Buccaneer Energy Limited has executed a Purchase and Sale Agreement for the acquisition of the two main productive leases in the former Cosmopolitan Unit (Cosmo) from Pioneer Natural Resources Alaska, Inc. (Pioneer). Cosmo is an undeveloped oil and gas field located in 50 feet of water in the Cook Inlet of Alaska and is in close proximity to the shoreline at Anchor Point on the Kenai Peninsula. Cosmo has regional proximity to Buccaneer's other Alaskan assets and will utilize the capabilities of the Endeavour rig during the northern hemisphere winter.
The acquisition is being jointly made with privately owned Fort Worth, Texas based BlueCrest Energy II, LP (BlueCrest) with Buccaneer acquiring a 25% working interest and BlueCrest a 75% working interest, with Buccaneer to assume operatorship of the project. Settlement of the acquisition is due on March 30, 2012 with the commercial terms of the transaction remaining confidential.
The strong interest in the region, which contains the Cosmo project, is demonstrated by Apache Corporation acquiring leases surrounding and adjoining the leases near Cosmo during the last State lease sale conducted in June 2011.
Buccaneer Director Dean Gallegos said, "The acquisition of our interest in the Cosmo project provides substantial benefits for the Company. Not only does it significantly increase Buccaneer's oil and gas reserves but it also increases operational utilisation and revenue performance of the Endeavour jackup rig, demonstrating the strength of our Alaskan strategy.
"Further the Cosmo acquisition fits very well in our Alaskan portfolio. As a more advanced project with an existing well and some infrastructure already in place, Cosmo provides nearer term oil and gas production potential than our two other Cook Inlet offshore projects which will still be developed in parallel."
As part of its due diligence on Cosmo, Buccaneer and BlueCrest engaged respected consulting firm Ralph E Davis to conduct an independent reserve estimate on the project. The 2P Reserves of Cosmo increase Buccaneer's independently assessed Alaskan 2P Reserves from 17.5 million barrels of oil equivalent (MMBOE) to 31.3 MMBOE, a significant increase of 79 percent.
Preliminary Development Plans
Development of the Cosmo project involves two separate plans:
An offshore well using the Endeavour jackup rig is planned for late 2012 that will further quantify both the oil and gas zones of the project.
Development of the Cosmo project will begin in the northern hemisphere winter of 2012 and continue through to 2014. The preliminary development plan includes drilling and producing oil wells from the existing onshore production site and drilling offshore water injection wells for reservoir pressure maintenance.
Separately, offshore gas wells will be drilled and tied back to the existing onshore site which will be connected to ENSTAR's recently completed gas transportation line.
The acquisition will allow the use of the Endeavour jackup rig to provide a more efficient development plan than was previously available to Pioneer. Without access to a jackup rig, all wells, including water injection wells needed to be drilled as long reach directional wells from onshore. Further, the shallower gas reserves could only be reached by an offshore drilling program that will utilize the Endeavour. Utilization of the Endeavour jackup rig materially improves the economic parameters of the overall project.
The Cosmo project is located in the southern part of the Cook Inlet which is free of ice flows during winter. Cosmo will provide a winter operational location for the Endeavour jackup rig to utilize the rig when ice flows in the northern part of the Cook Inlet preclude drilling during the November – March period.
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