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Bankrupt Buccaneer selling Alaska assets to its largest creditor

  • Author: Eric Lidji
  • Updated: September 28, 2016
  • Published November 1, 2014

Buccaneer Energy Ltd. is selling its Alaska assets to its largest creditor for $44 million.

After holding an auction on Monday, the Australian independent is asking a federal bankruptcy court in Texas to approve a sale to Houston-based AIX Energy LLC.

The proposed $44 million sale price represents a credit bid, which allows a secured creditor to offer the amount of its debt against cash bids from other potential buyers.

A court-approved sale process allowed Buccaneer to either hold an auction or sell its assets directly to AIX Energy, should a solicitation fail to yield any qualified bids.

The only qualified bid came from the Miller Energy Resources Inc.-affiliate Cook Inlet Energy LLC, which offered $35 million for the properties in a bid made Oct. 24. Miller had previously announced its intentions to bid between $40 million and $50 million.

Buccaneer used the $44 million credit bid from AIX Energy as the opening bid for the auction. Cook Inlet Energy declined to increase its initial bid, which ended the auction.

Should the AIX Energy sale fall through, Buccaneer would sell the assets to Cook Inlet Energy for $35 million. Buccaneer is asking the court to approve both contingencies.

Earlier in the bankruptcy proceedings, AIX Energy had agreed to be the "stalking horse bidder" in an auction, committing to bid more than $58 million for the Alaska assets.

What’s included

The sale covers "substantially all" of Buccaneer's assets.

The most valuable among those assets is the Kenai Loop gas field. The field includes seven leases (two with the Alaska Mental Health Trust, one with Cook Inlet Region Inc. and four with the state of Alaska), four wells and their data files, two drilling pads and associated field infrastructure, all geological and geophysical data and existing permits.

The sale also includes considerable office equipment, furniture and software.

The field is currently involved in a correlative rights dispute before the Alaska Oil and Gas Conservation Commission, which scheduled a public hearing for December. The field has been illegally draining from neighboring lands owned by the state, CIRI and the Trust Land Office, respectively. The AOGGC could require pooling or unitization.

Additionally, some of the Kenai Loop leases are under appeal or in litigation.

The sale also includes a tract at the former Northwest Cook Inlet unit in the waters of Cook Inlet and a tract at the onshore West Nicolai prospect on the west side of the Inlet.

The buyer will assume 13 contracts from Buccaneer. Those include three gas sales agreements with the Enstar Natural Gas Co.-affiliate Alaska Pipeline Co.; three separate interruptible gas sales agreements with Tesoro Alaska Co., Cook Inlet Energy and ConocoPhillips Alaska Natural Gas Corp., respectively; a liquids sale agreement with Tesoro Alaska involving condensate, and six leases, easements or other contracts.

Who is AIX?

To pursue its broad ranges of projects across Cook Inlet, Buccaneer assumed considerable debt, including a large credit facility with Meridian Capital CIS Fund.

Meridian Capital CIS Fund was affiliated with Meridian Capital International Fund, which became Buccaneer's largest shareholder in mid-2013 with 19.9 percent interest.

Meridian sold the debt to AIX Energy in April 2014. AIX Energy incorporated in Alaska in early May 2014, according to the state. Buccaneer filed for bankruptcy in late May.

Early in the bankruptcy proceedings, a group of unsecured creditors raised questions about the relationship between Meridian and AIX Energy. The Official Committee of Unsecured Creditors called AIX Energy "a newly formed shell entity comprised of individual oil and gas operators with whom Meridian had long-standing prior personal relationships." According to the committee, AIX Energy used a "mirror loan" from Meridian to buy the loan, making the transaction "little more than a book entry."

The creditors later reached a deal where AIX Energy agreed to pay $10 million into a trust that would be included in liquidation plans designed to repay unsecured creditors.

This story originally appeared in Petroleum News and has been republished here with permission.