Production Starts Up at Kenai Loop #4

Buccaneer Energy Limited advised that production from its 100 percent owned Kenai Loop #4 well commenced Feb. 10. The Kenai Loop # 4 well is currently producing at an initial rate of 2.0 million cubic feet per day (MMcf/d).

The long term deliverable production rate from the Kenai Loop #4 well is estimated to be 3.0 – 4.0 MMcf/d. Kenai Loop #4 gas production is in addition to the Company's current production of 6.5 MMcf/d from the Kenai Loop #1 well. The majority of the current total production of 8.5 MMcf/d (1,400 barrels of oil equivalent per day (boepd)) is being sold to the local gas utility Enstar.

This production rate is currently limited by the installed temporary production facilities. In November 2012, the Company commenced the installation of permanent production facilities and pipeline connections at Kenai Loop; however, severe weather conditions meant that the build out of these was suspended in December 2012.

It is expected that the permanent facilities will be completed by April 30 and once permanent production facilities are in place, it is anticipated that the Kenai Loop field's total production rate may be increased to 10.0 -11.0 MMcf/d (1,666 – 1,833 boepd). This represents a near 100 percent increase over the average production rate achieved in 2012.

Southcentral Alaska is currently experiencing severe gas shortages and the winter peak pricing of incremental gas supply reached $22.00/Mcf in the past 60 days. The Company has a minimum deliverability of 5.0 MMcf/d to Enstar under its current gas sales agreement at an annual weighted price of $6.24/Mcf. Incremental production above this level is being sold into the winter peak pricing environment, while the Company negotiates a new long term gas sales agreement with potential purchasers.

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