Buccaneer's 50% owned subsidiary Kenai Offshore Ventures ("KOV") has overnight in London completed the acquisition of the GSF Adriatic XI offshore jackup rig from Transocean.
The total purchase price of the Rig was US $68.5 million funded through:
KOV anticipates over the over the next 5 years both the OCBC and AIDEA facilities will be fully repaid by revenues received under the Bare Boat Charter agreement.
Coinciding with settlement the name of the Rig has been changed to "Endeavour – Spirit of Independence" ("Rig" or "Endeavour").
Buccaneer Director Dean Gallegos said, "With completion of this transaction, we have achieved what was initially considered by some, to be a very ambitious goal - to acquire an offshore jackup rig.
"This significant milestone for Buccaneer marks the start of the very tangible steps toward unlocking the value of our Alaskan offshore assets which Netherland, Sewell & Associates has estimated to be 73.3 MMBOE in combined 2P Reserves and P50 Resources. We are well on that path with mobilization to the Cook Inlet on track for April/May 2012.
"Furthermore the Endeavour represents a strategic asset, ensuring Buccaneer will feature predominantly in the "renaissance" of exploration activity in the offshore waters of Alaska."
The Endeavour is currently alongside Keppel shipyard in Singapore in preparation for the commencement of shipyard work that will include:
The aforementioned work will not include any significant structural work.
The costs of the shipyard work and mobilization to the Cook Inlet will be funded by additional draw downs from both OCBC and AIDEA, taking these facilities to US $56.0 million and US $23.6 million respectively.
Initial Work Program
The first well expected to be drilled by the Endeavour will be located on Buccaneer's 100% owned Southern Cross project where Netherland, Sewell & Associates have estimated Proven & Probable (2P) Reserves of 12.7 MMBOE and an additional P50 Resource of 14.7 MMBOE.
The Southern Cross project is in approximately 50 feet of water with no unusual technical hurdles to drill and develop. Southern Cross is within five miles of four significant oil and gas fields with a combined production of 1.1 billion BO and over 550 BCF of gas.
Buccaneer's initial test will offset several wells on its leasehold that tested oil and gas but were never produced. Buccaneer's first well is approximately 1700 feet from the Pan Am 17595 # 3 (circa 1960's), which tested 230 feet oil and 1,080 feet of mud cut oil from the Lower Tyonek and 165 feet of oil from the Hemlock.
It will also be structurally high to the Pan Am 17595 # 2 (circa 1960's), which tested the Lower Hemlock and recovered gas to the surface followed by fluid from which 990 feet of clean oil was recovered. Other wells on the lease tested gas from the Upper Tyonek. Buccaneer's well will be within the demonstrated hydrocarbon column for this area.
Pathway to unlocking value in offshore Alaska
As part of the acquisition Buccaneer's wholly owned subsidiary Kenai Drilling, LLC has executed a Bare Boat Charter Agreement with KOV. Kenai Drilling will market the Endeavour to third party operators, with day to day operations of the Endeavour being managed by Archer Drilling under contract.
The Bare Boat Charter commences when the Rig is delivered for operational service in the Cook Inlet, which is expected to be in April/May 2012, for a period of 5 years during which Kenai Drilling will pay bare boat charter fees to KOV.
Kenai Drilling's obligations under this charter agreement will be mitigated by the leasing of the Endeavour to third party operators, with whom discussions have already commenced.
The Company has also executed the following:
The Endeavour jackup rig was selected through a global search process. Its existing capabilities make it suitable for most water depths that exist in the Cook Inlet and northern Alaskan waters.
These capabilities include:
The Company appreciates the support that it has received from all parties and in particular AIDEA in completing this acquisition.
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