A subsidiary of Buccaneer Energy Ltd. has signed an agreement to buy a jack-up rig from Transocean Offshore Resources Ltd., the Australian independent announced Sept. 1.
Kenai Offshore Ventures LLC will buy the GSF Adriatic XI rig for $68.5 million.
The sale is expected to close between Sept. 30 and Oct. 25.
The rig has been cold stacked in Malaysia since 2009, Buccaneer said. Once the deal is finalized, Buccaneer said the rig would be moved to an Asian-based shipyard to undergo modifications to winterize the rig for use in the sub-Arctic conditions of Cook Inlet.
The entire effort to buy, modify and mobilize the jack-up rig, known as Project Endeavor, is expected to cost $86.5 million, according to Buccaneer. The company said that the budgets for the mobilization and modification activities are still being finalized.
The funding for the $86.5 million project will come from three sources, Buccaneer said.
Kenai Offshore Ventures, a 50-50 joint venture between Buccaneer and the Singapore-based marine company Ezion Holdings Ltd. will contribute $6.85 million. The Alaska Industrial Development and Export Authority will add between $24 million and $30 million through an agreement negotiated earlier this year between the public corporation of the State of Alaska and the joint venture. The remaining $50 million to $56 million will come from a loan issued by an as-yet-unnamed Asian-based bank.
Buccaneer said that the loan documentation is “in the process of being finalized.”
Southern Cross up first
Kenai Offshore Ventures plans to lease the rig to Buccaneer as well as other companies in the region looking to conduct offshore exploration and development activities.
Buccaneer expects the rig to arrive in Alaska by April or May 2012.
Through the joint venture, Buccaneer gets first dibs on the rig through 2014 and must drill at least four wells. The company operates two offshore units in Cook Inlet, Southern Cross and Northwest Cook Inlet. Through its unit agreements, Buccaneer must drill a well at each unit by Sept. 30, 2012, and another well at each by Sept. 30, 2014.
Buccaneer plans to start by drilling at Southern Cross, a field it is estimating could hold around 12.7 million barrels of oil equivalent in proven and probable reserves.
Two rigs in the Inlet
If the GSF Adriatic XI makes it to Alaska as expected, it would make the Cook Inlet home to two jack-up drilling rigs after nearly two decades without one in the region.
Houston-based Escopeta Oil Co. recently brought the Spartan 151 jack-up to its Kitchen Lights unit in the Cook Inlet and is finalizing a drilling program set to begin this year.
The first company to use a jack-up to drill an offshore exploration well to a certain depth in Cook Inlet becomes eligible for a $25 million tax credit from the state. The second and third companies to drill are eligible for slimmer credits if they use the same rig.
Kenai Offshore Ventures and AIDEA said their business case does not depend on the one-time credit, or on leasing the rig out to other companies, although both would help.
Both Escopeta and Buccaneer are eligible for ongoing exploration credits from the state.
