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Buccaneer eyeing West Eagle, Cosmo The independent is delayed at West Eagle, waiting for permits at Cosmopolitan and preparing for a January hearing on Kenai Loop Eric Lidji For Petroleum News
Buccaneer Energy Ltd. is making moves on three Cook Inlet projects as the year comes to a close, and claims to have leads on fixing a potential financing shortfall for its work.
The Australian independent is poised to spud the West Eagle No. 1 well, is permitting the Cosmopolitan No. 2 well and is touting numbers for its Kenai Loop field. The company also said it is talking to “multiple parties” about farming-out or selling certain assets.
The Glacier No. 1 drilling rig is currently on location at the West Eagle unit, according to Buccaneer. The company missed a Dec. 1 deadline to spud the well and is now aiming for a Jan. 31, 2014, deadline for completing the well. The West Eagle unit agreement required Buccaneer to post two $600,000 bonds with the Alaska Department of Natural Resources, one to backstop each of the two work commitments. The company said it plans to soon “explore its options with the DNR regarding the status of the first bond.”
The original unit agreement listed Sept. 1, 2013 as the deadline for both commitments. The Alaska Department of Natural Resources placed the unit in default in late September and gave Buccaneer the current deadlines of Dec. 1 and Jan. 31 at that time.
If Buccaneer misses the January deadline, the unit could terminate and two of the leases could expire retroactive to the end of their primary term, according to the agreement.
Buccaneer had originally planned on drilling the well in August.
The West Eagle unit is located in the southern Kenai Peninsula, some 20 miles east of Homer. The West Eagle No. 1 well is targeting an upper Tyonek interval where Standard Oil Company of California encountered gas in 1961 with the Anchor River No. 1 well.
Cosmo permits While Buccaneer prepares to spud West Eagle, it is awaiting permits to allow it to move forward on drilling the Cosmopolitan No. 2 well at the offshore field of the same name.
The Endeavour jack-up rig is docked in Port Graham, according to Buccaneer. The rig arrived at the port south of Homer earlier this year, after Buccaneer was forced to abandon a well at the offshore Southern Cross unit because of winter drilling restrictions.
The program is based on the premise that the offshore Cosmopolitan field is far south enough in Cook Inlet to accommodate winter drilling. Buccaneer said it applied for an Alaska Oil and Gas Conservation Commission permit for the well on Oct. 8, but “has yet to receive clear guidance from the agency with respect to its drilling plan and timing.”
The Cosmopolitan No. 2 well would delineate the gas zones encountered in the Cosmopolitan No. 1 well earlier this year, according to Buccaneer. The field is generally thought to be oil prone, and Buccaneer said it might deepen the well at a later date.
Kenai Loop numbers The Kenai Loop field likely contains 13.4 billion cubic feet of natural gas from two gas-bearing sands, according to new third party reserves Buccaneer has recently released.
The proved reserves include the sands at 9,700 feet and 10,000 feet at the onshore field north of Kenai, according to the engineering firm Ralph E. Davis Associates Inc.
The 13.4 bcf estimate also covers the probable reserves at the field. The report estimated that the field contains some 27.6 bcf of possible resources. Generally, “probable” means there is at least a 50 percent chance of recovered volumes meeting the estimate, and “possible” means at least a 10 percent chance of recovered volumes meeting the estimate.
The figures cover reserves net royalty interests, as required by Australian securities regulations. The company said described gross possible reserves closer to 19.3 bcf, based on recent mapping. Buccaneer believes it could drain those reserves using three wells.
The report also included a best estimate of 37.6 bcf for the prospective resources in the 9,700-foot sand. The estimate comes from a range of 18.8 bcf to 56.4 bcf. For the entire field, recent mapping indicated a best estimate of 53.4 bcf, which could be drained with eight wells, according to the company. The estimate includes other prospective sands.
The Kenai Loop field is at the center of a legal dispute between Buccaneer and the landowner Cook Inlet Region Inc. over leases and wells at the field. The AOGCC has scheduled a hearing in late January to hear complaints from CIRI on the matter.
The Kenai Loop field is currently producing some 8.8 million cubic feet per day from two wells and has produced some 4.7 bcf since coming online, according to Buccaneer.
Partnering, selling All these activities come as Buccaneer is struggling to keep two offshore units.
The state is poised to terminate the Southern Cross and North West Cook Inlet units because Buccaneer failed to meet drilling deadlines earlier this year. Buccaneer is arguing that the missed deadlines were the result of logistical delays and believes its good faith efforts and spending in the region to date should justify a year of clemency.
Even with a reprieve from the state, though, Buccaneer will need a financial partner to proceed at the units. Buccaneer recently terminated a farm-in agreement with the California independent EOS Petro Inc. that was to have paid for two wells each at Southern Cross, West Eagle and the deep oil segments of the ConocoPhillips-operated North Cook Inlet unit, as well as an option for two wells at North West Cook Inlet.
Buccaneer said “multiple parties” have expressed interest in buying or farming-in unnamed assets in its portfolio, but the proposals are all “conditional and non-binding.”
In a statement, Buccaneer Chief Executive Officer Curtis Burton said the company is mapping “tactical and strategic plans” going forward. “These plans include revisiting our capital position, our holdings and our near term development plans,” Burton said.
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