Buccaneer Contracts Marathon Rig for Kenai Loop Drilling

Buccaneer has entered into a contract for a rig to drill the Kenai Loop project. The contract has been executed with Marathon Oil for the Glacier Drilling Rig # 1. The rig has been used for several similar wells in the area and its experienced crews make it a preferred choice for Buccaneer's first well in Alaska.

The rig is being re-located to a staging area near the Kenai Loop project area to enable final movement to the drill site without delays from spring thaw and to facilitate final preparations for the upcoming project. The Company expects that the well will spud in mid April 2011 on completion of drill site construction and finalisation of remaining service/equipment providers. The Company will advise an expected spud date once these arrangements have been finalised.

Kenai Loop is an onshore gas play located in the eastern Cook Inlet Basin in the northern part of the Kenai Peninsula near the city of Kenai (see attached map). The Company has now acquired 100% working interest (80% to 86.5% net revenue interest) in approximately 9,009 acres from multiple landowners.

Features of the Kenai Loop Project are as follows:

  • Lies on a ridge between the Kenai Cannery Loop field (175 BCF gas production) and Beaver Creek oil and gas field (6 million barrels oil and 205 BCF gas production);
  • Seismic amplitude anomalies in the same productive intervals as the above fields;
  • Several control wells and 200 miles of 2D seismic data were used to map Kenai Loop and, similar to the surrounding fields, there are multiple stacked pay zone possibilities between 5,000 and 10,000 feet;
  • Resource potential per well is 5 BCF gas and the in-house estimated reserve range is between 35 - 78 BCF gas with most likely reserves of 52 BCF gas. Initial rates per well are estimated to be in the 5 to 10 million cubic feet per day range;
  • Three drilling locations are in the process of being permitted;
  • The first well will be a step-out well from the Kenai Cannery Loop field;
  • 1 mile to the nearest gas sales pipeline;
  • Strong local market for gas in the area, recent gas contracts have a US$7.00 / MCF floor and US$10.00 / MCF ceiling.