AIX Energy LLC came to Alaska in a financial capacity. But through a series of events culminating in a bankruptcy auction, the company became a new Cook Inlet operator.
On April 30, 2014, the Texas-based company acquired the debt of Buccaneer Energy Ltd., an Australian independent which had been exploring for oil and natural gas in Cook Inlet. AIX Energy officially registered as a corporation in Alaska on May 9, 2014, according to the state Division of Corporations, Business and Professional Licensing.
At the time Buccaneer filed for bankruptcy protection in late May 2014, AIX Energy was its largest secured creditor. The company originally agreed to be a stalking-horse bidder for Buccaneer’s assets, but those plans changed through the course of the bankruptcy proceedings. In an October 2014 bankruptcy auction, AIX acquired nearly all of Buccaneer’s assets in Alaska with a $44 million credit bid, which is the process by which a creditor can bid the value of the debt it is owed against cash offers from other bidders.
By that point, Buccaneer had relinquished or sold many of its undeveloped properties, and had also sold its interest in an onshore rig and an offshore jack-up rig used for exploration. The sale gave AIX Energy control of the producing Kenai Loop gas field.
The Kenai Loop field
Buccaneer Energy Ltd. acquired the Kenai Loop prospect through its initial acquisition of Cook Inlet properties from the independent Stellar Oil & Gas LLC in early 2010.
The prospect brought together a collection of non-contiguous state of Alaska, Cook Inlet Region Inc. and Alaska Mental Health Land Trust leases northeast of the Cannery Loop unit, which Buccaneer later supplemented to make a roughly 9,400-acre prospect.
Over the course of its nearly five-year tenure as operator of Kenai Loop, Buccaneer drilled four wells, brought the field online in January 2012 and increased production.
Through July 2015, the Kenai Loop field had produced slightly more than 10 billion cubic feet of natural gas, according to the Alaska Oil and Gas Conservation Commission.
Using the Glacier No. 1 drilling rig, Buccaneer drilled the Kenai Loop No. 1 well in April 2011 to a total vertical depth of 10,680 feet and tested the well at 10 million cubic feet per day in June 2011. An analysis of two prospective sands by the consulting firm Ralph E. Davis Associates Inc. estimated that the prospect contained some 31.5 billion cubic feet of natural gas and some 3.9 million barrels of oil equivalent in proven reserves.
In September 2011, Buccaneer used Glacier No. 1 to drill the Kenai Loop No. 3 well to a total vertical depth of 11,000 feet to test the prospective zones identified in the first well but the well was a dry hole and Buccaneer considered permitting it for Class II disposal.
After bringing the field into production in early 2012, Buccaneer commissioned a 3-D seismic survey over a 25-square-mile region around Kenai Loop. After incorporating the results into its geologic model, Buccaneer drilled the Kenai Loop No. 4 well to some 13,000 feet in September 2012. A test in January 2013 flowed at 3 million cubic feet per day, and Buccaneer brought the well online in February 2013 at 2 million cubic feet per day. By March, the Kenai Loop field was producing some 10 million cubic feet per day.
Unit application in late 2012
Toward the end of 2012, Buccaneer applied to form a Kenai Loop unit over seven leases covering some 7,500 acres. The Alaska Department of Natural Resources denied the request because it felt Buccaneer was using the unit process as a way to preserve leases rather than to maximize development. The company had argued that a unit would help simplify operations given the multiple leaseholders in the crowded region. At the time, all activity was occurring on a single lease, which likely contributed to the differing views.
In June 2013, Buccaneer renamed the three Kenai Loop wells to better reflect their position on the drilling pad: Kenai Loop No. 1 became Kenai Loop No. 1-1, Kenai Loop No. 3 became Kenai Loop No. 1-2 and Kenai Loop No. 4 became Kenai Loop No. 1-3.
That August, Buccaneer started drilling the Kenai Loop No. 1-4 well. The 10,700-foot well targeted what “appears to be a fault separated from the current producing zones in the Kenai Loop No. 1-1 and Kenai Loop No. 1-3 wells,” the company said during the drilling process. The well flowed at 5.9 million cubic feet per day during a test in October 2013.
While Buccaneer had originally hoped to bring Kenai Loop No. 1-4 into production by the end of the year, the well quickly became the center of regulatory and legal disputes.
Specifically, CIRI accused Buccaneer of using the well to drain natural gas from neighboring leases. The dispute drew the attention of the state of Alaska and the Alaska Mental Health Trust land office, which also own neighboring leases. The dispute became even more complicated when Buccaneer filed for bankruptcy protection in late May 2014. The action suspended the regulatory and legal cases, and those cases, in turn, cast a shadow of uncertainty over the process of auctioning off Buccaneer’s assets in Alaska.
Dispute resolved in early 2015
In early 2015, after AIX acquired the assets, the parties managed to resolve the dispute and AIX Energy was able to proceed as operator without worrying about the liability.
Since then, AIX Energy has been quiet about its plans for the field. The only public announcements have come through regulatory and legal channels. In late 2014, AIX Energy secured a short-term supply agreement with Chugach Electric Association. In August 2015, AIX Energy settled a legal dispute with Cook Inlet Energy LLC over a supply contract inherited from Buccaneer. AIX Energy had claimed the fellow Cook Inlet independent had “breached the contract by failing to timely pay” for gas shipments.
In a May 2015 Cook Inlet lease sale, AIX Energy acquired two tracts near Kenai Loop.
