Buccaneer Closes Farm-out Venture with EOS Petro
Buccaneer Energy Limited reported it closed the farm-out of some Alaska projects through a joint operating agreement with EOS Petro Inc. Thursday.
EOS will earn or have the right to earn a 50 percent working interest in Buccaneer’s Southern Cross unit and North Cook Inlet unit deep oil rights, both located offshore Alaska, and the West Eagle project onshore Alaska. EOS will also have the option to earn a 50 percent working interest in Buccaneer’s North West Cook Inlet unit offshore Alaska under the same terms, Buccaneer reported in an Aug. 22 press release.
Under the agreement, EOS will pay 100 percent of the costs associated with the first two wells in each of the four projects. Buccaneer will retain a 50 percent working interest and serve as operator of each project. EOS is expected to spend between $150 million and $200 million under the agreements.
Buccaneer will retain its existing working interest in both the Kenai Loop project and Cosmopolitan project, in which Buccaneer holds 100 percent and 25 percent interest.
“With a clean balance sheet, onshore operations ramping up and an offshore program that is just beginning, we believe the prospects for Buccaneer are extremely bright – the remainder of 2013 and through 2014 will be a very exciting time for the company,” aid Buccaneer CEO Curtis Burton in a statement.
EOS recently formalized a commitment with GEM Global Yield Fund, a $3.4 billion fund and member of the Global Emerging Markets Group, through which GEM would fund EOS with an aggregate of up to $400 million, through a stock subscription agreement for EOS’ acquisition of domestic and international oil and gas assets and working capital.
“We look for projects with the right risk profile, and have become convinced that Buccaneer’s operations in Alaska will provide that for us,” said EOS Chairman Nikolas Konstant in a statement. “Being able to partner with an established operator on permitted projects that are ready to drill is ideal.”
London-based Chrystal Capital introduced EOS to Buccaneer in January of this year. The quality of the Buccaneer asset base in Cook Inlet is the main reason for the partnership; the funding makes it possible for EOS to execute on that partnership, Burton told Rigzone.
EOS has properties in Illinois and opportunity in other parts of the world, Burton said.
“Part of the EOS deal is to utilize the experience of the Buccaneer G&G to evaluate opportunity in the areas we have experience, Alaska being number 1, and extensive Lower 48 experience including the Gulf of Mexico and many other areas around the world.”
Buccaneer has six offshore wells in the permitting process and may drill up to three more wells at the Kenai Loop and one West Eagle well onshore near Homer, Alaska, Burton said. All offshore wells and onshore wells will be drilled by the Endeavour, Spirit of Independence (ILC 300’) and the Glacier onshore rig, both of which Buccaneer currently has under long-term contract.
The Endeavour will mobilize to the Southern Cross unit to drill the first well in the farm-out program the weekend of Aug. 24-25. The Glacier is drilling the Kenai Loop #1-4 well; the rig will next drill the West Eagle #1 well at the West Eagle project on the southern end of the Kenai Peninsula.
Buccaneer is also partnered with Blue Crest on the Cosmopolitan project.
The company entered Alaska’s Cook Inlet with the acquisition of 70,000 acres from Stellar Oil & Gas in March 2010.
“Alaska is unique in that it has several incentives that encourage drilling on State lands,” Burton told Rigzone.
The ACES [Alaska’s Clear and Equitable Share] program offers a cash rebate of up to 65 percent of all monies spent on exploration, drilling, and building production facilities. To date, Buccaneer has recovered a total of $30.5 million since commencing operations in Alaska in the middle of 2010.
“We have an additional 11.2 million to be recovered and we still need to submit invoices for work done on the Cosmopolitan project,” Burton noted.
The permitting process, while at times difficult, is manageable. Burton noted that the company completed the Cosmopolitan purchase from Pioneer in August 2012 and all of its permits were in place by late February 2013. Buccaneer has already drilled a successful well on the site.
Alaska represents an oil and gas basin that was proven by the majors over 50 years ago. The Cook Inlet is the home of several large fields and accumulated infrastructure. What makes it unique is that the last drilling done there offshore was in the early 90s. This means that while these structures are well known, shallow water and prolific producing fields, no one has ever applied today's oil and gas technology toward their development.
“This creates a huge opportunity for companies like Buccaneer, which was a first mover, to find and produce large quantities of hydrocarbons,” Burton told Rigzone.
To find opportunity like this would typically mean that a company like Buccaneer would need to move into deeper water or other countries around the world.
Since Buccaneer entered Cook Inlet in 2010, the company has spent over $100 million to develop its Alaskan program and offshore and onshore projects with a total independently certified Proven and Probable (2P) Reserves of 74.1 million barrels of oil equivalent (MMboe), 2C Contingent Resources of 23.9 MMboe and P50 Prospective Resources of 111.4 MMboe.
To advise other companies coming into the basin, Buccaneer suggests partnering with someone that has already cut their teeth into the Cook Inlet experience. In Buccaneer’s case, it needed to bring a jackup from Singapore and secure a land drilling rig along with the acreage to drill.
“We made sure that we had plenty of local expertise on staff to facilitate our permitting and community relations and we made sure that we were moving first. If you are not prepared to do that you really need a partner that has that capability,” Burton noted.
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