Buccaneer Energy Limited on Friday announced it has executed a gas sales contract with ConocoPhillips, to supply natural gas to ConocoPhillips’ LNG facility located on the Kenai Peninsula approximately 10 miles north-west of Buccaneer’s 100% owned Kenai Loop project.
The contract with ConocoPhillips commences when Kenai Loop # 1 starts production in December 2011. The contract is expected to conclude on 30 April 2012, with the potential to end earlier, if construction of the Cook Inlet Natural Gas Storage (“CINGSA”) facility is completed prior to this date.
Once the CINGSA facility is on line, Buccaneer has a gas sales contract in place with ENSTAR - the largest gas utility in Alaska. ENSTAR will purchase the Kenai Loop gas and inject into CINGSA for storage and use at a later date.
Buccaneer is not obligated to sell any gas under the ConocoPhillips contract, however it gives the Company both flexibility and surety as it will allow the Kenai Loop # 1 well to flow continuously from the commencement of production, while being able to sell gas either into the ConocoPhillips gas contract or the daily auction to supply local peak demand requirements during the Northern Hemisphere winter. The daily auction to supply gas does not provide guaranteed daily volumes.
Buccaneer has the ability to sell up to 2.5 BCF to ConocoPhillips under the contract. The pricing as part of the gas sales contract is consistent with recently executed gas contracts.
Buccaneer Director Dean Gallegos said: "This gas sales contract with ConocoPhillips is another milestone for Buccaneer. With secured contracts for the gas produced at Kenai Loop #1 from the time of first production, and the flexibility to be able to sell into the peak demand daily auction market, places Buccaneer in a strong position with substantial cash flows from December 2011 rather than April 2012.
Further, the ability to flow the well continuously will give us the opportunity of assessing the reservoir performance prior to the commencement of the ENSTAR gas contract in April 2012. If the reservoir performs as testing has indicated, it will give us the ability to increase the production rate from the anticipated minimum of 5.0 MMCFD.”
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