Buccaneer Energy Limited Positive AIDEA Due Diligence And Jack-Up Rig Update

Buccaneer Energy Limited is pleased to update on the progress of the acquisition of a jack-up rig for operations in the Cook Inlet, Alaska.
Buccaneer is in the process of negotiating and financing the acquisition of a jack-up rig that will have the capacity to operate in all areas within the Cook Inlet as well as the Beaufort Sea and Chukchi Sea off the North Slope of Alaska.
Given some of the existing oil and gas fields within the Cook Inlet are located in waters up to 300' in depth, the jack-up Buccaneer is seeking to acquire has the following features:
- Able to operate in waters up to 300' in depth;
- Capable of drilling wells to 25,000';
- Will have -10 degree rated steel allowing it to work in the wide environmental envelope that exists in the Arctic;
- Has a large deck area and variable deck load so it is able to store tubulars (casing) for deep drilling operations;
- The proposed rig is equipped with piping for a 15,000 PSI blow out protector ("BOP") system; the Company has negotiated the inclusion of a 15,000 BOP as part of the acquisition. Thus it has the capacity to easily upgrade its BOP so as to allow drilling high pressure locations that exist in the Cook Inlet; and
- Is cold stacked in an Asian location so has no requirement to obtain a Jones Act Waiver to mobilise to the Cook Inlet.
The acquisition of the jack-up rig and mobilisation to the Cook Inlet is anticipated to generate up to 400 direct and indirect jobs in the Cook Inlet region. This will create a significant economic boost and increase in tax base at a time when the region is feeling the effects of an economic down turn.
AIDEA Involvement
Buccaneer is pleased to advise that the Alaska Industrial Development & Export Authority (AIDEA) is continuing its statutorily mandated due diligence review of Buccaneer's business plan to acquire the above mentioned jack-up rig. AIDEA has retained consultants and counsel to review Buccaneer's proposal and has discounted Buccaneer's key operating assumptions in order to "stress test" the business model. After applying these discounts, AIDEA's preliminary view is that there is potentially a business case for bringing a rig to the region for use by Buccaneer and third party exploration companies.
As a result, AIDEA is proceeding with its due diligence review, which includes analysis of the project's proposed financing terms, its operating structure, and other components of a major infrastructure project.
Any investment AIDEA makes must be prudent and beneficial to the State of Alaska. Future negotiations between Buccaneer and AIDEA are anticipated to include finalisation of operating structures, documentation, repayment schedules, insurance and security.
AIDEA understands the importance of this project and of completing its review in a timely manner consistent with its duties as a public agency.
Senior Debt Facility
Buccaneer is also pleased to advise that it is in advanced discussions in respect to securing a Senior Debt facility of up to US$50.0 million. Buccaneer believes that this facility, in addition to the proposed investment from AIDEA, will provide sufficient funding for the acquisition and all necessary upgrades before mobilisation to the Cook Inlet.
Further releases will be made as this financing is progressed.
Mobilisation & Permitting
Buccaneer is applying for all permits necessary to drill four offshore wells in Cook Inlet, with all approvals expected by the end of May 2011. The Cook Inlet wells include two at its North Middle Ground Shoal (Southern Cross Unit) and two at North West Cook Inlet.
The longest lead time involved with permitting was modifying Buccaneer's existing Air Quality Permit. Modifying the existing permit required extensive air quality modelling due to locations of the four wells and size of the jackup. Submittal of the application for the permit modification will occur this week, with approval expected by the end of May 2011 following a required regulatory review period.
The Buccaneer rig will be moved to Alaska from a foreign port thus eliminating a need to obtain a Jones Act Waiver from the US Federal Government. This waiver is necessary only if the rig to be transported begins and ends its journey in a US port and is transported by a foreign flagged vessel.
Source: Press release