KOV Transports Endeavour Jackup to Cook Inlet; Buccaneer Updates Ops

Kenai Offshore Ventures, LLC (KOV) has executed a heavy lift contract to transport the Endeavour, Spirit of Independence (300' ILC) from Singapore to the Cook Inlet, Alaska. The Endeavour is expected to depart Singapore at the end of July 2012 and it will take approximately 21 days to reach the Cook Inlet, where the rig will be offloaded and towed via tug to the first well location in Buccaneer's offshore program.

On completion of the 2012 drilling season anticipated to be in early November it is anticipated that the rig will be towed to the Cosmopolitan location in the ice free southern Cook Inlet to commence drilling operations.

As previously advised the Company's part owned subsidiary Kenai Offshore Ventures, LLC executed a Repair Contract with Keppel FELS Shipyard in Singapore for the repair and modification of the jackup rig, Endeavour. Substantially more work than originally scheduled for the Singapore shipyard period has now been completed including the following:

• In early 2012 there was a change in US Federal government regulations that required an increase in lifeboat capability for jackups operating in US waters. This required engineering and steel works to be completed that were not originally anticipated;
• During 2012 several opportunities to use the rig as a standby rig for "major" operators who have projects in the Chukchi Sea and Beaufort Sea presented a unique opportunity to achieve improved utilization of the rig. In order to realize this improved utilization, however, additional improvements to the rig were needed to insure suitability;
• The acquisition of the Cosmopolitan project in the southern Cook Inlet that is ice free in winter meant a winter drilling location for the Endeavour thereby increasing its utilization. This required the work that was going to be completed in the first winter period to be brought forward to Singapore; and
• The desire to certify the Endeavour with the American Bureau of Shipping (ABS) for the maximum 5 years so no interruptions to operations would be necessary in future years meant all key systems needed to be taken to workshops, stripped, repaired where necessary and reinstalled.

The above additional work required resulted in a budget increase and approximately $2.5 million of the funds raised from the recently announced capital raising will be used to satisfy Buccaneer's obligations to that joint venture company.

KOV is also putting in place additional financial arrangements that require no additional lump sum payment from Buccaneer, to facilitate this Buccaneer has agreed to an increase in the Bare Boat Charter fee 15 - 20 percent. The Bare Boat Charter fee forms part of the day rate Buccaneer will be charging to itself and third parties and which is subject to a 65.0 percent cash rebate from the Alaskan State Governments ACES incentive program.

Offshore Projects

In addition to its 3 onshore Cook Inlet projects the Company also has three projects located offshore Cook Inlet, Alaska.

All of these projects have independent assessed reserves and resources by respected US based engineering firms as follows:

Certified Offshore Reserves and Resources (MMBOE)

Buccaneer is the Operator for all of the above projects.

Endeavour's Capabilities

The Endeavour jackup rig was selected following a rigorous 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 ability to operate in water depths up to 300 feet;
• Constructed of -10 degree Celsius rated steel allowing it to work safely in the wide environmental envelope that exists in the Arctic, including the Chukchi and Beaufort Sea which are located offshore the North Slope;
• Two sets of blow out protectors ("BOPs"), both 10,000 and 15,000 PSI, giving it capacity to drill high pressure horizons that exist in the Cook Inlet;
• Cantilever beam extensions that enhance its ability to work over existing platforms in the Cook Inlet to undertake drilling and repair operations; and
• High variable deck load rating of 8,300 KLBS which enable it to operate with extra equipment and materials onboard, should support services be limited.

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