-binding letter of intent with Meridian for a $50 million credit facility, which Buccaneer would use to repay some $49.8 million drawn from two credit facilities with Chicago-based Victory Park Capital worth $100 million.
Finally, sometime in the first quarter Buccaneer plans to issue "renounceable rights," or discounted shares, at $0.0125 per share, in an attempt to raise another $60.3 million.
By ERIC LIDJI