Continuing its aggressive acquisition of producing properties across Alaska, Miller Energy Resources Inc. is looking to buy the Cook Inlet assets of Buccaneer Energy Ltd.
In a Sept. 15 press release, Miller said that it had entered into a non-binding letter of intent to buy “substantially all” of Buccaneer’s operating assets in Alaska for approximately $40 million to $50 million. The Tennessee-based independent would fund the acquisition “with its existing facilities or other borrowings,” the company said.
While any final agreement requires board approval, “management believes the transaction would be accretive to both credit and cash flow per share metrics.”
The Australian independent Buccaneer is currently in the middle of bankruptcy proceedings and had been planning an auction to sell most of its Alaska properties.
A diverse portfolio
The assets under consideration are varied. They include onshore properties on both sides of Cook Inlet and at both ends of the Kenai Peninsula, as well as an offshore prospect.
The most valuable, at least at the moment, is the onshore Kenai Loop gas field, which is the only producing property of the bunch. But the field is currently at the center of a correlative rights dispute between Buccaneer and Cook Inlet Region Inc. The case before the Alaska Oil and Gas Conservation Commission has been delayed by the bankruptcy.
The remaining properties are non-producing.
While Buccaneer relinquished many leases at its West Eagle unit after drilling a dry hole, it still owns a handful of leases at the southern Kenai Peninsula prospect. Those leases are in the area east of the producing North Fork unit, which Miller recently acquired. And Buccaneer owns leases at the onshore West Nicolai prospect, on the west side of Cook Inlet, where Miller began its operations in Alaska and continues to invest heavily.
Buccaneer also holds the rights to a deep oil prospect at the offshore Nook Cook Inlet unit, operated by ConocoPhillips. Exploring the prospect would require a jack-up rig.
According to Miller, Buccaneer has approximately 1.9 million barrels of oil equivalent of proved reserves and produces approximately 1,700 barrels of oil equivalent per day.
The proposed acquisition would continue Miller’s expansion efforts in Alaska.
After several years focused on rejuvenating and expanding its core properties on the west side of Cook Inlet through its subsidiary Cook Inlet Energy LLC, Miller has spent the past year selling off existing assets in Tennessee and going after opportunities in Alaska. The company recently acquired the gas producing North Fork unit in Cook Inlet and under contract on acquiring the oil producing Badami unit on the eastern North Slope.
Auction?
A sale would represent a shift in strategy for Buccaneer.
Until now, the company had been proceeding toward an auction for its assets. The U.S. Bankruptcy Court for the Southern District of Texas recently accepted a settlement between Buccaneer and its largest unsecured creditors that cleared the path to an auction.
In an earlier iteration of the auction, AIX Energy LLC, Buccaneer’s largest secured creditor, had agreed to be the stalking-horse bidder, committing to bid some $58 million for “substantially all” of Buccaneer’s assets. A staking horse bidder guarantees a minimum bid, which is meant to protect the auctioning company from being underbid.
Buccaneer must approve its bankruptcy plan by Oct. 14.
Outstanding taxes
Those bankruptcy proceedings have become complicated by delinquent taxes.
Buccaneer recently asked the court for permission to pay back taxes to the state of Alaska for gas production from Kenai Loop that were due at the end of June 2014.
Unless Buccaneer pays the back taxes, it cannot collect some $20 million in pending State of Alaska tax credits for previous exploration work, according to the company.
Those tax credits feature prominently in plans to repay creditors.
