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Buccaneer sells some Alaska assets; no plans to leave Cook Inlet

Alex DeMarban
Buccaneer Energy and its Endeavour jack-up rig have been prominent parts of the Cook Inlet oil and gas renaissance, and the company plans to continue in the basin despite plans to sell some Alaska assets. Courtesy Peter Law

A central player in Cook Inlet’s oil and gas revival is selling a big chunk of its Alaska assets to raise $65 million and go debt-free, but it will continue to be involved in the basin that provides most of the state’s natural gas.

The deal-making by Buccaneer Energy is multifaceted. It includes the sale of its stake in the promising Cosmopolitan project and the proposed sale of its stake in Kenai Offshore Ventures, which owns the Endeavour offshore drilling rig.

Though Buccaneer hopes to unload its stake in the rig, it will retain operational control of the rig through the fall of 2017, allowing Buccaneer to continue using it for offshore drilling at sites such as Southern Cross in central Cook Inlet. Retaining control of the rig also allows Buccaneer, through its subsidiary Kenai Drilling, to generate revenue by operating it for other companies.

The Sydney, Australia-based company Buccaneer will retain its onshore fields on the Kenai Peninsula, including the already-producing Kenai Loop field near the Walmart in Kenai.

Buccaneer was drawn to Alaska by generous state incentives that have sparked a burst of exploration and rekindled hopes that Cook Inlet oil and gas production would dramatically increase in the basin, which became the site of Alaska's first oil rush following a big strike in 1957.

The $127 million Endeavour jack-up rig was purchased and refurbished with help from the state-owned Alaska Industrial Development and Export Authority, which provided a $24-million loan. An AIDEA spokesperson said the deal does not affect the agency's agreement with Buccaneer. "We believe that with this consolidation, Buccaneer will be better positioned to continue its Cook Inlet exploration and development," said Karsten Rodvik, AIDEA spokesman. 

Buccaneer, which is traded on the Australian stock exchange, has worked to prove up the Cosmopolitan project with tests at the  Cosmopolitan No. 1 well in Cook Inlet about 10 miles north of Anchor Point.

Buccaneer will sell its 25-percent stake in the Cosmopolitan field to BlueCrest Energy, raising $41.25 million. Buccaneer acquired its interest in the field 1 1/2 years ago, and has spent about $9 million there, after state rebates were deducted.

As part of the deal, BlueCrest has agreed to operate the Endeavor rig for three winters, starting this year, at a daily rate of $175,000. That money will be paid to Buccaneer because it retains control, though not ownership, of the rig.

Buccaneer is selling its 50 percent equity interest in the rig for $24 million to Teras Investments of Singapore, pending approval from the state-owned agency. Teras, the other common owner, is a subsidiary of Ezion Holdings of Singapore. Buccaneer had planned to sell its ownership in the drilling rig but maintain control of its operations, Buccaneer said in the release.

"Ezion is an experienced player in offshore oil and gas support, and we are very pleased to continue our partnership with them in the development of Alaska oil and gas resources," said Rodvik. 

Contact Alex DeMarban at alex(at)alaskadispatch.com