Explorers 2015: AIX acquires Kenai Loop, exploration plans unknown

Woodlands-based company acquired Buccaneer assets through bankruptcy sale, currently operating production

Eric Lidji

For Petroleum News

Toward the end of 2014, AIX Energy LLC acquired nearly all of the assets of the Australian-based independent Buccaneer Energy Ltd. in a bankruptcy auction.

The most valuable asset in the acquisition was the producing Kenai Loop gas field, northeast of the city of Kenai. Although AIX Energy has yet to publically announce any exploration plans for the field, Buccaneer had been advancing exploration and development projects simultaneously during its tenure as operator of the onshore field.

Prior to the bankruptcy proceedings, Buccaneer had been among the most ambitious exploration companies in the Cook Inlet region. The company was actively pursuing exploration programs at five prospects while developing the Kenai Loop field. The portfolio ultimately proved to be too large for the small independent, and the company sold certain assets, relinquished certain prospects and ultimately filed for bankruptcy.

At the time that Buccaneer filed for bankruptcy protection in late May 2014, the Texas-based AIX Energy was its largest secured creditor. AIX Energy had acquired the debt through a series of transactions over the previous year. An “official committee of unsecured creditors” highlighted those transactions during the bankruptcy proceedings.

In mid-2013, the venture capital firm Meridian Capital International Fund acquired a 19.9 percent interest in Buccaneer, becoming the large stakeholder in the company. By early 2014, Buccaneer began selling off assets to balance its books. Around that time, a Meridian affiliate called Meridian Capital CIS took over some Buccaneer debt operated by another company. On April 30, 2014, Meridian Capital CIS said it was transferring the debt to AIX Energy, which subsequently became Buccaneer’s largest secured creditor.

AIX Energy LLC officially registered as a corporation in Alaska on May 9, 2014, after having reserved the name “AIX Energy LLC” and cancelled the reservation the day before, according to the Division of Corporations, Business and Professional Licensing.

Because of those transactions, which preceded the bankruptcy filing on May 31, 2014, the unsecured creditors wanted to know more about the relationship between Meridian, AIX Energy and Buccaneer. “In order to accomplish indirectly what it could not do directly, Meridian installed AIX - a newly formed shell entity comprised of individual oil and gas operators with whom Meridian had long-standing prior personal relationships - as a ‘straw-man’ lender to foreclose the debtors’ assets,” the committee wrote in July 2014.

In August, the two sides reached a settlement, which required AIX Energy to create a trust that would be used to repay unsecured creditors as part of any liquidation plan.

In an October 2014 bankruptcy auction, AIX acquired nearly all of Buccaneer’s assets with a $44 million credit bid, which is when a creditor offers its debt against cash bids.

AIX Energy currently leases some 1,048 acres of state lands in the vicinity of the Kenai Loop field and operates four wells - Kenai Loop 1-1, Kenai Loop 1-2, Kenai Loop 1-3 and Kenai Loop 1-4, accord to state reports. In late 2014, the city of Kenai formally assigned a Buccaneer lease on city property in the vicinity of Kenai Loop to AIX Energy.

Those wells are located on Alaska Mental Health Trust leases.

Through the acquisition, AIX Energy also took over supply contracts pertaining to Kenai Loop production. In late 2014, AIX Energy signed a new deal to provide an interruptible supply to Chugach Electric Association Inc., totaling no more than 300 million cubic feet.

Whether AIX Energy intends to develop Kenai Loop, explore the surrounding area, sell the prospect or merely harvest its acquisition is unclear at the moment. Throughout its seismic acquisition and exploration campaign, Buccaneer suggested that the Kenai Loop region might contain additional gas-bearing intervals worthy of further investigation.