The Alaska Industrial Development and Export Authority is selling the Endeavour drilling rig after failing to secure a long-term charter in Cook Inlet for the jack-up rig.
The public corporation is selling its stake in the rig to its two partners, the Singapore-based Ezion Holdings Ltd. and the Ezion-subsidiary Teras Investments Pte. Ltd.
Technically, the rig is owned by the joint venture Kenai Offshore Ventures LLC. AIDEA is the preferred owner of the joint venture. Ezion and Teras are the common owners.
The operating agreement gave the common owners an option to buy out AIDEA.
Even though Kenai Offshore Ventures was unable to find a long-term customer, AIDEA said “there continues to be great interest in having the Endeavour available for Cook Inlet drilling.” Without a contract, Kenai Offshore Ventures sought other opportunities. If the sale goes through, the rig would leave the Cook Inlet basin, bound for South Africa.
A four-year saga
The now-bankrupt independent Buccaneer Energy Ltd. formed Kenai Offshore Ventures in late 2010 to purchase a jack-up drilling rig using short-term tax-exempt bonds. The company wanted to use the rig to explore offshore oil and gas prospects in the Cook Inlet.
As the agency responsible for issuing the bonds, AIDEA became involved the project.
The bond never occurred, but AIDEA remained interested. The project fit the goals of a 2009 strategic plan calling for the public corporation to actively diversify its investments.
So AIDEA partnered with Buccaneer and Ezion to buy the rig.
In mid-2011, Kenai Offshore Ventures purchased the Transocean Adriatic XI jack-up rig and renamed it “Endeavour - Spirit of Independence.” Toward the end of the year, the AIDEA board approved a deal to invest as much as $30 million in the Endeavour project.
By contributing some $23.6 million to Endeavour, AIDEA became a preferred member of Kenai Offshore Ventures. Buccaneer and Ezion invested some $30.4 million to the project as common members. Oversea-Chinese Banking Corporation (OCBC) Ltd. invested the remaining $66 million needed to fund the estimated $120 million project.
Rig drilled Cosmopolitan No. 1
After some delays, Endeavour was used to drill the Cosmopolitan No. 1 well for Buccaneer. The well discovered oil and gas. But soon after, Buccaneer sold its share in Cosmopolitan and sold its stake in Kenai Offshore Ventures to minority partners.
The move was an effort by Buccaneer to improve its financial situation. But even with the sales, Buccaneer eventually filed for bankruptcy protection in late May 2014.
In early feasibility studies, AIDEA identified 22 wells in the Cook Inlet basin that might require the use of a jack-up rig. These were technical candidates, not expressions of interest. At the end of the day, Kenai Offshore Ventures was unable to find any takers.
“Our KOV partners’ investment in the Endeavour was good not only for Cook Inlet, but resulted in their recent and major investment on the North Slope: partnering with AIDEA to jointly finance and own an oil and gas production and processing facility at the Mustang Field,” AIDEA Director of Project Development and Asset Management Jim Hemsath said in a statement, referring to AIDEA’s more recent investments with Brooks Range Petroleum Corp. “We remain bullish on Cook Inlet, and are in discussions on potential oil and gas production facilities in addition to a potential new rig for the Inlet.”
Even with the departure, Cook Inlet is still home to a jack-up rig: the Spartan 151, which has been drilling at the Kitchen Lights unit on behalf of Furie Operating Alaska LLC.
When AIDEA was in negotiations with Buccaneer to buy Endeavour, the Furie predecessor Escopeta Oil Co. worried about having competition from the public sector.
