NEWS BULLETIN

January 15, 2011 --- Vol. 17, No. 15January 2011

AIDEA pushes forward on jack-up project

The Alaska Industrial Development and Export Authority board of directors agreed to consider co-owning a jack-up rig in partnership with a private consortium on Feb. 14.

The public corporation of the State of Alaska agreed to spend up to $200,000 developing a “finance plan,” including a joint ownership agreement and financing guarantees.

If the deal ultimately goes through, AIDEA would co-own the rig along with Buccaneer Alaska Drilling and Seahawk Drilling. Buccaneer, the local subsidiary of an Australian independent, operates two offshore Cook Inlet units and also plans to lease the rig out to third parties. Seahawk, a Houston-based offshore driller, would operate the rig.

The budget covers $25,000 for a technology consultant, $25,000 for a financial advisor and $150,000 for legal services, money that Buccaneer Alaska Drilling and Seahawk Drilling would be required to repay if the AIDEA board ultimately approves the deal.

Buccaneer and Seahawk asked AIDEA to join the project last year, first as a bond-issuing agency and then as a co-owner of the rig. AIDEA conducted a due diligence study in December and January to see if the proposal made good business sense. The study determined that “the rig meets the technical specifications necessary to support the business model and therefore, the revenue estimates,” according to AIDEA management.

The details of the business model remain unknown because the due diligence study is not a public document and most discussions of it have taken place during executive session.

On the same day, Seahawk filed for Chapter 11 bankruptcy protection. It is unclear how that decision will impact negotiations between Seahawk and Buccaneer, and AIDEA.

Pioneer terminates Cosmopolitan unit

Pioneer Natural Resources terminated the Cosmopolitan unit on Feb. 11.

The Texas-based independent voluntarily terminated the offshore Cook Inlet unit in a letter to the Alaska Department of Natural Resources and the U.S. Bureau of Ocean Energy Management, Regulation and Enforcement. The joint state-federal unit sits along the coast of the southern Kenai Peninsula near the town of Anchor Point.

Pioneer said it is not surrendering any leases in the unit that have wells certified as capable of producing in paying quantities, such as ADL 384403 and ADL 18790.

Pioneer announced plans to leave Cosmopolitan earlier this year, but outstanding work commitments in the unit agreement put the short-term future of the leases into question.

All seven leases in the former unit are past their initial lease terms.

See full stories in Feb. 20 issue, available to subscribers online by 11 a.m. Friday, Feb. 18, at www.PetroleumNews.com


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