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Buccaneer Energy Signs New Cook Inlet ENSTAR Gas Contract

NEW ENSTAR GAS SALES CONTRACT

  • New gas sales contract at US$6.80 / MCF
  • Currently producing at 10.0 MMCFD increasing to 11 – 11.5 MMCFD
  • Operating cash flow of US$21.0 million per annum
  • Proved Developed Reserve increased 98%
  • Proved Developed PV10 US$70.0 million

Buccaneer Energy Limited (“Buccaneer” or “the Company”) is pleased to advise that it has executed a short term gas sales contract with Alaska Pipeline Company (“APC”), a wholly owned subsidiary of SEMCO Energy, Inc. The gas will be provided to APC’s affiliate, ENSTAR Natural Gas Company, a division of SEMCO Energy, Inc. (“ENSTAR”). APC and ENSTAR are regulated public utilities in Alaska and ENSTAR is the largest gas utility in Alaska, supplying approximately 135,000 residential and commercial users in South Central Alaska.

The short term gas sales contract allows for the commencement of gas sales to ENSTAR from the Kenai Loop # 4 well during the period 20 March – 30 September 2013. Buccaneer and APC are also in discussions for a new multi-year contract.

The short term gas sales contract is a firm commitment by Buccaneer to deliver and a firm commitment by ENSTAR to purchase volumes of between 4.37 and 5.0 million cubic feet per day (“MMCFD”) at a set price of US$6.80 / MCF. ENSTAR is responsible for transportation costs after the receipt points.

This new contract is additional to the existing gas sales agreement with ENSTAR to sell 5.0 MMCFD at an estimated annual weighted average price for 2013 of approximately US$6.19 / MCF. Under that contract ENSTAR is also responsible for transportation costs after the receipt points.

The Company is currently negotiating a third gas sales contract to a private third party user to deliver gas at a rate of 1.0 – 1.5 MMCFD commencing on 1 April 2013, the pricing of this contract is expected to be at a premium to the most recent ENSTAR gas sales contract.

The Kenai Loop field is currently producing 10.0 MMCFD and is anticipated to increase to 11.0 – 11.5 MMCFD from 1 April 2013. This is expected to deliver approximately US$21.0 M in net operating cash flow at the wellhead after royalties and operational expenses.

Reserve Certification

The Company has received a revised reserve certification from Ralph E Davis for the Proved Developed Producing (“PDP”) and Proved Developed Non Producing (“PDNP”) components of the Kenai Loop reserves.

The PDP Reserves have increased to 19.9 BCF (3.3 MMBOE) with an additional Proved Developed Non Producing (“PDNP”) reserves of 2.4 BCF (400,000 BOE). The total Proved Developed Reserve category is therefore 22.3 BCF (3.7 MMBOE) for a 98% reserve increase.

The PDP and PDNP Reserves have a Future Net Income of ~US$100 million and a Present Value (at a 10% discount) of US$70.0 million.

The Company is currently finalising subsurface mapping at the Kenai Loop Field so Ralph E. Davis can certify the Proved Undeveloped (“PUD”), Probable and Possible reserves. Additionally the Company is seeking an estimate from Ralph E. Davis on the total Resource potential of the Kenai Loop Field which will require further analysis of subsurface mapping and which includes the 25 square mile 3D seismic acquired over the area in 2012.

 

 
 
Competent Persons Statement

The information contained in that report pertaining to the Alaskan offshore projects was reviewed by Dr. Vijay Bangia, PhD in Petroleum Engineering from the University of Tulsa, who has over 32 years experience including employment by Shell Oil Company, Union Texas Petroleum, Burlington Resources and Renaissance Alaska. Dr. Bangia has approved the inclusion in this report of the technical matters and information herein in the form and context in which it appears.

 
 
About Buccaneer

Buccaneer Energy Limited is an Australian listed company focused on developing its 100% owned oil & gas assets in Alaska. The Company's flagship projects are a series of onshore and offshore developmental and exploration prospects in Alaska’s Cook Inlet.

Buccaneer Energy has a 3 pronged cashflow strategy:

  • Developing the 100 % owned Kenai Loop onshore gas project with independently assessed 6.4 MMBOE in 2P Reserves;
  • Operating an offshore jack-up rig for use by third parties in the Cook Inlet; and
  • Developing its 100% owned offshore Cook Inlet projects that have independently assessed 88.4 MMBOE in 2P Reserves / P50 Resources using the acquired jack-up rig.

Buccaneer Energy has a 50/50 joint venture with Singaporean based Ezion, a leader in the development, ownership and chartering of strategic offshore assets and the Alaskan Industrial Development and Export Authority (“AIDEA”). This joint venture has acquired the jack-up rig “Endeavour” which is capable of drilling in all areas of the Cook Inlet, the Beaufort Sea and the Chukchi Sea. Mobilisation of the Endeavour into the Cook Inlet was completed in late August 2012.

The Alaskan Government is supportive of oil and gas in the Cook Inlet. There are a number of fiscal incentive programs for exploration and development in the Cook Inlet.

Buccaneer Energy has drilled the two wells onshore Kenai Loop both of which are in production at a combined rate of 9.0 MMCFD (1,500 BOEPD), the Company expects this to increase to 10 - 12 MMCFD (1,666 – 2,000 BOEPD) by 31 March 2013 when construction of permanent production facilities for the second well have been completed.

Buccaneer Energy also has major working interests in two producing projects in Texas, USA. Pompano is an offshore gas project located in the Gulf of Mexico, drilled by the Company in 2008 and has an additional pipeline of ‘drill-ready’ gas prospects.

 
_______________
www.buccenergy.com  

Level 9, 25 Bligh Street
SYDNEY NSW 2000, Australia
T: +61 2 9233 2520
F: +61 2 9233 2530

ABN: 63 125 670 733

952 Echo Lane, Suite 420,
Houston, Texas 77024, USA
T: +1713 468 1678
F: +1713 468 3717

 

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