Buccaneer proposing West Eagle unit

Australian independent claims drilling could start soon if the state unitizes now-expired leases in the southern Kenai Peninsula

Eric Lidji

For Petroleum News

Saying it was “poised to drill” before its leases in the area expired, Buccaneer Energy Ltd. is asking the state to unitize nine Cook Inlet leases in the southern Kenai Peninsula.

The proposed West Eagle unit would cover some 46,395 onshore acres at the southeastern edge of the peninsula, west of the North Fork and Nikolaevsk units.

When the Australian independent proposed the unit earlier this year, it claimed it could drill at West Eagle before eight of the nine leases expired on Sept. 30, 2012, but said it needed an assurance it wouldn’t lose most of the leases after spending the money to drill.

In its unit application, Buccaneer said it would not drill unless the state unitized the acreage, saying, “It simply makes no commercial sense to drill the proposed well, prove up the resource, and then watch the surrounding acreage that overlies the prospect expire.”

But with the Alaska Division of Oil and Gas putting the matter out for comment on Oct. 11 and accepting comments through Nov. 14, those leases have since reached the end of their primary term. Without unitization, Buccaneer would lose 88 percent of West Eagle.

With unitization, Buccaneer believes it can quickly begin exploring and potentially developing a prospect it believes contains more than 100 billion cubic feet of natural gas.

Buccaneer believes its work to date at West Eagle justifies unitization.

Buccaneer picked up the West Eagle prospect in March 2010, as part of its initial acquisition of 57,600 gross acres from Stellar Oil and Gas LLC, but in the two and a half years since it has focused more on other prospects in the portfolio, including the onshore Kenai Loop prospect and the offshore Southern Cross and Northwest Cook Inlet units.

Still, in making its case to the state, Buccaneer cited two developments.

First, in 2011, Buccaneer acquired and reprocessed a 233-mile 2-D seismic survey over West Eagle. The seismic survey mapped a “large north-south trending gas prospective anomaly” in the northeast of the prospect, as well as potential oil and shallow gas leads.

The Border Range Fault running through the area bisects the proposed unit, according to Buccaneer, creating two distinct geologic profiles. The proposed West Eagle No. 1 well would be the first well on the “East Side Play” since the 1960s, according to Buccaneer.

The 1960s wells include the Caribou Hills well Gulf Oil drilled in search of oil in the Hemlock and the Anchor River No. 1 Socal drilled in search of gas in the Upper Tyonek.

Second, in May, a Buccaneer subsidiary secured a three-year lease on the Glacier No. 1 drilling rig with an option to buy, giving the company a rig for a West Eagle program.

“Simply put, Buccaneer has not sat idle; we have moved fast to get into a position to develop the resources and we have committed to an aggressive schedule to the get the field into production,” the company wrote in its unit application. “Moreover, we are willing to agree to automatic consequences if we fail to meet our commitments.”

In filings, Buccaneer proposed splitting the West Eagle unit into two exploration blocks.

Block A would cover the four easternmost leases — ADL 391141, ADL391144, ADL 391145 and ADL 391625 — and Block B would cover the five westernmost leases at the unit — ADL 391146, ADL 391149, ADL 391142, ADL 391147 and ADL 391148.

In a proposed three-year plan of exploration, Buccaneer said it would drill a well in Block A by Sept. 30, 2012 — a deadline that must now be changed, if the unit is approved. The well would target a Tyonek interval identified in the Anchor River No. 1 well. If Buccaneer failed to drill the first well, the unit and all its expired leases would terminate.

If it met the first commitment, though, Buccaneer would drill either a second well in Block B or acquire 3-D seismic over a portion of the unit by Sept. 30. 2014. If Buccaneer failed to meet the 2014 commitments, the leases in Block B would be terminated.

With a successful exploration campaign, Buccaneer would propose a plan of development by Sept. 30, 2015, designed to move the West Eagle field into production.