Sunday, July 22, 2012

Endeavour to embark; Buccaneer executes heavy lift contract to bring jack-up rig to Cook Inlet

Eric Lidji
For Petroleum News

Buccaneer Energy Ltd. is getting ready to bring its jack-up rig to Alaska.

Kenai Offshore Ventures LLC, a subsidiary of the Australian independent, recently completed a heavy lift contract to move the Endeavour rig to Alaska from Singapore.

Buccaneer expects the rig to depart in late July and arrive 21 days later in the Cook Inlet, where the company plans to use it at as many as three offshore prospects this year.

After completing summer work at Southern Cross and Northwest Cook Inlet, Buccaneer will move the rig south sometime in early November to drill at the Cosmopolitan project.

In partnership with the Alaska Industrial Development and Export Authority, Kenai Offshore Ventures bought the Transocean Adriatic XI jack-up rig last September for $68.5 million and renamed it Endeavour — Spirit of Independence. The rig has since been undergoing repairs and upgrades at the Keppel FELS Shipyard in Singapore.

While in Singapore, the rig underwent “substantially” more work than Buccaneer originally planned, according to the company. Those additional upgrades include increasing the lifeboat capacity to meet new U.S. regulations, improvements allowing Endeavour to be used as a standby rig for activities in the Beaufort and Chukchi seas, pushing up work planned for next winter to accommodate the Cosmopolitan drilling program, and work to extend its certification with the American Bureau of Shipping.

With the upgrades, Endeavour can operate in water depths up to 300 feet in both Cook Inlet and the Arctic Ocean. The rig includes two sets of blowout preventers, both 10,000 and 15,000 PSI. Additional upgrades allow the rig to carry heavier-than-usual loads and to perform drilling or repair operations in conjunction with existing platforms.

New capital infusion

Buccaneer also recently said it is raising another $13.5 million for its Alaska operations.

The company said July 18 that it had executed binding agreements for the issue of 292,682,927 shares in the company to raise a total of $12 million and a Share Purchase Plan to eligible shareholders capped at $1.5 million.

The capital will go toward onshore, offshore and exploration ventures in Alaska.

The placement will take place in two parts. The first, to raise some $5.8 million, will take place immediately. The second, to raise some $6.2 million, is subject to shareholder approval. Buccaneer expects to hold a general meeting sometime in late August.

Zenith Securities Pte Ltd and Augsburg Investments Ltd have each subscribed to 48,780,488 shares in the first tranche, each corresponding to a 4.3 percent interest in Buccaneer, according to the company. Zenith and Augsburg will jointly hold a non-executive seat on the Buccaneer board as part of a “long term strategic relationship.”

The remaining shares in the $12 million placement were “supported by existing institutional shareholders and a range of new international and domestic institutions and sophisticated investors and was heavily oversubscribed,” according to Buccaneer.

“The company is about to embark on a significant period of activity and growth in its Alaskan operations and to do this effectively will require the company forming solid business relationships not only within Alaska but also globally,” Buccaneer Director Dean Gallegos said. “The company’s ability to complete a large equity capital raising relative to its size is confirmation of the strong underlying strength of its Alaskan projects and business plan. We look forward in working with Zenith and Augsburg to maximize and monetize the value of the Company’s asset base for the benefit of all shareholders.”

Offshore and onshore work

Buccaneer plans to use the capital for a variety of projects.

Those include drilling another development well at the onshore Kenai Loop project, progressing its offshore exploration efforts, completing its acquisition of a 25 percent interest in the Cosmopolitan project, funding its 50 percent stake in its rig-operating subsidiary Kenai Offshore Ventures and paying for general day-to-day operations.

The initial effort will focus on “maximizing production delivery” at Kenai Loop, Gallegos said. Buccaneer brought the onshore gas field online in January and plans to drill an additional development well at the field this summer. “To optimize its capital expenditure program, offshore exploration will be phased to follow the development of its onshore Kenai Loop project,” Gallegos added. “To reduce operational expenditure while the company focuses on its Kenai Loop development, the company will seek to contract out the recently acquired Endeavour jack-up rig to third party operators.”

Under its unit agreements, Buccaneer must drill one well each at its Southern Cross and Northwest Cook Inlet units by Sept. 30, 2012, or lose the units. “We intend meeting our commitments before leasing out to third parties,” Gallegos told Petroleum News.

Although Kenai Offshore Venture and AIDEA based their business case for buying the rig on Buccaneer projects, they always intended to lease the rig out to third parties.

Southern Cross sits between the Granite Point and Trading Bay oil fields. Northwest Cook Inlet lies on the northwest side of ConocoPhillips’ North Cook Inlet gas field.

The infusion of capital also allows Buccaneer to close on Cosmopolitan.

Buccaneer and BlueCrest Energy II, LP, a privately held energy company out of Fort Worth, Texas, purchased two offshore leases at the prospect from Pioneer Natural Resources Alaska Inc. in February and initially anticipated closing as soon as March 30.

Through the deal, Buccaneer would acquire a 25 percent interest in the leases.

The Cosmopolitan leases are off Anchor Point, in the southern Kenai Peninsula.