The Alaska Industrial Development and Export Authority took another step toward owning a jack-up rig on June 6 by executing a joint ownership agreement with two private companies looking to bring that mobile drilling unit to the Cook Inlet basin.
The deal between the public corporation of the State of Alaska, the Australian independent Buccaneer Energy Ltd. and the marine company Ezion Holdings Ltd. sets out terms for AIDEA to invest up to $30 million in the so-called Project Endeavour.
The roughly $85 million project involves buying a jack-up rig, upgrading it for upgrading it for cold weather use and shipping it to Alaska to facilitate drilling in the waters of Cook Inlet.
Buccaneer and Ezion must finalize a list of tasks before AIDEA is required to commit any funds to the project. AIDEA said it expects that to happen by the end of June.
The parties are looking to purchase the Transocean Adriatic XI, currently dry docked in Singapore. AIDEA expects the rig to begin its trip to Alaska this year, and to start drilling in Cook Inlet at the end of the 2011 open water season or more likely next year.
The deal is the result of months of negotiations.
AIDEA began considering a partnership with Buccaneer last October. The AIDEA board approved the deal in early April, but further negotiations delayed the signing until now.
“The execution of this Joint Ownership Agreement is a major step forward in our efforts to accelerate the development of oil and gas resources in Cook Inlet,” AIDEA Chairman of the Board Hugh Short said in a prepared statement. “The process to getting here involved long and complex negotiations, and I commend AIDEA’s team for their hard work undertaken with eyes consistently on the goal.”
Working on conditionsFor the next month, Buccaneer and Ezion will be working to finalize arrangements.
The joint ownership agreement includes 15 conditions that Buccaneer and Ezion must meet before AIDEA is required to invest any money. Those include adding $5 million of their own capital to the project, securing the remaining $50 million needed to fund the purchase of the rig, executing a contract to buy the Adriatic XI or something similar from Transocean and signing the contracts to upgrade that rig for use in Alaska.
In late May, AIDEA consultant Mark Gardiner, of Western Financial Group, said that the companies were far along on meeting most of the conditions, with AIDEA in some cases already reviewing final documents, but that none of them had as of yet been finalized.
Even once the parties close on the deal, Buccaneer and Ezion must meet six additional conditions — such as contracting a shipping company to bring the rig to Cook Inlet, drafting organizational and management documents and permitting a drilling program by certain dates — in order to keep the deal from going into default and triggering liens.
Buccaneer is one of two independent companies looking to bring a jack-up to Alaska.
Houston-based Escopeta Oil is in the process of bringing the Spartan 151 to Cook Inlet. The rig is currently undergoing work in British Columbia. See update on page 1 of this issue.