Buccaneer Energy Ltd. said May 29 that through a subsidiary, Kenai Land Ventures LLC, it has completed arrangements for a three-year lease on the Glacier 1 drilling rig, with an option to purchase.
The Glacier 1 was formerly owned by Glacier Drilling Co., a subsidiary of Marathon Oil Co.
Buccaneer said it facilitated the purchase of the Glacier rig “by a third party that specializes in the energy sector.”
Kenai Land Ventures, the Buccaneer subsidiary, signed a three-year “bare rig” agreement with the new owner and has an option to purchase the rig at any time after the first six months for $7,338,000.
Buccaneer said the bare rig lease rate Kenai Land will pay to the new owner is a discount to the rates Buccaneer paid to Glacier Drilling for use of the rig to drill Kenai Loop wells last year. Kenai Land has exclusive rights to the Glacier 1 for the three-year period, but can also lease the rig to third parties “and charge a premium to the lease rate it is charged by the owner.”
If Kenai Land exercises the option to purchase, a portion of the lease payments paid to that time would be credited against the purchase price, Buccaneer said.
The Glacier 1 was built for Marathon and began drilling for that company on the Kenai Peninsula in 2000. Marathon described it as a purpose-built truck-mounted drilling rig designed for work on the peninsula and bought the rig to meet the needs of an anticipated multiyear drilling program.
The rig, a Mesa 1000 carrier-mounted land drilling rig, can drill to approximately 15,000 feet.
“The rig is unique in that it was designed and built with the input of drillers that would operate the rig on the Kenai Peninsula,” Buccaneer said, adding that the rig was designed to operate close to neighborhoods, with a small size ideal for pad drilling, minimizing the drilling footprint and the impact on surroundings.
The Glacier 1 drilled both of Buccaneer’s Kenai Loop wells in 2001.
“The lease back and option to purchase conserves capital for development of the Company’s Kenai Loop project, ensures timely drilling at our Kenai Loop project and also assists by controlling the costs associated with the project,” Buccaneer Director Dean Gallegos said in a statement.
He said the rig environment in Cook Inlet is expected to be tight for three years, and the transaction ensures Buccaneer’s ability to develop its onshore projects, while maintaining the option to purchase the rig.
—Kristen Nelson
