Second jack-up rig to explore in Cook Inlet by next April
There will be a second jack-up rig exploring for oil and gas in Cook Inlet by next April, this one owned about one-third by the state of Alaska.
The Alaska Industrial Development and Export Authority, a state corporation, finalized an agreement Nov. 14 to invest $27 million in the purchase of the Adriatic XI jack-up rig along with two partners, Australia-based Buccaneer Energy and Ezion Holdings Ltd. of Singapore, the chairman of the Alaska Industrial Development and Export Authority said in a press release.
AIDEA’s stake in the rig is temporary, however. After five years the authority’s investment will be repaid under terms of the deal.
The jack-up rig was purchased from TransOcean Offshore Resources Ltd. The rig, to be used in drilling for oil and gas in Cook Inlet and possibly other Alaska offshore areas, will be renamed Endeavor – Spirit of Independence, according to Hugh Short, the chairman of AIDEA’s board.
AIDEA has transmitted the first part of its $24 million investment, Short said.
The rig was purchased for $68.5 million, which was funded by $17.6 million from AIDEA, $44 million in debt financed by the Overseas Chinese Banking Corp., and with $6.9 million funded by Buccaneer and Ezion Holdings, according to a Nov. 15 release from Buccaneer.
There will be other expenses in modifications needed for the rig, which will be funded by additional debt from Overseas Chinese Banking Corp. and cash investment from AIDEA, bringing the state authority’s investment to $27 million.
Buccaneer and Ezion Holdings have organized a subsidiary, Kenai Offshore Ventures, to own the jack-up rig. Archer Drilling has been hired as a contractor to operate the rig.
AIDEA’s investment is structured as a Preferred Interest Investment with a fixed annual dividend of 8 percent that is guaranteed by Buccaneer Energy, according to the authority. The state authority’s investment and the loan by the Chinese bank will be repaid in five years, under terms of the deal.
“Kenai Offshore Ventures anticipates over the next five years both the OCBC and AIDEA facilities will be fully repaid by revenues received under the Bare Boat Charter agreement,” Buccaneer said in its press release.
That essentially will buy out AIDEA. After that the authority will have no ownership stake in the jack-up rig, AIDEA spokesman Karsten Rodvik said.
The jack-up rig was moved from Malaysia, where it was in storage, to the Keppel FELS Shipyard in Singapore, where it will undergo upgrading and modifications in preparation for its work in Alaska waters.
It is expected to be moved to Alaska in April 2012, and to begin Cook Inlet drilling in May.
Buccaneer owns Cook Inlet offshore leases and has at least four prospects, which will be tested by the jack-up rig.
The first prospect to be tested is Buccaneer’s Southern Cross prospect, which is in 50 feet of water and is within five miles of established Cook Inlet production facilities, Buccaneer said in its press release.
“The conclusion of this deal is another very positive step forward for Cook Inlet oil and gas resource development,” said Short. “AIDEA’s investment in this rig will not only help secure long-term energy supplies for Alaskans, it will create job growth and help advance the region’s economy,” Short said.
There is already one jack-up rig now in Cook Inlet. Earlier this year Escopeta Oil Co. brought the Blake 151 rig, owned by Spartan Drilling Co., to Cook Inlet to do exploration drilling.
Escopeta began drilling in September and encountered natural gas at two intervals to the 8,800 foot level. Drilling ceased for the winter on Oct. 28 and is to resume next April, about the same time the Endeavour rig will arrive.
AIDEA has said previously that the Endeavour rig is larger than the Blake 151 and will be able to drill in deeper water depths. The rig is rated as being capable of operating in waters as deep as 300 feet.
Tim Bradner can be reached at [email protected].