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Vol. 15, No. 13 Week of March 28, 2010
Providing coverage of Alaska and northern Canada's oil and gas industry

Another Aussie indie enters inlet; Buccaneer acquires Stellar acreage

An Australian exploration company is picking up a package of Cook Inlet leases.

The Sydney-based independent Buccaneer Energy Ltd. announced on March 25 that it was acquiring 57,600 gross onshore and offshore acres from Stellar Oil and Gas LLC.

Stellar Oil and Gas, owned by several executives from the Texas-based independent Renaissance Alaska, holds around 10,000 gross offshore acres at the North Middle Ground Shoal and the Northwest Cook Inlet prospects and more than 47,000 gross onshore acres on the Kenai Peninsula at the North Sterling and West Eagle prospects.

A sister company, Stellar Energy, fought unsuccessful to buy the abandoned Cook Inlet assets of California independent Pacific Energy, which filed for bankruptcy protection.

Renaissance is in the process of transferring its Cook Inlet acreage to Stellar. In October, Stellar told Petroleum News it was seeking new funding for its exploration program.

Buccaneer estimates the acreage holds between 53 million and 149 million barrels of oil and 598 billion and 1.2 trillion cubic feet of gas. The company said the leases contained three “identified prospects” and two “significant leads,” but did not offer any details.

In May 2008, Renaissance began permitting four exploration wells on its offshore leases in Cook Inlet, one at North Middle Ground Shoal in Trading Bay and three surrounding the ConocoPhillips-operated North Cook Inlet unit east of the village of Tyonek.

Those latter three wells would have delineated the Northern Lights prospect, which Renaissance eventually transferred to Escopeta Oil to form the Kitchen Lights prospect.

In addition to the acreage, Buccaneer said it is acquiring a six-man management team.

Buccaneer is the second Australian independent to enter Alaska this month. Earlier in March, Linc Energy (Alaska) Inc. acquired the Cook Inlet leases of GeoPetro Resources.

Buccaneer attributed its interest in Alaska to tax credits and local natural gas prices.

It called the exploration credits in ACES, or Alaska’s Clear and Equitable Share, “a significant incentive and substantially reduces the commercial discovery threshold.”

The company also noted that natural gas prices in the Cook Inlet “trade at around 40 percent premium to the remainder of the United States due to declining production and increasing demand.” Unlike the spot markets common in the Lower 48, Alaska regulators approve Cook Inlet natural gas prices in long-term contracts. The local price is an average of various contracts, and has at time been lower than the Henry Hub price.

Buccaneer called the Cook Inlet basin “significantly under explored” and pointed to “numerous studies” suggesting the potential to “host additional world class reserves.”

While noting the offshore leases are “close to pipeline and platform infrastructure,” Buccaneer also said “no technical hurdles exist to drill and develop reserves.”

Seasonal ice packs, intense weather and environmental precautions are all standard in the sub-Arctic Cook Inlet basin. Plus, drilling in the relatively shallow waters requires a specialty rig such as a jack-up, something independents like Renaissance, Pacific Energy and Escopeta Oil have spent years unsuccessfully trying to contract and move to Alaska.

That said, Buccaneer “expects to drill its first prospect” this year.

A history of fast exploration

The company’s history suggests that ambitious timeline may be more than just talk.

Founded in 2006, Buccaneer raised $17 million in an initial public offering in late 2007, and began developing its first prospect, the Pompano field off of the Texas Gulf Coast, in early 2008. Using several loans, the company now also operates the Jaguar and Ruby prospects in offshore Louisiana, and the onshore Lee County project in southeast Texas.

On its Web site, Buccaneer describes its strategy as “acquiring low-cost, low-risk properties left-behind or passed-over by large producers” and “Leveraging an increasingly tight market for oil and gas hardware and development resources.”

The former is a strategy shared by many independents in the Cook Inlet and on the North Slope. In fact, one Stellar executive, Mark Landt, oversaw operations in region around the leases when he worked as a land manager for ARCO in the early to mid-1990s.

Exploration work over the years suggest the waters of the upper Cook Inlet sit over a geologic trend sit along an anticline running 30 miles from northeast to southwest that include the prolific North Cook Inlet unit and the prospective Kitchen Lights unit.

—Eric Lidji

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